Debt management licensing regime has commenced
From 1 July 2021, providers of debt management services (including firms offering ‘debt negotiation’ or ‘credit repair’ services) are regulated under the National Consumer Credit Protection Act 2009 (National Credit Act).
This means providers of these services must:
- hold a credit licence with an authorisation that covers those services (or act as a representative of such an authorised licensee); or
- be operating in accordance with the transitional arrangements, specifically that by 30 June 2021 they:
- applied to ASIC for a credit licence or variation that covers this activity (or have arrangements to act as a representative of a provider that has applied for a licence to cover this activity); and
- are a member of the Australian Financial Complaints Authority (AFCA).
If providers of debt management services have not met these requirements, they must cease engaging in these activities.
The transitional arrangements only apply while ASIC is considering the application for a credit licence or variation. If no licence is granted the provider must cease engaging in these activities.
ASIC will be closely monitoring compliance with the new laws, including identifying unlicensed conduct and taking action where necessary.
Published list of applicants – debt management services
ASIC has published a list of persons/entities that have applied for a credit licence or a variation by 30 June 2021 (seeking the ‘debt management services’ authorisation) and were members of AFCA on that date.
The list reflects licence applications that have not yet been determined by ASIC and where the person/entity has consented to ASIC publishing details of their application.
If you are dealing with a person or entity that provides debt management services, this list may help you to decide whether they can provide those services under the transitional arrangements. You may also need to check on AFCA’s website to determine whether the person or entity has current AFCA membership.
ASIC reminds credit licensees that under section 31 of the National Credit Act they are prohibited from conducting business with unlicensed persons.
On 29 April 2021, the National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 were made, which prescribe certain debt management services as a ‘credit activity’ for the purposes of the National Credit Act.
More information about the changes
What are ASIC’s and the ACCC’s responsibilities for debt collection?
ASIC and the Australian Competition and Consumer Commission (ACCC) are responsible for administering the Commonwealth consumer protection legislation in relation to the debt collection industry.
As a general guide, ASIC’s jurisdiction covers situations in which the underlying debt relates to the provision of a financial service, including a credit facility. Debts in relation to the provision of goods and services other than financial services will fall within the jurisdiction of the ACCC.
For a detailed explanation about the respective jurisdictions of ASIC and the ACCC in relation to debt collection, download a copy of our joint publication (ASIC refers to this document as RG 96).
Debt collection guidelines for collectors and creditors
ASIC and the ACCC originally released their Debt collection guideline for collectors and creditors in October 2005. A revised version of the guideline was published in July 2014, following extensive consultation with industry and consumer representatives. The guideline reflects ASIC and ACCC’s views of how relevant provisions of the Australian Consumer Law and the ASIC Act apply to debt collection conduct. The revised guideline reflects significant changes to the law since the original publication. It also incorporates recent court outcomes and practical examples to assist creditors, collectors and debtors in areas that have caused concern (refer: 14-159MR).
Download the debt collection guideline for collectors and creditors (RG 96)
Debt collection: consumers’ rights and responsibilities
For more information, read ‘Dealing with debt collectors‘ on our Moneysmart website.
Collecting statute-barred debts
The debt collection industry needs to review its practices in relation to old debts, where the legal limitation period has expired, according to a report released by ASIC in September 2005.
The ASIC report, Collecting statute-barred debts, found that debt collectors making demands for payment of old debts need to do more to avoid the risk of misleading and deceptive conduct, unconscionable conduct and undue harassment.
Statute-barred debts are debts on which the legal limitation period has expired. The limitation period is set under state law and there is some variation across states. The period is usually six years after the debtor defaults on regular payment obligations under the contract, but it can be revived by subsequent payment or acknowledgement of the debt. Where a debt is statute-barred, the debtor can raise that fact as a complete defence in any legal proceedings for recovery.
Download a copy of Report 55 Collecting statute-barred debts | Read the media release
Go to the website of the ACCC for more information about debt collection practices
To engage in credit activities, a business must have a credit licence or an authorisation from a credit licensee.
ASIC is the national regulator for consumer credit and consumer leases under the national credit legislation. This legislation includes:
- the National Credit Code (which is Schedule 1 to the National Consumer Credit Protection Act 2009 (National Credit Act)) – which contains requirements for the entry into and terms and enforcement of credit contracts and consumer leases
- the National Credit Act – which contains requirements that persons who are involved with consumers obtaining credit contracts or consumer leases must be licensed and must comply with responsible lending requirements.
People that engage in credit activities generally need a credit licence or an authorisation from a licensee. This includes both the credit providers and lessors, and other persons, such as finance brokers.
‘Credit activity’ is defined in the National Credit Act and includes activity relating to credit contracts, consumer leases, mortgages and guarantees, and credit services.
On 25 September 2020, the Government announced proposed reforms to the responsible lending obligations contained in Ch 3 of the National Credit Act. The proposed reforms will amend the obligations that apply before entry into a credit product or the provision of credit assistance. ASIC’s guidance relating to the current responsible lending obligations will be reviewed and updated when the proposed reforms are finalised.
Credit guidance and information
We have issued detailed guidance and general information to help you understand the credit licensing process and your obligations under the credit legislation: see Related links.
You can find more information about licensing on our Credit licensees pages.
However, you may also need to get professional advice on how the law applies to your situation.
You might not need an Australian credit licence if you meet an exemption under the legislation, or if ASIC has granted relief. See Regulatory Guide 51 Applications for Relief (RG 51) for more information on applications for relief.
Information for consumers and borrowers on using credit wisely and managing debt and what to do if experiencing financial difficulty is available on the Moneysmart website.
To make a complaint to ASIC about a credit product or service, read the information on How to complain.