Changes to the National Credit Act

13 October 2021

Debt Management Services

Changes to the National Consumer Credit Protection Act 2009 (National Credit Act) have broadened the meaning of ‘credit activity’. Now more people and businesses are classified as providers of ‘debt management services’ and are required to hold an Australian Credit Licence at an authorisation level covering debt management services.

For the purposes of the National Credit Act and licensing requirements, a ‘debt management service’ includes:

Activity

Description

Debt management assistance

Suggesting and/or helping a consumer to:

apply for a change to a credit contract where the consumer is a debtor;
apply for a postponement of enforcement proceedings; and
make a complaint or claim to a credit provider, Australian Financial Complaints Authority (AFCA), Australian Securities and Investment Commission (ASIC) or the information commissioner

Credit reporting assistance

Suggesting or helping a consumer to apply for a change to information collected by a credit reporting body about a credit contract where the consumer is a debtor.

Specific examples of debt management services include:

Activity

Description

Credit repair services

Offering to repair, clean or fix entries in a consumer’s credit report that relate to a consumer credit contract.

Debt negotiation services

Offering to help a consumer negotiate repayment arrangements or changes to a debt under a consumer contract with the credit provider.

Dispute lodgment assistance

Helping a consumer lodge a dispute with a credit provider of AFCA in relation to the consumer’s credit contract.

Hardship notice assistance

Helping a consumer give a hardship notice to a credit provider when they are having difficulties meeting their repayment obligations under their credit contract.

Note: A complete definition of what constitutes a debt management service, debt management assistance and credit reporting assistance is defined in section 6 of the National Credit Act.

On and from 1 July 2021, anyone providing debt management services is required to hold a credit licence with a suitable authorisation and be a member of AFCA.

woman-paying-using-credit-card

Transitional arrangements

To comply with transitional arrangements by 30 June 2021, debt management service providers must:

have applied for a credit licence (or variation to an existing licence) authorising the provision of debt management services; and
be a member of AFCA.

Alternatively, if a person intends to provide debt management services as an authorised credit representative they may do so until:

ASIC deals with their licence application or variation; and
they become a credit representative of a credit licensee authorised to provide debt management services.

If these criteria have not been complied with and the provision of debt management services has continued, a person may be engaging in credit activities while unlicensed, which is an offence.

Insolvency practitioners are exempt in engaging in credit activities while acting in their capacity as administrator, liquidator, trustee in bankruptcy etc.

Lawyers are exempt pursuant to regulation 24 of the National Consumer Credit Protection Regulations 2010. However, the exemption does not apply to lawyers that hold out or actively advertise that they provide debt management services.