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Australian Credit Licences - Do you need one?

The regulation of credit providers will undergo significant changes in 2010, with uniform credit regulation across Australia.  The new National Credit Code will be effective from 1 July 2010, with ASIC becoming the national regulator.   

The Council of Australian Governments agreed in 2008 that the Commonwealth Government should take over responsibility for the regulation of consumer credit from the states and territories.  

This means that home loans, personal loans, credit cards, consumer leases, overdrafts and line of credit accounts, among other products and services, will be regulated under Commonwealth legislation and administered by ASIC.  

Anyone involved in “credit activities”, or as a credit provider, will need to obtain an Australian Credit Licence (or ACL) from ASIC.  This is a new requirement for many businesses that already provide services around lending, such as brokers, aggregators, mortgage managers, debt collectors and mortgage insurers.  

The National Credit Code is being implemented in two phases.  Between 1 April and 30 June 2010 anyone who needs to obtain an ACL can pre-register with ASIC.  ASIC will then accept applications for an ACL from 1 July 2010.  Anyone who needs an ACL must have one by 1 January 2011.  

One of the key requirements for ACL holders will be the “responsible lending obligations” that apply when a licence holder suggests, assists or actually enters into credit contracts with consumers.  As part of the responsible lending obligations a credit guide must be provided to the consumer.   

In addition, there is an onerous obligation on an ACL holder to make reasonable enquiries about a consumer’s requirements, objectives and financial situation and assess whether the credit contract is unsuitable for the consumer.   

Small business will be interested to see whether the second stage of the process results in lending to small business being regulated by the National Credit Code.  Other proposals include the imposition of interest rate caps, regulation of reverse mortgages and point of sale credit assistance.  However, the terms of the second stage of the process are yet to be finally determined.  

If you think your business might be affected by the changes or need an Australian Credit Licence, we encourage you to act early in the new year to ensure you comply fully with your obligations.

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