Can I Get an Exemption to Holding an Australian Credit Licence (ACL)?

Introduction

Businesses diving into the credit world usually need an Australian Credit Licence, often referred to as an ACL. This essential requirement comes from the National Consumer Credit Protection Act 2009. But surprise, not every business in this field needs to have an ACL.

Indeed, there are licensing exemptions available under the same Act and its associated regulations. This guide provides important information on these exemptions, helping you determine whether your business might be exempt from the requirement to hold an ACL.

Understanding the Australian Credit Licence and Credit Activities

What is an Australian Credit Licence (ACL)?

An ACL is generally required for entities that engage in credit activities. This licensing regime was established nationally on 1 July 2010 under the National Consumer Credit Protection Act 2009 (Cth).

If your business is involved in providing credit or consumer leases to consumers, it is important to determine whether you need to be licensed. Engaging in credit activities without the appropriate licence is an offence under the National Consumer Credit Protection Act 2009 (Cth).

Defining Credit Activities

“Credit activity” is defined broadly under the National Consumer Credit Protection Act 2009 (Cth) and includes several key actions. These activities generally relate to credit contracts or consumer leases that fall under the National Credit Code. Credit activities include:

• Providing credit under a credit contract.
• Being a lessor under a consumer lease.
• Benefiting from mortgages or guarantees related to a credit contract.
• Exercising rights or performing obligations as a credit provider, lessor, mortgagee, or beneficiary of a guarantee.
• Suggesting or assisting a consumer to apply for a credit contract, consumer lease, or an increase to a credit limit.
• Acting as an intermediary to secure a credit contract or consumer lease for a consumer.

Additionally, it’s important to note that the licensing requirements apply only if your activities relate to credit contracts and consumer leases covered by the National Credit Code. If the National Credit Code does not apply, then your actions are not considered “credit activities” requiring a licence.

Who is Exempt from Holding an Australian Credit Licence?

Authorised Credit Representatives

While an Australian Credit Licence (ACL) is generally required for entities engaging in credit activities, there are specific exemptions to this requirement. One key exemption pertains to authorised credit representatives.

If you are an authorised credit representative acting on behalf of a licensed principal, you are not required to hold an ACL. Here’s how it works:

• Authorisation: A credit licensee can authorise individuals to engage in credit activities on their behalf.
• Credit Representatives: These authorised individuals are known as “credit representatives.”
• Documentation: The authorisation must be documented in writing.
• Scope of Activities: The authorisation can cover some or all of the credit activities included in the principal’s credit licence.

By meeting these conditions, authorised credit representatives can operate without holding their own ACL, provided they act within the scope of their authorisation.

Employees and Directors of Licensees

Employees and directors of a licensed principal, or related bodies corporate, are also exempt from needing their own Australian Credit Licence when engaging in credit activities on behalf of the licensee.

Key points of this exemption include:

• Authority Through Employment or Duties: Authority to act on behalf of the licensee is granted through employment terms or director responsibilities, without requiring specific authorisation for credit activities.
• Scope of Conduct: The exemption applies when the credit activities are conducted within the scope of their employment or director duties.

This means that employees and directors can perform credit activities without holding an ACL, as long as they operate within their designated roles and responsibilities.

Specific Exemptions Under the National Credit Act and Regulations

Financial Counselling Agencies

Financial counselling agencies can be exempt from the requirement to hold an Australian Credit Licence (ACL) under specific conditions. This exemption recognises the unique role these agencies play in providing free and independent support to individuals experiencing financial hardship.

To qualify for this exemption, a financial counselling agency must meet several key criteria outlined in the National Consumer Credit Protection Regulations 2010 (Cth) and the National Consumer Credit Protection Act 2009 (Cth). These conditions ensure the integrity of financial counselling services and the appropriate application of the exemption.

The requirements include:

• No Fees or Remuneration:
  The agency must not charge any fees for its financial counselling services. Additionally, neither the agency nor its associates can receive any remuneration from these services. This ensures that the service remains free to consumers and avoids conflicts of interest.
• No Other Credit Activities:
  The agency and its staff must refrain from engaging in any other credit activities outside the scope of the exemption. This condition prevents agencies from using the exemption to conduct broader, licensable credit activities without proper oversight.
• Financial Counsellor Membership and Training:
  The agency must ensure that its financial counsellors are members of, or eligible for membership in, a recognised financial counselling association. Furthermore, counsellors must have appropriate training to ensure they possess the necessary skills and knowledge to provide competent advice. This requirement upholds the professional standards and quality of advice provided by financial counsellors.
• Independent and Confidential Service:
  The financial counselling service must be free, confidential, and independent. This ensures that consumers can trust the advice they receive is impartial and focused solely on their best interests.
• Restriction on Term Usage:
  Only agencies that meet the exemption criteria can use the terms “financial counsellor” and “financial counselling.” This restriction protects consumers by ensuring that only genuinely exempt agencies can present themselves as financial counsellors.

It is important to note that these exemptions are subject to strict conditions. Agencies must diligently meet all the specified requirements to operate without a credit licence.

