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Brokers who provide premium funding should consider registering by the end of June

 New consumer credit laws come into force on 1 July and NIBA has urged member brokers who provide premium funding to consider registering online by the end of this month.

Brokers can register at www.asic.gov.au/credit

In the meantime, NIBA is making a last-ditch effort to ensure that brokers who provide premium funding will be exempt.

NIBA has lodged an application with the Australian Securities and Investments Commission (ASIC) to ensure that insurance brokers are exempt from the operation of the National Consumer Credit Protection Act  2009 (Cth).

NIBA has been informed by ASIC that the outcome of its application is likely to be determined by 17 June 2010.

If an exemption is granted, brokers who have registered would not need to take further action and could merely let their registration lapse.

However, if an exemption is NOT granted by ASIC prior to 31 December, then NIBA members should consider whether they want to:

• cease to provide the credit services and have their registration automatically cancelled; or
• continue to provide the credit services and apply for a credit licence by 31 December or act as a representative of a licensed provider (if appropriate).

Background
The consumer credit laws require anyone who is providing credit to retail clients to be licensed.
 
While only a small percentage of brokers offer premium funding direct to retail clients, those who do will need to ensure that they comply with the new regime.

The Insurance Premium Financiers Association of Australia has sought relief for premium funders. Insurers are already exempt from the consumer credit laws.

As the initial legislation is limited to credit provided to consumers for wholly or predominantly personal, domestic or household purposes, the immediate implications for financial services licensees performing insurance functions are likely to be limited.

If, as currently planned by the Government under the second stage, the arrangements are extended to include small business, the implications for financial services licensees undertaking insurance functions are likely to be significantly greater, particularly in relation to premium funding.

As a result of these concerns, NIBA held initial discussions with Treasury and ASIC on 26 March 2010.

During the discussions, both Treasury and ASIC indicated that the legislated exemptions applicable to registration and licensing under the new arrangements are unlikely to apply to premium funding as it currently operates. In other words, insurance brokers may have to significantly change the way in which they provide their premium funding services before being eligible for an existing exemption.

NIBA has therefore lodged an application with ASIC for a new exemption for insurance brokers and will keep members informed about the result.

^{IMPORTANT NOTICE
This document is designed to provide helpful general industry guidance on some key issues relevant to this topic. It should not be relied on as legal advice. It does not cover everything that may be relevant to you and does not take into account your particular circumstances. It is only current as at the date of release. You must ensure that you seek appropriate professional advice in relation to this topic as well as to the currency, accuracy and relevance of this material for you.}