Consumer credit 

Schedule 1 of the National Credit Act contains the National Credit Code (Code) which defines the ‘credit’ that is regulated under the Act.

The Code states that if under contract either of the following situations occur, then credit is being provided:

  • payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred
  • one person (the debtor) incurs a deferred debt to another (the credit provider). 

Importantly, the Code will only apply to credit that is:

  • provided to a natural person or strata corporation
  • provided wholly or predominantly:
    • for personal, domestic or household purposes
    • residential property investment 
  • charged for, or may be charged for, by the credit provider
  • provided in the course of a carrying on a business of providing credit in Australia or as part of, or incidentally to, any other business carried on in Australia.

"Predominantly" in this context requires the purpose for which more than half the credit is intended to be used.

Regulated credit activities

If you engage in 'credit activities', defined in section 6 of the National Credit Act, you will be required to hold an Australian credit licence (ACL) or be an authorised credit representative.

There are two broad categories of credit activities:

  • activities relating to the provision of a credit contract or consumer leave, and securing obligations under credit contracts
  • credit services.  

A credit service is defined as a credit activity. You will provide a credit service if you either provide credit assistance to a consumer or act as an intermediary. 

Credit assistance

You will provide credit assistance to a consumer where you:

Suggest:

  • the consumer apply for provision of credit under a particular credit contract with a particular credit provider or particular lease with a particular lessor
  • the consumer apply for an increase to the credit limit on a particular credit contract
  • they remain in their current credit contract or consumer lease.

Assist:

  • the consumer apply for a particular credit contract with a particular lender or particular consumer lease with a particular lessor
  • the consumer to apply for an increase to their credit limit on a particular credit contract.

Even where you deal with an immediate relative acting on behalf the consumer’s behalf or deal with another intermediary, you will still be assisting the consumer.

The Australian Securities and Investments Commission (ASIC) has specifically stated that advising a consumer to pay off an existing debt is not considered to be "suggesting", as it does not suggest the consumer apply for a new credit contract, apply for an increase under an existing credit contract or remain in an existing credit contract.

Act as an intermediary

The National Credit Act defines that you will act as an intermediary if you act as an intermediary between a lender or lessor and a consumer with the aim of securing the provision of credit or a consumer lease for the consumer, for example finance brokers and mortgage managers. 

The critical element is that your role, wholly or partially, is to secure a credit contract or consumer lease for the consumer with a credit provider or lessor.