Australian Credit Licence Application Guide: ACL & ASIC Requirements

For anyone wanting to dive into credit activities in Australia, snagging an Australian Credit Licence (ACL) is often essential. This licence lets you and your team take part in certain credit activities detailed in the licence itself. Getting a grip on the Aussie credit licence application process is key for businesses and individuals aiming to provide credit services by the book.

This guide provides a step-by-step approach to navigate the ACL application process effectively. It is designed to offer clarity and direction for those seeking to apply for a credit licence and aims to simplify the often complex requirements to get an Australian credit licence, ensuring a smoother application experience.

Step 1: Determine if You Need a Credit Licence for Your Business

Is Your Business Engaging in ‘Credit Activities’? 

If you intend to engage in credit activities in Australia, you must either hold an ACL or be authorised to act as a credit representative. Engaging in credit activities without the appropriate licence or authorisation can lead to strict penalties. Therefore, it’s essential to determine whether your business activities fall under the definition of ‘credit activities’ to decide if you need to apply for an ACL.

To assess whether your business operations involve ‘credit activities’ and require an ACL, consult Regulatory Guide 203 (RG 203). This guide is specifically designed to help businesses determine if their activities necessitate a credit licence. RG 203 provides detailed information to:

• Assess your obligations under the credit licensing framework
• Understand the requirements for compliance
• Ensure your business operations meet regulatory standards

Reading RG 203 is the crucial first step to understanding your obligations and ensuring your business complies with the regulations.

Step 2: Understand the ACL Licensing Process

Navigating RG 204: Your Application Roadmap

To successfully navigate the ACL application process, it is essential to familiarise yourself with Regulatory Guide 204 (RG 204). Titled ‘Applying for and Varying a Credit Licence’, RG 204 serves as a comprehensive roadmap for your application journey. This guide provides a detailed outline of the procedures for both applying for and varying your credit licence. By reading RG 204, you gain a crucial understanding of the application process, ensuring that you meet all the necessary requirements to obtain an Australian credit licence.

Unlock Key Insights: Explore Common ACL Application FAQs

To further clarify the process of obtaining an ACL, it is highly recommended to explore the frequently asked questions (FAQs) about getting a credit licence. These FAQs are designed to provide additional insights and address common queries that applicants may have regarding the application process. Reviewing these FAQs can help you gain a clearer understanding of specific aspects of the application, ensuring you are well-prepared to apply for a credit licence.

Step 3: Prepare Your Essential Application Documents

Crafting a Compelling Summary Business Description

When applying for an ACL, you must provide a summary business description. This document outlines the credit activities you plan to conduct and serves as an overview of your business operations and how you intend to run them.

Your summary business description should include the following details:

• Specific Credit Activities: Define the credit activities you will undertake, whether all or only some of those your licence authorises.
• Types of Credit Products: Specify the credit products you will offer, such as home loans, personal loans, or credit cards.
• Assessment Methods: Describe your methods for assessing credit applications, including whether you will offer ‘low doc’ loans.
• Distribution Strategy: Detail how you will reach consumers, for example, through branch offices, home visits, or online platforms.
• Remuneration Structure: Indicate if you will receive commissions or charge upfront fees for credit services.
• Geographical Scale: Outline the geographical scale of your business, including the number of offices and how you will supervise representatives in different locations.
• Outsourcing Plans: If you plan to outsource any business functions, specify which functions, to whom, their location, and your reasons for choosing them.

‘Fit and Proper’ People: Conducting Necessary Background Checks

As part of your ACL application, you are required to conduct background checks on your ‘fit and proper’ people. For each individual deemed ‘fit and proper,’ you must attach specific documents to your application. These documents include:

• National Criminal History Check: Essential for assessing the character of individuals managing your credit business.
• Bankruptcy Check: Verifies the financial integrity of your key personnel.
• Overseas Criminal History Check: Necessary for individuals from overseas to ensure they meet the required standards.

These background checks are crucial for the Australian Securities and Investments Commission (ASIC) to determine whether the people managing your credit business are of good character, honest, and competent. They help ensure that those in control of the credit licence operate with integrity and in accordance with legal and ethical standards.

