Since the introduction of the National Credit Code in 2010, a lot of time has been spent by a substantial number of vendor financiers, trying to work out how to duck and weave around the two pieces of legislation that regulate vendor finance the most.
The Terrible Two
These two pieces of legislation are:
- the National Consumer Credit Protection Act that created the National Credit Code (NCC), and
- the various, State based, Real Estate Agent Acts (there is a different one for each State).
As a result of this ducking and weaving, awhile ago we heard Lease/Options would allow you to avoid regulation. Recently we’ve heard Back to Back Lease Options are the way to go.
What The Government Wants
To me, it seems pretty obvious the government requires a level of protection for consumers and they’ve legislated accordingly. My guess is this requirement for consumer protection isn’t going away and the more we, as an industry, try to duck and weave around it, the stronger the legislation will become.
My bottom line is: regulation of our industry is here to stay and going along with it isn’t that hard.
As Australia’s most experienced vendor finance solicitor, Tony Cordato, said, “anyone serious about vendor finance cannot be a one trick pony – that is, do lease options only.”
The Road To Acceptance
When the NCC first arrived I too decried it, ignored it and hoped it would go away. My beautiful wife Karen brought me to my senses with the news that I’d better get used to it because it wasn’t going away.
Around the same time we started to get legal opinion that Joint Ventures did not give us the protection we thought they did.
A little later, after reading the various Real Estate Agent Acts, I started to see how the various definitions of what constitutes ‘acting as an Real Estate Agent’ come awfully close to what we do when we’re helping a seller and a buyer get together.
Just How Hard Is It? (Credit Contracts)
Due to our years of vendor finance ‘prior experience’ (as ASIC calls it) we were able to get our own Australian Credit Licence (ACL). If we were starting off today, we’d become an Authorised Credit Representative until we had sufficient prior experience and then apply for our own ACL. Rough cost for our ACL was $2,000.
Now we can happily assist a seller and a buyer setup a credit contract to achieve their mutual aims. Without having to look over our shoulder 😉
Just How Hard Is It? (Real Estate Agent Activities)
When Rob and I decided we needed our full Real Estate Agent licences we paid about $3,100 to get them. We also spent quite a number of days in the classroom. We should have held off for couple of years 😉 as now the number of days required in the classroom has dropped significantly and I’ve recently seen course costs drop to below $2,000.
No more ducking and weaving required. We can now get on with our business with all the tools we need available to us. No more ‘one trick ponies’ and no more wasting time working out whether we need to be licenced for each transaction.
An Interesting Side Effect
Looking at our books we believe these licences have improved our bottom line. We now know we can transact the full range of transactions that arrive on our desk and we do 🙂
PS. FYI, I resigned as Vice President of the Vendor Finance Association last Tuesday. I remain a member and look forward to an Association that represents the whole industry, is cohesive and without factions (as far as that is possible)