ASIC Credit (Flexible Credit Cost Arrangements) Instrument 2017/780

This instrument is structured around a small number of operational concepts that determine coverage, prohibition triggers, safe harbours and administrative obligations. The key concepts in the text are the regulated person, flexible credit cost arrangement, introducer (and associated person), the pricing variables that may not be the basis for benefits, specified rates and base rates, specified fees and charges, and the recordkeeping and anti‑compensation rule.

• Regulated person and scope: The persons subject to the obligations are described as licensees (regulated persons) and, in some circumstances, both a licensee and an exempt special purpose funding entity (s 53A(1)). The instrument applies only where the flexible credit cost arrangement relates to a credit contract other than a home loan or to a consumer lease (s 53A(1)). The target is the commercial arrangement that connects a regulated credit provider or lessor with an introducer under a flexible cost mechanism.

• Flexible credit cost arrangement and introducer: The operative prohibition centres on benefits given to the introducer under the flexible credit cost arrangement or an associated person (s 53A(2)). The instrument assumes the existence of an introducer role and associated persons, but does not in the text supplied define those terms. The note inside s 53A(2) draws attention to an external definition of “determines, proposes or influences” for particular circumstances that do not count as influencing the rate, indicating that other parts of the Act address those definitional questions.

• Pricing variables as triggers: The statute targets two specific price signals. For credit contracts it is the annual percentage rate under the contract, and for consumer leases it is the rental charge measured as the amount by which the rental payable exceeds the cash price of the goods (s 53A(2)(c)(i)-(ii)). If the benefit amount is determined by reference to those signals, and the introducer has in some way determined, proposed or influenced the level of the APR or rental charge, the benefit is prohibited (s 53A(2)(d)).

• Determination, proposal or influence: The prohibition is conditional on the introducer having determined, proposed or influenced the APR or rental charge (s 53A(2)(d)). The instrument advises the reader to consult the definition of “determines, proposes or influences” elsewhere for circumstances that do not amount to such influence. This concept is therefore pivotal: the same payment will be permitted or prohibited depending on whether the introducer’s conduct meets that influence standard.

• Safe harbours by pre‑specified caps and bases: Section 53A(3) provides safe harbours where the benefit is determined by reference to APR or rental charge but remains within a range pre-specified by the regulated person before any introducer influence. For APRs, the APR must not exceed a “specified rate” that was specified by the regulated person before any introducer determination/proposal/influence, and either the APR must not be less than a base rate equal to 200 basis points less than the specified rate or, if it is less, the benefit amount must be calculated as if the APR were the base rate (s 53A(3)(a)(i)-(ii)). For rental charges, the parallel test uses a specified rental charge and a base amount that is 4 per cent less than the specified rental charge (s 53A(3)(b)(i)-(ii)). These mechanics convert a prohibition of rate‑linked benefits into a banded tolerance where the pricing variable was pre‑committed by the regulated person.

• Specified fees and charges and anti‑compensation rule: Section 53B introduces the concept of “specified fees and charges”, defined as the greater of $0 and the amount, if any, that a regulated person specified before any introducer determination/proposal/influence as the maximum amount of the relevant fees (s 53B(2)). The section prohibits paying benefits where the fees payable to introducers exceed those specified amounts (s 53B(1)), forbids determining those specified fees by reference to loss or potential loss of revenue stemming from application of s 53A (s 53B(3)), and requires the regulated person to keep written records of the basis for any specified fees for seven years (s 53B(4)). A note expressly links this to “dealer origination fees” or “dealer administration fees”, making the legislative target explicit in the text.

• Exclusions for internal corporate payments: Sections 53A(4) and 53B(5) exclude benefits given to the regulated person’s own directors or employees, related bodies corporate, and their directors or employees. Those benefits are not caught by the prohibitions in sections 53A(2) and 53B(1), (3) and (4).

• Enforcement levers: The instrument attaches civil penalties of 2,000 penalty units to the substantive civil prohibitions (s 53A(2); s 53B(1), (3), (4)). It also creates criminal offences for contravening the statutory requirements in the relevant subsections (s 53A(5); s 53B(6)) with penalties of 100 penalty units or two years imprisonment, or both.

• Transitional carve‑outs: Clause 6 of Part 3 prevents retroactive application to credit activities engaged in before commencement, to credit contracts or leases entered into before commencement, and to contracts entered into before 1 February 2019 where the offer or acceptance predated commencement (Pt 3 cl 6(a)-(b)(i)-(ii)). This preserves existing transactions.

