Hi
The following could be ruled as an ad. If it is, so be it but I know there are a lot of Vendor Financiers out there worried about the requirement to get an Australian Credit Licence (ACL).
Vendor Finance Institute Pty Ltd is about to commence a series of Vendor Finance ACL courses in Sydney, Melbourne, Perth and Brisbane. Details of the course dates are available at:
http://www.vendorfinanceinstitute.com.au/upcoming-events-2.htmlThe first 3 days of the course is training to complete the Cert IV in Financial Services (Finance/Mortgage Broking) and the 4th day covers the ACL application , as it relates to Vendor Financiers.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi AllFollowing is some information regarding a question that's being asked a lot recently in the Vendor Finance world:
Does my Vendor Finance business need an Australian Credit Licence?
The new National Consumer Credit Protection Act requires anybody or any company who “in the course of a business” provides consumer credit or consumer credit advice, to hold an Australian Credit Licence (ACL) or to be a Representative of an ACL holder.
• You do not need an ACL if you only plan to utilise Lease/Options.
• If you plan to use Instalment Contracts and/or Second Mortgages in your vendor finance (VF) business, you need to be an ACL holder or a Representative of an ACL holder.
• All Vendor Financiers who intend to become Joint Venturers, or who desire to advertise on websites or in the media need to obtain an Australian Credit Licence.
• Even if you only plan to use an Instalment Contract and/or Second Mortgage once, based on the information available from ASIC, it is advisable to get ACL coverage for your Instalment Contract or Second Mortgage. More information on this point follows.
“in the course of a business …”
ASIC Regulatory Guide 203 mentions;
“In relation to the provision of credit, the National Credit Code applies to credit contracts where, among other matters: the credit provider provides the credit in the course of a business of providing credit ….” and
“In relation to credit assistance and intermediaries, the National Credit Act states that a provider of credit assistance or an intermediary comes within the scope of the Act if the relevant credit activity occurs:
… in the course of, as part of, or incidentally to, a business carried on ….”In some quarters, the above quotes have led to the idea that if only two or three Instalment Contracts or Second Mortgages are undertaken or advised on each year, then the provider of these credit activities will not be seen as providing these activities “in the course of a business”.
The “in the course of a business” question has been addressed by ASIC. Regulatory Guide 203 also mentions;
“We have published guidance about this in Regulatory Guide 121 Doing financial services business in Australia (RG 121) at RG 121.41–RG 121.50. This guidance may be useful for deciding whether you are carrying on a business in Australia for the purposes of the National Credit Act.”
Regulatory Guide 121.42 (g) says;
“You will not be deemed to be carrying on a business in Australia merely because, … you:
conduct an isolated transaction that is completed within 31 days, not being one of a number of similar transactions repeated from time to time;”Obviously an Instalment Contact and/or a Second Mortgage IS longer than "31 days". Also, two or three Instalment Contracts or Second Mortgages per year IS "a number of similar transactions repeated from time to time".
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Paul,
I have been following this as an interested observer and appreciate the information you provide on the forums.
One thing I haven't got clear yet is the difference between Lease/Options and Instalment Contracts and/or Second Mortgages. And why are the lease/options exempt?
Regards,
Andrew
itsandrew
Go as far as you can see and you will see further.
Hi Andrew
Thanks. A Lease/Option is a set of paperwork used to control and possess a property. With residential property, the paperwork used consists of a residential tenancy agreement (for possession) and a call option (with caveat) for control.
An Instalment Contract uses a traditional Contract of Sale with a 12 or 13 page Instalment Schedule added. Contracts are exchanged and the purchaser is given possession, as long as they make their Instalment payments, until the sale completes. The paperwork is often drawn up for 20 to 30 years but most clients will refinance into a traditional loan, in 2 to 5 years. This addition of the Instalment Schedule to the standard Contract of Sale, has the effect of making the Contract a Contract of Sale and a Home Loan, all in the one document.
A Second Mortgage is just a traditional mortgage that's number two on the list of mortgages on the property's title. In vendor finance it's often used where the vendor gives a loan to cover any shortfall in the purchase price or available refinancing funds.
