Which credit providers must comply with the National Consumer Credit Protection Act?

31 Jan

Written By For Good Digital

Chapter 2 of the NCCP Act generally requires all persons engaging in ‘credit activities’ to hold an Australian Credit Licence. In practice, this means that most credit providers, finance brokers and lease providers have to hold an Australian Credit Licence. You can check if a business is licensed to engage in credit activities by visiting www.asic.gov.au and searching the professional register.
‘Credit activity’ is defined comprehensively in section 6 of the NCCP Act. In brief, a person is engaged in a credit activity if the person:
- is a credit provider under a credit contract regulated by the NCC;
- carries on a business of providing regulated credit;
- provides credit assistance;
- acts as an intermediary;
- is a lessor under a regulated consumer lease;
- carries on a business of providing regulated consumer leases;
- is a mortgagee under a regulated mortgage; or
- is a beneficiary of a regulated guarantee.
Certain debt management services are considered to be a ‘credit activity’ where 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 (see National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 (Cth)).
Debt management services involve suggesting/helping a consumer to:
- apply for a change to a credit contract for which the consumer is a debtor
- apply for a postponement of enforcement proceedings;
- make a complaint or claim to a credit provider, AFCA, ASIC, or the Information Commissioner;
- apply for a change to information collected by a credit-reporting body about a credit contract for which the consumer is a debtor.
ASIC’s ‘Information Sheet 254’ (available at www.download.asic.gov.au/media/iqbiovhu/info254-published-5-may-2021.pdf) provides more information about credit licensing and debt management services.
Lawyers are generally exempt from credit licensing, unless they hold out or advertise to consumers that they provide debt management services.
Section 8 of the NCCP Act defines the following activities as credit assistance:
- suggesting that the consumer apply for a particular credit contract with a particular credit provider;
- suggesting that the consumer apply for an increase to the credit limit of a particular credit contract with a particular credit provider;
- suggesting that the consumer remain in a particular credit contract with a particular credit provider;
- assisting the consumer to apply for a particular credit contract with a particular credit provider;
- assisting the consumer to apply for an increase to the credit limit of a particular credit contract with a particular credit provider;
- suggesting that the consumer apply for a particular consumer lease with a particular lessor;
- suggesting that the consumer remain in a particular consumer lease with a particular lessor; or
- assisting the consumer to apply for a particular consumer lease with a particular lessor.
The definition captures finance broking services.
However, under the NCCP Regulations (reg 24), certain activities that fall within this definition are exempted, including in certain circumstances, credit activities provided by lawyers, tax agents and clerks or cashiers.
Acting as an intermediary (e.g. finance brokers, aggregators, mortgage managers) between a credit provider and a consumer or between a lessor and a consumer is regarded as credit activity, which requires a credit licence. An intermediary is therefore required to have a credit licence to engage in such activity.
It does not matter whether the person acts on their own behalf or on behalf of another person (NCCP Act s 9).
Australian credit licences fall into different categories, depending upon the credit activity or activities they are engaged in. However, there are some obligations imposed on all licensees. These include:
- doing all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly (NCCP Act s 47(1)(a));
- complying with the conditions on the licence, the credit legislation and any other obligations prescribed by the NCCP Regulations (NCCP Act ss 47(1)(c)–(d), (m));
- ensuring that its representatives are adequately trained, and are competent to engage in the credit activities authorised by the licence (NCCP Act s 47(1)(g));
- having an internal dispute resolution procedure that complies with ASIC standards (NCCP Act s 47(1)(h));
- being a member of AFCA (NCCP Act s 47(1)(i)); and
- having professional indemnity insurance (NCCP Act ss 47(1)(j), 48; NCCP Regulations reg 12).