Taken together, the instrument’s main concepts create a compliance architecture that conditions payment of introducer benefits on the origin of pricing decisions and on pre‑specified caps and bases that must be set and recorded before introducer influence. It also forecloses the specific response of increasing dealer-style fees to offset the prohibition, by forbidding calculation of those specified fees with reference to loss or potential loss from s 53A.

The instrument explicitly identifies several categories of persons and relationships that it reaches. The primary regulated parties are licensees (described as regulated persons) who have entered into flexible credit cost arrangements in relation to a credit contract (other than a home loan) or a consumer lease and who are, or propose to be, the credit provider or lessor under the relevant contract or lease (s 53A(1)(a)). The instrument also applies to arrangements involving both a licensee and an exempt special purpose funding entity where three conditions are satisfied: there is a servicing agreement between them in relation to a relevant credit contract or consumer lease; the licensee or the exempt special purpose funding entity has entered into a flexible credit cost arrangement in relation to the contract or lease; and the exempt special purpose funding entity is, or proposes to be, the credit provider or lessor (s 53A(1)(b)(i)-(iii)). Those combinations cover common structural forms where a licence‑holder originates or services a deal while an SPFE assumes legal exposure.

The immediate practical targets of the prohibitions are introducers under flexible credit cost arrangements and their associated persons, because the obligations prevent regulated persons from giving benefits to those introducers or associated persons in the specified circumstances (s 53A(2)). The instrument therefore affects any business acting as an introducer, any person associated with an introducer who receives benefits, and credit providers/lessors and servicers who remunerate introducers.

There is an explicit carve‑out for home loans; the obligations apply only to credit contracts other than home loans and to consumer leases (s 53A(1)). The effect is to exclude mortgage lending from this part of the instrument while capturing consumer credit other than home loans and consumer leases.

The text also identifies related corporate actors who are excluded from the prohibitions when they receive benefits. Payments to a director or employee of the regulated person, to a related body corporate of the regulated person, or to a director or employee of a related body corporate are not caught by subsection (2) of s 53A (s 53A(4)), and are similarly excluded from s 53B obligations under s 53B(5). Those exclusions mean intra‑group payments and employee remuneration are outside the targeted prohibitions.

Regulated persons who specify fees and charges are specifically required to set the “specified fees and charges” before any introducer determination, proposal or influence and to retain written records for seven years (s 53B(2), (4)). Credit providers, lessors and servicers that work with introducers, and dealers that historically recover origination/administration costs through dealer fees, are thus materially affected by the specification, recording and anti‑compensation rule in s 53B(3)-(4). The instrument’s note explicitly labels the kinds of fees targeted as dealer origination or dealer administration fees.

Compliance functions within licensees will need to manage the new duties, because the instrument makes the regulated person responsible for ensuring that benefits are not given in contravention of the prohibitions (s 53A(2); s 53B(1)). Breaches attract civil and criminal penalties (s 53A(2), (5); s 53B(1), (3), (4), (6)), making the risk profile for directors, compliance officers and the licensee itself material.

Finally, the transitional clause in Part 3 limits coverage for pre‑existing activity: the instrument does not apply to credit activity engaged in before commencement; to contracts or leases entered into before commencement; and to contracts or leases entered into before 1 February 2019 where the offer or acceptance predated commencement (Pt 3 cl 6). Parties with transactions that satisfy these timing tests are not affected by the new rules for those specific transactions.

In summary, who pays and who must decide: regulated persons (licensees and certain SPFE arrangements) must decide whether a given benefit is caught by the pricing‑linked prohibition, must set and document any specified rates and specified fees before introducer influence, must ensure internal payments fall within the exclusions, and must retain the required records. Introducers and their associated persons can no longer be paid variable benefits tied to APR or rental charge where they influenced the pricing, and dealers that have relied on origination/admin fees must ensure any such fees are specified in advance and not calculated to compensate for the s 53A prohibition.

The instrument creates affirmative duties for regulated persons and concomitant constraints on introducers and associated persons. It does not create express entitlements in favour of any private party beyond the statutory exemptions and allowed practices, but the duties have the practical effect of altering what regulated persons may contractually agree to or pay. The principal duties and related procedural obligations follow from the text.