Better information on these subjects can be found at:
https://www.propertyinvesting.com/strategies/lease-options
https://www.propertyinvesting.com/strategies/wraps
http://www.vendorfinancelawyer.com.au/instalment_contracts.htm
http://www.vendorfinancelawyer.com.au/vendor_finance_intro.htm
http://www.vendorfinance.asn.au/Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
itsandrew wrote:Hi Paul,I have been following this as an interested observer and appreciate the information you provide on the forums.
One thing I haven't got clear yet is the difference between Lease/Options and Instalment Contracts and/or Second Mortgages. And why are the lease/options exempt?
Regards,
Andrew
Lease options would be exempt because there is no lending involved. You are just agreeing to sell the property to someone at a future point in time.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
PaulDobson wrote:Hi
The following could be ruled as an ad. If it is, so be it but I know there are a lot of Vendor Financiers out there worried about the requirement to get an Australian Credit Licence (ACL).
Vendor Finance Institute Pty Ltd is about to commence a series of Vendor Finance ACL courses in Sydney, Melbourne, Perth and Brisbane. Details of the course dates are available at:
http://www.vendorfinanceinstitute.com.au/upcoming-events-2.htmlThe first 3 days of the course is training to complete the Cert IV in Financial Services (Finance/Mortgage Broking) and the 4th day covers the ACL application , as it relates to Vendor Financiers.
Cheers, Paul
Hi Paul does this mean that anyone involved in the credit industry eg financial planners, Brokers etc(who have a licence already) do not need a new licence to do vendor financing?
Thanks
HarryThanks Paul and Terry.
I have a few questions regarding Lease/Options:
I have read a lot about options on this forum in the context of development. Is it the same thing (with a tenancy agreement attached)?
What sort of lifespan do people take on the options compared with instalment contracts and are they fairly straight forward?
After the introduction of the NCCP are lease/options becoming more common?
Also, where can I read/learn more information about lease options?
Andrew
itsandrew
Go as far as you can see and you will see further.
An option is just an agreement which allows the option holder to purchase the property at some time in the future.
A lease/option is just a term to describe a situation where a person has a lease with an option to buy as well. There are heaps of different ways in which these can be structured. I have seen some which are over 30 years with the strike price (at which the tenant can buy the property) going down like a PI loan. so after 30 years of paying rent they can purchase the property for $1 – they can also purchase at any time at a gradually reducing amount.
Or the option could be drawn up so that they pay market rate as determined by a valuation by HTW or market rate less 10%. You could charge higher rent and have part of this rent come off the strike price or you could charge normal rent with a fixed strike price and a option term of, say, 6 months.
It all comes down to your imagination and whatever you are able to negotiate.
BTW, you should consider the 2 different sides of options – selling and buying. Developers mainly buy, while LO people will be selling an option.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Harry
Prior to the 1 July 2010 there were various, State based, credit licences. As of 1 July these State based licences disappeared, to be replaced by the Australian Credit Licence (ACL). Therefore anyone who now provides credit or provides credit advice is required to get to get an ACL or become a Representative of an ACL holder, whether they have held a State based licence or not.
If a vendor financier is providing credit by way of Instalment Contracts or vendor financed mortgages, they will need all those transactions to be covered by an ACL. This coverage may come about by way of the vendor financier having an ACL, being an ACL Representative or possibly conducting the transaction in a joint venture with an ACL holder or Rep.
The same applies to a vendor financier that provides "advice" regarding Instalment contracts or vendor financed mortgages.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi AllThe two courses we've run so far, in Sydney and Melbourne, have been well received. Just FYI, our next course, in Brisbane, starts on Wednesday 10 November. The Cert IV runs Wednesday, Thursday and Friday and the ACL Application Day is on Saturday 13 November.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi All Vendor Financiers
ASIC recently made it known that unless you get your ACL Application into them by 10 December, you will not receive your ACL before 31 December. 10 December is only 3 weeks away!!
Vendor Finance Institute ran it's last ACL Application – Assistance Day, in Brisbane on 13 November and have no further Assistance Days programmed for this year. In an effort to ensure we help as many Vendor Financiers get their ACL before the end of the year as possible, we have turned the Assistance Day into a DVD set that's available as of today.
