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Enforcing fees for service: Is lodging a caveat ever ok?

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Australian Broker | 16 Oct 2013, 08:00 AM Agree 0
A South Australian finance broker has been banned in part for threatening to lodge a caveat over fees for service - but is this ever legal?
  • SIDBROKER | 16 Oct 2013, 10:00 AM Agree 0
    I am sure ASIC would be very happy for all brokers to work for nothing just so long as we continue to play their game and pay our ACL fees each year so that they can keep their job and continue to be paid by us and the Australian public. Its all a joke is it not!! Mr. Abbott when you get a chance you have some more work to do!
  • Ray C | 16 Oct 2013, 10:07 AM Agree 0
    Isn't the MFAA advertising that it's members are Credit Advisers - Last paragraph very confusing.
  • GC | 16 Oct 2013, 10:07 AM Agree 0
    The idea of placing a caveat over a clients property is disgraceful. I have just gone through this process of refinancing a client. we found a caveat had been placed and the broker went out of business 3 years ago. It has taken 9 weeks to get the Registrar to grant permission to remove the caveat. If a client doesnt think his "assistance was worth pay for then he clearly didnt do the job properly.
    Basic common sence will tell you that a fee for service will never work in this industry as the brokers will lose and the banks will win.
  • Papery | 16 Oct 2013, 10:13 AM Agree 0
    If you do your job properly (& sometimes you have to work with a client for a long time before they are ready to consider any particular credit contract) I dont see how you can avoid 'credit advice or budget management' advice.
    Its a crazy regulated/unregulated we are in. No wonder Lawyers love it!
  • Gary Simmons | 16 Oct 2013, 10:16 AM Agree 0
    In an idyllic world, the client happily pays us brokers for our services right on time, every time. In the real world this occasionally doesn't happen. I, like most professionals have been caught out by clients not paying after accepting a loan approval. Unfortunately this is the risk we run and any ideas to mitigate this risk short of breaking the NCCP law would be welcome. My understanding is of course this issue only applies to transactions under the NCCP and not commercial or business finance, where I believe it would be possible (but not desirable) to lodge a caveat to recover unpaid fees.
  • Southside | 16 Oct 2013, 10:34 AM Agree 0
    So its ok for other businesses to chase outstanding debts, just not brokers! We have to loose out.
    Wake up !!!
  • Old Broker | 16 Oct 2013, 10:42 AM Agree 0
    I agree that for loans under NCCP rules you cannot put a caveat on a property in order to force the client to pay your fee.
    However if the client has signed an agreement for a fee to be charged (for either advice or processing) then they have agreed to pay that fee and you are entitled to collect. That is what the courts are there for
    Commercial loans are not under NCCP at this point and often the only way you can be paid is by charging the client a fee under a mandate generally as a percentage of the loan amount
    If the mandate states that if the fee is not paid within the prescribed period then a caveat will be placed on the property to obtain the payment. From the legal advice I have received this is the only way you can truly enforce the undertaking in a court
  • Thomas | 16 Oct 2013, 10:51 AM Agree 0
    Jon Denovan, the very notion of providing an opinion that someone ought to purchase a particular product is advice, in this case the advice is to enter into a credit contract. To say, ‘I reckon you should get a CBA Rocket Home Loan’ is credit advice. Yes it also is credit assistance.

    The Act carefully and purposely avoids use of the term advice to avoid confusion with personal financial advice, however this is exactly what it is - credit advice. Having to make an informed assessment, of a consumer's circumstances to suggest or merely assist in a credit contract (whether or not unsuitable) is providing credit advice to that client.

    If I said, ‘I reckon you should get an ABC insurance policy from XYZ’ this is personal financial advice - my opinion and a personal recommendation following an informed assessment, of a client's circumstances to recommend a financial product. It's black and white.

    There is no difference except that ACL requirements are much looser than AFSL. The sooner ASIC wake up and declare that credit advice is actually what an ACL licensee provides (or should) rather than just credit assistance, the sooner the whole industry can move on, skill up and get with the times.
  • BJ | 16 Oct 2013, 11:34 AM Agree 0
    It would appear a fee may not be levied in advance of “the provision of credit advice”. The real danger is executing an agreement to pay for “credit advice” in advance of that advice and the potential client takes that advice and goes directly to a lender or another broker. Entering into a formal agreement would appear problematic and enforcing the same appears to be a mine field.
    Any chance the MFAA could shed some light and give some direction.
    How does this work for the fee for service model and enforcing an agreement and recovery of fees.
  • Tired Old Broker | 16 Oct 2013, 12:11 PM Agree 0
    In my experience, there is ample opportunity via the Small Claims Tribunal process for brokers to recover agreed to costs regarding fee for service.
  • Rent Boy | 17 Oct 2013, 09:09 AM Agree 0
    Brokers don't be so worried there is a way around this and its more fun that you think.
    Firstly get the client to agree to your terms of trade with you that clearly says that you can charge interest, default them , pass them to a debt collection company, all legal in todays world of doing business. The client must sign your terms of trade. Signature is king. If the borrower don't pay then you can commence action , charge interest , lodge a default via Veda and then commence court action. Get a judgement and then they have 2 blisters on their name. Now lets see if the borrowers can borrow any money elsewhere. This is perfectly legal and within the ACT as no one has lodged any caveats and you got them with a judgement for 12 years but it gets better , issue a bankruptcy notice after you get a judgment and see the fun begin from there. You see the NCCP does not dissolve a persons obligations to not pay their bills and swan around thinking that they can get away from anything. Remember folks signature is king and also must be signed before you do any work for the client but its another way to getting people to pay for their bills. If you want anymore info just post and I will respond.
  • Ian | 17 Oct 2013, 11:21 AM Agree 0
    I think Jon Denovan might find that you have to read the "other services" in conjunction with the word licensees. That is, I believe a Court would interpret the other services as being services related to the license. If I choose to provide a cleaning service I don't need an ACL and a cleaning service has nothing to do with credit. Any attempt by ASIC to stop me lodging a caveat in relation to a service unrelated to an ACL would arguably be ultra vires. I haven't got the time but it would be interesting to read the second reading speech by the Minister to see whether Mr Denovan's contention was foreseen as an ill which the Act was seeking to redress.

    Does Mr Denovan maintain that should I obtain a judgment having sued on my fee agreement then I would be precluded from enforcing the judgment by placing a writ on the title?
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