A 101 Guide to ASIC’s Power to Cancel Your Australian Credit Licence (ACL)

Introduction

Holding an Australian Credit Licence (ACL) is fundamental for any person or business intending to engage in credit activities within Australia. However, maintaining this licence requires ongoing compliance, as the Australian Securities and Investments Commission (ASIC) holds significant power to cancel or suspend an ACL under the National Consumer Credit Protection Act 2009 (Cth).

Understanding the circumstances under which ASIC can exercise its power to cancel a licence is therefore essential for every licensee. This guide provides crucial information on ASIC’s authority in this area, outlining the specific grounds and processes involved, to help licensees navigate their compliance obligations and protect their authorisation to engage in credit activities.

When ASIC Can Cancel an Australian Credit Licence Without a Hearing

Failure to Commence or Ceasing Credit Activities

Under sections 54(1)(b) and 54(1A) of the National Consumer Credit Protection Act 2009 (Cth), ASIC can cancel an ACL without offering the licensee a hearing in the following circumstances:

• The licensee ceases to engage in credit activities.
• The licensee does not commence authorised credit activities within six months of the licence being granted.

As a result, ASIC has recently cancelled licences when it became aware that licensees had not engaged in credit activities for some time. For instance, Accumulus Capital Pty Ltd had its licence cancelled partly because it failed to engage in credit activities since its licence was granted in December 2014. Licensees must notify ASIC if they cannot commence their credit business within this six-month timeframe.

Failure to Pay Levies or Compensation Scheme Payments

ASIC may also cancel an ACL without a hearing if the licensee fails to meet certain financial obligations. Specifically:

• Under paragraph 54(1)(d) of the Act, ASIC may cancel a licence when industry funding levies and any related late-payment penalties remain unpaid for at least 12 months after the due date. For example, this failure contributed to the aforementioned cancellation of Accumulus Capital Pty Ltd’s licence.

Moreover, section 54(1B) mandates cancellation following a payment by the Compensation Scheme of Last Resort (CSLR). This occurs when:

• The CSLR pays compensation to a consumer for an unpaid determination made by the Australian Financial Complaints Authority (AFCA) against the licensee, and
• ASIC receives notification of that payment.

Cancellation in these circumstances is mandatory and not subject to merits review. Several ACLs have been cancelled on this basis, including:

• Ferratum Australia Pty Ltd
• Ultimate Credit Management Pty Ltd
• Worry Free Finance Pty Ltd

Insolvency or Other Disqualifying Events for the Licensee

Section 54(1)(c) of the National Consumer Credit Protection Act 2009 (Cth) provides additional grounds for ASIC to suspend or cancel an ACL without a hearing. These grounds relate to specific disqualifying events concerning the licensee or associated individuals.

ASIC may cancel the licence if any of the following events occur in relation to the licensee or associated individuals:

• The licensee becomes insolvent.
• If the licensee is a natural person, they are convicted of serious fraud.
• If the licensee is a natural person, they become incapable of managing their affairs due to physical or mental incapacity.
• A prescribed State or Territory order comes into force against the licensee, or against key personnel if the licensee is a body corporate, partnership, or trust.

When ASIC Can Cancel an Australian Credit Licence After Offering a Hearing

Breaching General Conduct Obligations

Under section 55(1)(a) of the National Consumer Credit Protection Act 2009 (Cth), ASIC has the power to suspend or cancel an ACL if the licensee contravenes its general conduct obligations outlined in section 47 of the Act. Before taking such action, ASIC must provide the licensee with an opportunity for a hearing, as mandated by section 55(4).

The general conduct obligations under section 47 require licensees to:

• Engage in credit activities efficiently, honestly, and fairly.
• Have adequate arrangements to manage conflicts of interest.
• Comply with the conditions on their licence and the credit legislation.
• Take reasonable steps to ensure their representatives comply with the credit legislation.
• Maintain competence to engage in authorised credit activities.
• Ensure their representatives are adequately trained and competent.
• Have compliant internal dispute resolution procedures and be a member of the AFCA scheme.
• Maintain adequate compensation arrangements, such as professional indemnity insurance.
• Have adequate resources (financial, technological, and human) and risk management systems.
• Have adequate arrangements and systems for compliance, documented in a written plan.
• Comply with the Reference Checking and Information Sharing Protocol.

Failure to meet these obligations can lead to various enforcement actions by ASIC, including licence suspension or cancellation after a hearing.

