Reading time: 3 minutes

Did you know that if you are involved in credit-based activities in Australia, you may need an Australian credit licence or authority from a credit licensee before commencing your business? This article aims to provide you with a snapshot about credit licences in Australia and whether or not you may need one to operate your business.

What is credit activity?

Credit activity is defined in the National Consumer Credit Protection Act 2009 and is governed by the National Credit Code (Code). Credit activities governed by the Code include:

  • credit contracts;
  • consumer leases;
  • provision of credit services; and
  • payment obligations secured by related mortgages and guarantees.

When Does the Code Apply?

The Code will only apply if:

  • the debtor is a person or strata corporation; and
  • the credit is provided wholly or predominately (i.e. more than half) for:
    • personal, domestic or household purposes; or
    • to purchase, improve or renovate investment property for residential use; or
    • to refinance credit used for these purposes; and
  • a charge can be made for the provision of the credit; and
  • the provider of the credit does so in the course of a business of providing such credit.

When Does the Code Not Apply?

The Code does not apply if:

  • the provision of credit is for less than 62 days; and
  • the maximum amount of fees and charges for the credit is 5% or less of the amount of credit; and
  • the maximum amount of interest to be charged is less than 24% per annum.

Am I Excluded From Complying with the Code?

If you are authorised to engage in credit activities on behalf of a licensee, you will not need a credit licence. You will also not need a credit licence if you are:

  • an employee or director of a licenced principal;
  • you obtain an exemption from ASIC for the licencing requirement; or
  • the credit activities you engage in are exempt from the Code.

This includes but is not limited to:

  • situations where there is no express agreement in place;
  • the payment of insurance premiums by instalments;
  • pawnbrokers;
  • trustees of estates; and
  • employee loans.

How Do I Get a Licence?

If you require a credit licence, you will need to apply to ASIC. When completing your application, you will need to apply for all authorisations that are required for your business. You must also become a member of an External Dispute Resolution Scheme which is approved by ASIC.

The application for a credit licence also requires background checks be completed for those involved in your business (i.e. directors/secretaries/senior personnel). These checks include a criminal history check, bankruptcy search and credit history check. Copies of these checks will need to be included in your application.

Key Takeaways

If you are required to obtain a credit licence, it is important to do so before you commencing your business. If you fail to operate in accordance with your credit licence, it is a breach of law and there are criminal and civil penalties that may apply. If you are not sure whether you require a credit licence, contact LegalVision today and one of our commercial lawyers will be able to assess your business and determine whether a credit licence is required. We are also able to assist with completing your credit licence application.


How to Protect and Enforce Your Trade Mark

Wednesday 11 May | 11:00 - 11:45am

Protect your business’ brand from copycats and competitors. Register for this free webinar to learn how.
Register Now

Corporate Governance 101: Responsibilities for New Directors

Friday 13 May | 11:00 - 11:45am

If you are a new company director, join our free webinar to understand your legal compliance obligations. Register today.
Register Now

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer