A few years have passed since the consumer credit laws and
licensing regime commenced back in 2010. So now may be a good time
to review your options when it comes to offering credit services in
addition to your financial advisory services. You may be a credit
representative of an Australian Credit Licensee thinking about
making the move to your own licence. Maybe you have never helped
clients with acquiring loans but want to be able to. Or perhaps you
want to avoid accidentally being caught by the credit regime
altogether. This article considers some of these options.
When are financial advisers most likely to be caught by the
credit regime? When they provide credit assistance or act as an
Broadly speaking credit assistance is assisting, or suggesting,
that a consumer enter into, increase the credit limit of, or remain
in a particular credit contract or lease with a particular credit
provider or lessor. In essence, that means if you assist a client
to apply for a home loan from the Bendigo Bank, that is credit
assistance. If you suggest that a client leases a car through their
local car dealer, that is credit assistance. If you suggest that a
client keeps their credit card with Westpac, that is also credit
For the purposes of the credit laws, you act as an intermediary
when you directly or indirectly act as an intermediary between a
credit provider and a consumer for the purposes of securing credit
for the consumer under a credit contract with the credit provider.
This is a very broad definition which captures a number of
activities including when you refer clients to a broker. If you are
reading this and thinking "I do that but I'm not
authorised under a licence!" don't lose any sleep. There
is an exemption that you can use; you may already be using it
without realising. We will discuss the exemption later in this
If you are familiar with the financial services regime you will
notice that credit assistance is similar, but not identical, to
providing financial product advice and dealing by arranging on
behalf of another.
If you provide credit assistance or act as an intermediary you
will need an authorisation under an Australian Credit Licence
('ACL') unless one of the exemptions apply.
So what are some of your options?
Get your own ACL
Become a credit representative of another licensee
Utilise the referral exemption
Be careful to avoid providing credit assistance
What do you need to think about when considering your
Cost – there are costs involved in setting up and running
your own ACL. ASIC fees, PI insurance and ongoing compliance to
name a few. It may be more cost effective to become a credit
representative of another licensee.
Liability – licensees are ultimately responsible for all
credit activities engaged in under their licence and compliance
with the credit laws. Are you comfortable having that
Resources – do you have sufficient human resources to
supervise credit activities and ensure compliance with changing
Control – do you want the freedom to suggest any credit
product that you think is suitable for your client? If you are a
credit representative you may be bound to your licensee's
approved product list.
Work load – do you have enough work to justify becoming a
credit representative or licensee? Is it better to just refer the
few clients that require credit assistance to someone else?
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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