Failing the Fit & Proper Person Test

ASIC may also suspend or cancel a licence under section 55(1)(c) of the National Consumer Credit Protection Act 2009 (Cth) if it has reason to believe that the fit and proper person requirement in section 37A is no longer satisfied. This test applies not only to the licensee itself but also potentially to its officers, partners, trustees, or controllers, depending on the licensee’s structure.

The assessment considers various factors outlined in section 37B, such as:

• Previous licence suspensions or cancellations,
• Banning orders,
• Insolvency history,
• Criminal convictions, particularly those involving serious fraud.

If ASIC forms the view that the licensee or relevant associated persons are no longer fit and proper to engage in the authorised credit activities, it can initiate the cancellation or suspension process. However, ASIC must first offer the licensee a hearing under section 55(4).

Providing False or Misleading Information

Providing false or misleading information to ASIC can also be grounds for licence suspension or cancellation under section 55 of the National Consumer Credit Protection Act 2009 (Cth). Specifically, sections 55(1)(d) to (g) empower ASIC to take action if:

• The original application for the licence was false in a material particular, materially misleading, or omitted a material matter.
• Information, an audit report, or a statement lodged with ASIC in relation to the licence application (under subsection 37(4)) was false, misleading, or omitted a material matter.
• An application made by the licensee to vary licence conditions (under paragraph 45(2)(b)) was false, misleading, or omitted a material matter.
• Information, an audit report, or a statement lodged with ASIC in relation to an application to vary conditions (under subsection 46A(3)) was false, misleading, or omitted a material matter.

As with other grounds under section 55, ASIC must give the licensee an opportunity for a hearing before suspending or cancelling the licence for providing false or misleading information.

The Cancellation Process & Licensee Rights

Requirement for a Hearing in Certain Cases

In certain circumstances, ASIC must provide a licensee with an opportunity to be heard before deciding to suspend or cancel their ACL. This requirement applies when ASIC proposes action based on grounds outlined in section 55 of the National Consumer Credit Protection Act 2009 (Cth), including:

• breaches of general conduct obligations
• failure to meet the fit and proper person test

Under section 55(4), the licensee is entitled to appear or be represented at a private hearing. At this hearing, they can make submissions on the matter before ASIC reaches its final decision on suspension or cancellation.

Notice & Reasons for Cancellation

When ASIC decides to vary, suspend or cancel an ACL, it must formally inform the licensee. Section 60 of the National Consumer Credit Protection Act 2009 (Cth) requires ASIC to provide written notice that:

• details the action taken
• specifies the date the variation, suspension or cancellation takes effect

In addition, under section 61, if a licence is suspended or cancelled, the notice must include a statement outlining the reasons for ASIC’s decision.

Appealing ASIC’s Decision

Licensees generally have the right to seek a merits review of ASIC’s decision to cancel or suspend their licence. Affected entities—such as Auckland Finance Pty Ltd and Accumulus Capital Pty Ltd—may apply to the Administrative Review Tribunal (formerly the Administrative Appeals Tribunal or AAT).

This appeal right covers decisions made under sections 54 and 55 of the National Consumer Credit Protection Act 2009 (Cth). However, mandatory cancellations—such as those resulting from payments by the CSLR under section 54(1B)—are typically not subject to merits review.

Consequences of Australian Credit Licence Cancellation

Failure by a licensee to meet their general conduct obligations under the National Consumer Credit Protection Act 2009 (Cth) can lead to significant enforcement action by ASIC.

Among the potential penalties, ASIC holds the power to:

• suspend an ACL
• cancel an ACL

This underscores the critical importance for licensees to maintain ongoing compliance with all regulatory requirements to avoid jeopardising their authorisation to engage in credit activities.

Conclusion

ASIC holds considerable power under the National Consumer Credit Protection Act 2009 (Cth) to cancel or suspend an ACL based on various grounds. These grounds range from immediate cancellation triggers like inactivity or unpaid levies to situations requiring a hearing, such as breaches of conduct obligations or providing false information, highlighting the critical need for ongoing licensee compliance.

For businesses both established and emerging, especially those in the process of applying for an ACL, ensuring your systems and practices meet these strict standards is fundamental. Contact AFSL House today for trusted expertise and specialised services tailored to help you meet your obligations and ensure your ACL remains secure.

Frequently Asked Questions