What is an annual compliance certificate?

Credit licensees are required to lodge a compliance certificate with ASIC on an annual basis: see section 53 of the National Credit Act. ASIC has published Information Sheet 135 Annual compliance certificates for credit licensees (INFO 135) to assist licensees to meet their lodgment obligations.

Why does the Chief Executive Officer (CEO) have to sign the annual compliance certificate? Can the compliance leader or another senior officer sign it?

INFO 135 provides information on who can sign an annual compliance certificate, and, in many cases, the certificate must be signed by the licensee’s CEO. This is because the legislation is aimed at ensuring that compliance is addressed at the very highest level of the business. ASIC recognises that the CEO may need to act on the information and advice of key persons, depending on the size and complexity of the business.

Is there a fee for lodging an annual compliance certificate?

No. You do not generally need to pay a fee when you lodge your annual compliance certificate. However, fees will apply if your certificate is late or if you do not lodge it electronically.

What guidance is available on responsible lending?

Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) sets out our expectations for meeting the responsible lending obligations in the National Credit Act.

How does responsible lending work in practice?

RG 209 includes scenarios on how the responsible lending obligations might apply for a range of borrowers (e.g. self-employed borrowers, people consolidating loans and impulse buyers on weekends). While these scenarios illustrate our guidance on the responsible lending obligations, they are not intended to be exhaustive.

As a credit provider, can I rely on an assessment of the customer carried out by my broker?

A credit provider is required to make its own suitability assessment. You cannot rely on a preliminary assessment by the broker. RG 209 provides more detail on credit providers’ use of material collected by a broker.

What should be covered in the compliance plan?

The compliance plan should cover how you will meet your obligations under the credit legislation. The content of your compliance plan depends on the nature, size and complexity of your business. A written plan serves to clarify the obligations that apply to your business, who in your business is responsible for monitoring compliance with those obligations, what steps will be taken to monitor compliance, and how often this will happen. It also provides a record of what has been done, so you can review your procedures and performance periodically.

Has ASIC issued guidance on compliance plans and suitable content?

Yes, we have issued some guidance for small businesses, including tips for preparing compliance documents: see Information Sheet 97 Guidance for small credit businesses (INFO 97).

However, we cannot provide sample compliance plans given that businesses vary greatly in size and complexity. Each credit licensee must consider their individual requirements and procedures.

What are the obligations in relation to conflicts of interest?

Credit licensees must ensure their customers are not disadvantaged by any conflicts of interest. You should make adequate arrangements to meet this obligation (e.g. with regard to remuneration or incentive structures). What this means will vary depending on the circumstances.

Additionally, mortgage brokers may be subject to additional requirements when conflicts of interest exist.

See Regulatory Guide 205 Credit licensing: General conduct obligations (RG 205) for examples of conflicts of interest and guidance on your obligations. Section D of Regulatory Guide 273 Mortgage brokers: Best interests duty (RG 273) contains guidance on additional requirements for mortgage brokers.

What credit registers does ASIC maintain?

ASIC maintains the following registers for credit licensing:

• Registered/Licensed Persons
• Credit Representatives
• Banned Persons (Credit)

What type of information do the registers include?

The details we maintain are prescribed in the National Consumer Credit Protection Regulations 2010. They include business addresses, business names (if any) and Australian Financial Complaints Authority (AFCA) scheme membership.

How do I satisfy legal requirements to ensure I don't appoint a credit representative who has been banned? For example, how often am I expected to check ASIC's banned persons register?

See Information Sheet 109 Credit licensee offences: Prohibited dealings and unlawful authorisations (INFO 109).

What are the penalties for engaging in credit activities without a credit licence?

The legislation imposes criminal and civil penalties for engaging in credit activities without a credit licence.

The maximum monetary penalty for individuals is the greater of:

• 5,000 penalty units
• three times the benefit obtained and detriment avoided.

Note: See www.asic.gov.au/penalties for more information about penalties, including the value of a penalty unit.

The maximum monetary penalty for bodies corporate is the greater of:

• 50,000 penalty units
• three times the benefit obtained and detriment avoided
• 10% of the annual turnover for the 12-month period ending at the end of the month in which the body corporate contravened, or began to contravene, but no more than 2.5 million penalty units.

Note: See www.asic.gov.au/penalties for more information about penalties, including the value of a penalty unit.

If convicted of an offence, the maximum term of imprisonment is two years.

What are the penalties for non-compliance with general conduct obligations?

The above civil penalties may also apply for contraventions of some general conduct obligations. Some of these obligations include:

• doing all things necessary to ensure the credit activities are engaged in efficiently, honestly and fairly
• ensuring consumers are not disadvantaged by any conflict of interest in relation to the credit activities
• taking reasonable steps to ensure compliance with the credit legislation
• maintaining competence and training
• having an internal dispute resolution procedure and being a member of the AFCA scheme
• having adequate arrangements and systems to ensure compliance
• if not regulated by APRA, having adequate resources and risk management systems.

See RG 205 for guidance on the general conduct obligations.