What is an Australian credit licence?

Three groups need to be licensed or authorised. Credit providers who offer, provide or vary consumer credit contracts or consumer leases. Credit assistance providers, which is the legal name for a broker or intermediary who arranges or suggests credit for a consumer. And lessors who enter consumer goods leases that fall within the NCCP framework. Referral-only arrangements can still count as credit assistance if you recommend or suggest a particular loan.

Some activity sits outside the regime. Lending to companies and other business borrowers generally falls outside the consumer credit definitions, though the analysis needs care, and some intra-group or incidental lending is exempt. The exemptions are narrow. Rather than hold a licence, a small broker or introducer can operate as an authorised credit representative under a licensee such as an aggregator, which supervises them and answers to ASIC for their conduct.

ASIC assesses both the entity and its responsible people. The fit and proper test looks at honesty, integrity, competence and any disqualifying history such as bankruptcy or regulatory action. Alongside that, the application needs the company structure and ASIC extracts, a business plan describing the credit activities and distribution channels, financial statements and cashflow forecasts showing the business can pay its way, and a compliance plan with policies for responsible lending, dispute handling, privacy and AML/CTF where relevant.

You also supply training records for key staff, copies of consumer-facing documents such as the credit guide and contracts, background checks and evidence of AFCA membership. The application is lodged online with a fee. Timing depends on how complete and well-evidenced the application is; ASIC publishes its licensing service standards, and months rather than weeks is the realistic planning horizon. Incomplete financials, thin compliance arrangements or unproven competence are the usual causes of delay.

The licence is the start, not the end. Before providing or suggesting credit a licensee must make a reasonable assessment of the customer's financial situation, requirements and objectives, and must not enter a contract that is likely to cause substantial hardship. It must keep a written compliance plan that identifies risks, assigns owners and is reviewed regularly, and it must keep records of assessments, disclosures, contracts and complaints for the statutory period so ASIC or AFCA can review them.

Licensees must stay members of AFCA, tell customers how to complain, notify ASIC of changes to licence details, key people, insolvency events and serious breaches, maintain a training program with evidence of competence, and remain financially viable. Where the licensee authorises ACRs, it must have a written authorisation agreement, actively supervise their files and notify ASIC of each appointment.

ASIC acts where it sees consumer harm, systemic failures or serious non-compliance. It can suspend or cancel a licence, issue infringement notices, seek injunctions and freezing orders, accept enforceable undertakings, bring civil penalty proceedings and prosecute deliberate wrongdoing. The breaches that most often trigger action are missing or inadequate suitability assessments, misleading marketing or disclosure, poor complaint handling or lapsed AFCA membership, and weak supervision of representatives.

Suspension or cancellation stops the business carrying on regulated credit activity immediately, so it is operationally serious as well as reputationally damaging. If ASIC issues a show-cause notice, preserve records, tell your professional indemnity insurer and senior management, get advice and respond frankly with evidence of remediation. Decisions can be subject to merits or judicial review.