Don’t Let Organisational Competence Hold Up Your ACL Application

Introduction

Securing an Australian Credit Licence (ACL) is a pivotal step for any business aiming to engage in credit activities, and a critical part of your licence application is demonstrating organisational competence. Applicants must convincingly show the Australian Securities and Investments Commission (ASIC) that they have the necessary frameworks and capabilities to meet their obligations under the National Consumer Credit Protection Act 2009 (National Credit Act).

ASIC’s evaluation of this organisational competence proof for your credit licence application centres on two main pillars: the suitability, qualifications, and experience of your nominated Responsible Managers, and the adequacy of your training plans for credit representatives. Providing clear proof in these areas is essential for a successful Australian credit licence application, assuring ASIC of your firm’s preparedness to operate responsibly.

Understanding ASIC’s Organisational Competence Obligation for Your ACL

If you are applying for or hold an ACL, a fundamental requirement is to demonstrate and maintain organisational competence. Under section 47(1)(f) of the National Credit Act, credit licensees must ensure they possess the necessary competence to engage in the credit activities authorised by their licence.

The Australian Securities and Investments Commission (ASIC) provides guidance through Regulatory Guide 206 Credit licensing: Competence and training (RG 206), which outlines the minimum expectations for proving organisational competence. ASIC refers to this as the ‘organisational competence’ obligation.

The primary objective behind this requirement is to ensure that your business, and the people responsible for your credit activities, operate:

• Efficiently
• Honestly
• Fairly

This is stipulated in section 47(1)(a) of the National Credit Act. ASIC’s focus is on the capability and proficiency of those managing and performing the credit activities to ensure consumer protection and market integrity.

The specific actions needed to comply with the organisational competence obligation depend on several factors related to your credit business:

• The nature of your operations
• The scale of your business
• The complexity of your credit activities
• The types of credit activities you undertake
• The roles individuals perform within your organisation

While the National Credit Act places the responsibility on you to ensure this competence, RG 206 details ASIC’s minimum expectations for both your licence application and ongoing compliance.

When applying for an ACL, ASIC primarily assesses your organisational competence by examining the qualifications and experience of the individuals you nominate as ‘responsible managers.’ These individuals are key personnel who manage your credit business, and their suitability is a critical factor in ASIC’s evaluation of your firm’s overall competence.

Furthermore, demonstrating organisational competence to ASIC involves your systems for representative training. You must show that your credit representatives are adequately trained and competent to engage in the credit activities authorised by your licence, as required by section 47(1)(g) of the National Credit Act. This involves having clear, documented training plans and systems embedded within your recruitment and operational processes.

What is Organisational Competence for an ACL?

If you are applying for or hold an ACL, a fundamental requirement is to demonstrate and maintain organisational competence. Under section 47(1)(f) of the National Credit Act, credit licensees must ensure they possess the necessary competence to engage in the credit activities authorised by their licence.

The Australian Securities and Investments Commission (ASIC) provides guidance through Regulatory Guide 206 Credit licensing: Competence and training (RG 206), which outlines the minimum expectations for proving organisational competence. ASIC refers to this as the ‘organisational competence’ obligation.

The primary objective behind this requirement is to ensure that your business, and the people responsible for your credit activities, operate:

• Efficiently
• Honestly
• Fairly

This is stipulated in section 47(1)(a) of the National Credit Act. ASIC’s focus is on the capability and proficiency of those managing and performing the credit activities to ensure consumer protection and market integrity.

The specific actions needed to comply with the organisational competence obligation depend on several factors related to your credit business:

• The nature of your operations
• The scale of your business
• The complexity of your credit activities
• The types of credit activities you undertake
• The roles individuals perform within your organisation

While the National Credit Act places the responsibility on you to ensure this competence, RG 206 details ASIC’s minimum expectations for both your licence application and ongoing compliance.

When applying for an ACL, ASIC primarily assesses your organisational competence by examining the qualifications and experience of the individuals you nominate as ‘responsible managers.’ These individuals are key personnel who manage your credit business, and their suitability is a critical factor in ASIC’s evaluation of your firm’s overall competence.

Furthermore, demonstrating organisational competence to ASIC involves your systems for representative training. You must show that your credit representatives are adequately trained and competent to engage in the credit activities authorised by your licence, as required by section 47(1)(g) of the National Credit Act. This involves having clear, documented training plans and systems embedded within your recruitment and operational processes.

Training Plans: Proving Organisational Competence

ASIC’s Training Expectations for Representatives

As part of your ACL application, demonstrating robust training plans for your credit representatives is a key component of proving organisational competence to ASIC. Under section 47(1)(g) of the National Credit Act, ACL holders must ensure their representatives are adequately trained and competent to engage in the credit activities authorised by their licence. ASIC, through Regulatory Guide 206 Credit licensing: Competence and training (RG 206), clarifies its expectations for meeting this obligation.

ASIC generally expects that, as a credit licensee, you will determine what constitutes appropriate initial and ongoing training for your representatives. This approach allows for flexibility, acknowledging the diverse nature, scale, and complexity of businesses within the credit industry. Your ACL application must clearly show that these training programs are not just planned but are embedded within your organisation’s recruitment and training systems.

The responsibility lies with you to ensure your representatives are suitably qualified for their roles. While ASIC has not set specific educational prerequisites for most representatives (except for those providing home loan credit assistance, as detailed in RG 206), your training systems must ensure ongoing compliance with the representative training obligation. This is a critical aspect ASIC will consider when assessing your organisational competence proof during the licence application process.

Documenting Training Systems for Your ACL Application

To effectively demonstrate organisational competence for your ACL application, merely having training plans is insufficient; these systems must be thoroughly documented. ASIC expects credit licensees to maintain records of their recruitment and training policies and procedures. Presenting these documents to ASIC provides tangible proof of your commitment to ensuring your credit representatives are, and will remain, adequately trained and competent.

Your documentation should clearly outline:

• The initial training programs for new representatives, tailored to their roles and the credit activities they will undertake. This includes how you assess their understanding and competence before they begin their duties.
• The ongoing training schedules and content designed to keep representatives updated on industry changes, new legislation, and evolving best practices. This demonstrates a proactive approach to maintaining competence.
• Procedures for identifying training needs, delivering training, and assessing its effectiveness. This shows a systematic approach to compliance.
• Records of training undertaken by each representative. This provides evidence of the implementation of your policies.

By providing comprehensive documentation of your representative training systems, you support your ACL application by showing ASIC that you have established measures to ensure the ongoing competence of those acting on your behalf. This is a crucial element in satisfying ASIC that your organisation possesses the necessary organisational competence to engage in credit activities responsibly.

Conclusion

Successfully obtaining an ACL requires applicants to clearly demonstrate their organisational competence to ASIC. This proof is essential to satisfy ASIC that the business can meet its obligations under the National Credit Act and operate efficiently, honestly, and fairly.

Organisational competence is primarily demonstrated through:

• The suitability of Responsible Managers
• The adequacy of credit representative training plans

To ensure your ACL application effectively showcases the required organisational competence and meets ASIC’s rigorous standards, seeking expert assistance can be invaluable. The competence of our lawyers in ACL applications will help you acquire your license with ease. Contact AFSL House today for trusted expertise and specialised services to navigate the Australian credit licence application process and secure your licence.

Frequently Asked Questions About Demonstrating Organisational Competence for an ACL