ACL Regulated Credit Activities

Print PDF

What is credit?

Schedule 1 of the National Consumer Credit Protection Act 2009 (National Credit Act) contains the National Credit Code (Code) which defines the ‘credit’ that will be regulated under the National Credit Act. 

The Code states that if under contract either of the following situations occur, then credit is being provided:

  • payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or
  • one person (the debtor) incurs a deferred debt to another (the credit provider)

Importantly the Code will only apply to credit that is:

  • provided to a natural person or strata corporation; and
  • is provided or intended to be provided wholly or predominantly:
    • for personal, domestic or household purposes; or
    • to purchase, renovate or improve residential property for investment purposes; or
    • refinance credit that has been provided wholly or predominantly to purchase, renovate; or 
    • improve residential property for investment purposes; and
  • a charge is or may be made for providing the credit; and
  • the credit is provided in the course of a carrying on a business of providing credit in Australia or as part of, or incidentally to, any other business carried on in Australia.

‘Predominantly’ in this context requires the purpose for which more than half the credit is intended to be used.

What activities and advice will be caught by the reform?

If you engage in 'credit activities', defined in section 6 of the National Credit Act, you will be required to hold an Australian credit licence (ACL) or be an authorised credit representative.

The following table sets out when a person will engage in a credit activity.

Topic A person engages in a credit activity if:
 
Credit contracts

  • the person is a credit provider under a credit contract; or
  • the person carries on a business of providing credit, being credit the provision of which the National Credit Code applies to;  or
  • the person performs the obligations, or exercises the rights, of a credit provider in relation to a credit contract or proposed credit contract (whether the person does so as the credit provider or on behalf of the credit provider)

For example: banks, credit unions, building societies, finance companies and vendors offering sales contracts by instalment such as hire purchase agreements. 

An individual may be a lender.
 
Credit service  the person provides a credit service
  
Consumer leases 

  • the person is a lessor under a consumer lease; or
  • the person carries on a business of providing consumer leases; or
  • the person performs the obligations, or exercises the rights, of a lessor in relation to a consumer lease or proposed consumer lease (whether the person does so as the lessor or on behalf of the lessor)

It does not include leases by businesses used to hire goods such as cars or plant and equipment because they are for business purposes.  Short-term, indefinite and employment leases are also excluded.  Examples include leases novated to an employer or leases paid by salary sacrifice. 
 
Mortgages 

  • the person is a mortgagee under a mortgage; or
  • he person performs the obligations, or exercises the rights, of a mortgagee in relation to a mortgage or proposed mortgage (whether the person does so as the mortgagee or on behalf of the mortgagee)

Guarantees 

  • the person is the beneficiary of a guarantee; or
  • the person performs the obligations, or exercises the rights, of another person who is a beneficiary of a guarantee or proposed guarantee, in relation to the guarantee or proposed guarantee (whether the person does so on the person’s own behalf or on behalf of the other person)

Prescribed activities  the person engages in an activity prescribed by the regulations in relation to credit, being credit the provision of which the National Credit Code applies to, or would apply to if the credit were provided

What is a credit service?

A credit service is defined as a credit activity. You will provide a credit service if you either provide credit assistance to a consumer or act as an intermediary (s7). 

Credit assistance
You will provide credit assistance to a consumer where you:

  • Suggest:
    • the consumer apply for provision of credit under a particular credit contract with a particular credit provider / particular lease with a particular lessor;
    • the consumer apply for an increase to the credit limit on a particular credit contract;
    • they remain in their current credit contract / consumer lease; or 
  • Assist:
    • the consumer apply for a particular credit contract with a particular lender / particular consumer lease with a particular lessor; or
    • the consumer to apply for an increase to their credit limit on a particular credit contract.

Even where you deal with an immediate relative acting on behalf the consumer’s behalf or deal with another intermediary, you will still be assisting the consumer.

Specifically the Australian Securities and Investments Commission (ASIC) have stated that advising a consumer to pay of an existing debt is not considered to be ‘suggesting’, as it does not suggest the consumer apply for a new credit contract, apply for an increase under an existing credit contract or remain in an existing credit contract.

Act as an intermediary

The National Credit Act defines that you will act as an intermediary if you act as an intermediary between a lender or lessor and a consumer with the aim of securing the provision credit or a consumer lease for the consumer, for example finance brokers and mortgage managers.

The critical element is that your role, wholly or partially, is to secure a credit contract / consumer lease for the consumer with a credit provider / lessor.

 

 

Contact Us


_________________

Order Online


_________________

Order Form


________________