Primary prohibitions and duties

• Prohibition on certain benefits: A regulated person must not give, and where s 53A(1)(b) applies must not engage in conduct leading another regulated person to give, any benefit, monetary or non‑monetary, to the introducer or an associated person where (a) the benefit amount is determined by, or varies by reference to, the APR for a credit contract or the rental charge for a consumer lease, and (b) the introducer or associated person has determined, proposed or influenced the APR or rental charge (s 53A(2)(a)-(d)). The duty is framed as a prohibition on providing benefits that are price‑linked and tied to introducer influence.

• Exceptions for pre‑specified bands: Section 53A(3) creates a specific duty to ensure that where benefits are determined by reference to APR or rental charge they must fall within a pre‑specified maximum and base band. For APRs the regulated person must have specified a maximum APR (specified rate) before any introducer influence; the APR actually applied must not exceed that specified rate, and must either not be below the base rate (specified rate less 200 basis points) or the benefit must be calculated as if the APR were the base rate (s 53A(3)(a)(i)-(ii)). For rental charges a specified rental charge and a base amount 4 per cent less than that specified rental charge perform the same role (s 53A(3)(b)(i)-(ii)). Practically, regulated persons who wish to continue to give benefits tied to APR or rental charge must pre‑commit to maximums and must apply the base‑rate floor rule.

• Prohibition on excessive dealer‑style fees and anti‑compensation: Section 53B(1) prohibits payment of benefits to an introducer or associated person where credit fees or consumer lease fees payable to the introducer exceed the “specified fees and charges” as defined in s 53B(2). The regulated person must specify any maximum amount before any introducer influence, and s 53B(3) separately requires that the regulated person must not determine those specified fees by reference to the loss or potential loss of revenue to the introducer resulting from the effect of s 53A on how a benefit can be determined. In short, a regulated person cannot offset the s 53A prohibition by inflating or setting fees to compensate introducers. Section 53B(4) also mandates seven years of written records documenting the basis on which any specified fees and charges were determined.

Recordkeeping and pre‑specification duties

• Specified fees and charges must be set before any introducer influence and must be documented. The statutory definition of “specified fees and charges” looks to amounts specified by the regulated person before any determination/proposal/influence referred to in s 53A(2)(d) as the maximum permitted for those fees (s 53B(2)). The regulated person must keep written records of the basis for any such specification for seven years (s 53B(4)).

Exclusions and limited rights

• Exclusion for internal payments: Benefits provided to the regulated person’s own directors or employees, to related bodies corporate, or to directors or employees of a related body corporate are outside the scope of s 53A(2) and s 53B(1), (3), (4) (s 53A(4); s 53B(5)). These exclusions mean that internal remuneration and intra‑group transfers are not prohibited by the instrument. That is an affirmative carve‑out rather than a positive right; it is a permitted practice.

Enforcement and consequences

• Civil and criminal penalties: The duties carry civil penalties of 2,000 penalty units for contraventions of the substantive prohibitions in s 53A(2) and in s 53B(1), (3), (4). There are also criminal offences: s 53A(5) makes an offence of contravening the s 53A(2) requirement, with a penalty of 100 penalty units or two years imprisonment, or both; s 53B(6) makes an offence of contravening requirements under s 53B(1), (3) or (4) with the same criminal penalty. The text sets out the commission elements for those criminal offences as the person being subject to the requirement, engaging in conduct, and that the conduct contravenes the requirement (s 53A(5)(a)-(c); s 53B(6)(a)-(c)). The duties therefore carry both civil and criminal exposure.

Practical procedural rights and duties implied by the text

• Pre‑commitment and documentation: Regulated persons have the procedural duty to pre‑specify maximum APRs, specified rental charges and specified fees before introducer influence, and to retain the documentary basis for those specifications for seven years (s 53A(3); s 53B(2), (4)). This creates an administrative compliance obligation to record pricing and fee policy decisions in advance of introducer involvement.

• Limit on fee-setting motivation: A regulated person must not determine specified fees by reference to loss or potential loss to an introducer resulting from the way s 53A affects how a benefit may be determined (s 53B(3)). This limitation restricts the permissible motives and bases for fee determination.

Rights that are not present in the text

• No express private right of action: The instrument does not create an express private right of action or statutory entitlement to damages for consumers or introducers. The enforcement mechanisms set out are civil penalties and criminal sanctions, but the instrument does not itself provide private enforcement remedies in the sections supplied.

• No express approvals or licences: The instrument does not establish a new approval process or licensing requirement beyond the status of “licensee” as a regulated person. Any interpretation or operationalisation of the “determines, proposes or influences” trigger will require reference to definitions elsewhere in the Act.

