Lenders relied, and continue to rely, on retail dealers submitting completed loan applications that give accurate information about the applicant’s financial situation and sufficient means for the lender to verify the applicant’s financial situation. Often, the retail dealer will not make the underlying sale unless the loan is approved. The dealer thus has a strong reason to portray the loan applicant’s financial situation in a way that will warrant loan approval. On this matter the case studies showed that dealers did not, and it can safely be assumed, do not now, always record the true position.
Yet the lender must meet its obligations under the NCCP Act, regardless of whether it has sub‑contracted some or all of the steps to a retail dealer and regardless of whether its contract with the dealer obliges the dealer to do these things on pain of termination of the dealership.
As the Productivity Commission has noted, when the NCCP Act was introduced in 2009, the Government said that it would review the exemption of retailers within 12 months. In 2013, Treasury announced a review of the exemptions for retail dealers (in its terms, vendor introducers), released a discussion paper and sought submissions. The discussion paper proposed three options for consideration:
- maintaining the status quo;
- requiring retail dealers to comply with the NCCP Act; or
- modifying the application of the obligations in the NCCP Act, according to the functions they are performing, so that retail dealers who are more actively involved in product selection and delivery would be subject to a higher level of regulation:
- retail dealers acting as a broker would be required to hold an ACL or be appointed as a credit representative by an ACL holder;
- retail dealers who act only on behalf of a single financier or under first or second choice arrangements would be subject to modified and limited regulation under the NCCP Act; and
- retail dealers who have a role in product selection but have a limited role in arranging finance would be subject to different modified regulation under the NCCP Act.
As the 2013 Treasury discussion paper said, the exemption of retail dealers under the NCCP Act has several consequences:
- they are not subject to entry or conduct standards and ASIC has no power to exclude from the market any who engage in conduct that is dishonest or incompetent;
- they have no responsible lending obligations; and
- consumers may be unable to obtain remedies for their conduct.
Treasury did not complete the review. The Productivity Commission has recommended that Treasury do that ‘with a view to removing or reforming the exemption’.
On the material I have seen, I would strongly favour the second option identified by Treasury in its 2013 discussion paper. That is, I strongly favour removing the exemption of retail dealers from the operation of the NCCP Act, with the consequence that retail dealers would be subject to the requirements of that Act.
Recommendation 1.7 – Removal of point-of-sale exemption
The exemption of retail dealers from the operation of the NCCP Act should be abolished.
 Productivity Commission, Report 89, 29 June 2018, 432.
 Treasury, The Exemption of Retailers from the National Consumer Credit Protection Act 2009, January 2013.
 Treasury, The Exemption of Retailers from the National Consumer Credit Protection Act 2009, January 2013, 2.
 Treasury, The Exemption of Retailers from the National Consumer Credit Protection Act 2009, January 2013, 7.
 Productivity Commission, Report 89, 29 June 2018, 433.