ASIC Credit (Deferral of Mortgage Broker Obligations) Instrument 2020/487

Overview

The ASIC Credit (Deferral of Mortgage Broker Obligations) Instrument 2020/487 was enacted to provide relief to mortgage brokers and related professionals in light of the economic challenges posed by the COVID-19 pandemic. This legislative instrument was created under subsection 163(3) of the National Consumer Credit Protection Act 2009 by the Australian Securities and Investments Commission. The primary objective of this instrument is to defer certain obligations for mortgage brokers, credit representatives, and related entities, to ease the immediate financial pressure on these sectors during a period of economic uncertainty. This legislative instrument exempts specific classes of persons, including mortgage brokers and credit representatives, from certain obligations under the National Consumer Credit Protection Act 2009 until 1 January 2021. These exemptions are intended to provide temporary relief to the credit industry, allowing professionals to focus on supporting consumers without the added burden of stringent regulatory requirements during a challenging economic period.

Scope and Application

The ASIC Credit (Deferral of Mortgage Broker Obligations) Instrument 2020/487 applies to certain financial entities and individuals within the mortgage broker and credit industry, providing temporary relief from specific obligations under the National Consumer Credit Protection Act 2009. Specifically, the instrument exempts mortgage brokers, credit representatives of licensees who are mortgage brokers, mortgage intermediaries, credit providers, and employers of these entities from certain obligations concerning best interests and conflicted remuneration, in relation to credit services provided before 1 January 2021. This relief is limited to actions taken before this date, regardless of when the benefits are received. The instrument is a legislative measure made under the authority of the National Consumer Credit Protection Act 2009, and its scope is explicitly defined within the instrument itself, with no extensions or restrictions noted through subordinate instruments.

Key Provisions

The ASIC Credit (Deferral of Mortgage Broker Obligations) Instrument 2020/487 primarily operates by deferring certain obligations for mortgage brokers and related entities under the National Consumer Credit Protection Act 2009. Specifically, section 5 of the Instrument exempts mortgage brokers and credit representatives of licensees that are mortgage brokers from the "best interests" obligations outlined in Division 2 of Part 3-5A of the Act (section 5(1)). These best interests obligations generally require credit providers to act in the best interests of consumers when providing credit assistance. Similarly, section 6 of the Instrument exempts a broader range of entities, including mortgage brokers, mortgage intermediaries, credit representatives of mortgage brokers or intermediaries, credit providers, and employers of these individuals, from the ban on conflicted remuneration outlined in Division 4 of Part 3-5A of the Act (section 6(1)). These exemptions are in place until 1 January 2021. The obligations imposed by this Instrument on the specified entities are primarily centred around the temporary exemption from certain statutory requirements. Mortgage brokers, credit representatives, mortgage intermediaries, credit providers, and their respective employers are exempt from the best interests obligations and the ban on conflicted remuneration, as detailed in sections 5 and 6 of the Instrument. These entities are expected to continue providing credit services but are temporarily relieved from the need to comply with specific regulatory duties until the commencement of 2021. The Instrument does not impose additional obligations beyond these exemptions. For breaches of the obligations set out in the National Consumer Credit Protection Act 2009, which this Instrument defers, there are potential civil and criminal consequences. Under the Act, contraventions of certain provisions can result in significant penalties. For example, individuals can face fines of up to $275,000 and/or imprisonment for up to five years for serious breaches, while corporations can face fines of up to $1,350,000 for similar offences. The Act also provides for the possibility of pecuniary penalties for breaches of civil penalty provisions, which can be substantial depending on the nature and severity of the breach. These penalties underscore the importance of compliance with the obligations once the deferral period ends.