In summary, the key duties are: do not pay benefits linked to APR or rental charge if the introducer influenced those price points; if benefits are to be linked to those variables then set maximums and base bands before introducer influence; do not inflate specified fees to compensate for the prohibition; keep seven years of records supporting any specified fees. The rights contained in the text are limited to the statutory exceptions for internal corporate payments and the safe‑harbour bands; otherwise the instrument is a set of negative obligations on regulated persons and their commercial pricing practices.

The instrument attaches both civil and criminal sanctions to breaches of the obligations in sections 53A and 53B. The enforcement architecture is concentrated on pecuniary civil penalties for the substantive prohibitions and on criminal offences for contravention of the same statutory requirements, as set out below.

Civil penalties

• Section 53A(2) includes an express civil penalty of 2,000 penalty units for giving, or causing another regulated person to give, a benefit to an introducer or associated person where the benefit amount is determined by reference to APR or rental charge and the introducer influenced the APR or rental charge (s 53A(2)). The civil penalty applies to contraventions of the subsection’s requirement.

• Section 53B attaches civil penalties of 2,000 penalty units to its substantive prohibitions and obligations. Specifically, s 53B(1) (prohibiting benefits where fees exceed specified fees and charges), s 53B(3) (prohibiting determination of specified fees by reference to loss or potential loss of revenue to the introducer resulting from s 53A), and s 53B(4) (requiring seven years of written records) each carry a civil penalty of 2,000 penalty units.

Criminal offences

• Section 53A(5) establishes a criminal offence where a person who is subject to the requirement in s 53A(2) engages in conduct that contravenes that requirement. The criminal penalty is 100 penalty units or two years imprisonment, or both.

• Section 53B(6) establishes a criminal offence where a person who is subject to a requirement under s 53B(1), (3) or (4) engages in conduct that contravenes that requirement. The criminal penalty is 100 penalty units or two years imprisonment, or both.

Elements and burden

• The statute structures the criminal offence elements as: (a) the person is subject to the specific statutory requirement; (b) the person engages in conduct; and (c) the conduct contravenes the requirement (s 53A(5)(a)-(c); s 53B(6)(a)-(c)). The instrument does not in the supplied text specify fault elements beyond those structural elements; it does not, in the sections shown, expressly require knowledge, recklessness or dishonesty for the criminal offence. For any question about requisite mental elements for criminal prosecution, the interpreting authorities and other Act provisions would need to be consulted because the supplied text itself frames the elements in those three parts.

Regulatory enforcement paths and compliance tools implied by the text

• The text establishes civil enforcement through civil penalties and criminal enforcement through the offence provisions. It does not set out in these sections which regulator will administer the civil penalty proceedings, the procedures for imposing civil penalties, or the prosecutorial authority for criminal offences. Those procedural mechanisms are likely set elsewhere in the wider statutory framework governing licensees, but the instrument as supplied ties the conduct to civil and criminal exposure.

• The instrument’s recordkeeping duty in s 53B(4) , seven years of written records of the basis for specified fees and charges , imposes an evidentiary burden that will be material in any enforcement action. The regulator or prosecutor will be able to test asserted compliance by reference to those records.

Consequences for internal controls and compliance functions

• The severity of the civil penalty quantum (2,000 penalty units) and the availability of criminal sanctions (100 penalty units or up to two years imprisonment, or both) creates strong incentives for regulated persons to implement compliance controls to avoid the required conduct. The instrument also creates a specific administrative recordkeeping duty (s 53B(4)) that will be scrutinised in enforcement.

Transitional limitations on enforcement

• Part 3 clause 6 excludes pre‑existing activity and contracts from the instrument’s application (Pt 3 cl 6(a)-(b)(i)-(ii)). That exclusion limits enforcement exposure to arrangements entered into after commencement, and to contracts not caught by the 1 February 2019 lookback rule in specified offer/acceptance circumstances.

Summary of penalties and enforcement: breaches of the substantive prohibitions in s 53A(2) and in s 53B(1), (3), (4) carry civil penalties of 2,000 penalty units. Contraventions of the statutory requirements can also constitute criminal offences under s 53A(5) and s 53B(6), carrying penalties of 100 penalty units, or two years imprisonment, or both. The instrument imposes documentary obligations that will be central to regulatory and prosecutorial proof.

