Credit contracts made before 1 July 2010
Contracts or other instruments that are made and in force, and to which an old credit code applied, immediately before 1 July 2010 are known as a ‘carried over instrument’.
Generally, the requirement to hold a credit licence doesn’t apply to people who engage in credit activities (other than credit services) relating to carried over instruments.
This means that if you only engage in credit activities in relation to these carried over instruments, you will not have to apply for registration or for a credit licence.
There are however special provisions in the Transitional Act and associated regulations for the registration and licensing of people who engage in credit activities in relation to carried over instruments.
Should you choose to register with the Australian Securities & Investments Commission (ASIC), you will be asked if your registration is made only on the basis of these carried over instruments. If you answer ‘yes’ your registration will be subject to a condition that you are only authorised to engage in credit activities (other than providing credit services) in relation to these carried over instruments.
You can only change your business after registration to engage in credit activities in relation other credit contracts or consumer leases if ASIC agrees to vary your registration and remove this condition.
Items not covered by the National Consumer Credit Protection Act 2009 (National Credit Act)
Some types of credit are excluded, as stated in section 6 of the Code. They include:
- insurance premiums payable by instalment
- employee loans
- credit provided by pawnbrokers
- bill facilities
- short-term credit (less than 62 days and meeting other specific criteria relating to fees, charges and interest rates)
- credit without express prior agreement (for example where a savings account falls into debit)
- credit for which only an account charge is payable
- joint credit and debit facilities
- credit provided by a trustee of a deceased person’s estate
Margin lending is also excluded as such facilities are now regulated as a financial product and therefore requires issuers and advisers of margin lending facilities to hold an Australian Financial Services (AFS) Licence. For further information refer to the regulation of margin lending.
Specific exemptions from licensing
There are specific categories or organisations which are exempt from the licensing requirements in certain circumstances. Registered tax agents are one such group. The National Consumer Credit Protection Regulations 2009 state that:
A credit activity is exempted if:
(a) it is engaged in by a tax agent in the following circumstances:
(i) the tax agent is registered under Part VIIA of the Income Tax Assessment Act 1936;
(ii) the tax agent engages in the credit activity in the ordinary course of activities as a tax agent; and
(b) it is a credit activity mentioned in item 2 of the table in subsection 6 (1) of the Act; and
(c) it does not involve providing a certificate or assessment (however described) relating to whether a consumer will be able to meet financial obligations under a credit contract or consumer lease.
Other groups and organisations include:
- a receiver, receiver and manager, provisional liquidator or liquidator
- a lawyer
- a point-of-sale retailer
For full details refer to part 2 – 4 of the National Consumer Credit Protection Regulations 2009.
Debt collectors licensed under state or territory law and who collect a debt as the lender’s agent are also exempt until 1 April 2011.