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Implications of New
National Consumer Credit
Regime on your business
 who needs to apply for an Australian Credit
licence?
 are there any other options?
 what needs to be done to apply for an
Australian Credit licence?
Daniels Bengtsson Pty Limited
 what industries do you, the participants,
represent?
Daniels Bengtsson Pty Limited
 Commonwealth take over of consumer credit
 replacing State & Territory regimes
 National Consumer Credit Protection Act , called
the Credit Act
 comprehensive licensing regime for all
businesses engaged in credit activities
 ASIC the single, national regulator
Daniels Bengtsson Pty Limited
 persons engaging in credit activities –
 initial registration with ASIC
 subsequent grant of Australian Credit licence
 entry standards for registration & licensing
 registered persons and licensees to meet
ongoing standards of conduct
 gives ASIC the power to suspend or cancel a
licence or registration, or to ban an
individual from engaging in credit activities
Daniels Bengtsson Pty Limited
 main group affected
 industry participants – detailed under ‘credit
activities’
 main impact –
 those who only conduct business in States or
Territories where there is currently no licensing or
registration scheme
 costs –
 one-off - applying for a licence
 complying with ongoing licence obligations
Daniels Bengtsson Pty Limited
pre 1 July 2010 credit activities
 register between 1 April & 30
June
 licence between 1 July & 31
December
post 1 July credit activities
 licence before you start engaging
in the credit activity
Daniels Bengtsson Pty Limited
pre 1 July 2010 credit activities
 register between 1 April & 30
June
 licence between 1 July & 31
December
post 1 July credit activities
 licence before you start
engaging in the credit activity
Daniels Bengtsson Pty Limited
a person continuing to engage
in credit activities from 1 July
2010 without being registered
X cease engaging in credit
activities until the credit
provider obtains an ACL
a registered credit provider
continuing credit activities from
1 January 2011 without being
licensed
X cease engaging in credit
activities until the credit
provider obtains an ACL
Daniels Bengtsson Pty Limited
 must not carry on credit activities unless –
 the credit activity is authorised –
 in the person’s Australian Credit Licence
 in transitional registration before licensing
 an individual is –
 a credit representative of a licensee/registered
person
 a director or employee of a licensee/registered
person
 activity or person exempt under the regs
Daniels Bengtsson Pty Limited
 credit providers under credit contracts
 performing obligations, or exercising rights,
of a credit provider under a credit contract
 providers of consumer leases
 performing obligations or exercising rights
in respect of credit contracts or mortgages &
guarantees in relation to credit contracts
Daniels Bengtsson Pty Limited
 ‘credit activities’ involves credit contracts,
leases, mortgages and guarantees where the
National Credit Code applies to the provision
of the credit
Daniels Bengtsson Pty Limited
 debtor a natural person or strata corporation
 credit provided wholly or predominantly for
 personal, domestic or household purposes
 to purchase, renovate or improve residential
property for investment
 to refinance credit provided in relation to above
Daniels Bengtsson Pty Limited
 goods are hired wholly or predominantly for
personal, domestic or household purposes
 a charge is or may be made for the hiring of
the goods & the charge, together with any
other amount payable under the consumer
lease, exceeds the cash price of the goods.
Daniels Bengtsson Pty Limited
 continue to be a credit provider or lessor for
as long as you continue to be a party to the
contract –
 collecting money due
 enforcing contracts
 obligation to stay licensed continues for the
life of the contract
 implication for businesses that go into ‘run off’ ie
no new lending after 1 July
Daniels Bengtsson Pty Limited
 assignees of credit providers, lessors.
mortgagees or beneficiaries of guarantees
must be licensed because they –
 collect money
 enforce contracts, mortgages or guarantees
Daniels Bengtsson Pty Limited
 persons providing credit service –
 finance brokers and other intermediaries where they
have a role in securing credit for a consumer
 persons who assist consumers in relation to a
particular credit contract with a particular credit
provider
Daniels Bengtsson Pty Limited
 apply for a provision of
credit in respect of a
particular credit contract
with a particular credit
 you suggest that
the consumer …
 apply for an increase to
the credit limit of a
particular credit contract
with a particular credit
provider
 remain in their current
credit contract or lease
Daniels Bengtsson Pty Limited
 you assist the
