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Credit Licensing — your required systems and compliance arrangements

August 14, 2010


ASIC (in Australia) is now accepting applications for a credit licence from persons registered under the new National Credit Code. Registered persons engaging in credit activities have until 31 December 2010 to lodge an application, or they will not be entitled to continue engaging in credit activities after that date.


What you need to have in place

Apart from answering a number of questions and providing information about the people involved in your business, you will need to confirm as part of your licence application that you have, or will have, systems in place that satisfy the Code’s compliance arrangements in a number of areas. These areas include: General Compliance with your Licence and the Code; Risk Management; Conflicts of Interest; Outsourcing and Training of Representatives; Adequacy of Resources; and Dispute Resolution.


Written Policies and Procedures

ASIC has made it clear that it is not sufficient to simply assert that you have the necessary systems in place, or that your systems and procedures exist and are followed, but that this happens informally. You should have a documented policy or policies covering each of the above compliance areas. Apart from being good business practice, ASIC has the power to make enquiries and request information from licensees, and you may need these policies to provide evidence of your compliance systems, as well as evidence that they have been followed. Your policies should include provision for regular review of your systems and procedures, and clearly identify the individuals responsible for compliance obligations and review of the systems.


‘Broad Compliance Obligations’

You should have a general Compliance Policy which covers how you will monitor and ensure compliance with what ASIC refers to as your ‘broad compliance obligations’. These include complying with the Code and the conditions of your licence generally, as well as your obligation to act “efficiently, honestly and fairly”. It may also deal with your approach to the more specific responsible lending obligations and how you will assess whether a particular credit contract is “not unsuitable” to a consumer.


Risk Management

Your Risk Management Statement should identify the areas of risk critical to your business, including financial, compliance, human resources and IT risks. Often this will involve a table-style analysis that cross-references the likelihood of particular risks with the severity of their impact on the business should they occur. It also outlines your procedures for minimising the identified risks, and how you would respond were a particular event to occur.


Dispute Resolution

As well as being part of an approved external dispute resolution provider, you need to have a documented internal procedure for handling complaints and dealing with disputes. ASIC’s requirements for internal dispute resolution are quite specific, and are largely based around the relevant Australian standard AS ISO 10002-2006. Amongst other things the Standard sets the definition of what is a “complaint”, and specifies timeframes for resolution of disputes.


Peter Karcher

Partner, Gray & Perkins

t: +61 2 8235 1218

e: p.karcher@grayperkins.com.au


Miles Anderson

Partner, Gray & Perkins

t: +61 2 8235 1244

e: m.anderson@grayperkins.com.au


Gray & Perkins is a law firm and affiliate of AC&E International — the firm works with AC&E in the areas of corporate and property law. Gray & Perkins' practice has been operating continuously since 1890, making it one of the oldest law firms in Australia.


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Important Notice


The reader is informed that this idea is not legal or commercial advice from AC&E International Pty Limited, and you should seek your own legal advice prior to acting on any of the information contained in this idea. You can also contact the authors from Gray & Perkins listed above to seek your own legal advice. AC&E International Pty Limited does not accept any responsibility or liability for the accurateness or completeness of information contained in this idea, and there is no assumed direct or indirect liability by AC&E International Pty Limited. The reader should be aware that some information may be incorrect, incomplete or out of date when viewed, and is advised to verify the information themselves and seek their own legal advice before acting or relying upon it.



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