Debt management reforms: credit licensing
What has changed?
The Government has introduced new laws that mean certain debt management services are now a 'credit activity' for the purposes of the National Consumer Credit Protection Act 2009 (National Credit Act).
From 1 July 2021, subject to transitional arrangements, providers of debt management services must hold an Australian credit licence (credit licence) with an authorisation that covers debt management services (debt management authorisation).
The transitional arrangements allow for the continued provision of debt management services while a provider is actively taking steps to be covered by a credit licence.
Under the transitional arrangements, if you intend to provide debt management services from 1 July 2021, you needed to, by 30 June 2021:
- have applied for a credit licence (or variation to an existing licence) with a debt management authorisation or have arrangements in place to act as a representative of a provider that has applied for a credit licence to cover this activity, and
- have become a member of the Australian Financial Complaints Authority (AFCA).
ASIC has published a list of persons/entities that applied to ASIC for a credit licence or variation seeking the ‘debt management services’ authorisation by 30 June 2021 and were members of AFCA on that date (30 June 2021).
For more information about these changes, see INFO 254 Debt management services: Applying for a credit licence or variation (INFO 254).
For information about the new laws and the transitional arrangements, see the National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 (Debt Management Services Regulations) and Explanatory Statement.
What is a debt management service?
For the purposes of the National Credit Act and the credit licensing requirements, a 'debt management service' broadly covers the kinds of activities listed in Table 1, provided:
- the activity is in relation to consumer credit contracts, and
- a fee, charge or other amount is paid or payable by or on behalf of the consumer in relation to the service.
Table 1: Activities related to consumer credit contracts
Debt management assistance
Suggesting and/or helping a consumer to:
Credit reporting assistance
Suggesting and/or helping a consumer to apply for a change to information collected by a credit reporting body about a credit contract for which the consumer is a debtor
The activities described in Table 1 will also be considered to be a 'debt management service' if they are provided to consumers who have given a guarantee to support a consumer credit contract.
For the full definition of what constitutes a 'debt management service', 'debt management assistance' and 'credit reporting assistance', see section 6 of the National Credit Act (as inserted by regulations 4B and 4C of the Debt Management Services Regulations).
What do I need to do if I provide debt management services?
If you are a provider of debt management services from 1 July 2021, you needed to by 30 June 2021:
- have submitted – and ASIC must have accepted for lodgement – your complete application for a credit licence (or variation to an existing licence) authorising you to provide debt management services, and
- have become a member of AFCA.
Alternatively, if you intend to provide debt management services as an authorised credit representative, you needed to have met certain transitional arrangements. For more information, see 'Being authorised as a credit representative' in INFO 254.
What are the transitional arrangements?
If you comply with the requirements set out in 'What do I need to do if I provide debt management services?', you will be able to continue to provide debt management services until:
- ASIC deals with your licence application, by either granting or refusing to grant the credit licence (or variation), or
- you become a credit representative of a credit licensee who is authorised to provide debt management services.
If you do not comply with the requirements of the transitional arrangements and continue to provide debt management services from 1 July 2021, you will likely be breaking the law by engaging in unlicensed conduct.
For further information about the transitional arrangements, see the Debt Management Services Regulations.
How do I submit a licence application?
The licence application you submit must be complete. For example, it will need to include certain proofs and attachments such as criminal history and bankruptcy checks for natural person applicants, or in the case of body corporates, for all officers or controllers.
ASIC may reject an application for lodgement if it is incomplete: see section 218(1) of the National Credit Act. If you lodge your application after 1 June 2021, you risk losing the benefit of the transitional arrangements, if the application is not complete and ASIC does not accept it for lodgement by 30 June 2021.
If ASIC accepts the lodgement of your licence application, we will assess the information you have provided and will make a decision on whether to grant you a credit licence.
During our assessment of your application, we may request further details or information from you. While ASIC seeks to assess all licensing applications in a timely manner, we cannot provide you with an indication of how long this will take.
Where can I find more detailed information?
For more information on the new laws, including the transitional arrangements, and what you need to do to comply, see:
- Debt Management Services Regulations and the Explanatory Statement
- INFO 254 Debt management services: Applying for a credit licence or variation
See also our general information for credit licensees, which can help you understand the process and what will be expected of you.
If you are unsure about how these changes may affect you, you should seek your own independent legal advice.