The instrument is textually a set of additions to the regulatory architecture governing licensees, credit contracts (other than home loans) and consumer leases. The supplied text contains internal cross‑references and notes indicating that definitions and procedural mechanisms exist elsewhere in the Act. The interaction points, as directly shown in the text, are as follows.

Dependence on definitions elsewhere in the Act

• The instrument instructs the reader to consult the definition of “determines, proposes or influences” for various circumstances that do not amount to determining, proposing or influencing the amount of the APR or rental charge (s 53A(2) Note). That indicates that the precise reach of the prohibitions is calibrated by definitions and interpretative provisions found elsewhere in the statutory framework. Any interpretation of whether an introducer’s conduct triggers the prohibition must therefore be made against those elsewhere definitions.

• The instrument assumes the existing statutory categories of “licensee” and “exempt special purpose funding entity” and uses the phrase “regulated person”. Those terms derive from the wider Act’s definitions and licensing framework. Determining whether an entity is a licensee or an exempt SPFE requires reference to the full Act and any subordinate instruments that define licensing status and exemptions.

Interaction with consumer credit and consumer lease rules

• The instrument differentiates between credit contracts other than home loans and consumer leases. It therefore interacts with the segmentation in the broader consumer credit regulatory regime. For example, practices lawful for home loans are explicitly outside this instrument’s scope (s 53A(1)). Any analysis of compliance must therefore consider the wider Act’s provisions that govern home loans and other credit products to ensure which instrument applies to a given product.

• The focus on APR for credit contracts and on the rental charge for consumer leases connects to existing requirements that specify how APR and lease charges are calculated and disclosed. The instrument’s prohibitions will operate alongside those disclosure and calculation rules.

Interaction with existing fee‑setting, agency and representative regimes

• Section 53B(1)(c)(i) and (ii) and s 53B(1)(d)(i)-(ii) target scenarios where the introducer or associated person is providing credit services as a representative of the credit provider/lessor, or is a linked supplier of the credit provider/lessor. Those formulations align with existing legal concepts of representation and linked‑supplier relationships in the wider regulatory scheme. Entities that act as representatives or linked suppliers will therefore need to reconcile their existing agency and representative obligations with the new restrictions on fee levels and fee bases.

• The note in s 53B explicitly identifies the provision as applying to fees commonly described as dealer origination fees or dealer administration fees. That situates the instrument within the broader transactional ecosystem in which dealers, brokers and other intermediaries historically recover costs through such fees.

Interaction with enforcement and procedural frameworks outside the instrument

• The instrument imposes civil penalties and creates criminal offences but does not specify procedural enforcement mechanisms, which are likely set out elsewhere in the Act (for example in parts of the Act that govern civil penalty proceedings, enforcement by the relevant regulator, and criminal prosecution). Therefore the instrument will operate within the Act’s general enforcement framework and any administrative or prosecutorial rules established for licensee oversight.

Interaction with corporate law and related‑party regimes

• The exclusions for payments to a regulated person’s director, employee, related body corporate or directors and employees of a related body corporate (s 53A(4); s 53B(5)) mean that the instrument will intersect with corporate law rules on related‑party transactions, remuneration disclosure and director duties. The permitted intra‑group and employee payments remain subject to those other legal regimes even though they are outside these provisions.

Interaction with transitional and savings provisions

• Part 3 clause 6 creates non‑retroactivity for activities and contracts entered into before commencement and for certain contracts entered into before 1 February 2019 in response to pre‑commencement offers or acceptances (Pt 3 cl 6). That interacts with the timing rules and transitional arrangements elsewhere in the statute and subordinate instruments that govern when new regulatory obligations apply. Practitioners must assess whether a particular transaction qualifies for the transitional carve‑outs.

What the instrument does not itself change

• The instrument does not redefine APR or rental charge for disclosure purposes, it does not alter licensing criteria, and it does not change other existing consumer protections in the wider statute. Its effect is targeted to the intersection of introducer remuneration and pricing variables.

In short, proper application of these sections requires reading them alongside the Act’s definitional and enforcement provisions, the rules governing representations and linked suppliers, and the Act’s disclosure and calculation rules for APR and lease rental charges. The text supplied leaves those interactions to the broader statutory framework, which should be consulted to determine precise scope and enforcement mechanisms.

The text supplied includes only the new operative provisions (sections 53A and 53B) and a transitional Part 3 clause 6 that limits retroactivity. The instrument as presented does not contain any prior versions, repeals, or amending instrument citations. Therefore the only amendment history available in the supplied material is the transitional saving described in Part 3.

