Debt Management

The credit licensing regime in Australia now covers individuals or businesses engaging in debt management services.

Debt management services means an individual or business providing:

 

The National Consumer Credit Protection Regulations 2010 (“Regulations”) contain the definitions of these services.

What is Debt Management Assistance?

Debt management assistance is where a person, by dealing directly with the consumer or the consumer’s agent in the course of (or incidentally to) a business carried on in the credit industry, the person:

  • suggests that the consumer apply, or assists the consumer to apply for:
    • a change to; or
    • a deferral or waiver of an amount under; or
    • a postponement of;
      a credit contract for which the consumer is the debtor;

 

  • in relation to a credit contract for which the consumer is the debtor, suggests that the consumer, or assists the consumer to:make a complaint or claim to the credit provider, Australian Financial Complaints Authority (“AFCA“), ASIC or the Information Commissioner; or
    • give a hardship notice (within the meaning of the Code) to the credit provider; or
    • institute proceedings or take any other action.

What is Credit Reporting Assistance?

The Regulations state that credit reporting assistance is provided to a consumer or their agent where a person:

  • suggests that the consumer apply, or assists the consumer to apply, for a change to information collected or held by a credit reporting body (within the meaning of the Privacy Act 1988) in relation to a credit contract for which the consumer is the debtor; or
  • in relation to a credit contract for which the consumer is the debtor, suggests that the consumer, or assists the consumer to:
    • make a complaint or claim to the credit provider, AFCA or ASIC, regarding information collected or held by a credit reporting body; or
    • institute proceedings or take any other action regarding information collected or held by a credit reporting body.

In relation to both debt management assistance and credit reporting assistance, the Regulations note that a person does not provide this assistance unless a fee, charge or other amount is paid or is payable by or on behalf of the consumer in relation to the debt management assistance, regardless of who this fee is paid to.

If you provide debt management services in relation to debts under utilities contracts, business loans or consumer leases, you are not required to apply for a credit licence to provide these services.

It is also worth noting that the Regulations state that debt management firms are unable to avoid the obligation to be licensed through the use of disclaimers which state that they are not “suggesting” a particular course of action.

ASIC’s released Information Sheet 254 in relation to debt includes:

  • requirements for Australian Credit Licence applications in relation to debt management services and ASIC’s expectations in relation to the experience and qualifications of the Responsible Manager;
  • guidance in relation to the general obligations of debt management service providers; and
  • specific guidance in relation to the obligation to provide services efficiently, honestly and fairly, as it applies to debt management service providers.

There are serious penalties and repercussions for operating without an Australian Credit Licence or without the correct authorisation. If it’s not clear whether you need an Australian Credit Licence or which authorisations are appropriate for your business, please contact Sophie Grace.

 

Background

In September 2020, the Australian Government announced that it would support consumers engaged in financial disputes with credit providers by introducing licensing obligations for debt management firms representing consumers in those disputes.

In January 2021, Treasury updated the Regulations to include a new category of credit licensing for debt management services.

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