ASIC today released further regulatory guidance on the implementation of the National Consumer Credit Protection Act (National Credit Act). This release is the second package of regulatory guidance on the implementation of the National Consumer Credit regime.

The guidance sets out how ASIC will approach the administration of the National Consumer Credit regime. It has been developed to help industry prepare their credit licence applications and also understand ASIC’s expectations in relation to their obligations as credit licensees.

Separate guidance has been developed to specifically assist small business operators make a credit licence application. We have also updated regulatory guides on applications for relief and when we will issue no-action letters under the National Credit Act.

The release of this package is part of ASIC’s effort to provide as much upfront guidance as is possible before the commencement of the National Consumer Credit regime in July 2010. It follows the release of guidance on the registration process which begins on 1 April 2010.

Individual industry participants, industry organisations and consumer representatives have made significant contributions to this guidance. ASIC Commissioner, Dr Peter Boxall, thanked industry participants for their feedback into ASIC’s consultation process.

‘We will continue to work with people likely to be affected by the new requirements as part of our commitment to achieving a smooth transition for industry’, Dr Boxall said.

ASIC has released the following new publications:

• Regulatory Guide 204 Credit licensing: Applying for and varying a credit licence (RG 204)

• Regulatory Guide 205 Credit licensing: General conduct obligations (RG 205)

• Regulatory Guide 206 Credit licensing: Competence and training (RG 206)

• Regulatory Guide 207 Credit licensing: Financial requirements (RG 207)

• Regulatory Guide 208 How ASIC charges fees for credit relief applications (RG 208)

• INFO 97 Guidance for small credit businesses (INFO 97)

ASIC has also updated two existing regulatory guides to accommodate the National Consumer Credit regime:

• Regulatory Guide 51 Applications for relief (RG 51)

• Regulatory Guide 108 No Action letters (RG 108)

A summary of the main contents of these regulatory guides is set out in Part 1 of the attachment. ASIC also plans to issue further regulatory guidance, including guidance on responsible lending and compensation and insurance arrangements for credit licensees, in early 2010.

Further information

To receive information from ASIC about the National Consumer Credit Protection reforms, including relevant policy announcements and regulatory guidance, subscribe to the ASIC Credit Reform Update.

ASIC will continue to publish information on its website www.asic.gov.au/credit about the new regulatory framework including the legislation, licensing process, general obligations and the timeframe in which the changes will take effect.

ASIC’s timetable for the issue of key publications related to the implementation of the National Consumer Credit regime is set out in Part 2 of the attachment. This part includes reference to some publications that have already been issued.

Attachment to ASIC Advisory 09/262AD: ASIC releases guidance for credit licensees

PART 1

A summary of the regulatory guidance issued today follows:

Regulatory Guide 204 Credit Licensing: Applying for and varying a credit licence (RG 204)

An application for a credit licence and an application to vary a credit licence will need to be made electronically using ASIC’s online licensing system.

RG 204 will help applicants to prepare their application by:

1. explaining how the online applications will be tailored to the particular applicant;

2. describing what questions will be asked, and giving some guidance on how ASIC expects those questions will be answered by different types of applicants; and

3. providing a roadmap to the other guidance published by ASIC (including the other regulatory guides mentioned in this release).

Regulatory Guide 205 Credit Licensing: General conduct obligations (RG 205)

RG 205 provides guidance for credit licence applicants and credit licensees about ASIC’s expectations for meeting the general conduct obligations in s47(1) of the National Credit Act.

RG 205 is designed to help credit licensees and credit licence applicants to:

1. understand what ASIC looks for when assessing an application for a credit licence;

2. develop arrangements and systems to meet the ongoing requirement to comply with the licensee obligations; and

3. understand what ASIC looks for when assessing whether licensees are complying with their licensee obligations.

RG 205 recognises that the general conduct obligations are designed to work in a flexible way and that it is the credit licensee’s responsibility to put in place arrangements to comply with the general conduct obligations.

RG 205 also recognises that what an individual credit licensee needs to do to comply with the National Credit Act and the conditions on its credit licence will vary according to the nature, scale and complexity of the business the credit licensee carries on.

ASIC has also released a feedback report on the consultation process: see REP 178 Response to submissions on CP 110 General conduct obligations of credit licensees.