Transitional application (existing transaction exclusion)

• Clause 6 of Part 3 provides the sole temporal and transitional rule in the supplied text. It states that the instrument does not apply to: (a) any credit activity engaged in before the instrument commences; and (b) a credit contract or consumer lease that was entered into before the instrument commences, or entered into before 1 February 2019 as a result of an offer made by the credit provider or lessor before commencement, or an acceptance by the credit provider or lessor before 1 February 2019 of an offer made by the consumer before commencement (Pt 3 cl 6(a)-(b)(i)-(ii)). These transitional rules function as retrospective carve‑outs for pre‑existing commercial activity and for certain transactions where offers or acceptances preceded the instrument’s commencement.

No other amendments or legislative history provided

• The supplied material does not list prior versions of these sections, legislative amendments, explanatory memoranda, second reading speeches, commencement dates, or related instruments. There is therefore no legislative amendment history to record in the text supplied beyond the transitional carve‑out.

Practical consequence of the limited amendment history in the supplied text

• Because the instrument includes an explicit transitional provision, practitioners need to check the commencement date (not provided in the material supplied) to determine which transactions are excluded under Pt 3 cl 6. The absence of other amending history in the text means that any further legislative changes, interpretative precedents, or administrative guidance must be sought outside this instrument.

If you require a formal amendment ledger or a chronology of changes to these sections, that information will be in the broader legislative record and statutory compilation that includes commencement notices and any subsequent amendments. The supplied text does not provide that record.

The instrument as supplied contains no litigation history. The text does not name any cases, nor does it include citations to judicial decisions, interpretative rulings, or precedent. There are no recorded prosecutions, civil penalty proceedings, or contested interpretations included in the material provided.

Implication for practitioners

• Because there is no litigation history in the text, questions about how courts or tribunals will construe key phrases in the instrument,most importantly the meaning of “determines, proposes or influences”, and what constitutes an introducer or an associated person in various factual patterns,will remain open until interpreted by relevant courts or administrative bodies. The instrument itself alerts the reader that definitions exist elsewhere, so early litigation or regulatory guidance may be decisive in shaping practical compliance.

• Enforcement agencies and regulated entities will provide the first practical tests of the instrument through interpretation, administrative enforcement and potential criminal or civil prosecutions. The absence of recorded litigation in the supplied text means that compliance advisers must prepare for uncertainty on borderline facts, and rely on the statutory text, accompanying definitions elsewhere in the Act, and any administrative guidance from regulators.

If you want a search for subsequent cases or enforcement actions that interpret these provisions, that will require consultation of court records, regulatory enforcement releases and legal databases, because none are referenced in the supplied instrument.

The text contains several specific drafting features and procedural triggers that create traps for the unwary. The following are concrete operational “gotchas” that arise directly from the instrument’s language and structure.

1. The prohibition is conditional on introducer influence, not on the existence of a benefit alone (s 53A(2)(d)). If an introducer did not “determine, propose or influence” the APR or rental charge, the prohibition in s 53A(2) will not be engaged. But the instrument refers to the definition of “determines, proposes or influences” elsewhere, so whether a particular interaction constitutes influence may be non‑obvious and depends on the wider Act’s definitions. Do not assume that simple referral or providing information is harmless; consult the definitional provisions.

2. Safe harbour depends on pre‑specification before any introducer influence (s 53A(3); s 53B(2)). A regulated person who attempts to rely on the specified rate or specified fees but cannot show that the specification occurred before any introducer determination/proposal/influence risks breaching the provision. The statutory ordering matters.

3. Base rate floors and base amount calculations are narrow and precise. For APR‑linked benefits the base rate is 200 basis points less than the specified rate; for rental charges the base amount is 4 per cent less than the specified rental charge (s 53A(3)(a)(ii), (b)(ii)). If the actual APR or rental charge is below those base thresholds, the permitted benefit may need to be recalculated as though the APR or rental charge were at the base level. Practitioners must ensure their calculators and systems implement those mechanics correctly.

4. The instrument explicitly excludes payments to directors, employees and related bodies corporate (s 53A(4); s 53B(5)). However, payments that are routed to related parties or that are disguised as consultancy fees or vendor payments may still fall foul of the prohibitions if the Statute’s substantive elements are satisfied. The existence of an exclusion does not licence creative re‑characterisation absent careful legal clearance.

