ASIC CLASS ORDER [CO 13/274]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
National Consumer Credit Protection Act 2009
The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 13/274] under paragraph 109(3)(a) of the National Consumer Credit Protection Act 2009 (the Credit Act).
Paragraph 109(3)(a) of the Credit Act provides that ASIC may exempt a class of persons from all or specified provisions to which Part 2-6 applies, including Chapter 2 of the Credit Act, which deals with, among other things, the requirement to hold an Australian credit licence.
Persons who provide credit assistance to consumers are required to hold an Australian credit licence. “Credit assistance” is defined in section 8 of the Credit Act and generally includes, among other things, suggesting or assisting a consumer to apply for or remain in a particular credit contract with a particular credit provider.
1. Background
In 2003, ASIC provided a limited exemption to financial counselling agencies from the requirement to hold an Australian financial services licence under the Corporations Act 2001 to enable them to provide financial product advice to persons where the advice was provided in the context of the overall financial counselling service. The exemption is set out in ASIC Class Order [CO 03/1063].
When framing the Credit Act and the National Consumer Credit Protection Regulations 2010 (the Credit Regulations), this licensing exemption was substantially adopted in subregulation 20(5) of the Credit Regulations to exempt financial counsellors from the credit licensing requirements.
Subregulation 20(5) of the Credit Regulations imposes substantially similar conditions to those that apply under ASIC Class Order [CO 03/1063], namely that services are at no cost to consumers, that the agency does not otherwise carry on a business that would otherwise require a licence and that certain other requirements relating to training were met.
Under subregulation 3(1) of the Credit Regulations, “financial counselling service” is defined as a “counselling and advocacy service provided predominantly to assist individuals in financial difficulty to resolve their problems”. There is some doubt as to the scope of coverage of that definition for the purposes of subregulation 20(5) of the Credit Regulations.
Following the implementation of the national consumer credit regime in 2010, ASIC undertook an assessment of the range of non-commercial services provided to consumers and small business principally by non-Government organisations in relation to financial and credit issues to consider any regulatory issues arising in relation to the credit and financial services regimes. ASIC identified a spectrum of services inclusive of services directed toward:
- low income and/or disadvantaged consumers and people in financial hardship;
- primary producers and rural small businesses; and
- capacity building programs such as financial literacy programs.
ASIC identified two services that may not qualify for the exemption in subregulation 20(5) of the Credit Regulations but ought to be exempt from the credit licensing requirements on similar terms:
- rural financial counselling services, and
- financial literacy services provided by money management service providers principally to Indigenous consumers in regional and remote Australia.
ASIC Class Order [CO 11/926] (the principal class order) provided two exemptions from the credit licensing requirements in relation to the provision of “credit assistance” by rural financial counselling service providers and money management service providers.
The exemption for money management service providers created a framework within which the money management financial literacy and capacity building services, principally for Indigenous consumers in regional and remote areas, could continue to be provided in circumstances where the service may involve the provision of credit assistance from time to time.
2. Purpose of the class order
The purpose of ASIC Class Order [CO 13/274] (the amending class order) is to revoke the exemption from the credit licensing requirements in relation to the provision of “credit assistance” by money management service providers.
Money management services are a part of the Financial Management Program administered by the Commonwealth Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA). In providing the exemption to money management service providers, ASIC had regard to the relevant Government funding and supervisory arrangements in place for the delivery of money management services.
After the making of the principal class order, FaHCSIA formed the view that the provision of credit assistance was outside the scope of money management services and that the provision of credit assistance to clients of money management service providers is more appropriately delivered by qualified financial counsellors or persons licensed or authorised to provide credit assistance under the credit licensing regime.
The amending class order gives effect to FaHCSIA’s policy intention by removing the exemption in the principal class order.
3. Operation of the class order
The amending class order varies the principal class order by removing the exemption from the credit licensing requirements in relation to the provision of “credit assistance” by money management service providers.
As a result of these changes, a money management service provider providing financial literacy and capacity building services to people, principally Indigenous people in regional and remote Australia can no longer lawfully provide credit assistance as part of the money management service without either holding an Australian credit licence or acting as a representative of such a licensee or are otherwise exempt under the Credit Regulations.
4. Consultation
Before making this class order, ASIC consulted with FaHCSIA.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011
ASIC Class Order [CO 13/274]
This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrument
The purpose of this legislative instrument is to vary ASIC Class Order [CO 11/926] which contains two exemptions from the credit licensing requirements of the National Consumer Credit Protection Act 2009 (the Credit Act).
This legislative instrument removes the exemption for money management service providers from the requirement to hold an Australian credit licence where, in the course of providing a money management service, they may provide regulated credit assistance to clients.
This exemption was given to money management service providers that deliver services within the parameters set by the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA).
Money management services are financial literacy and capacity building services principally provided to Indigenous consumers in regional and remote Australia. Money management services sit within a broader Financial Management Program administered by FaHCSIA.
FaHCSIA formed the view that the provision of credit assistance is outside the scope of money management services and that the provision of regulated credit assistance to clients of money management service providers is more appropriately delivered by qualified financial counsellors providing services with the benefit of an existing exemption under subregulation 20(5) of the National Consumer Credit Protection Regulations 2010 (the Credit Regulations) or by persons who hold an Australian credit licence or are representatives of such licensees.
This legislative instrument gives effect to FaHCSIA’s policy intention by removing the exemption for money management service providers.
Human rights implications
This legislative instrument does not engage any of the applicable rights or freedoms.
Conclusion
This legislative instrument is compatible with human rights as it does not raise any human rights issues.