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If you plan to operate a business that involves providing credit or credit activities, you may need to first apply for an Australian Credit Licence (ACL). In this article, we set out four things you should know before you apply for an ACL.

What is an ACL?

An ACL is a licence that the Australian Securities and Investment Commission (ASIC) issues, which permits businesses to engage in credit activities. Credit activities include, among others:

  • providing credit under a credit contract;
  • benefitting from mortgages or guarantees relating to a credit contract; and 
  • acting as an intermediary between a credit provider and a consumer. 

Conducting credit activities without an adequate licence can lead to civil and criminal penalties, including two years’ imprisonment.

What Should I Consider?

1. The Role of ASIC 

ASIC regulates all ACL holders and assesses the application for an ACL. ASIC will grant an ACL if:

  • there is no reason to believe that the applicant is likely to contravene any legal obligations of an ACL holder or any conditions that ASIC may impose; 
  • the applicant is a fit and proper person; and 
  • the application otherwise meets all the criteria set out by the law.

‘Fit and proper person’ has a broad definition. An applicant is fit and proper if ASIC is satisfied that the applicant will conduct the management of credit activities to the standard that ASIC expects. However, if you apply as a company, ASIC will hold the directors and company secretaries to this standard.

In addition, ASIC may consider if the applicant or its representative have held any similar licence like the Australian Financial Service Licence (AFSL), if that licence has been revoked, suspended or cancelled, and any previous record of complying with the regulators. 

Depending on the nature of the credit activities you want to engage in, ASIC may impose additional conditions on your ACL. Additionally, before ASIC can refuse an applicant, it must provide the applicant with an opportunity to appear in a hearing before ASIC to make its case. ASIC can also suspend or cancel an ACL if it becomes aware of any adverse event involving the applicant, which ASIC believes warrants such suspension or cancellation. 

2. Application Process

To get an ACL, an applicant must complete a Form CL01 Australian Credit Licence application, then lodge it with ASIC and pay the application fee. At the time of writing, the application fee ranged between $2055 to $4624 depending on whether the applicant is an individual or a company. The fee may also vary depending on whether the applicant applies for certain other permits with the ACL. 

The ACL application can be made online or on paper. However, lodging a paper application can be detrimental.  ASIC will consider this in determining whether you have adequate technological resources. This is a metric they consider when it comes to the complexity and scale of the credit activities you engage in. Applicants will also pay a higher application fee for a paper application. 

After applying, ASIC may ask you for additional information to assist with assessing the application. ASIC will then allocate a unique ACL number to you if your application is successful. If you have an existing AFSL, your ACL number will be the same as this.

3. General Obligations of an Australian Credit Licensee

If you obtain an ACL, then you must always remain compliant with any conditions under your ACL or any general obligation that the law stipulates. For instance, ASIC may restrict an ACL holder’s ability to advertise or market the credit activities it is permitted to engage in. For example, in terms of general obligations, an ACL holder must:

  • ensure they always act efficiently, honestly and fairly;
  • ensure they handle any conflict of interests in connection with any credit activity appropriately;
  • educate and train its representatives and employees of the obligations and the conditions under the ACL;
  • monitor the competency of representatives and employees;
  • implement internal dispute resolution procedure to deal with any disputes; and 
  • give ASIC the information that ASIC asks for or must be provided under the law. 

Please note that this is not an exhaustive list.

4. Exceptions to Requiring an ACL

It is essential to obtain relevant legal advice to understand whether you must have an ACL. Even if you believe you need an ACL, a competent lawyer will be able to give you a specific answer. For instance, suppose you represent a person who holds an ACL. Then, you may be covered under their ACL and may not need a separate licence. There are other exceptions as well, so you should obtain legal advice. 

Key Takeaways

Any person wanting to engage in credit activities may need an Australian Credit Licence or an ACL first. Before making an application, you should consider the role of ASIC, the application process, the general obligations of an ACL holder and if you are exempted from needing an ACL. 

If you need help with understanding more about the ACL or the application process, or would like assistance with making an application, our experienced Regulatory and Compliance team can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is an Australian Credit Licence?

An Australian Credit Licence is a licence issued by the Australian Securities and Investment Commission, that permits you or your business to engage in certain credit activities.

How do I apply for an Australian Credit Licence?

You can apply for an Australian Credit Licence through the Australian Securities and Investment Commission, either online or through paper.

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