Frequently Asked Questions
Do I need a Credit Licence?
If you engage in credit activities you will need an Australian Credit Licence or authorisation from a credit licensee (become a Credit Representative) to conduct business.
What are the benefits of becoming a Credit Licensee?
- Being your own boss. A Licensee has obligations and if the Licensee appoints a Credit Representative (CR), it's the Licensee's prerogative, quite rightly, to tell their Credit Reps how to meet the obligations. So as a Credit Rep, you get told what your business methods will be. There are many ways to comply with the NCCP obligations. As a Licensee you get the control and the choice as to how you're going to comply.
- Many of the obligations of a Licensee (some of which are not obligations of a Credit Rep), are simply good business practice. So if you have an obligations that is forcing you to do something which is good for your business, we think that's a good thing.
- Many brokers that are Credit Reps, are Reps under their aggregator's Licence and are therefore somewhat tied to the aggregators. Having your own licence puts you one step closer to the freedom of being to move if you choose.
How do I get a Credit Licence?
Regulatory Guide 204 (RG 204) details the documents required and the process for obtaining a Credit Licence. You first need to understand your obligations and how you conduct your business. Regulatory Guides can be difficult to understand and there is no checklist. QED Risk Services can advise you of everything required and the best course of action. Read More: link.
Once the documentation is prepared and the online application is submitted, ASIC may require further explanation. QED Risk Services specialises in dealing with ASIC as we have applied and successfully obtained over 400 licences so far for our clients. There is isn't anything that ASIC have asked for that we haven't seen before.
What do I need to get a Credit Licence?
The two main requirements for a Credit Licence to determine whether you are eligible are your experience and qualifications.
The Responsible Manager on the credit licence must have a minimum of two years' experience in the NCCP regulated environment, since 1 July 2010.
If you are applying for a Credit Licence with the authorisation of 'other than a provider of credit', you must have a minimum of two years broking experience.
Therefore if you are applying for a Credit Licence with the authorisation of 'provider of credit', you must have at least two years' experience as a Lender or making lending decisions.
Each Responsible Manager will also require at least a relevant Cert IV qualification of some kind.
If you are uncertain of your experience and qualifications, please call us on 1300 817 662. We are happy to help.
The other documents required (apart from your NCCP policy and procedure documentation to meet the Licence General Conduct Obligations are Criminal History Check and Bankruptcy Check for each Responsible Manager.
How long does it take to get a Credit Licence?
Once your license application has been lodged with ASIC, they claim to have a 60 day turnaround. Unfortunately as at August 2017 they are rarely able to meet this standard and can often take longer than this. QED strongly advises that brokers plan to have at least a 6 month period before receiving their license, and to arrange for a fully compliant application as soon as possible.
When QED Risk Services prepares documentation and lodges your application with ASIC, we can tell you when it is given to an analyst. After lodging and managing over 500 Credit Licenses, we know all the analysts and can give you more of an idea. At QED Risk Services, we are in regular contact with ASIC to check on our clients' applications, and fight for their Credit Licenses to be approved.
How do I manage a conflict of interest with Aggregator Bonus Commissions?
An aggregator is offering its brokers a bonus commission if they were to write a specific volume of business over a period of time with one of the lenders on its panel. How does the broker manage this conflict of interest?
Answer: First and foremost, if the broker were to recommend this lender, the broker has to demonstrate that the loan product has to meet the client's requirements and objectives. Once the broker has made the preliminary assessment that the loan product is not unsuitable, they have to disclose this conflict of interest in the Credit Proposal Disclosure Document by including an additional paragraph in the section "Estimated commissions payable to us" stating that volume based commissions may be payable for this particular loan product.
The broker would have to disclose specific loan volume and the bonus commissions payable if the figures are known and provided. For example, we would receive a bonus commission of $5,000 for writing $6 million of loans with ABC Lender for the 3 months period ending 30 June 2015.
Alternatively, if specific information about the bonuses is not provided, the broker has to include an additional disclosure that they may receive additional, volume-based commissions from this lender as noted in their Credit Guide provided to the clients.