When do you need an Australian credit licence?

If you engage in a credit activity you must hold an Australian credit licence (“ACL”) unless you are a credit representative of an ACL holder or otherwise exempt.

Credit activity refers to credit that is regulated by the National Credit Code (the “Code”). This includes consumer lending and consumer leases. If you only lend to companies or only make commercial purpose loans, your lending will not be subject to the Code, and you will not require an ACL.

Credit activity includes providing credit (lending) and consumer leases. It also includes performing the obligations or exercising the rights of a lender or lessor. If you are an assignee of these rights, you are engaging in credit activity.

Another type of credit activity is called a credit service. There are two kinds of credit service: providing credit assistance, and acting as an intermediary.

Credit assistance is where you suggest that the consumer apply for a particular credit contract (or credit increase) or a particular consumer lease with a particular provider, or you assist the consumer to make such an application. It also includes suggesting that the consumer remain in an existing credit contract or consumer lease. The assistance has to be when you are dealing directly with the consumer or an agent of the consumer as part of your business, or when it is incidental to your business.

Acting as an intermediary is the other kind of credit assistance, and occurs when you act as an intermediary between a credit provider and a consumer for the purposes of securing a credit for the consumer, as part of your business or incidental to your business.

There are specific exemptions from the requirement to hold an ACL. There is an exemption for employees or directors of an ACL holder (or a related entity) who are acting within the authority of the licensee.

A person can be appointed as a credit representative of an ACL holder and in that case does not need an ACL for credit activity covered by the authorisation.

The regulations exempt certain classes of people engaging in credit activities in certain circumstances, such as insolvency practitioners, lawyers, tax agents, certain types of insurers, and debt collectors.

There are exemptions as well for various kinds of limited credit activity such as referrals, doing the work of clerks or cashiers, and passing on information.

Another important exemption is called the “point of sale” exemption, which allows suppliers to arrange for credit for the purchase of their goods or services without having to hold an ACL.

We recommend that you get legal advice on whether your proposed credit activities may require an ACL.