Obtain an Australian Credit Licence – ACL
Do you need an Australian Credit Licence – ACL?
Anybody providing credit assistance after 1 January 2011 is required to hold an ASIC regulated Australian Credit Licence (ACL) or be a Credit Representative of the holder of an Australian Credit Licence. The process of attaining this ACL starts now and involves a process through registration with ASIC to applying for the actual Licence. Walker and Miller’s compliance partner MDS answers commonly asked questions to help you understand the process.
What is the new Australian Credit Licence and who does it affect?
The new ACL is bringing the control of credit activities under the governing body of ASIC. If you engage in credit activities for the first time from 1 July 2010, you will generally need an ACL or an authorisation from a licensee before commencing business.
If you currently engage in credit activities and want to continue doing so from 1 July 2010, you need to be registered with ASIC by the end of 30 June 2010, and apply for a credit Licence between 1 July 2010 and 31 December 2010, or become a representative of a licensee.
‘Credit Activity’ is defined in the National Credit Act and includes activity relating to credit contracts, consumer leases, related mortgages and guarantees and credit services. If you are authorised to engage in credit activity on behalf of a licensee, you will not need a credit Licence for those activities.
In addition, you are giving credit assistance to a consumer if you:
Suggest that the consumer:
- apply for a particular credit contract with a particular lender, or apply for a particular consumer lease with a particular lessor;
- apply for an increase to their credit limit on a particular credit contract; or
- remain in their current credit contract or consumer lease; or
Assist the consumer to:
- apply for a particular credit contract with a particular lender, or apply for a particular consumer lease with a particular lessor; or
- apply for an increase to their credit limit on a particular credit contract
What is the process to obtain an ACL?
From 1 July, 2010 to continue to engage in ‘credit activities’ and provide ‘credit services’ you must either of registered with ASIC that you will be applying for an ACL or be authorised as a Credit Representative of a registered person.
Registration allowed you and your representatives to engage in credit activities for a limited period of time, but you will need to obtain a credit Licence if you wish to continue those activities from 1 January 2011.
Once ASIC has approved your registration, from 1 July 2010 you can apply for an ACL. From January 1 2011 anybody engaging in credit activities must either have their ACL or have the application into ASIC for processing.
What is Registration?
Registration with ASIC is the first step in obtaining your ACL. Registering provides ASIC with an indication that you wish to obtain an ACL and that you meet the criteria to obtain an ACL. Registration will also be a requirement to keep lender accreditations. Registration commences from 1 April 2010 and closes on June 30 2010.Please be aware that registrations are processed in the order they are submitted. You must register by 18 June for ASIC to guarantee that they will process your registration by 30 June.
How do I Register?
To register you must complete an Application for registration to engage in credit activities (Form CS01) found on the ASIC website at www. asic.gov.au/credit and lodge it electronically. In the application you will be asked to provide information about yourself, the people involved in your business and the business itself.
One of the most important things that many people are not aware of is that you must be a member of an External Dispute Resolution (EDR) scheme before registering. You will not be able to complete your registration until you are a member of an EDR scheme. The approved EDR schemes are the Financial Ombudsman Services and Credit Ombudsman Service Ltd.
When your application is granted you will be notified by ASIC and your name will be entered on the Australian Credit Register as a registered person.
In the case of registering credit representatives under your registration you can do this once you have been registered and for the remainder of the registration period. Please be aware that these credit representatives must also be members of an EDR scheme.
What happens if I don’t register?
If you do not register with ASIC by the 30 June 2010 and continue to engage in ‘credit activities’ after July 1, you will be breaking the law and be subject to substantial penalties. Furthermore it is likely you will lose all lender accreditations.
How to apply for the ACL?
Although the licence application phase does not begin until the 1 July 2010 it is important to start planning ahead. With the number of applications ASIC are going to receive it is going to be an advantage to get it processed early. Aside from this fact there is also a lot of preparation which needs to take place to lodge this application.
Registration will grant you a temporary transition into the new National Credit ACT but as of 1 January 2011 all persons engaging in credit activities must be licensed or an authorised representative of a licensee.
ASIC will not automatically grant an ACL, applicants will need to meet requirements for a credit licensee which include being able to comply with the general conduct obligations of credit licensees under the National Credit Act and being a ‘fit and proper’ person to engage in credit activities.
Lodging an ACL application will require the applicant to answer and demonstrate a number of ASIC requirements. These include:
Providing details relating to the types of credit activities you propose to engage in under the credit licence.
Providing details about ‘compliance with your obligations’. This involves identifying the people in your business, demonstrating that they are competent to engage in credit activities. You will be asked about your compliance arrangements, the adequacy of your resources and the dispute resolution, risk management and compensation systems that you have in place.
You will have to provide supporting information detailing the past conduct of your people, the experience and qualifications of your responsible managers and what your credit business will involve and how it will be operated.
Furthermore you will have to make declarations that you understand and will comply with the obligations of the ACL.
The introduction of the new ACL will have an effect on the current credit market and the way many businesses are currently operated and most importantly regulated. Effectively ASIC are imposing the same regulations currently experienced by AFSL holders. Licensees of the ACL will have to maintain ongoing compliance services which will become clearer in the upcoming months.
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