Australian Credit Licensing Choices

Similar to the Australian Financial Services Licence regime, the upcoming Australian Credit Licence legislation also allows options to prospective credit providers as to how they operate.

Chapter 2 of the National Consumer Credit Protection Bill 2009 requires that, in order to engage in credit activities, a person is either:

a credit licensee;
an employee or director of a licensee; or
a credit representative of a licensee.

One thing that this effectively means is that aggregators and other similar groups will need to decide, strategically and very soon, which path they will choose to go down – to authorise individual broker businesses in the aggregator network as credit representatives of the aggregator’s licence; or to require each broker to obtain their own licence.

Each path has its pros and cons but, contrary to what some commentators have suggested, each has nearly an equal amount of work involved.

For example, to get an individual licence, the applicant will need to satisfy ASIC of its ability to cover off on a number ofÂ requirements.Â But if the applicant (eg an aggregator) is authorising others as credit representatives of its licence, then the applicant will need to take steps to ensure that those same requirements are being followed through in the credit representative’s business.

In either case, a sufficient audit trail, compliance programme and risk management programme will be required, all the way down to grass-roots level within the individual brokers.Â Whether this is done by aggregator groups in the process of applying for their licence and authorising their credit reps; or done by individual brokers in applying for their own licences, the work and costs involved will be similar.

For this reason, industry participants will need to carefully consider the other pros and cons in making their choice and should not choose based on what they think will be “easier”.

See our Australian Credit Licensing page for more details.

Posted on: Monday, 14 December, 2009

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