A recent ASIC ban of a Sydney finance broker serves as a warning to both brokers and lenders to be careful when accepting referrals, says a leading finance solicitor.
Earlier this month, ASIC banned Siv Lim of Cabramatta from engaging in credit activities for three years and cancelled her Australian credit licence.
While working as an independent contractor for Betar Prestige Cars Pty Ltd, trading as Audi Parramatta, Lim submitted loan applications to Volkswagen Financial Services on behalf of Betar where Betar was not authorised to do so.
In order to make its referrals, Betar was relying on the point of sale exemption found in NCCP Regulation. This exemption states that suppliers of goods and services are exempt from licensing where the referral is made by the supplier themselves to finance a customer’s purchase of their goods or services, or made by a referrer from the premises of the supplier (as in the case of Lim) to finance the suppliers goods or services.
The activities that resulted in Ms Lim’s ban included making referrals to finance vehicles not sold by Betar or making referrals to refinance vehicles previously purchased from Betar.
According to Amber Warren, a partner at Gadens law firm, this should be a lesson for brokers to be cautious of rogue referrers.
“The lesson for lenders an brokers accepting referrals is to check the exemption under which the referrer is operating and have measures in place to ensure that the rules relating to the circumstances under which such referrals can be made are being followed,” she said.
“In particular, it is important to remember that accepting a referral from an unlicensed entity that has not been made in accordance with the law can result in the entity accepting that referral being found guilty of dealing with an entity who wasn’t licensed but should have been.”