In our alert on 4 March 2021 we commented on an exposure draft of proposed legislation (the National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021) requiring that debt management and credit repair companies obtain an Australian Credit Licence.
The regulations are now law and the Australian Securities & Investments Commission (ASIC) has wasted no time in implementing those regulations, now requiring that all providers of debt management and credit repair services apply for an Australian Credit Licence (or vary an existing licence) by no later than 30 June 2021 – otherwise they will no longer be permitted to operate and provide such services.
ASIC has issued an information circular – Information Sheet 254 – outlining what is required and how debt management and credit repair companies (affected parties) are to go about the licence application process.
Basically, ASIC requires that affected parties lodge an application for an Australian Credit Licence and have that application “accepted” for lodgement by ASIC by no later than 30 June 2021. The concept of an application being “accepted” involves submission by an applicant of not only the application but all required supporting documentation. If the supporting documentation does not accompany the licence application or is not supplied upon request, then ASIC has the right to reject the application outright and require it to be relodged.
The practical steps to be taken by affected parties are set out in detail in Information Sheet 254 and we will leave it to you to read that information sheet if it is relevant to your operations.
However, it is important for all clients to make sure that their operations are not affected by these new regulations, so as to require either an application for a new Australian Credit Licence or a variation to an existing licence.
While the regulations are primarily directed at debt management and credit repair companies, a wider group of parties will be caught by these new regulations. For the purposes of this note, we extract the summary contained in Information Sheet 254 explaining what is a debt management service:
|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:
• 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 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.|
It is important that all clients examine their current activities to determine whether or not they will be caught by these new regulations. It is important to note that the legislation will also capture firms acting behind the scenes, giving advice and making suggestions but not necessarily acting as the consumer’s authorised representative in internal or external dispute resolution.
However, it appears to us that:
- a registered debt agreement administrator preparing and administering a debt agreement under Part IX of the Bankruptcy Act 1966, and
- a registered trustee performing functions, or exercising powers under Part X of the Bankruptcy Act 1966
are both generally exempt from the requirement to hold an Australian Credit Licence by virtue of Regulation 20 of the regulations made under the National Consumer Credit Protection Act 2009. Analysis of the extent of that exemption is outside the scope of this article and specific legal advice should be sought before seeking to rely upon any apparent exemption.
While the summary provided by ASIC in Information Sheet 254 is very useful, ultimately there is no substitute for reading the legislation itself for a full description of what constitutes ‘a debt management service’, ‘debt management assistance’ and ‘credit reporting assistance’.
If you reach the conclusion that you are or may be affected by these new regulations, then you need to take immediate action to ensure that you are able to continue to operate post 30 June 2021.
~ with Michael Timlin, Graduate at Law