Premium funder Principal Finance says it has gained an exclusion from the new National Credit Code.

The exclusion – the first granted to a premium funder – means that brokers and other intermediaries using the company for consumer funding won’t require a credit licence or need to comply with the “responsible lending” obligations of the National Consumer Credit Protection Act 2009.

Principal Finance MD David Palyga told insuranceNEWS.com.au that earlier this year the company lodged its own application for relief with the Australian Securities and Investments Commission (ASIC) that was separate to industry applications. When it was rejected, the company appealed to the Administrative Appeals Tribunal.

“We had asked for relief for the premium funding industry, but during the appeal ASIC refused to consider industry-based relief and looked at Principal only,” he said.

“[The appeal] gave us access to ASIC’s reasonings for the rejection, so we were then able to put forward our own unique and specific detail as to why we deserved an exemption.”

Mr Palyga says the campaign to obtain an exemption for Principal Finance took nine months, and included discussions with a federal minister and two MPs, as well as a large amount of documentation.

While he supports licensing within the credit industry, an “unintended consequence” of the new legislation has been the threat of reduced competition and consumer choice.

Insurers have been exempted from the National Credit Code, and Mr Palyga says he was concerned brokers and other intermediaries would divert business to the insurers’ “pay by the month” facilities.

He told insuranceNEWS.com.au the introduction of the National Consumer Credit Protection Act last year “magnified this competitive disparity to the point that it threatened to remove competition from the industry and choice for the consumer”.

Principal Finance’s exclusion is substantially the same as the exclusion enjoyed by insurers under subsection 6(8) of the code.

The company asked for a similar exemption to the insurers’ because both offer the client the ability to convert an annual premium to a monthly instalment. “So both should be given an exemption for the type of facility they offer,” he said.

The exemption is effective immediately, and Mr Palyga says the company will roll out a new exempt product before December 31, the deadline for brokers to be licensed to deal with non-exempt premium funders. He says brokers will have to continue to comply until the new product is available.