The National Consumer Credit Protection Act (NCCP Act) is the key legislation passed by the Commonwealth taking over the regulation of credit from 1 July 2010.
Businesses conducting a credit activity must be registered or be appointed as a credit representative of a registered business. Credit activities include finance broking, lending, leasing, servicing and managing NCCP Act regulated loans.
Click here to see whether your circumstances require that you need a licence.
The following information is as summarised by the MFAA:
How does licensing affect day to day business for brokersThe basic new requirements are:
you must conduct enquiries to assess whether a loan is unsuitable. This involves a three stage process:
- make reasonable enquiries about the borrower’s requirements and objectives
- make reasonable enquiries about the borrower’s financial situation
- take reasonable steps to verify that financial situation
you must ensure that borrowers are not disadvantaged by any conflict of interests
comparison rate schedules are abolished (but you must still show comparison rates in advertisements that mention repayments or interest rates)
you must be registered/licensed or appointed as a credit representative under an organisation's licence
you must ensure that any referrer who is not registered or a credit representative discloses to the borrower any commission payable to the referrer (it’s a good idea for you to make this disclosure)
The NCCP Act also imposes the following general conduct obligations:
conduct business efficiently, honestly, and fairly
comply with any conditions imposed on their registration
comply with all credit legislation
take reasonable steps to ensure your representatives (this includes employees as well as credit representatives) comply with all credit legislation.
- Breach register - There is no obligation to maintain a breach register until you are licensed, but it would be a good idea.
- Loan assessments - You need to develop a system for assessing whether a loan is ‘not unsuitable’ and a system for recording that information. From 1 January 2011 you will need to provide a copy of that assessment on request.
Register online yourself at www.asic.gov.au/credit.
Before you complete your registration, please check the following:
1. Determine which entity you are registering as the licensee.
2. Depending on the entity in point 1, check all business registration details are correct on relevant government websites e.g. if a company, check the company’s details on www.asic.gov.au are correct.
3. If registering as a company, make sure all Directors details on www.asic.gov.au are correct.
4. Obtain police and bankruptcy checks for all “owners” of the entity eg. for a company then checks for the directors; or for a partnership then checks on the partners, etc.
5. Ensure that the entity is a member of an external disputes resolution scheme e.g. COSL (www.cosl.com.au)
The National Finance Institute has teamed with Risk Services experts to offer a unique Australian Credit Licensing (ACL) Application Kit which not only provides you with all the elements you will require to gain your ACL, but enables you to gain the maximum leverage from the new regulatory requirements and add value to your business - see below or Click here for more information on the Kit.