AFSL & ACL Licensing for P2P & Marketplace Lenders in Australia

Introduction

The regulatory landscape for peer-to-peer (P2P) and marketplace lending in Australia presents a unique challenge for operators, as most platforms must navigate two separate licensing regimes. This dual-licensing requirement stems from the fundamental nature of the business model, which, on one side, facilitates credit to borrowers and, on the other, pools and manages investor funds as a financial product. Consequently, these platforms typically require both an Australian Credit Licence (ACL) and an Australian Financial Services Licence (AFSL) to operate legally.

Understanding this dual structure is essential for any lending platform seeking to establish a compliant and sustainable business in Australia. This guide provides clear insights into why both licences are necessary, explaining the obligations that arise from providing consumer credit under the National Consumer Credit Protection Act 2009 (Cth) and those from operating a managed investment scheme under the Corporations Act 2001 (Cth). Navigating these interconnected regulatory frameworks is the first step toward building a trusted marketplace for both borrowers and investors.

The Dual Licence Requirement for P2P Lending Platforms

P2P and marketplace lending platforms in Australia face a distinct regulatory challenge because they typically perform two separate functions. This business model means most operators must navigate two licensing regimes simultaneously, requiring them to hold both:

• An ACL
• An AFSL

This dual-licensing requirement reflects the fundamental structure of how these online platforms operate. On one side, they facilitate the provision of credit to borrowers, and on the other, they pool and manage funds from investors who are seeking a return. Each of these functions falls under a different set of Australian laws.

The need for an ACL is triggered by the platform’s lending activities. When a P2P lender provides loans to individuals for personal, domestic, or household purposes, it is engaging in “credit activities” as defined by the National Consumer Credit Protection Act 2009 (Cth). This makes an ACL mandatory to ensure consumer protection and responsible lending practices.

Simultaneously, the platform’s interaction with investors triggers the need for an AFSL. By pooling money from multiple investors to fund loans, the platform typically operates a Managed Investment Scheme (MIS) under the Corporations Act 2001 (Cth). An interest in an MIS is considered a financial product, and operating such a scheme is a financial service that legally requires an AFSL.

Your Australian Credit Licence (ACL) Obligations

Defining Credit Activities for Your P2P Platform

If your P2P lending platform offers loans to consumers for personal, domestic, or household purposes, you will generally need an ACL. The National Consumer Credit Protection Act 2009 (Cth) defines several “credit activities” that trigger this requirement. Understanding which activities your platform performs is crucial for compliance.

These regulated activities include:

Credit Activity	Description
Providing credit directly	Occurs if your platform, often acting as a trustee for investors, enters into the loan contract with the borrower.
Providing credit assistance	Involves suggesting a specific loan to a consumer or helping them apply for it through your platform.
Acting as an intermediary	Facilitating the loan process between the borrower and the ultimate credit provider, which also requires a licence.

The specific entity requiring the ACL authorisation depends on your business structure. For instance, if a separate custodian entity is used to enter into loan contracts, that custodian will need an ACL as the credit provider, while your platform may need a separate authorisation for providing credit assistance.

Meeting Responsible Lending & Disclosure Duties

The central obligation for any ACL holder is responsible lending, as outlined in the National Consumer Credit Protection Act 2009 (Cth). Before entering into a consumer loan, you must ensure the contract is “not unsuitable” for the borrower. This involves a mandatory three-step process.

The key pillars of responsible lending are:

Pillar of Responsible Lending	Core Requirement
Making reasonable inquiries	You must inquire about the consumer’s financial situation, including their income and expenses, as well as their requirements and objectives for seeking the loan.
Verifying the consumer’s financial situation	You must take reasonable steps to verify the information provided, typically by reviewing documents like bank statements or payslips.
Assessing suitability	Based on the verified information, you must assess whether the consumer can meet the loan repayments without experiencing substantial hardship and if the loan meets their stated needs.

In addition to these assessment duties, you must provide borrowers with clear disclosure documents. This includes a credit guide, which explains their rights and your obligations, and a pre-contractual statement detailing the loan’s key terms, interest rate, and fees.

Establishing Dispute Resolution & Compliance Systems

Holding an ACL requires you to have robust systems for managing compliance and resolving disputes. A critical requirement is membership in the Australian Financial Complaints Authority (AFCA), which is the ASIC-approved external dispute resolution scheme. This provides consumers with a free and independent avenue to resolve complaints they cannot settle with you directly.

Before a matter can be escalated to AFCA, you must have your internal dispute resolution (IDR) procedures in place. These procedures should be accessible and designed to handle complaints from borrowers efficiently and fairly. Maintaining these systems is not optional; it is a core condition of your licence.

Navigating the AFSL & MIS Rules

Structuring Your P2P Platform as a Managed Investment Scheme (MIS)

The investment side of a P2P lending platform is typically structured as an MIS under the Corporations Act 2001 (Cth). An MIS is an arrangement where investors contribute funds to be pooled together in a common enterprise, with the aim of producing financial benefits. A key feature is that investors do not have day-to-day control over how their funds are managed.

In the context of a P2P lending platform, this structure is triggered because investors’ funds are pooled to be lent out to various borrowers. The platform operator manages this pool of loans, making it a financial product in the form of an interest in an MIS. This structure requires the operator to hold an AFSL.

