Business Law

New Australian Credit Licensing Regime

Published in: March 2010

In July 2010, the Australian Securities and Investments Commission (ASIC) will assume responsibility for regulation of consumer credit under the National Consumer Credit Protection Act 2009 (Cth) (NCCPA). This initiative removes the States' jurisdiction over consumer credit and attempts to create a licensing system that broadly mirrors similar ASIC licensing regimes (such as Australian financial services licences).

This article briefly considers the changes that the NCCPA introduces and how consumer credit providers may ensure their compliance.

Obligations

The NCCPA applies to entities that engage in "credit activities". ASIC's Regulatory Guide RG203 defines this as:

• providing credit under a credit contract or consumer lease;
• benefiting from mortgages or guarantees relating to a credit contract; and
• providing credit services in relation to a credit contract or consumer lease.

If an entity (which may be a credit or service provider) to which the NCCPA applies engages in credit activities, the Act imposes two key obligations:

• for entities that are providing consumer credit before 1 July 2010 (and who wish to continue doing so): to register and then seek licensing by ASIC; and
• for entities that wish to provide consumer credit after 1 July 2010: to have an Australian credit licence before engaging in credit activities.

However, ASIC may grant exemptions from the licensing system and may (in a similar way to Australian financial services licences) recognise where one business is acting as the authorised representative of another entity that already holds an Australian credit licence.

NCCPA Compliance

Businesses that are currently engaging in activities that would be covered by the definition of "credit activities" in the NCCPA, should seek legal advice concerning initial registration with ASIC. Businesses may register from 1 April 2010, although ASIC recommends registration before 18 June 2010 (even though the deadline is 30 June 2010), as the volume of applications may prevent registration and the ability for the business to continue providing consumer credit. Your business must then ensure that it obtains an Australian credit licence before 31 December 2010.

For new businesses, your solicitor can assist you in meeting the requirements of licensing or seeking to act as a representative of another licensee. This process will include obtaining background checks on your company's directors, secretaries and key personnel, together with statements and a thorough explanation of your business' credit activities. You can also contact ASIC directly with questions on 1300 300 630.