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Schedule 3—Mortgage brokers

Schedule 3 Mortgage brokers

Part 1 Main amendments

National Consumer Credit Protection Act 2009

1  Subsection 5(1)

Insert:

associate : see section 15A.

2  Subsection 5(1) (at the end of the definition of commission )

Add:

Note:          Commissions may be conflicted remuneration: see Division 4 of Part 3-5A.

3  Subsection 5(1)

Insert:

conflicted remuneration : see sections 158N and 158NA.

mortgage broker : see section 15B.

mortgage intermediary : see section 15C.

4  After section 15

Insert:

15A   Meaning of associate

             (1)  If a person is associated with a credit provider for the purposes of the National Credit Code:

                     (a)  the person is an associate of the credit provider; and

                     (b)  the credit provider is an associate of the person.

             (2)  In any other case, a person is an associate of another person in the circumstances prescribed by the regulations.

15B   Meaning of mortgage broker

             (1)  A licensee is a mortgage broker if:

                     (a)  the licensee carries on a business of providing credit assistance in relation to credit contracts secured by mortgages over residential property; and

                     (b)  the licensee does not perform the obligations, or exercise the rights, of a credit provider in relation to the majority of those credit contracts; and

                     (c)  in carrying on the business, the licensee provides credit assistance in relation to credit contracts offered by more than one credit provider.

             (2)  A credit representative of a licensee is a mortgage broker if:

                     (a)  the credit representative carries on a business of providing credit assistance in relation to credit contracts secured by mortgages over residential property; and

                     (b)  neither the credit representative nor the licensee performs the obligations, or exercises the rights, of a credit provider in relation to the majority of those credit contracts; and

                     (c)  in carrying on the business, the credit representative provides credit assistance in relation to credit contracts offered by more than one credit provider.

15C   Meaning of mortgage intermediary

             (1)  A licensee is a mortgage intermediary if:

                     (a)  the licensee carries on a business of acting as an intermediary in relation to credit contracts secured by mortgages over residential property; and

                     (b)  the licensee does not perform the obligations, or exercise the rights, of a credit provider in relation to the majority of those credit contracts; and

                     (c)  in carrying on the business, the licensee acts as an intermediary in relation to credit contracts offered by more than one credit provider.

             (2)  A credit representative of a licensee is a mortgage intermediary if:

                     (a)  the credit representative carries on a business of acting as an intermediary in relation to credit contracts secured by mortgages over residential property; and

                     (b)  neither the credit representative nor the licensee performs the obligations, or exercises the rights, of a credit provider in relation to the majority of those credit contracts; and

                     (c)  in carrying on the business, the credit representative acts as an intermediary in relation to credit contracts offered by more than one credit provider.

5  After Part 3-5

Insert:

Part 3-5A Mortgage brokers and mortgage intermediaries

Division 1 Introduction

Subdivision A Guide to this Part

158K   Guide to this Part

This Part imposes obligations on mortgage brokers and mortgage intermediaries.

Mortgage brokers must act in the best interests of consumers when providing credit assistance in relation to credit contracts.

Where there is a conflict of interest, mortgage brokers must give priority to consumers in providing credit assistance in relation to credit contracts.

Mortgage brokers and mortgage intermediaries must not accept conflicted remuneration.

Employers, credit providers and mortgage intermediaries must not give conflicted remuneration to mortgage brokers or mortgage intermediaries.

The circumstances in which these bans on conflicted remuneration apply are to be set out in the regulations.

Subdivision B Interpretation

158KA   Doing acts

                   A reference in this Part to doing an act or thing includes a reference to causing or authorising the act or thing to be done.

158KB   Circumstances in which a secondary representative is taken to be acting within actual or apparent authority

             (1)  This section applies if a person (the secondary representative ) is authorised as a credit representative of a licensee by a credit representative that is a body corporate (the primary representative ).

             (2)  For the purposes of this Part, the secondary representative is taken to be acting within the scope of the secondary representative’s actual or apparent authority from the licensee if the secondary representative is acting within the actual or apparent scope of the authority given by the primary representative to engage in specified credit activities on behalf of the licensee.

158KC   Obligations under this Part in addition to other obligations

                   The obligations imposed on a person under this Part are in addition to any other obligations to which the person is subject under this Act or any other law.

Division 2 Best interests obligations

Subdivision A Licensees that provide credit assistance in relation to credit contracts

158L   Application of this Subdivision

             (1)  This Subdivision applies in relation to credit assistance provided by a licensee to a consumer in relation to a credit contract if the licensee is a mortgage broker.

             (2)  However, this Subdivision does not apply in relation to credit assistance provided to a consumer in relation to a credit contract by a credit representative acting within the scope of the credit representative’s actual or apparent authority from the licensee.

Note 1:       A credit representative in these circumstances is covered by Subdivision B of this Division.