The ACL Application – Assistance Day consists of:
1. A manual that shows every page you will encounter during your ACL online application. Plus answer pages, so that you will have all the answers for your application, before you start the actual online application. The manual also contains printouts of all the Manuals, Policies and Documents ASIC require you to have to be eligible for an ACL.
2. A flash drive that contains all the Manuals, Policies and Documents mentioned above, in MS Word format, so you can add your business details to the Templates provided and edit them as required.
3. Me standing in front of you for a day, working through the manual and the contents of the flash drive.
The ACL Application – Assistance Pack is the same as the Assistance Day, except we replace me, standing in front of you for a day, with a set of two DVD's, of me working through the manual and the contents of the flash drive. All in all, 3 hours and 16 mins of sheer excitement
The DVD set, i.e. our Assistance Pack, will allow you to work at your own pace, while still covering all the information provided at the Assistance Day.
10 December isn't far away. The Assistance Pack is available at:
http://www.vendorfinanceinstitute.com.au/acl-pack.html
Included in the price are four, 15 minute support calls directly to me. I look forward to talking with you.
Cheers, PaulPaul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Paul,
Have there been many vendor financiers receive ACL's yet? The process is not particularly easy and most brokers have not applied for or received ACL's and a significant portion have not even fullfilled the compliance requirements to become Credit Reps of their aggregator. The first half of the new year will be interesting as there will be a lot of people in the finance industry who cannot trade, I assume it will be the same with vendor financiers.
Regards
AlistairHi Alistair
Yes a lot of vendor financiers have received their ACL's. I think the reason for this is vendor financiers operate in both areas of the new NCCP Act 2009, i.e. we "provide credit" and we "provide credit advice".
When the ACL was first brought to our attention early this year, we were concerned that the general vendor finance industry might make the mistake of ignoring it, so we decided to create a course to both help vendor financiers get their ACL's and to make us some money
We find that once our clients get the ACL Assistance Pack, it usually takes them, on average, about two weeks to get the ACL. Not that it takes that long but life intervenes. If you really got stuck into it and depending on the back-log in ASIC (they've recently been swamped), you could get it done in just a few days.
I agree, the first half of next year will be very interesting as the penalties for operating while unlicenced are large. Some vendor financiers will make the decision to operate with Lease/Options only, as they aren't regulated under the NCCP. However I think they'll find they're on a "one trick pony" and it may limit their business in the future but then, I'm biased
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Paul,
I have decided to use vendor finance to increase the cashflow of my current properties. I would like to start this process properly from the start so I would like to do your ACL pack and get a Credit Licence. Am I correct in thinking I can still do your ACL pack get the licence but just not recieve it till after Dec 31? Or is it to late altogether to go down this road? I could not find an area in your vendor finance institute website for questions like this? Maybe I was blind? Thankyou
ErrolHi Errol
The deadline of 31 December was only for people who "registered" for the ACL prior to 30 June this year. This "registration" allowed existing businesses the opportunity to continue to run their businesses from 1 July to 31 December, under the "registration". It also meant that existing businesses then had from 1 July to 31 December to put in their full application for the ACL.
For new entrants into the business, like yourself, your only deadline is that your first regulated transaction must have licence coverage before you undertake it. If you have no prior experience in the Credit Industry, you will need to do a Certificate IV in Financial Services (Finance/Mortgage Broking) before apply for an ACL. My suggestion would be:
1. Get your Cert IV. It can be done in via various teaching methods. The quickest is the 3 day, in classroom, course. We can organise that for you or you can organise it yourself. I've seen 3 day courses from between $900 and $1,100.
2. Then think of using our ACL Pack for the ACL application process.Please excuse the current VFI website. As you mentioned, it's a bit clunky. The new improved
one is under construction.Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi All Vendor Financiers
Awhile back ASIC made it known that people/businesses who had Registered for the ACL prior to 30 June, needed to submit their ACL applications prior to 10 December, to ensure they would get their ACL's issued prior to 31 December (the cut-off date for Registration validity).
Just last week, two students who had Registered and submitted their applications after 10 December where told that, as long as Registered people/businesses have lodged a full application prior to 31 December they will be OK to continue their businesses until their applications are either rejected or accepted.
So, if you're Registered and you thought it was too late, you still have until the end of the month to submit your full application.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
