A few years have passed since the consumer credit laws and licensing regime commenced back in 2010. So now may be a good time to review your options when it comes to offering credit services in addition to your financial advisory services. You may be a credit representative of an Australian Credit Licensee thinking about making the move to your own licence. Maybe you have never helped clients with acquiring loans but want to be able to. Or perhaps you want to avoid accidentally being caught by the credit regime altogether. This article considers some of these options.

When are financial advisers most likely to be caught by the credit regime? When they provide credit assistance or act as an intermediary.

Broadly speaking credit assistance is assisting, or suggesting, that a consumer enter into, increase the credit limit of, or remain in a particular credit contract or lease with a particular credit provider or lessor. In essence, that means if you assist a client to apply for a home loan from the Bendigo Bank, that is credit assistance. If you suggest that a client leases a car through their local car dealer, that is credit assistance. If you suggest that a client keeps their credit card with Westpac, that is also credit assistance.

For the purposes of the credit laws, you act as an intermediary when you directly or indirectly act as an intermediary between a credit provider and a consumer for the purposes of securing credit for the consumer under a credit contract with the credit provider. This is a very broad definition which captures a number of activities including when you refer clients to a broker. If you are reading this and thinking "I do that but I'm not authorised under a licence!" don't lose any sleep. There is an exemption that you can use; you may already be using it without realising. We will discuss the exemption later in this article.

If you are familiar with the financial services regime you will notice that credit assistance is similar, but not identical, to providing financial product advice and dealing by arranging on behalf of another.

If you provide credit assistance or act as an intermediary you will need an authorisation under an Australian Credit Licence ('ACL') unless one of the exemptions apply.

So what are some of your options?

  1. Get your own ACL
  2. Become a credit representative of another licensee
  3. Utilise the referral exemption
  4. Be careful to avoid providing credit assistance altogether.

What do you need to think about when considering your options?

  • Cost – there are costs involved in setting up and running your own ACL. ASIC fees, PI insurance and ongoing compliance to name a few. It may be more cost effective to become a credit representative of another licensee.
  • Liability – licensees are ultimately responsible for all credit activities engaged in under their licence and compliance with the credit laws. Are you comfortable having that responsibility?
  • Resources – do you have sufficient human resources to supervise credit activities and ensure compliance with changing credit laws?
  • Control – do you want the freedom to suggest any credit product that you think is suitable for your client? If you are a credit representative you may be bound to your licensee's approved product list.
  • Work load – do you have enough work to justify becoming a credit representative or licensee? Is it better to just refer the few clients that require credit assistance to someone else?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.