Keep it Current: Ensuring Your Background Checks are Up-to-Date

It is crucial to ensure that the criminal history and bankruptcy checks you provide are current. Specifically, both the criminal history check and the bankruptcy check must not be more than 12 months old at the time of your ACL application. Submitting outdated checks can lead to delays or rejection of your application, as ASIC needs assurance that the information reflects the current status of your ‘fit and proper’ people. Therefore, obtain these checks close to your application submission date to comply with this recency requirement.

Step 4: Information on Your Responsible Managers

Highlighting Qualifications and Relevant Experience

When applying for an ACL, it is essential to provide comprehensive information about your responsible managers. Specifically, the application must include details of their:

• Qualifications
• Relevant work experience

ASIC requires this information to assess whether your business has the organisational competence to engage in credit activities. Demonstrating that your responsible managers possess the necessary expertise is a key requirement in the application process to obtain an Australian credit licence.

Step 5: Consider Your Credit Representatives

Authorising Credit Representatives: What ASIC Needs to Know

Upon applying for an ACL, it is important to consider who you will authorise as your credit representatives. You are required to inform ASIC about any individuals who are authorised to engage in specific credit activities on your behalf. This is a crucial step in the application process, ensuring transparency and accountability in your credit operations.

Step 6: AFCA Membership: A Must-Have for Licence Application

Why AFCA Membership is Non-Negotiable

When applying for an ACL, membership with the Australian Financial Complaints Authority (AFCA) is a mandatory step. AFCA serves as the external dispute resolution scheme in Australia for financial complaints, and ASIC requires you to be a member when lodging your licence application.

AFCA membership is essential for several reasons:

• Dispute Resolution: It provides a crucial avenue for consumers to resolve disputes, ensuring that complaints are handled by an independent body.
• Regulatory Compliance: As a credit licensee, you are obligated to have a dispute resolution system in place, which includes external dispute resolution through AFCA.
• Industry Integrity: This membership reinforces the integrity and fairness of the credit industry by ensuring that consumers have access to impartial complaint handling.

Step 7: Verify and Update Your ASIC Records

Is Your ASIC Profile Current? Checking and Updating Registers

Before applying for an ACL, it’s essential to ensure that the details ASIC holds about you are current. ASIC’s online application system is designed to pre-fill certain information if you are already registered, such as:

• Australian Financial Services Licence (AFSL) holders
• Registered companies

This pre-filled information is sourced from ASIC registers, including:

• Australian Company Register (Cth)
• AFS Licensees Register (Cth)

Verifying that this pre-filled information is up-to-date is crucial because you cannot modify it directly within the credit licence application. If any details are incorrect or outdated, you must take the following steps:

• Update the Relevant ASIC Register: Identify the specific ASIC register that contains the outdated information.
• Make the necessary updates to ensure all details are accurate.
• Proceed with Your Credit Licence Application: Once the information is updated, continue with your credit licence application process.

Checking and updating your details beforehand ensures a smoother application process for your ACL. You can review ASIC registers, including those for companies, Australian Financial Services Licences, and credit registrations, to confirm that all your information is current.

Step 8: Calculate Your Licence Application Fee

Understanding the Costs: Working Out Your Licence Fee

To successfully apply for an ACL, it’s essential to calculate the correct licence application fee. The Australian Securities and Investments Commission (ASIC) utilises a tiered fee structure for credit licence applications and variations. This structure is based on the National Consumer Credit Protection Act 2009 (Cth).

This tiered approach ensures that:

• The application fee reflects the complexity of each application.
• ASIC can recover the costs associated with processing the application.

To determine the specific fee for your ACL application, you should consult the resources provided by ASIC. ASIC offers guidance on how to calculate your fee, ensuring you pay the correct amount when lodging your application. Key resources include:

• Information Sheet 108: Titled ‘Fees for Australian credit licences and annual compliance certificates’, this sheet provides a schedule of tiered lodgement fees for credit licence applications.
• Schedule of Credit Fees on the ASIC Website: This schedule outlines the fees based on the National Consumer Credit Protection (Fees) Regulations 2010 (Cth).