5. Recordkeeping is specific and long. Section 53B(4) requires seven years of written records of the basis for any specified fees and charges. Failure to keep the records is itself actionable with a civil penalty of 2,000 penalty units (s 53B(4)). The evidentiary burden in an enforcement action will fall on the regulated person to demonstrate that the specified fee was properly set and documented in advance.

6. The anti‑compensation rule is explicit and broad. Section 53B(3) prohibits determining the specified fees by reference to the loss or potential loss of revenue to an introducer resulting from the operation of s 53A. This prevents a straightforward pass‑through approach whereby a regulated person increases dealer fees to offset what it can no longer pay as APR‑linked benefits. The provision requires that fee-setting not be motivated by restoring introducer revenue lost due to s 53A.

7. Civil and criminal exposure coexist. The instrument imposes both civil penalties (2,000 penalty units) and criminal penalties (100 penalty units or two years imprisonment, or both) for contraventions. That creates a dual risk profile. The criminal offence elements in the supplied text are framed as a person being subject to the requirement, engaging in conduct, and the conduct contravening the requirement (s 53A(5); s 53B(6)). The supplied text does not specify fault elements beyond that, so counsel should not assume a requirement of mens rea without consulting the wider Act and relevant prosecutorial practice.

8. Home loans are outside the regime. The instrument applies only to credit contracts other than home loans (s 53A(1)). Do not apply these provisions to mortgage products unless other parts of the Act bring them within scope.

9. Transitional carve‑outs must be checked on precise timing facts. Part 3 clause 6 excludes pre‑commencement activity and certain contracts entered into before 1 February 2019 where offers or acceptances predate commencement (Pt 3 cl 6). Whether a given contract falls within the transitional savings depends on the timing of offers and acceptances as well as the commencement date, which is not supplied in the material here.

10. The instrument contemplates representational and linked supplier contexts. Section 53B(1)(c) and (d) explicitly capture fees payable where the introducer is providing credit services as a representative or is a linked supplier. Entities who are representatives or linked suppliers should treat dealer‑style fees as potentially captured by s 53B’s specified fees cap.

11. “Associated person” is not defined in this supplied text. Because benefits given to associated persons are captured, ensure that the wider Act’s definition of associated person is consulted. Payments to parties that are associated with an introducer may be covered even if those payments are not paid directly to the introducer.

12. The instrument is silent on how regulators will exercise discretion to pursue civil or criminal avenues or how proportionality will be applied. Enforcement strategy and practice will materially affect commercial risk, so anticipate regulatory guidance or early precedents.

13. The note describing s 53B as covering “dealer origination fees” is illustrative but signals legislative focus. Dealers that historically relied on such fees must pay attention because the text targets those fees and constrains their ability to be used as compensatory mechanisms.

Each of these items is grounded in the instrument’s language. Practitioners should therefore treat the instrument as creating hard procedural and documentary requirements with precise numerical bands and pre‑specification ordering, and with material dual civil and criminal exposure for failures.

Compliance under this instrument requires both legal judgement on the factual triggers and practical process changes to documentation, pricing systems and payment flows. The following is a concrete, source‑grounded checklist of steps, mapped to the specific statutory obligations and the operational mechanics the text establishes.

Identify scope and roles

1. Determine whether your entity is a regulated person within the meaning of these sections: are you a licensee who has entered into a flexible credit cost arrangement in relation to a credit contract (other than a home loan) or a consumer lease and are, or will be, the credit provider or lessor? If you operate with exempt special purpose funding entities, check whether you are a party to a servicing agreement and whether the SPFE is or will be the credit provider/lessor such that s 53A(1)(b) applies (s 53A(1)(a)-(b)).

2. Map commercial roles: establish which third parties are introducers and who are associated persons under the wider Act. The instrument targets benefits paid to an introducer under the flexible credit cost arrangement or to associated persons (s 53A(2)). Consult the Act’s definitional sections to identify who counts as an associated person and under what circumstances an introducer is treated as having “determined, proposed or influenced” pricing.

Assess existing arrangements for catch‑up or entitlement

3. Identify whether existing contracts fall within the transitional carve‑outs in Part 3 clause 6. Exclude contracts and credit activity engaged in before the instrument’s commencement and contracts entered into before commencement or before 1 February 2019 in the specific offer/acceptance circumstances (Pt 3 cl 6). For ongoing portfolios, create a schedule documenting which contracts are transitional and which post‑commencement so the compliance treatment differs accordingly.