Whether the MIS needs to be registered with ASIC depends on several factors. Registration is mandatory if the scheme:

Category	Condition Triggering Mandatory Registration
Investor Type	The scheme is offered to retail investors.
Scheme Size	The scheme has more than 20 members.
Promotion	The scheme is promoted by someone in the business of promoting such schemes.

Platforms can choose to operate an unregistered scheme by offering interests exclusively to wholesale investors. While this reduces some compliance burdens, such as the need for a full Product Disclosure Statement (PDS), an AFSL is still generally required to provide the financial service.

Key AFSL Obligations for Your Lending Business

Holding an AFSL to operate an MIS imposes significant duties on your lending business, primarily governed by Chapter 5C of the Corporations Act 2001 (Cth). For a registered scheme offered to retail investors, the operator must act as a “Responsible Entity,” which must be a public company.

The core obligations for an AFSL holder operating an MIS include:

AFSL Obligation	Description
Acting in Investors’ Best Interests	The Responsible Entity must act in the best interests of the scheme’s members and prioritise their interests in the event of a conflict.
Maintaining a Compliance Plan	A detailed compliance plan must be prepared, lodged with ASIC, and adhered to, outlining systems to ensure legal compliance.
Establishing a Scheme Constitution	The MIS must be governed by a constitution that details member rights, investment processes, and withdrawal arrangements.
Preparing a Product Disclosure Statement (PDS)	A PDS must be provided to retail investors, explaining the product’s features, benefits, fees, and significant risks.
Ensuring Adequate Resources	The licensee must have adequate financial, technological, and human resources, including meeting net tangible asset requirements.
Implementing Risk Management Systems	Adequate systems must be established and maintained to identify, assess, and mitigate key operational and financial risks.

A Practical Licensing Roadmap for Your P2P Lending Business

Choosing the Right Business Structure for Your Lending Platform

The operational structure you choose for your P2P lending platform has significant compliance implications, particularly concerning which entity needs to hold the ACL. Your business model will determine whether your platform, a separate custodian, or another party is considered the credit provider.

ASIC has identified several common structures for a P2P lending business, each with different licensing requirements:

Business Structure	Licensing Implications
Platform as Credit Provider	The platform entity, acting as a trustee, enters into loan contracts directly and must hold an ACL with the authorisation to “engage in credit activities as a credit provider.”
Custodian as Credit Provider	A separate custodian entity holds funds and enters into loan contracts. In this model: The custodian is the legal credit provider and must hold the ACL. The P2P platform may still need a separate ACL authorisation for providing “credit assistance.”
Direct Investor Lending	The platform facilitates loans directly between individual investors and borrowers. In this scenario: The investors themselves become the credit providers and may need to hold an ACL. The platform would require an ACL authorisation to “engage in credit activities other than as a credit provider.”

Sequencing Your AFSL & ACL Applications

Navigating the dual application process for an AFSL and an ACL requires a strategic approach to streamline regulatory approval. It is generally advisable to begin with the AFSL application before proceeding with the ACL application.

The AFSL process is typically more complex and time-consuming, often taking between four and eight months for ASIC to assess a complete application. Starting with the AFSL allows you to finalise the core investment structure of your MIS first.

The key documents required for the AFSL, such as the scheme constitution and compliance plan, will articulate how credit activities are managed, providing ASIC with a holistic view of your business. While the AFSL application is under review, you can prepare and submit the less complex ACL application, which typically takes two to six months for a decision.

Exploring Alternatives to Direct Licensing

For new entrants to the marketplace, obtaining a full AFSL and ACL from the outset can be a significant investment of time and resources. Fortunately, there are alternative pathways that can reduce the initial regulatory burden and accelerate your time to market.

One common strategy is to operate as an authorised representative of an existing licence holder. This involves:

Representative Role	Description
Acting as a Credit Representative	Partner with a business that holds an ACL to engage in specified credit activities under their licence and supervision.
Becoming an Authorised Representative	Operate under an existing AFSL holder, which takes on the primary compliance responsibility for the financial services you provide.

Another alternative is to partner with an existing licensed operator to handle one side of the business. For example:

• Your platform could focus on loan origination and underwriting with an ACL
• While partnering with an established registered scheme operator that holds the necessary AFSL to manage the investor funds

Finally, in limited circumstances, you may apply to ASIC for relief from specific obligations if you can demonstrate that compliance would be unreasonable and unduly burdensome.

Conclusion

Successfully launching a P2P or marketplace lending platform in Australia requires navigating a dual-licensing framework, securing both an ACL for consumer lending and an AFSL to manage investor funds. Understanding the distinct obligations under the National Consumer Credit Protection Act 2009 (Cth) and the Corporations Act 2001 (Cth) is essential for establishing a compliant and trusted online platform for borrowers and investors.

To ensure your lending platform is structured for success and meets these complex regulatory requirements, contact the specialist AFSL lawyers at AFSL House. Our team offers expert guidance on AFSL and ACL applications and can provide tailored compliance frameworks to help turn these challenges into strategic opportunities.

Frequently Asked Questions (FAQ)