Lending without a licence? It’s no problem with Domain
The platform’s new finance partner, RealtyAssist, provides loans of up to $5m without having a credit licence, taking advantage of exemptions in the law.
RealtyAssist, Domain Holdings’ new finance partner, is providing vendor loans of up to $5m without having a credit licence – a move that has seen it become the target of complaints lodged with the corporate regulator.
RealtyAssist provides services to some of the largest realtors in the country – The Agency, Laing+Simmons and Century 21 – including giving vendors early access to funds that are part of an upcoming property settlement.
That gives sellers, if approved, access to funds ahead of the property transaction’s completion.
RealtyAssist charges a “simple credit fee” for the product and says it limits the loan term to 60 days, although potential borrowers can, via the application process, request a longer term than that, or simply say they are unsure how long they require the funds for. After the 60-day term expires borrowers are charged interest from the following day and then every 30 days.
The Australian understands that the Australian Securities and Investments Commission is investigating complaints about the arrangement and its heavy reliance on credit law exemptions. The regulator declined to comment.
RealtyAssist said it was not aware of any complaints about it received by ASIC. “We would take any complaints to ASIC (or investigation) very seriously,” the company said in a statement.
“RealtyAssist is a successful commercial company in this market and it is conceivable that its competitors may have lodged complaints (without foundation).” On the property settlement advance product, RealtyAssist provides between $5000 to $5m to borrowers and suggests the loans can run longer than 60 days.
“If you need more time before your property settles please contact us for assistance,” marketing material notes. “Your application will only take a few minutes to complete, so you can get your … advance as quickly as possible.”
RealtyAssist gives applicants the option to choose if they require funds in as little as 24 hours.
In response to questions, RealtyAssist’s lawyers said: “Pursuant to Regulation 58, exemptions apply for short term credit lending where the term of the loan is less than 62 days. The amount of the loan is not limited and hence this exemption can apply to loans of some magnitude.”
Asked specifically about the settlement products, RealtyAssist said it could be “in excess” of $5m. “Invariably, however, these loans are only entered into where there is a binding sales contract which provides expressly for a settlement to occur prior to the expiration of 62 days. There is no basis upon which the loan can exceed 62 days,” the lawyers wrote.
The National Credit Code specifies that to be exempt from legal obligations short-term credit should not exceed 62 days, and there are limits to the amount of interest charged.
There is no reference in the code, however, to a cap on the amount of short-term credit.
The lending practices by RealtyAssist have been labelled by industry watchers as skirting around and potentially flouting the spirit of the credit laws.
“It certainly sounds like they are providing credit so they should then be compliant with the provisions of the (National Consumer Credit Protection) Act,” said Andy Schmulow, a senior lecturer at the University of Wollongong’s School of Law.
One industry participant, who spoke on condition of anonymity, said: “The drafters of the credit act included the short-term exemption to facilitate companies like Telstra offering 30 days for a consumer to pay their telephone bill.
“It was included in recognition that 30 or 60 (day) payment terms might be construed as the provision of credit if the act was read literally and didn’t include the exemption. Never would have they imagined that the 62-day exemption would be used to make $5m loans to consumers by an unregulated lender.”
Banks and other lenders bound by consumer credit legislation are required to meet responsible lending and other obligations to ensure borrowers can afford to repay loans.
Buy now, pay later and other short-term credit providers rely on exemptions from the laws, although Treasury is set to release an issues paper in coming weeks canvassing potential regulation of the sector. The Australian Finance Industry Association on Friday said it was bringing forward a review of the BNPL code of practice which would be conducted by an independent consultancy, Promontory Australia.
While RealtyAssist doesn’t have a credit licence given it operates within exemptions from the National Credit Code, it said there would likely be loan products it would provide in the future that require an Australian Credit Licence. “In pursuit of this objective, RealtyAssist is in the process of securing its own ACL and anticipates having this in place in the coming months,” the company told The Australian.
Domain has recently partnered with RealtyAssist after quietly severing ties with its earlier BNPL partner, Limepay. It is currently seeking to transfer customers to RealtyAssist. Domain’s venture with Limepay was aimed at providing sellers of property a BNPL option to access funds to cover the cost of marketing their home to potential buyers.
Domain in mid-September contacted customers that accessed its initial BNPL partnership with Limepay, asking for consent to move them to Perth-based RealtyAssist. The Australian has obtained the communication, which does not provide a reason for the change.
Limepay has a credit licence but it was not used to deliver the MarketNow service in partnership with Domain.
Limepay declined to comment on, or respond to, a list of questions put to the company.
A copy of MarketNow loan material, sighted by The Australian, suggests the venture was seeking to extend loan terms by delaying their start date. “If you choose to use our pay later loan product, you defer the payment of your marketing amount to your pay later date for a cost. There is no binding legal contract between us until 30 days after you accept these terms and conditions or such other date as we decide (commencement date),” it said. “Your pay later date is 60 days after the commencement date, which gives you an extra 60 days to pay the marketing amount.”
A demonstration video created for real estate agents by RealtyAssist last year said more than half of customers were using the pay later option for property sale marketing costs. It showed options for the vendor to be able to extend the payment term from 60 days to a period of more than 120 days and less than 150 days.
RealtyAssist provides that BNPL option for property sellers and facilitates other products including an instalment offering for rental bond payments. It pays the bond for the property renter directly to the real estate agent and the amount is repaid by the renter over a 62-day period, at an interest rate of 8 per cent.
Late amounts incur a 24 per cent interest per annum charge.
A Domain spokeswoman said its MarketNow product was “strongly endorsed by agents and achieved rapid take up”.
“We recognised that our customers’ needs had outgrown the products provided by MarketNow, a joint venture with Limepay. Domain has a commercial relationship related to the distribution of RealtyAssist’s products, but all contractual product and lending relationships exist between RealtyAssist and customers taking on their products.
“Domain also has commercial relationships to support the distribution of a number of competitor products to RealtyAssist, as this is core to Domain’s open ecosystem strategy that offers agents choice,” the spokeswoman told The Australian on Sunday.
“Domain undertakes a degree of due diligence on its commercial partners to ensure that they are a partner that they wish to have an arrangement with.”
RealtyAssist – which has been in the process of raising up to $12.5m in a funding round – isn’t the only player in the market providing payment services to real estate agents and home sellers.
MoneyMe, which holds a credit licence, has the ListReady product that provides access to up to $35,000 to vendors to spend on marketing, home improvements, styling and auction fees.
CampaignAgent is another provider with a credit licence. It also provides a range of services including for those seeking to pay their property marketing costs upfront or pay later.
CampaignAgent provides the option to pay back marketing costs in up to six months, for a flat 5.9 per cent fee and no interest charges, with its marketing material noting: “No credit checks, no waiting (and) no late fees.”
News Corp Australia – publisher of The Australian – owns a stake in Domain’s largest competitor REA Group, which in turn holds a strategic investment in CampaignAgent.
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