The online credit licensing system will automatically calculate the application fee for you and provide a payment advice when you submit your application. It is important to note that while failure to pay the fee will not prevent your application from being lodged, ASIC will not grant your credit licence until the application fee has been paid.

For detailed information on how to calculate your specific fee, ASIC directs applicants to their provided resources.

Step 9: Professional Indemnity Insurance: Secure Your Cover

Demonstrating Your Professional Indemnity Insurance Adequacy

Before ASIC grants your ACL, you must demonstrate that you have adequate professional indemnity insurance in place. This insurance serves as a compensation arrangement for your clients if they suffer losses due to breaches of your obligations under the National Consumer Credit Protection Act 2009 (Cth). For most applicants, maintaining professional indemnity (PI) insurance cover is the standard method to fulfil this requirement.

ASIC’s Questionnaire: Providing Your Insurance Details

To verify your professional indemnity insurance, ASIC will require you to complete a questionnaire and provide a certificate of currency. This questionnaire will request the following information:

• Insurer Details: Information about your insurance provider.
• Type and Level of Cover: Specifics on the kind and extent of coverage you have.
• Scope of the Policy: The range of situations and liabilities covered by your policy.
• Policy Features: Confirmation that your policy includes the features outlined in ASIC’s guidance on compensation and insurance arrangements for credit licensees.

If you are unsure how to complete the questionnaire, it is advisable to consult with your insurance broker for assistance.

Step 10: Know Your Ongoing Licensee Obligations

Beyond the Application: Embracing Your Responsibilities as a Licensee

Once you obtain an ACL, it is crucial to understand that the journey does not end there. As a credit licensee, you will have ongoing obligations to ensure you operate your credit business efficiently, honestly, and fairly. ASIC provides guidance to help you understand these continuing responsibilities.

These obligations are in place to protect consumers and maintain the integrity of the credit industry. Licensees must comply with a range of general conduct obligations, including:

• Operating efficiently, honestly and fairly: All credit activities must be conducted with these principles at the forefront.
• Complying with licence conditions and credit legislation: Adherence to all terms of the ACL and relevant laws is mandatory.
• Maintaining competence: Licensees must ensure they and their representatives remain competent to engage in credit activities.
• Adequate training for representatives: Ensuring all credit representatives are properly trained is an ongoing requirement.
• Internal dispute resolution: Licensees must have and maintain internal dispute resolution procedures.
• External Dispute Resolution (EDR) scheme membership: Maintaining membership with AFCA is essential.
• Compensation arrangements: This includes maintaining adequate professional indemnity insurance to cover potential breaches of obligations.
• Documented compliance arrangements and systems: Licensees need to have and maintain adequate systems for compliance.
• Adequate resources and risk management systems: Sufficient resources and risk management protocols must be in place and maintained.
• Citing ACL number: Your ACL number must be cited on relevant documents.
• Regular and breach reporting to ASIC: Licensees are required to report to ASIC regularly and notify them of any breaches within 10 business days.
• Financial record-keeping: Proper financial records must be maintained.

Adhering to these ongoing obligations is essential for maintaining your ACL and ensuring the sustainable operation of your credit business. ASIC provides resources and guidance to assist licensees in meeting these responsibilities.

Conclusion

All ten steps of the credit licence application process—from determining if you need an ACL and gathering essential documents, to securing professional indemnity insurance and fulfilling ongoing obligations—ensure prospective licensees meet every requirement to get an ACL. This structured approach, combined with understanding ASIC’s guidelines, helps you apply for a credit licence with confidence, maintain organisational competence through responsible managers, and properly authorise any credit representative offering credit activities on your behalf.

We encourage you to contact our specialised team to explore our proven solutions for navigating the credit licence application process. Our experts, trusted by many successful ACL holders, stand ready to help you become an ACL holder, meet AFSL requirements where necessary, and guide you at each stage. By partnering with us today, you can streamline your path to engage in credit activities and secure your licence efficiently.

Frequently Asked Questions