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Accountants providing certificates for limited recourse borrowing arrangements may inadvertently be providing advice in breach of the National Consumer Credit Protection Act 2009, according to a financial services law firm.
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Accountants at risk of breaching credit laws
08 September 2014
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11 minute read
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Lesley Thorne, senior lawyer at The Fold Legal, said SMSF clients often ask their accountant to complete a certificate from the lender in order to confirm they have advised the client about the terms, risks, impact or effect of the loan, as well as its suitability for them and their ability to meet repayments.
However, unless the accountant holds an Australian Credit Licence or is a Credit Representative of a licensee, it is an offence to provide ‘credit assistance’ or ‘act as an intermediary’ in relation to consumer credit. In addition to being illegal, most accountants will not be covered for this advice under their existing insurance policy.
“Because the objective of an SMSF is to provide retirement funds for members, a property purchase or renovation by the SMSF will always be for investment purposes,” Ms Thorne said. “This means that a loan provided to SMSF trustees who are individuals intending to purchase/renovate property will be consumer credit.”
“This means that if the client’s loan is consumer credit and the adviser or accountant isn’t licensed or authorised, they can only provide the client and their lender with factual information.”
Where a loan is to purchase a different type of asset or the SMSF has a corporate trustee it won’t be considered consumer credit, Ms Thorne says.
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Ms Thorne’s tips for advisers and accountants when they are asked to provide an advice certificate for a client are:
• Do read the certificate carefully – understand what you are being ask to certify
• Don’t certify that you have provided advice that you are not authorised or qualified to provide, or haven’t in fact provided
• Don’t provide certification as to the suitability of a loan or a client’s ability to repay it – it is the lender’s responsibility to assess this
• Do strike through any sections that contain anything other than factual information
Ms Thorne says it is a complex area, so if in doubt, advisers and accountants should speak to their compliance officer or seek legal advice.
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