What is an agent?

Most agency in lending is created by express authority: a written agency or credit representative agreement that spells out which finance options the agent can arrange, what fees it can charge and which lenders it can deal with. Implied authority fills the gaps, so a broker authorised to arrange a business loan can collect documents, talk to the lender and coordinate settlement without a separate instruction.

Apparent (or ostensible) authority arises when a third party reasonably believes the agent has authority because of the principal's conduct. If a lender publicly lists a broker as an accredited representative, a borrower who relies on that listing may hold the lender to commitments the broker made, even where the broker overstepped. Whether a dealer had actual or only apparent authority to promise a borrower particular terms on a funder's behalf can decide who is liable.

Agents owe legal duties to their principal, which in lending sit alongside the NCCP Act and the Corporations Act. The core ones are a fiduciary duty to put the principal's interests first, reinforced for mortgage brokers by the statutory best interests duty, a duty of care and skill, and a duty to disclose material facts, risks and conflicts such as volume bonuses from particular lenders or ownership interests in referral partners.

Agents must also keep clear records, hold any customer funds separately and act within the principal's lawful instructions. Brokers meet much of the disclosure duty through the Credit Guide, which sets out how they are paid, who they act for and how complaints are handled.

ASIC oversees licensing, credit representative arrangements, conduct standards and disclosure for anyone providing credit assistance or financial services. The NCCP Act regulates the appointment and supervision of credit representatives: the licence holder must notify ASIC of each credit representative it appoints, which ASIC lists on its public credit representative register, train and monitor its representatives, and take responsibility for their actions. The Corporations Act covers AFSL arrangements and authorised representatives, and agents involved in designated services carry AML/CTF obligations under AUSTRAC.

The main risks in agency are unauthorised acts that apparent authority can make binding, undisclosed commissions or referral arrangements, misrepresentation of loan terms or approval prospects, and poor record-keeping. Clear written agreements, defined authority limits, regular monitoring and full disclosure of remuneration are the standard controls.