Regulatory Guide 206 Credit Licensing: Competence and training (RG 206)

RG 206 provides guidance on how credit licensees and licence applicants can meet the specific organisational competence and representative training requirements in s47(1)(f) and s 47(1)(g) of the National Credit Act.

RG 206 is designed to help credit licensees and credit licence applicants understand:

1. what ASIC looks for when assessing organisational competence in a licence applicant;

2. how credit licensees can meet their ongoing organisational competence obligations; and

3. what credit licensees need to do to meet their representative training obligations.

To assess organisational competence ASIC will look at the qualifications and experience of certain people within the licensee's business (its 'responsible managers'). As a general rule, we expect responsible managers to have at least two years relevant experience and a relevant qualification at the Certificate IV level or above.

We have generally not set specific educational qualifications or training requirements for representatives, although we expect licensees to ensure that their representatives are suitably qualified to perform their role. In the case of representatives of mortgage brokers, we will require a specific minimum qualification.

In setting out minimum expectations for organisational competence and representative training, RG 206 recognises both the diversity of the credit industry and the diversity of roles undertaken by credit representatives. We have also allowed for a transitional period giving participants until 30 June 2014 to acquire the necessary qualifications to meet our expectations.

ASIC has also released a feedback report on the consultation process: see REP 180 Response to submissions on CP 113 Training and competence for credit licensees.

Regulation impact statement

Regulatory Guide 207 Credit Licensing: Financial requirements (RG 207)

RG 207 provides guidance on how credit licensees and license applicants can meet the obligation in s47(1)(l) to have adequate financial resources to conduct their business in compliance with the National Credit Act.

RG 207 recognises that what a licensee needs to do to comply with the financial resource requirements will vary according to the nature, scale and complexity of its credit business and therefore under RG 207, the credit licensee will be responsible for deciding how to comply with the financial resource requirements.

At a minimum, however, we expect credit licensees to:

1. ensure that they have access to sufficient financial resources to be able to meet all of their debts as and when they become due and payable;

2. plan and monitor cash flows to make sure they are sufficient to adequately meet the licensees obligations under the National Credit Act; and

3. keep written records that demonstrate that the licensee’s financial resources are being monitored on a regular basis.

The Guide discusses how a licensee may designate a person to oversee compliance with the financial resource requirements.

ASIC has also released a feedback report on the consultation process: see REP 179 Response to submissions on CP 111: Financial resource requirements.

Regulation impact statement

Regulatory Guide 208: How ASIC charges fees for credit relief applications (RG 208)

RG 208 provides credit licensees with guidance on how fees for relief applications are charged and describes the principles ASIC uses to calculate fees.

INFO 97 Guidance for small credit businesses (INFO 97)

INFO 97 contains general information to help people who run small credit businesses prepare to make an application for a credit licence.

INFO 97:

• suggests that people who run small credit businesses read RG 204 to help them understand what questions they will be asked in their application, and what information they will need to get ready to give to ASIC;

• points out steps that can be taken early to get their business ready for making an application; and

• provides some suggestions and examples to help people who run small businesses think about how they will meet their obligations as licensees.

Regulatory Guide 51 Applications for relief (RG 51)

ASIC's existing policy on how we will deal with applications for relief from legislation that ASIC administers is set out in RG 51. ASIC has updated this Regulatory Guide to apply it to applications for relief from the National Credit Law. ASIC has power to provide exemptions (relief) from some provisions of the National Credit Law.

RG 51 provides guidance for credit licensees on the types of applications for relief that can be made, how to lodge an application for relief and ASIC’s general approach to applications for relief.

We have also updated the format of RG 51 and clarified some areas of the existing policy.

Regulatory Guide 108 No-action letters (RG 108)

RG 108 contains ASICs existing policy on when we will issue no-action letters in relation to legislation ASIC administers. The updated guide clarifies that RG 108 will also apply to the National Credit Act.

A no-action letter is an expression of ASIC’s regulatory intent and indicates that, at the time the no-action letter is given, ASIC does not intend to take regulatory action over a particular state of affairs or particular conduct.

RG 108 sets out ASIC’s policy regarding when it will issue a no action letter and ASIC’s approach to taking a class no-action position when more than one person is affected.

PART 2 - National Consumer Credit regime: publication timetable

Below is a summary of ASIC’s timetable for the release of key publications related to the implementation of the National Consumer Credit regime. This timetable is indicative only and includes reference to some publications that have already been issued.