Appointment of Credit Representatives Under the NCCP Act

Once a business is registered, it can start appointing credit representatives straight away. Jon Denovan looks at some of the procedures.

Representatives of licensees

Directors and employees (but not secretaries) of licensees are automatically representatives authorised to undertake credit activities on behalf of the licensee. There is no need for any further formal appointment or notification to ASIC.

For the technically minded, this derives from s29(3) NCCP Act, which provides that employees or directors of a licensee or a related corporation of the licensee don't need a licence to act on behalf of the licensee.

Appointment of credit representatives

However, when a company is appointed as a credit representative, the directors, and employees of the credit representative company are not authorised to conduct credit activities.

Directors, employees, and any subcontractors of a credit representative company need to be sub‑authorised by the corporate credit representative. The corporate credit representative requires consent from the licensee to do this. Only natural persons can be sub-authorised. The sub‑authorised credit representatives become credit representatives of the licensee and not of the credit representative.

If a subcontractor loan writer of the credit representative operates through a company, the licensee will need to appoint the corporate subcontractor directly as credit representatives can't sub-authorise companies.

Instead of the credit representative sub-authorising its directors, employees, and any subcontractors, a licensee could appoint those people directly. Licensees may prefer to keep control over the appointment of credit representatives by not consenting to any sub‑authorisations and appointing all credit representatives directly.

The licensee is responsible for notifying ASIC about appointments and variations to credit representatives directly appointed, but the credit representative company is responsible for notifying ASIC of appointments and changes to sub‑authorised credit representative.

Sub-authorised directors and employees of a credit representative company can rely on the company's EDR membership. However, contractors who are sub-authorised will need their own EDR membership. This derives from section 65(6) of the NCCP Act, which provides that a sub‑authorisation is void unless the natural person is a member of an EDR scheme. However, regulation 16 of the NCCP Regulations adds the proviso that the natural person doesn't need to be a member of an EDR scheme if the natural person is an employee or director of the credit representative.

Although ASIC has not yet made its final decision in relation to PI insurance, it appears that credit representatives (including sub‑authorised credit representatives) could be covered by the licensee's PI insurance, or a combination of the licensee's insurance and separate insurance affected by each credit representative.

All this is explained diagrammatically here.

What about appointment of credit representatives before a licence is granted?

Once a business is registered, it can proceed with appointing credit representatives (i.e. both before and after 30 June 2010). The appointment only takes effect from 1 July 2010 when the NCCP Act commences.

When the registration converts to a licence, the credit representatives appointed while registered automatically become credit representatives of the licensed business.

For the technically minded, the authority for the appointment of credit representatives at any time after registration is effected appears in section 32A and s33(1) of the NCCP (Transitional and Consequential Provisions) Act.

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