Changes to the way that providers of debt management services are regulated have now come into force.
From 1 July, firms offering debt management services, including ‘debt negotiation’ or ‘credit repair’, come under the National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021, which were made on 29 April and which classify debt management services as a ‘credit activity’.
The Australian Securities and Investments Commission (ASIC) says the changes mean that providers of these services must:
- hold a credit licence with authorisation that covers those services (or act as a representative of such an authorised licensee), or
- be operating in accordance with the transitional arrangements, specifically that by 30 June 2021 they:
- applied to ASIC for a credit licence or variation that covers these activities (or have arrangements to act as a representative of a provider that has applied for a licence to over these activities), and
- are a member of the Australian Financial Complaints Authority (AFCA).
Where providers of debt management services have not met these requirements, they must cease engaging in these activities. The transitional arrangements only apply while ASIC is considering the application for a credit licence or variation and, if no licence is granted, the provider must cease engaging in these activities.
ASIC has stated that it will closely monitor compliance with these new laws, including identifying unlicensed conduct and taking appropriate action where necessary.
ASIC has also published a list of applicants who have applied for a credit licence or variation by 30 June and were AFCA members on that date. The list reflects applications that have not yet been determined and where the person/entity has consented to ASIC publishing the relevant details.
The list is intended for people receiving debt management services to decide whether they can provide those services under transitional arrangements. Further, AFCA’s website can also provide more information regarding whether the person/entity has AFCA membership.
ASIC reminds credit licensees that, under section 31 of the National Consumer Credit Protection Act 2009, they are prohibited from conducting business with unlicensed persons.