Mere Referrals

Entities that only make “mere referrals” to licensed credit providers may also be exempt from needing a credit licence. This exemption is designed for businesses that, as part of their primary operations, introduce customers to credit options without providing credit assistance or acting as intermediaries in a regulated capacity.

For this exemption to apply, the referral activity must strictly adhere to specific conditions, ensuring it remains genuinely a “mere referral” and does not transition into licensable credit service activities.

The conditions for a “mere referral” exemption typically include:

• Limited to Information and Contact Details:
  The entity can only inform the consumer that a licensee can provide certain credit activities and provide information on how to contact the licensee. This might involve providing a website link or contact details.
• No Suggestion of Specific Products:
  The referrer must not suggest that the consumer apply for a particular credit contract or consumer lease with a specific provider. The referral should remain neutral and not steer the consumer toward a specific credit product.
• Disclosure of Benefits:
  The referrer must disclose to the consumer any benefits, such as commissions, they may receive for making the referral. Transparency about potential benefits is crucial for maintaining the integrity of the referral process.
• Written Referral Agreement (for Upstream Referrals):
  For “upstream referrals”—where consumer details are passed to the licensee—a written referral agreement with the licensee is necessary, outlining the permissible referral conduct. This agreement helps define and limit the scope of the referral activity.
• Incidental to Another Business (for Upstream Referrals):
  The referral must be incidental to carrying on another business and not the primary purpose of the business. This condition ensures the referral activity is secondary and not the core function of the business.
• Consumer Consent (for Upstream Referrals):
  For upstream referrals, the consumer’s consent must be obtained before their details are passed on to the licensee. This respects consumer privacy and ensures they are aware of and agree to their information being shared.

These conditions are designed to ensure that the entity making the referral is not providing credit advice or assistance but merely facilitating a connection between the consumer and a licensed credit provider. Businesses relying on this exemption must carefully structure their referral processes to comply with all these requirements.

Other Notable Exemptions

Clerks and Cashiers

Clerks and cashiers may perform tasks that could be considered credit activities. However, an exemption exists for those who engage in these activities in the ordinary course of their duties. This means that if you are employed as a clerk or cashier, you may not need a licence for certain routine actions.

Activities typically within the ordinary course of work for clerks and cashiers include:

• Distributing documents: Such as credit guides and key facts sheets.
• Providing factual information: Answering routine questions like current interest rates, fees, and charges on specific credit contracts or consumer leases.
• Receiving payments: For example, upfront application fees and issuing receipts.
• Performing routine administrative tasks: Including receiving loan or lease documentation, passing documents to consumers for signing, and processing completed documents.

It is important to note that this exemption is specific to activities ordinarily performed by clerks and cashiers. If a clerk or cashier engages in activities beyond these routine tasks, such as explaining loan terms or advising on application information, the exemption may not apply. In such cases, they might need to be authorised as a credit representative or hold their own Australian Credit Licence (ACL).

Suppliers of Goods or Services

Suppliers of goods or services may also be exempt from needing a credit licence in certain situations. This exemption applies when suppliers arrange credit for their customers through linked credit providers to finance the purchase of their goods or services.

This exemption applies under specific conditions:

• Linked Credit Provider: The credit activities must relate to credit contracts, continuing credit contracts, or consumer leases provided by a “linked credit provider” or lessor. A linked credit provider is one with whom the supplier has an arrangement to provide credit to the supplier’s customers for the goods or services.
• Predominant Use for Goods/Services: The credit provided must be wholly or predominantly used to pay for the goods or services supplied by the business. In the case of a continuing credit contract, it should be initially intended for this purpose.
• Business Premises: For some exemptions, the credit activities must be conducted from the supplier’s business premises. This condition may not apply to all variations of the exemption, so it is important to check the specific requirements in the National Consumer Credit Protection Regulations 2010 (Cth).
• No Land Supply: This exemption does not extend to situations where the supplier is providing an interest in land, such as property developers arranging finance for land sales.

It’s crucial to understand that while suppliers operating under this exemption do not need their own Australian Credit Licence, they are still considered to be engaging in credit activities on behalf of the linked credit provider. The linked credit provider must hold the necessary Australian Credit Licence and is responsible for the conduct of the supplier when engaging in these exempt credit activities.

Conclusion

Understanding the Australian Credit Licence (ACL) requirements can be complex, but comprehending the available exemptions is crucial for businesses operating in the credit industry. Various exemptions exist, including for:

• Authorised Credit Representatives
• Employees and Directors of Licensees
• Financial Counselling Agencies
• Entities Making Mere Referrals

Furthermore, specific exemptions cater to clerks, cashiers, and suppliers of goods or services under particular conditions as outlined in the National Consumer Credit Protection Act 2009 (Cth) and associated regulations.

To ensure your business operations are fully compliant and to determine definitively whether you need an Australian Credit Licence or if exemptions apply to your specific circumstances, it is essential to seek expert guidance. Contact our team today to explore how our unparalleled expertise in Australian Credit Licence exemptions can provide you with tailored legal advice and ensure your business adheres to all regulatory requirements.

Frequently Asked Questions