consumer to …
 apply for a provision of
credit in respect of a
particular credit contract
with a particular credit
 apply for an increase to
the credit limit of a
particular credit contract
with a particular credit
provider
Daniels Bengtsson Pty Limited
 you are providing credit assistance
regardless of whether you are dealing
directly with the consumer or with the
consumer’s agent
 for example, you are assisting an elderly parent
to apply for a credit contract, but are dealing with
their children
[Explanatory Memorandum §1.24]
Daniels Bengtsson Pty Limited
 it is enough to suggest  entry into a credit contract or lease
 applying for a credit limit
 staying in a particular credit contract
without actually arranging the contract
 assistance is less than ‘arranging’
Daniels Bengtsson Pty Limited
 regulates every person who may be an
intermediary between consumer & credit
provider
‘Innovations in credit product design and delivery
now mean that a consumer may pass through a
number of hands between the first person they deal
with and the lender, and may be uncertain as to the
roles or functions of all these different parties. It is
intended that the licensing requirements will apply
to all these persons.’
Daniels Bengtsson Pty Limited
 very wide –
 does not require conduct in relation to a
particular credit contract or credit provider
 does not require direct or indirect contact with
the consumer
 for example, acting as an intermediary by
preparing or passing on information but with the
object, wholly or partly, of securing the provision
of credit or a lease [Explanatory Memorandum §1.29]
Daniels Bengtsson Pty Limited
 A person will commit an offence where –
 they hold out that they are authorised
 they hold out or advertise that they can engage in
credit activities
 they demand or receive a fee from a consumer in
relation to a credit activity, when they are
unlicensed in relation to that credit activity
Daniels Bengtsson Pty Limited
 licensee cannot
conduct business
with another person
who is engaging in a
credit activity but
not licensed to do
so –
 essential licensees
understand who
they are doing
business with –
 what is their status –
licensed or exempt
under the regulations
 civil penalty – 2,000
penalty units
 criminal penalty – 200
penalty units + 2
years imprisonment
Daniels Bengtsson Pty Limited
 conducting business with 3rd parties –
can you list some of the 3rd parties you deal
with when you are engaging in credit
activities?
Daniels Bengtsson Pty Limited
 the regulations deal with exemptions in 3
ways  by exempting persons when engaging in certain
credit activities
 by exempting certain credit activities
 by exempting activities
Daniels Bengtsson Pty Limited
 Bankruptcy Act 1966
official receiver or
trustee, registered
debt agreement
administrator
 receiver, receiver and
manager, provisional
liquidator, or
liquidator
 a State or Territory
Public Trustee
 administrator of a
body corporate
 deceased’s personal
representative
 deceased licensee’s
personal
representative but
only for 6 months
 a public or local
government body or
authority, constituted
under Commonwealth,
State or Territory
legislation
Daniels Bengtsson Pty Limited
 State-based
registrations under –
 the Finance Brokers
Control Act 1975 (WA
 the Credit
(Administration) Act
1984 (WA)
 the Consumer Credit
(Administration) Act
1996 (ACT)
 financial counselling
service
 body providing
benefits to members
 charities providing
credit services to low
income people
Daniels Bengtsson Pty Limited
 lawyers
 tax agents but note  excluded from exemption
–
activity of tax agent
providing a consumer with
a certificate or assessment
as to whether the
consumer can meet their
financial obligations under
the contract: Reg 24(5)
 performers of some
statutory obligations –
 Privacy Act 1988
 Anti-Money
Laundering and
Counter-Terrorism
Financing Act 2006
Daniels Bengtsson Pty Limited
 a related body corporate of a licensee
 on behalf of that licensee
 only because its employees and directors are
engaging in credit activities on behalf of the
licensee
 the credit activities are not  being a credit provider under a credit contract
 being in the business of providing consumer credit
 being a lessor under a consumer lease
 being in the business of providing consumer leases
Daniels Bengtsson Pty Limited
 only when acting for a
licensee  to demand and receive
payments from borrowers
or guarantors under
credit contracts or
consumer leases
 to enforce rights in
relation to taking
possession of property
secured by a mortgage,
or goods hired under a
consumer lease
 only if –
 licensed under
State/Territory legislation
 only if authorised in
writing by a licensee to
engage in the activity
 only until 10 March
2011
Daniels Bengtsson Pty Limited
 the activities are –
 acting for a
licensee who is a –




