If you are intending on starting a business or currently operate an existing business in the finance sector, it is essential to determine whether your business requires an Australian Credit Licence (ACL). The National Consumer Credit Protection Act 2009 (Cth) (National Credit Act) stipulates that you require an Australian Credit Licence if you or your business engage in ‘credit activities’, unless an exemption applies. An ACL allows you and any of your authorised representatives to provide credit-related services to clients and is issued by the Australian Securities & Investments Commission (ASIC). ACLs are subject to a range of obligations, including but not limited to, general conduct obligations, organisational competence, compliance with the National Credit Code, registration with the Australian Financial Complaints Authority (AFCA) and various reporting requirements with multiple government bodies.

 

What are Credit Activities?

Section 6 of the National Credit Act specifically outlines what ‘credit activity’ entails and includes:

1. Providing credit under a credit contract or consumer lease;

2. Benefitting from mortgages or guarantees relating to a credit contract;

3. Exercising rights or performing obligations of a credit provider or lessor (either as the credit provider or lessor or on behalf of another person who is the credit provider or lessor);

4. Suggesting or assisting for a particular credit contract or consumer lease; and

5. Acting as an intermediary between a credit provider and a consumer (for a credit contract) or between a lessor and a consumer (for a consumer lease).

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You will require an ACL if you engage in any of the above credit activities, subject to any applicable exemption. The most common exemption that exists to obtaining an ACL is to be a credit representative of an ACL.

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Types of Businesses Typically Engaging in Credit Activities

In practice, there is a wide range of different types of businesses in the finance industry that, in most cases, where they are engaged in credit activities, are required to be licensed under the credit licensing regime including:

1. Credit Providers (e.g. Banks, Financial Institutions and Private Lenders).

2. Credit Assistance Providers (e.g. Mortgage Brokers, Finance Brokers, and Debt Collectors).

3. At times, other forms of businesses (e.g. Trustees, Managed Investment Schemes, and Non-Cash Payment Providers).

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Do You Meet the Requirements for Obtaining an Australian Credit Licence?

One of the biggest hurdles in obtaining your own Australian Credit Licence is having the appropriate Responsible Managers (RMs). RMs demonstrate that a Credit Licensee is competent when engaged in credit activities and to demonstrate competence for ASIC to issue an Australian Credit Licence, certain requirements must be met. These include:

Qualifications:

• Minimum credit industry qualification at Certificate IV level (e.g. Certificate IV in Credit Management); or

• Certificate IV in Finance and Mortgage Broking (where you provide third-party home loan assistance); or

• A higher-level qualification in a relevant discipline (e.g. Bachelor of Commerce).

 

Experience:

• Two years of problem-free experience, relevant to the credit activities you intend to engage in, typically obtained by being a Credit Representative of another ACL or working under an ACL as an employee.

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Whilst it is possible to obtain an ACL with only one RM, the application process is typically smoother where there are 2+ RMs intended to be an RM on a proposed ACL. Generally, it depends ASIC’s satisfaction with the organisational competence of the proposed Credit Licensee.

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How We Can Help

Adria Law are experts in assisting businesses engaging in credit activities in obtaining their own Australian Credit Licence and we closely with our clients through the preparation stage of an Australian Credit Licence application and post-application stages regarding any liaison with ASIC. 

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Whether you currently operate a credit-related business or are in the process of opening a credit-related business, contact our experienced lawyers today for a free consultation.