Adjust pricing and benefits architecture

4. Stop paying benefits that are calculated by reference to APR or rental charge where the introducer has determined, proposed or influenced the APR or rental charge. Section 53A(2) prohibits giving benefits, and s 53A(5) makes contravention a criminal offence. Remap all benefit calculation formulas to identify any variable that references APR or rental charge and trace whether the introducer contributed to the pricing decision.

5. If you intend to retain benefits linked to APR or rental charge, adopt pre‑specification of a maximum (specified rate or specified rental charge) before any introducer influence. Section 53A(3) allows benefits that are determined by reference to APR or rental charge where the APR or rental charge is not more than the specified rate specified by the regulated person before any introducer influence and other conditions are satisfied (s 53A(3)(a)-(b)). Document and time‑stamp the specification process.

6. Implement the base rate/base amount rules in your pricing systems. For APRs the base rate is 200 basis points less than the specified rate; if the APR ends up below the base rate, calculate the benefit as if the APR were the base rate (s 53A(3)(a)(ii)(A)-(B)). For rental charges the base amount is 4 per cent less than the specified rental charge and the same mechanics apply (s 53A(3)(b)(ii)(A)-(B)). Ensure your systems correctly apply those floors when computing benefit amounts.

Set and document specified fees and charges

7. For fees commonly described as dealer origination or dealer administration fees, ensure any maximum specified fee is set before any introducer influence. Section 53B(2) defines “specified fees and charges” by reference to an amount specified by the regulated person before any introducer determination/proposal/influence as the maximum permitted amount. Do not backdate specifications or apply them after introducer influence.

8. Do not calculate specified fees by reference to loss or potential loss to introducers resulting from s 53A. Section 53B(3) forbids determining specified fees with reference to such loss. Your pricing committee should adopt written minutes and rationales for fee levels that avoid any compensatory linkage to s 53A’s effects.

Recordkeeping and evidentiary steps

9. Maintain written records of the basis for any specified fees and charges for seven years (s 53B(4)). The records must demonstrate that the specified amount was set before any introducer influence and the commercial basis for the figure. Create an auditable trail: dated board or delegated committee approvals, supporting costings, market comparators and the legal advice considered.

10. Maintain contemporaneous records to show the timing and substance of any communications with introducers. Because the prohibition depends on whether an introducer “determined, proposed or influenced” pricing, contemporaneous evidence that shows no introducer influence will be important. Where introducers provide inputs, ensure there is a clear documented process that delineates whether the introducer’s role was strictly informational and thus outside the statutory definition of influence as defined elsewhere in the Act.

Contractual and operational controls

11. Update introducer/incentive agreements and dealer contracts to remove APR‑ or rental‑linked benefit formulas where the introducer has any role in setting the relevant pricing variables. Replace variable, price‑linked payments with fixed fees or other permissible remuneration structures that do not reference the APR or rental charge and are not calculated to compensate for lost APR‑linked benefits in contravention of s 53B(3).

12. Where benefits are paid to employees, directors or related bodies corporate, ensure proper governance and documentation to support the exclusion under s 53A(4) and s 53B(5). The exclusions apply to those internal payments, but those payments remain subject to other corporate governance requirements.

Compliance monitoring and governance

13. Establish a compliance control that checks pre‑specification timing. Ensure that the person or committee approving specified rates and specified fees logs the date and the fact that no introducer influence has occurred before approval.

14. Train sales, dealer and commercial staff about the new prohibitions. Because introducers and dealers often interact closely with pricing and finance teams, frontline staff must understand that communications that affect pricing could trigger the prohibition.

15. Conduct regular audits of dealer fees and introducer payments. The civil penalty and criminal exposure make periodic reviews prudent. Use the seven‑year records requirement as an internal audit checklist item.

Legal and risk management

16. Obtain legal advice on borderline facts where introducer inputs are extensive. Because the statutory trigger depends on whether an introducer “determined, proposed or influenced” pricing, take legal advice and document it for situations where introducer engagement is necessary for legitimate operational reasons.

17. Consider vendor and representation arrangements. Because s 53B expressly captures payments where the introducer provides credit services as a representative or is a linked supplier (s 53B(1)(c)-(d)), review representative agreements and linked supplier relationships to ensure fee structures comply.

Practical templates and operational artefacts to create

18. A template “specified fees and charges” declaration form with date, signatory, business rationale and supporting computations that is retained for seven years (s 53B(2), (4))