As you would be aware, you can apply for your Australian Credit License through ASIC’s website. The website process is simple and painless in the way in which it gathers the required information. Most brokers will have no problem negotiating the system.
However, some of the questions asked will make you think and may require considerable work or outside assistance. The main questions that applicants have had difficulty with are outlined below. We have also put together a guide to help you understand and answer the questions.
This is probably where you need to think seriously about whether you become licensed or simply an authorised representative. Do you want the burden of compliance or want somebody else to worry about it for you? And what will it cost?
For the average single broker business the licence fee will be $450 p.a., and for small groups $1000 p.a. If you were to become an authorised representative, the aggregators that have released their pricing estimates are looking around $1000 p.a. (But that may include Professional Indemnity Insurance as well as compliance and all the systems).
The application should make you think about your business and how you manage it, especially in relation to Risk Management and compliance, even down to IT systems.
The main part of the application is simply gathering information about your business, who you are, key people, business structure, locations etc. You also need to decide if you actually provide credit (“do you intend to provide credit as an original credit provider”) or just act as an intermediary, and whether you receive payments on behalf of someone else and require a trust account.
To apply for a license you do not need to have all the systems and paperwork in place for compliance, you just need to declare that you will have prior to issue of the license.
The question that seems to require the most thought is the last section:
Attach a summary that contains: an overview of business, with particular reference to the credit activities in which the applicant is engaged, or intends to engage, under this licence including credit products, credit assessment processes (where relevant), distribution model, remuneration structure (more detail to be specified in RG 204 Applying for and varying a credit licence);
details of how the business is or will be operated including whether the applicant’s business is operated from a single office or whether it operates from multiple offices and if so, how geographically diverse the business is;
if there are outsourced operations, details of who performs these and in what location, if other than the principal business address;
and any other information that would be material in assisting ASIC to understand the nature of the applicant’s business and the credit activities in which it intends to engage. This may affect the conditions of any licence granted to the applicant.”
Some of the questions we have been asked by applicants about questions that caused them trouble are:
- What does “Does the applicant intend to provide credit as an original credit provider?” mean?
- How do I show I am a “fit and proper person” ?
- I need to declare that I will have all the compliance and systems in place by the time the license is issued, but how am I going to get them in place?
- What are relevant educational qualifications?
- What if I don’t have any previous employers to show experience?
- I was bankrupted – can I still get a license?
- What are my “compliance obligations” that I have declared that I will have systems for?
- What is required in a written plan that documents arrangements and systems?
- How often do I need to have procedures monitored and reported on?
- What are conflict management arrangements?
- How do I show that I have adequate arrangements to comply, supervise and monitor? How do I document it?
- What is adequate training and competence mean and how do I put a written policy in place?
- What are adequate resources for financial, human and IT? Do I need to submit a full financial statement with assets and liabilities?”
- What does it mean that I need a written financial plan?
- What are IT systems to support business processes?
- Why do they want to know about my back up processes and computer failure plan? – I don’t really have one
- I work alone, how can I nominate a person as my IDRS?
- What does it mean to demonstrate that I have an adequate risk management system? What do I need to include in the submission?
- How do I document my risk management systems? How can I work out the probabilities of occurrences?
- What are compensation arrangements?
To apply for a license click here to go to the ASIC credit page
Alternatively we have put together several packages with My Dealer Services who have years of experience and 100% success rate in submitting AFSL licence applications to ASIC.