We've been the national consumer protection regulator for financial services since 1998. However before 11 March 2002, our responsibilities did not include credit products and services. From this date, and as a result of the Financial Services Reform Act, we became the Commonwealth government agency overseeing market conduct and consumer protection issues on credit (replacing the Australian Competition and Consumer Commission).
What is ASIC's credit jurisdiction?
We have a broad credit jurisdiction which derives from the consumer protection provisions of the ASIC Act. We regulate:
lending to small business
lending for investment purposes
consumer lending (in conjunction with the State and Territory government fair trading or business and consumer affairs departments).
Our jurisdiction applies whether the lender is a bank or any other finance provider, such as a finance company, a credit union, a retailer or a firm of solicitors. It is not necessary that the lender is a firm that is licensed by us. Our credit jurisdiction is however limited to activities that take place in the context of "trade or commerce". We do not regulate loans between friends or family members, or other non-commercial arrangements.
How is credit defined?
A "credit facility" is defined very broadly under the ASIC Act (see reg 2B(1)). This means that the consumer protection laws apply to a wide range of credit products including:
credit cards
small business overdraft facilities
investment loans
hire purchase agreements
personal and home loans
mortgages and guarantees which secure borrowings
negotiable instruments including bills of exchange and promissory notes used to provide credit.
In addition to the provision of credit, we regulate conduct involved in the giving of advice or other services about credit, and the activities of finance brokers.
Do I need to be licensed if I provide credit products, or other financial services about credit?
The definition of a financial product in the Corporations Act specifically excludes a credit facility (see s765A and reg 7.1.06). This means that if you deal only in credit products – or otherwise provide financial services only on credit products – you will not need to obtain an Australian Financial Services licence. Some credit providers may however need to be registered or licensed under relevant State legislation. Further, the new financial product disclosure provisions under FSRA also do not apply to credit products. Disclosure requirements under state legislation will however continue to apply in relation to consumer credit. Is consumer credit insurance a credit facility?
What conduct is prohibited under the ASIC Act?
The ASIC Act prohibits conduct that is misleading or deceptive – or is likely to mislead or deceive - on credit products and services (as well as other financial services). It also prohibits other market misconduct including:
misleading advertising and marketing, including 'bait' advertising
misleading statements made by finance brokers, sales representatives, loans officers etc
undue harassment and coercion at the point of sale and in debt collection
referral selling and pyramid selling
sending unsolicited credit cards or asserting a right to payment for other unsolicited financial services
Who else regulates credit?
ASIC shares its new responsibility for credit regulation with the state and territory government's fair trading and business and consumer affairs agencies. These agencies have sole responsibility for the detailed regulation of consumer credit under the Uniform Consumer Credit Code [the UCCC]. This legislation sets out such things as:
what information must be given to consumers before they borrow money
the form and content of loan, mortgage and guarantee contracts; and
information that must be supplied to borrowers in account statements
State laws also give consumers certain rights and protections if they get into financial difficulties and fall behind in their loan repayments. These only apply to consumer lending that is primarily for personal, domestic and household purposes. The states also administer specific legislation regulating finance brokers and pawnbrokers.
Our credit priorities and referral role
We are still developing our regulatory priorities on credit. However we will generally focus on issues that are national in scope and/or have a clear systemic aspect. For instance, we expect to take a close interest in credit advertising and marketing campaigns to make sure they are not misleading or deceptive.
We also anticipate playing a significant role, through our Infoline, in referring people with specific debt repayment, recovery action, account disputes, privacy disputes and a range of other concerns and issues to appropriate sources of assistance. These include other government bodies, dispute resolution schemes and legal aid and community sector agencies.
As the consumer protection watchdog for credit, we have national responsibility for conduct by finance providers including banks, credit unions, finance companies and mortgage brokers who:
sell credit products such as loans to consumers and small businesses
provide other services with these products.
There will be times when a consumer will need immediate assistance about a problem with a loan or other credit product. Because we can often not help directly in these cases, we have an important referral role to play in these cases.
