AFSL now needed for margin lending

Lenders without a financial services licence may find themselves roped into some version of the scheme that applies to many of their rivals now that the Australian government, rather than state governments, will take control of consumer credit laws.

The minister for superannuation and corporate law, Nick Sherry, yesterday outlined the scope of the regulations that the government plans to apply to margin lending, which falls under Commonwealth control from July. Other forms of consumer credit will switch to Commonwealth jurisdiction in 2009.

Sherry said suppliers of margin loans will have to hold an Australian Financial Services Licence.

The few margin loan providers in the market probably all hold these licences already given the broad scope of their banking businesses.
However, there may be niche providers who do not have a licence.

In other forms of consumer credit, often toward the expensive and more controversial end of the market, credit providers do not have to hold an AFSL.

Providers of margin loans will also have to comply with conduct standards, provide a product disclosure statement and statement of advice and also will be subject to responsible lending conduct provisions.

Sherry said these "responsible lending" terms would apply "as part of broader consumer credit reforms covering all credit providers".