Major changes to consumer credit laws
Does your business engage in the provision of credit to consumers?
Do you refer consumers to a provider of credit and receive an incentive for doing so?
If you answer yes to the above questions, the new National Consumer Credit Acts will apply to your business.
The Commonwealth Government has introduced the first phase of a national regime to regulate the provision of consumer credit. The National Consumer Credit Protection Acts (NCC) provides a single system for the regulation of consumer credit. Any business that participates in credit activities must now obtain a license by
What is a credit activity?
Any person that engages in any credit activity must be licensed or authorised by a licensee, whether the person does so on the person’s own behalf or on behalf of another person including:
- providing credit
- providing a credit service which includes providing credit assistance to a consumer or acting as an intermediary or on a referral basis
- providing consumer leases
- being a mortgagee under a Consumer Credit Code regulated mortgage
- being a beneficiary under a Consumer Credit Code regulated guarantee
The legislation requires that all consumer credit providers be licensed by the Australian Securities and Investments Commission (ASIC). Licensees will be subject to conduct prohibitions, must adhere to responsible lending requirements and be a member of an approved external dispute resolution scheme.
What is credit for consumers?
The NCC applies to the provision of credit to consumers where the credit is provided for wholly or predominately personal, household or domestics purposes. This includes: home loans, personal loans, credit cards, consumer leases, overdrafts, line of credit accounts, sales by instalments and loans for investment properties which are of a residential nature.
All persons engaging in credit activity for consumers must register with ASIC by
It is also important to note that the NCC requires businesses and their representatives to be licensed where the business refers consumers to a credit provider.
Does your business fall into any of the categories below?
- Property developer or real estate agent
- Assignee of debts
- Bank, credit union or building society
- Online, door-to-door or phone sales
- Finance broker or financial planner/advisor
- Mortgage broker or mortgage manager
- Responsible entity of an managed investment scheme
- Securitisation manager/trustee
- Seller of goods by instalments
If yes, it is likely that you will need to take immediate action.
The NCC compliance regime is rigorous and MST can assist your business in the transition to the new regulatory environment by providing services that include:
- advice on the implications of the NCC
- advice on the responsibilities and obligations required once registered with ASIC
- preparation of documentation for licence applications
- advice as to the ongoing responsibilities and obligations placed upon licence holders
Contact one of our Corporate Advisory lawyers if you have any queries regarding NCC licensing registration and compliance
Authors: David Boyall and Susan Reece Jones