credit provider
lessor
mortgagee
person who is the
beneficiary of a
guarantee
 selling, storing or
transporting property
of a debtor, lessor,
mortgagor or
guarantor
 giving or sending
statutory notices or
documents to a
debtor, lessee,
mortgagor or
guarantor or
guarantor
Daniels Bengtsson Pty Limited
 the credit provider a
linked credit provider
 linked credit provider
is a licensee
 the consumer enters
into the contract
wholly or
predominantly for the
purposes of payment
for the goods of
services supplied by
the supplier
 does not apply to
land
Daniels Bengtsson Pty Limited





example –
Milo runs a retail business
by arrangement with a
licence, brochures
inviting consumers to
apply for a particular
credit card are made
available to Milo’s
customers
the licensee has prepared
the
Milo refers customer’s
inquiries to a phone
number in the brochure.



Milo’s conduct is exempt
if –
consumers are advised of
the licensee’s’ licence
number
a reasonable person
would assume that the
licensee (eg Amex, Visa,
Mastercard) was the
lender in respect of the
credit card
Daniels Bengtsson Pty Limited




example –
Milo supplies goods
through a website which
advertises a link to a
credit cards provider
Milo has specified the
form and content of the
advertisement
the advertisement
includes a statement that
inquiries should be
addressed to the credit
cards provider with
contact details



Milo’s conduct is exempt
if –
consumers are advised of
the licensee’s’ licence
number
a reasonable person
would assume that the
licensee (eg Amex, Visa,
Mastercard) was the
lender in respect of the
credit card
Daniels Bengtsson Pty Limited
 inquirer wants
information about –


the cost, or an estimate of
the likely cost, of a credit
contract or a consumer
lease
terms and conditions of a
credit contract or a
consumer lease
 activity exempt if –

provider has information
about a number of
licensees but gives the
inquirer information about
only one licensee
Daniels Bengtsson Pty Limited
 the activity is done in the course of work of
a kind ordinarily done by clerks or cashiers
Daniels Bengtsson Pty Limited
 the persons acts as an intermediary by
giving the consumer contact information
about a licensee or their representative
 the person must disclose if they may receive
a payment or potential financial benefit
 similar to the FSR ‘clerks & cashiers’ exemption
Daniels Bengtsson Pty Limited
 ASIC must grant licence to a Credit Union
 licensed credit activities must match as
closely as possible what the Credit Union
applied for
 ASIC will issue Australian credit licence
numbers
Daniels Bengtsson Pty Limited
 commences 1 November 2011
 regulations will specify the circumstances
when you must cite the Australian credit
licence number
 will be the same number as a Credit Union’s
Australian Financial Services licence number
 eg Australian Financial Services & Credit Licence
No 1234567
Daniels Bengtsson Pty Limited
 alternative to licensing
 ensure that your business model is
appropriate
 ensure that you address the risk of
cancellation of the arrangement by the
authorising licensee
Daniels Bengtsson Pty Limited



Transitioning to the New Risk Management
Standard – AS/NZS ISO 31000:2009 (1 Day)
Introduction to Risk Management – AS/NZS
IOS 31000:2009 (1 Day)
Integrated Risk & Compliance Management (2
Days)
Interactive Electronic Version – visit
www.saiglobal.com/training
 Request Hard Copy by emailing us at
training.marketing@saiglobal.com
Or
 Request an in-house quote for training at
your premises, by emailing
inhouse@saiglobal.com or via the ‘Request a
Quote’ link on our website


For any further questions you may have
please email us at
training.marketing@saiglobal.com
or call us on 1300 727 444.
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