Note 2:       The conduct of any other representative, acting within the scope of actual or apparent authority from the licensee, is taken to have been engaged in also by the licensee: see sections 324 and 325.

158LA   Licensee must act in the best interests of the consumer

                   The licensee must act in the best interests of the consumer in relation to the credit assistance.

Civil penalty:          5,000 penalty unit s.

158LB   Conflict between consumer’s interests and those of the licensee etc.

                   If the licensee knows, or reasonably ought to know, that there is a conflict between the interests of the consumer and the interests of:

                     (a)  the licensee; or

                     (b)  an associate of the licensee; or

                     (c)  a representative of the licensee; or

                     (d)  an associate of a representative of the licensee;

the licensee must give priority to the consumer’s interests when providing the credit assistance.

Civil penalty:          5,000 penalty units.

Subdivision B Credit representatives that provide credit assistance in relation to credit contracts

158LD   Application of this Subdivision

                   This Subdivision applies in relation to credit assistance provided to a consumer in relation to a credit contract by a credit representative acting within the scope of the credit representative’s actual or apparent authority from a licensee, if either the credit representative or the licensee is a mortgage broker.

158LE   Credit representative must act in the best interests of the consumer

             (1)  The credit representative must act in the best interests of the consumer in relation to the credit assistance.

Civil penalty:          5,000 penalty units.

             (2)  The licensee must take reasonable steps to ensure that the credit representative complies with subsection (1).

Civil penalty:          5,000 penalty units.

158LF   Conflict between consumer’s interests and those of the credit representative etc.

             (1)  If the credit representative knows, or reasonably ought to know, that there is a conflict between the interests of the consumer and the interests of:

                     (a)  the licensee; or

                     (b)  an associate of the licensee; or

                     (c)  the credit representative; or

                     (d)  an associate of the credit representative; or

                     (e)  another representative of the licensee; or

                      (f)  an associate of another representative of the licensee;

the credit representative must give priority to the consumer’s interests when providing the credit assistance.

Civil penalty:          5,000 penalty units.

             (2)  The licensee must take reasonable steps to ensure that the credit representative complies with subsection (1).

Civil penalty:          5,000 penalty units.

Division 4 Conflicted remuneration

Subdivision A What is conflicted remuneration?

158N   Conflicted remuneration

                   Conflicted remuneration means:

                     (a)  any benefit, whether monetary or non-monetary, that:

                              (i)  is given to a licensee, or a representative of a licensee, who provides credit assistance to consumers; and

                             (ii)  because of the nature of the benefit or the circumstances in which it is given, could reasonably be expected to influence the credit assistance provided to consumers; or

                     (b)  any benefit, whether monetary or non-monetary, that:

                              (i)  is given to a licensee, or a representative of a licensee, who acts as an intermediary; and

                             (ii)  because of the nature of the benefit or the circumstances in which it is given, could reasonably be expected to influence whether the licensee or representative acts as an intermediary, or how the licensee or representative acts as an intermediary.

158NA   Regulations may further define conflicted remuneration

                   The regulations may prescribe:

                     (a)  circumstances, in addition to those set out in section 158N, in which a benefit given to a licensee or a representative of a licensee is conflicted remuneration ; and

                     (b)  circumstances in which a benefit given to a licensee or a representative of a licensee is not conflicted remuneration .

Subdivision B Ban on accepting conflicted remuneration

158NB   Licensee must not accept conflicted remuneration

                   A licensee must not accept conflicted remuneration in circumstances prescribed by the regulations if:

                     (a)  the licensee is a mortgage broker; or

                     (b)  the licensee is a mortgage intermediary.

Civil penalty:          5,000 penalty units.

158NC   Credit representative must not accept conflicted remuneration

             (1)  A credit representative of a licensee must not accept conflicted remuneration in circumstances prescribed by the regulations if the credit representative or the licensee is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

             (2)  The licensee must take reasonable steps to ensure that the credit representative complies with subsection (1).

Civil penalty:          5,000 penalty units.

Subdivision C Ban on giving conflicted remuneration

158ND   Employer must not give employees conflicted remuneration

             (1)  An employer of a licensee must not give the licensee conflicted remuneration in circumstances prescribed by the regulations if the licensee is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

             (2)  An employer of a representative of a licensee must not give the representative conflicted remuneration in circumstances prescribed by the regulations if the licensee or the representative is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

158NE   Credit provider must not give conflicted remuneration

             (1)  A credit provider must not give a licensee conflicted remuneration in circumstances prescribed by the regulations if the licensee is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

             (2)  A credit provider must not give a representative of a licensee conflicted remuneration in circumstances prescribed by the regulations if the licensee or the representative is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

158NF   Mortgage intermediary must not give conflicted remuneration

             (1)  A mortgage intermediary must not give a licensee conflicted remuneration in circumstances prescribed by the regulations if the licensee is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

             (2)  A mortgage intermediary must not give a representative of a licensee conflicted remuneration in circumstances prescribed by the regulations if the licensee or the representative is:

                     (a)  a mortgage broker; or

                     (b)  a mortgage intermediary.

