5 May 2021 - Firms offering debt management services require credit licence to operate

ASIC has issued INFO 254 regarding new laws requiring providers of debt management services to hold an Australian credit licence with an authorisation to provide these services.

Debt management includes such activities as suggesting and/or helping a consumer to:

  • apply for a change to a credit contract for which the consumer is a debtor, including negotiating revised repayment arrangements or claiming financial hardship
  • apply for a postponement of enforcement proceedings
  • make a complaint or claim to a credit provider, AFCA, ASIC or the Information Commissioner
  • ‘repair’, ‘clean’ or ‘fix’ entries in their credit report that relate to a consumer credit contract.

Under transitional arrangements, anyone intending to provide debt management services from 1 July 2021 will need to have done the following by 30 June 2021:

  • applied for a credit licence (or variation to an existing licence) with a debt management authorisation or have arrangements in place to act as a representative of a provider that has applied for a credit licence to cover this activity, and
  • become a member of the Australian Financial Complaints Authority (AFCA).

Exemptions from the changes include debts under utilities contracts, business loans or consumer leases; financial counselling agencies that do not charge consumers fees for their services; and lawyers (in some permitted circumstances). Existing Australian credit licence holders who are affected by these changes will also need to apply by 30 June 2021 to vary their licence to include a debt management authorisation.

How FEP can help:

Financial Education Professionals acknowledges the Traditional Owners of Country throughout Australia. We pay our respects to Elders past, present and emerging.