ASIC Credit (Amendment) Instrument 2018/836

Overview

The ASIC Credit (Amendment) Instrument 2018/836, enacted by the Australian Securities and Investments Commission under the National Consumer Credit Protection Act 2009, addresses the transitional challenges posed by the establishment of the Australian Financial Complaints Authority (AFCA). The instrument modifies the ASIC Corporations and Credit (Transition to AFCA) Instrument 2018/814, aiming to ensure that credit representatives retain their authorisations while they transition from existing external dispute resolution schemes to the AFCA scheme. The primary objective of this amendment is to prevent the automatic invalidity of credit representatives' authorisations due to delays in joining the new AFCA scheme, provided they remain members of an approved external dispute resolution scheme during the interim period. The instrument operates by exempting certain credit representatives from specific provisions of the National Credit Act, allowing them continued authorisation until they formally join the AFCA scheme by the commencement date of 1 November 2018. This amendment was introduced without consultation as it was deemed minor and technical, focusing solely on facilitating a smooth transition to the AFCA scheme. The legislative instrument aligns with human rights standards as it does not engage with any of the rights or freedoms outlined in the international instruments under the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

The ASIC Credit (Amendment) Instrument 2018/836 operates under the authority granted by subsection 109(3) of the National Consumer Credit Protection Act 2009, and modifies the ASIC Corporations and Credit (Transition to AFCA) Instrument 2018/814. This amending instrument is specifically designed to address transitional issues arising from the establishment of the Australian Financial Complaints Authority (AFCA), a unified external dispute resolution scheme for financial services. It applies to Australian credit licensees (ACL) and authorised credit representatives (ACR) who must comply with membership requirements of the AFCA scheme, which commenced on 21 September 2018. The instrument aims to prevent the automatic invalidity of authorisations for credit representatives who have not yet secured AFCA membership but remain members of an approved external dispute resolution scheme such as the Credit and Investments Ombudsman (CIO). The transitional provisions ensure that such credit representatives' authorisations remain valid until 31 October 2018, provided they are members of an approved EDR scheme, after which the authorisations will no longer be valid unless they have become members of AFCA. This legislative instrument applies across the Commonwealth of Australia and is designed to support the smooth transition to the AFCA scheme, which fully replaces the existing EDR schemes on 1 November 2018.

Key Provisions

The ASIC Credit (Amendment) Instrument 2018/836 (the amending instrument) is a legislative tool that modifies the ASIC Corporations and Credit (Transition to AFCA) Instrument 2018/814, aligning it with the introduction of the Australian Financial Complaints Authority (AFCA) as the unified external dispute resolution (EDR) scheme. The main operative sections of the amending instrument are found in sections 1 and 2. Section 1 of the amending instrument inserts a new section 65A into the National Consumer Credit Protection Act 2009 (National Credit Act), which temporarily exempts certain credit representatives from the requirement to be members of the AFCA scheme between 21 September 2018 and 31 October 2018. This exemption applies to credit representatives who, as of 21 September 2018, are not members of the AFCA scheme but are members of an approved EDR scheme, such as the Credit and Investments Ombudsman (CIO) (section 65A(1)(a) and (b)). Section 2 of the amending instrument specifies that the exemption provided by section 65A ceases to apply as of 1 November 2018, which is the commencement date of the AFCA scheme. The amending instrument imposes specific obligations and requirements on the parties it governs. Credit representatives who fall under the exemption must ensure they maintain membership in an approved EDR scheme between 21 September 2018 and 31 October 2018. Additionally, they must apply for and secure membership in the AFCA scheme before the exemption expires on 31 October 2018. Failure to become a member of the AFCA scheme by 1 November 2018 results in the credit representative's authorisation becoming invalid under the ordinary operation of the National Credit Act (sections 64(5)(c) and 65(6)(c)). Furthermore, financial firms must comply with the requirements to be members of both an approved EDR scheme and the AFCA scheme from 21 September 2018 (section 65A(2)). In terms of offences, penalties, and consequences for breach, the amending instrument does not introduce new penalties or criminal consequences. However, the continued validity of a credit representative's authorisation hinges on their compliance with the membership requirements. For credit representatives who fail to become members of the AFCA scheme by 1 November 2018, their authorisation will cease to have effect by operation of sections 64 and 65 of the National Credit Act. This effectively means that they will no longer be permitted to act as credit representatives, which could have significant professional and legal repercussions for them and their employing firms.