Civil penalty:          5,000 penalty units.

Division 6 Miscellaneous

158T   Anti-avoidance

                   A person must not, either alone or together with one or more other persons, enter into, begin to carry out or carry out a scheme if:

                     (a)  it would be concluded that the person, or any of the persons, who entered into, began to carry out or carried out the scheme or any part of the scheme did so for the sole purpose or for a purpose (that is not incidental) of avoiding the application of any provision of this Part in relation to any person or persons (whether or not a person or persons who entered into, began to carry out or carried out the scheme or any part of the scheme); and

                     (b)  the scheme or the part of the scheme has achieved, or apart from this section, would achieve, that purpose.

Civil penalty:          5,000 penalty units.

National Consumer Credit Protection ( Transitional and Consequential Provisions) Act 2009

6  In the appropriate position

Insert:

Schedule 10—Application provisions for Schedule 3 to the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2019

 

1  Definitions

In this Schedule:

amending Act means the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2019 .

2  Application of best interests obligations

Division 2 of Part 3-5A of the National Credit Act, as inserted by item 5 of Schedule 3 to the amending Act, applies in relation to the provision of credit assistance to a consumer on or after 1 July 2020 (whether or not the assistance was sought, or commenced being provided, before that day).

3  Application of ban on conflicted remuneration

(1)       Subject to subitem (2), Division 4 of Part 3-5A of the National Credit Act, as inserted by item 5 of Schedule 3 to the amending Act, applies to a benefit given on or after 1 July 2020 to a licensee, or a representative of a licensee, if the benefit is given under an arrangement entered into on or after 1 July 2020.

(2)       The regulations may prescribe circumstances in which that Division applies, or does not apply, to a benefit given to a licensee or a representative of a licensee.

Part 2 Consequential amendments

National Consumer Credit Protection Act 2009

7  Subsection 5(1)

Insert:

indirect remuneration means a commission or conflicted remuneration.

8  Paragraph 92(e)

Omit “commissions” (wherever occurring), substitute “indirect remuneration”.

9  Section 111 (paragraph beginning “Division 5”)

Omit “commission”, substitute “indirect remuneration”.

10  Subparagraph 113(2)(g)(i)

Omit “commissions”, substitute “indirect remuneration”.

11  Subparagraph 113(2)(g)(ii)

Omit “those commissions”, substitute “that indirect remuneration”.

12  Subparagraphs 113(3)(b)(i) and (ii)

Omit “commissions” (wherever occurring), substitute “indirect remuneration”.

13  Division 5 of Part 3-1 of Chapter 3 (heading)

Omit “ commissions ”, substitute “ indirect remuneration ”.

14  Section 121 (heading)

Omit “ commissions ”, substitute “ indirect remuneration ”.

15  Paragraph 121(2)(b)

Omit “commissions”, substitute “indirect remuneration”.

16  Paragraphs 121(3)(a) and (b)

Omit “commissions”, substitute “indirect remuneration”.

17  Section 134 (paragraph beginning “Division 5”)

Omit “commission”, substitute “indirect remuneration”.

18  Subparagraph 136(2)(g)(i)

Omit “commissions”, substitute “indirect remuneration”.

19  Subparagraph 136(2)(g)(ii)

Omit “those commissions”, substitute “that indirect remuneration”.

20  Subparagraphs 136(3)(b)(i) and (ii)

Omit “commissions” (wherever occurring), substitute “indirect remuneration”.

21  Division 5 of Part 3-3 of Chapter 3 (heading)

Omit “ commissions ”, substitute “ indirect remuneration ”.

22  Section 144 (heading)

Omit “ commissions ”, substitute “ indirect remuneration ”.

23  Paragraph 144(2)(b)

Omit “commissions”, substitute “indirect remuneration”.

24  Paragraphs 144(3)(a) and (b)

Omit “commissions”, substitute “indirect remuneration”.

25  Subparagraph 158(2)(g)(i)

Omit “commissions”, substitute “indirect remuneration”.

26  Subparagraph 158(2)(g)(ii)

Omit “those commissions”, substitute “that indirect remuneration”.

27  Subparagraphs 158(3)(b)(i) and (ii)

Omit “commissions” (wherever occurring), substitute “indirect remuneration”.

28  Subparagraph 160B(2)(a)(i)

Omit “commissions (apart from commissions that are”, substitute “indirect remuneration (apart from indirect remuneration that is”.

29  Paragraph 160B(2)(d)

Omit “commission”, substitute “indirect remuneration”.