6 October 2017
ASIC has consulted about the renewal of the licensing relief applying to financial counselling agencies in relation to financial product advice (eg. basic bank accounts, insurance, retirement savings account products or superannuation).
ASIC announced last week that they are continuing the relief, with just some minor drafting changes. ASIC’s media release below for your information.
What this means broadly
Nothing significant has changed, so it is business as usual. The important parts of the relief are around remuneration, fees and charges (see next heading), membership (or eligibility for membership) of a financial counselling association, and making sure that staff are adequately trained so that they have the appropriate skills and knowledge.
In recent years, there have been a couple of examples of financial counsellors who have refused to join a financial counselling association. This has created a fair bit of angst and we know that some agencies are now requiring membership as a condition of employment. If that situation does arise again, what would probably happen is that ASIC would write to the agency concerned asking for evidence around “eligibility”.
It is also worth noting that the explanatory memorandum accompanying the new legislative instrument reinforces the importance of the financial counsellor’s role in providing competent advice:
• “The limited circumstances in which the exemption applies ensures clients can have a high degree of confidence that when their financial counsellors provide them with advice, they do so free from any conflicts of interest, and with an acceptable level of skills, knowledge and professionalism.”
Remuneration, Fees and Charges
ASIC’s media release notes that:
“Recently there have been changes to the funding arrangements for financial counselling services, including lump sum payments made by industry participants. ASIC will continue to work with the financial counselling sector to understand how these changes impact the relief to ensure it is operating as intended.”
17-324MR ASIC remakes relief for financial counselling agencies providing advice or credit assistance
ASIC has made two new instruments relating to financial counselling agencies to continue the relief provided by class orders that were due to expire (‘sunset’).
ASIC has remade:
• Class Order [CO 03/1063] Licensing relief for financial counselling agencies in ASIC Corporations (Financial Counselling Agencies) Instrument 2017/792
• Class Order [CO 11/926] Credit licensing exemptions for NGOs (non-government organisations) providing credit assistance to consumers and ASIC Credit (Financial Counselling Agencies) Instrument 2015/992, in ASIC Credit (Financial Counselling agencies) Instrument 2017/793
The new corporations instrument continues relief for financial counselling agencies from the Australian financial services (AFS) licensing, conduct and disclosure obligations in Chapter 7 of the Corporations Act 2001, when providing particular financial product advice.
The new credit instrument continues relief for rural financial counselling service providers from the requirement to have an Australian credit licence when providing credit assistance. It also continues amendments made to the National Consumer Credit Regulations 2010 for financial counselling agencies.
The relief was made without substantive changes following public consultation through Consultation Paper 282 Remaking ASIC class orders on financial counselling licensing relief (CP 282).
Responses to consultation
ASIC sought feedback from the financial counselling industry and consumer advocates on our proposals to remake the instruments. We received 10 submissions. The submissions supported the proposals and made some comments about possible changes.
We also engaged with industry both before and after the formal consultation period to obtain more detailed feedback on some our proposals.
Remuneration, fees and charges
Respondents were supportive that the relief continue to apply to financial counselling services that are independent and free from conflict.
Recently there have been changes to the funding arrangements for financial counselling services, including lump sum payments made by industry participants. ASIC will continue to work with the financial counselling sector to understand how these changes impact the relief to ensure it is operating as intended.
Who can rely on the exemptions?
The relief provided in both instruments applies to situations where we consider it is necessary to facilitate the continued operation of financial and rural financial counselling services.
For example, there is a specific exemption for rural financial counselling services, as it is unclear if they can rely on the general exemption in the National Credit Regulations. As rural financial counsellors do not provide financial advice, they are not expressly included in the Corporations instrument.
The circumstances in which relief can be relied on include the requirement that financial counsellors are members, or eligible to members, of relevant State or Territory associations. Associations provide training and supervision to ensure financial counsellors have the adequate skills and knowledge.
Under the Legislation Act 2003, legislative instruments such as class orders sunset after 10 years unless action is taken to exempt or preserve them. This ensures that legislative instruments like class orders are kept up to date and only remain in force while they are fit for purpose and relevant.
[CO 03/1063] was due to expire (‘sunset’) on 1 October 2017. [CO 11/926] was due to sunset on 1 April 2022 and ASIC Credit (Financial Counselling Agencies) Instrument 2015/992 was due to sunset on 1 April 2026.
Read more about sunsetting class orders
• ASIC Corporations (Financial Counselling Agencies) Instrument 2017/792
• ASIC Credit (Financial Counselling agencies) Instrument 2017/793