If you engage in credit activities in Australia, you will likely require a credit licence. Credit licences are issued by ASIC in accordance with the National Consumer Credit Protection Act 2009 (Act). The Act is a national regime and replaced the prior existing state and territory legislation. The types of credit regulated by ASIC include:
- Credit cards;
- Home loans;
- Personal loans;
- Consumer leases; and
- Overdrafts and lines of credit.
The Credit Licence Application Process
To apply for a credit licence in Australia, there are a number of steps which need to be taken. Firstly, you will need to determine whether a credit licence is required for your business based on the credit activities it is involved in or whether exceptions may apply. This includes if you are a representative of a licenced credit provider.
If you determine that a credit licence is required, the second step is to complete an ASIC Application for an Australian Credit Licence. A fee will be required to be paid with the application which is based on the amount of credit you have advanced, have successfully referred to a credit provider and the amount payable under a consumer lease.
Within the licence application, background checks will be required for those that manage your business. This includes criminal history checks, bankruptcy searches and credit checks. You will also need to have a dispute resolution process in place. When completing the licence application, you will be required to provide a declaration that you will comply with your obligations as a credit licensee.
If you deemed by ASIC to be a streamlined applicant (i.e. you are an authorised deposit taking institution or a general or life insurer registered with APRA), you will be required to provide less information to ASIC with your licence application.
If you credit licence application is approved and your business changes or your managing personnel change, you will need to apply for a variation of your credit licence.
I Have Been Granted My Credit Licence, What Are My General Obligations?
Once you have been issued your credit licence, it is important that you comply with your licence obligations. These general obligations include but are not limited to:
- engaging in credit activities honestly, fairly and efficiently;
- complying with the Act;
- complying with the licence conditions;
- having dispute resolution procedures in place;
- having risk management procedures in place;
- avoiding conflicts of interest;
- ensuring that the representatives of your business comply with the credit legislation;
- ensuring that the representatives are sufficiently trained; and
- have compensation arrangements in place.
Failure to comply with your licence requirements is a breach of the law and may involve criminal and civil penalties along with disqualification/banning by ASIC.
Before operating your credit business, you must first determine whether you need a credit licence. LegalVision’s team of commercial lawyers can assist in determining whether you business may require such licence or whether it is exempt. You should also be aware of your requirements as a licence holder and obtain assistance if you are unsure of your position to assist in avoiding any deemed breaches of your licence by ASIC.