User pays model applies to 2017/18 Financial Year, meaning brokers are already accumulating costs.
Brokers are at risk of being caught out by ASIC’s user-pays model, an industry expert has warned.
ASIC’s user-pays model came into effect on Saturday 1st July and could cost businesses with credit representatives thousands of dollars in extra costs. However, Greg Ashe, director of QED compliance services, warns many business owners will be taken by surprise: “it seems so far away; I’m conscious that…as of Saturday, all of us who have credit intermediary licensee businesses with credit reps are accruing this levy.”
Although the levy will not be charged until January 2019, the costs will be substantial – Ashe estimates between $400-$1300 per rep per year plus the businesses corporate license – and credit license holders now need to think about how to pass these costs onto their reps.
With the user-pays levy ultimately determined by ASIC’s costs it is likely to increase, explains Ashe: “There’s the potential there for ASIC to staff up as much as they like because guess what? We’re paying for it now. That fee is only likely to go upwards because this is why ASIC wanted the fee in the first place: because they are so, so under-resourced.”
ASIC first announced the dates for fees back in October 2016, but there remains much confusion around the levy’s specifics.
At the time ASIC noted that “the levies charged in January 2019 will be based on ASIC’s actual operating expenditure regulating each subsector in 2017–18. This ensures that each industry group is only charged for the actual costs of regulating that group.” Mortgage brokers fall into a group of around 5,800 credit licensees, which includes banks and non-bank lenders.
ASIC isn’t entirely to blame for problems in user-pay system’s implementation, Ashe believes: “they are aware that there are terrible issues and flaws, not so much in the legislation but that there are so many unknowns, but there’s nothing they can do because it is still administratively with the Treasury…they’re waiting for the information just like we are.”
What can be done?
To prepare for user-pays, law firm Dentons (previously Gadens) says ASIC recommend that “licensees should review and ‘rationalise’ their AFSL by removing any authorisations that are no longer necessary in order to minimise the amount payable.”
Another solution could be acquiring your own credit license, which Ashe’s firm QED assists brokers to do. Even Ashe however admits that “ASIC waiting times are getting so long for this so it’s not a decision to be taken lightly.” Both Ashe and Dentons estimate waiting times of three months, with minimum costs of $3500, depending on business size.
Should user-pays provide ASIC with more resources that time could reduce, noted Ashe, but told MPA that he’s “pretty sure that the legislators didn’t want there to be thousands of more licensees because of this regulation.”