ASIC to licence mortgage brokers

Mortgage brokers will need to be licensed by the corporate watchdog by the end of the year and could face hefty fines and the removal of their licence for misconduct, under wholesale changes planned for Australia’s credit licensing regime.

Corporate Law Minister Nick Sherry says the creation of a mandatory nationwide Australian Credit Licence will protect the public, as licence holders will need to meet minimum entry standards before they can offer products and services to consumers.

Under the draft National Consumer Credit Protection Bill 2009, all banks, credit unions, and other lenders - known in the bill as credit providers - and all credit advisers and mortgage and credit brokers - known as credit service providers - will be required to hold a licence.

Sherry says the Australian Securities and Investments Commission (ASIC) will supervise the licensing scheme, which replaces a patchwork of inconsistent regimes across the states and territories.

"Currently only one state has a licensing regime, but once credit providers and advisers are licensed across the whole country, they will have to meet continuing standards of conduct, higher than any that exist at the state and territory level," Sherry says.

"Consumers will be consistently protected across Australia, as a person who loses their licence or registration will be excluded Australia-wide. At present, there's nothing to prevent a person continuing to operate simply by moving to a different state or territory, a situation that undermines consumer confidence and is completely unacceptable."

Sherry says providers or advisers who break the rules under the new system face tough penalties, including hefty fines, a loss of licence and even jail time.

"ASIC will be given the power to promptly cancel or suspend a licence or ban people from engaging in credit activities, where it's necessary to protect consumers from the risk of financial harm and to maintain the integrity of the credit market," he says.

"Questionable operators on the margins who can't meet these new national standards won't be allowed to engage in credit activities and will be forced to exit the industry. This stands to assist the very good reputation of those mainstream lenders and brokers who comply with the law."

After a registration phase, the Australian Credit Licence regime will begin on January 1 next year.