Line 3 · Credit
Can a business consultant help me get a business loan?
The answer, at the width ASIC gives it: engaging in credit activities generally means needing an Australian credit licence, or an authorisation from a credit licensee, before you start business. Generic advice about credit is the other side of that line: ASIC says a financial planner who gives generic advice about credit does not need a credit licence.
Two readings a reader will meet elsewhere: that credit advice needs a licence, and that some credit is not caught at all. This guide sets them beside each other and gives the test ASIC states that reconciles them. It does not decide whether your own loan or your own advice falls inside or outside the rules.
Any adviser
Licensed, registered, or a director
- 1 TaxApplies tax law to your own circumstances, and you rely on it, for a feeTax agent or BAS agent, registered with the Tax Practitioners Board
- 2 Financial productsRecommends which financial product to buy: shares, super and insurance among themAFS licensee, or an authorised representative of one
- 3 CreditSuggests or assists with a specific contract from a specific credit providerCredit licensee, or a credit representative of one
- 4 Legal workAdvises on, or drafts, the terms of a contractAustralian legal practitioner, holding a current practising certificate
- 5 The companyThe directors are accustomed to act in accordance with the adviser’s instructions or wishesA director in law, with no appointment needed
General information about how Australian law treats business advice. It is not tax, financial or legal advice. Check an adviser on the official register, where a line names one.
What needs a credit licence
The starting rule is ASIC’s: a business carrying on credit activities generally needs an Australian credit licence, or an authorisation from a credit licensee, before it starts.
Alongside the licence sits the conduct law. Anyone who engages in credit activities for consumer credit must comply with the National Credit Act and the National Consumer Credit Regulations 2010. The Act defines a ‘credit activity’ in section 6.
ASIC does not answer the question for a business; it tells a business how to answer it. Its guidance is to look at the activities the business will carry on, and to use ASIC’s guidance to decide whether they are caught by the definition of ‘credit activity’.
Exemptions exist, and they have conditions. Exemptions from the credit licensing requirements are set out in the National Credit Act and in the National Consumer Credit Protection Regulations 2010, for certain kinds of persons and activities. Most of those exemptions apply only in certain circumstances, and only when particular requirements are met; anyone relying on one should check that every requirement is satisfied.
Why the answer seems to disagree
Two statements from the same regulator seem to pull apart. The first: a business that engages in credit activities generally needs an Australian credit licence, or an authorisation from a credit licensee, before it starts. The second: a loan is not regulated by the National Credit Act unless it is predominantly for personal, domestic or household purposes.
The test that reconciles them is stated plainly: the consumer-credit test has not moved, so a loan predominantly for personal, domestic or household purposes is caught, and ‘predominantly’ means a consumer component of more than 50%.
Applied to a company borrower: property development mostly runs through companies, and the credit legislation does not reach loans to companies; only loans to natural persons are caught, along with loans to strata corporations. There is a carve-back ASIC notes for people rather than companies: where a loan to a natural person is wholly or predominantly for buying, renovating or improving a residential property as an investment, the National Credit Act regulates the loan and the credit provider must hold a licence.
Who the credit rules are written for
The regime is written around credit to people for personal purposes. The test ASIC states: is the advance predominantly for personal, domestic or household purposes? ‘Predominantly’ means a consumer component of more than 50%; where the test is not met, the National Credit Act does not regulate the loan.
Two kinds of lending sit outside the credit legislation for their own reasons. Loans to companies are not subject to it, and only loans to natural persons are caught, along with loans to strata corporations. And margin lending has its own legislation: Chapter 7 of the Corporations Act 2001 regulates it, separately from the National Credit Act.
Pawn broking has its own exemption: the credit legislation does not apply to it where the pawned goods are the only recourse on a default, and state-based legislation covers pawn broking, along with consumer protection provisions of the Australian Securities and Investments Commission Act 2001.
Passing you to a lender
Working out whether a person who refers a consumer on to a credit provider, or to a credit service provider, needs to be licensed (or to be a credit representative of a credit licensee) turns on two questions. The first: is the referral a regulated credit activity that needs an Australian credit licence? If it is, the second: does the referral exemption cover it?
The exemption has a narrow shape. It may cover you if you only tell the consumer that one particular credit licensee or their credit representative can provide particular credit activities (such as lending, suggesting or assisting), how to contact them, and if you disclose any benefit or commission that you may receive.
If a complaint arises
Two pieces of the ASBFEO’s guidance are about the money itself rather than the licence. Read the contract before signing, check the interest rate and what happens if a payment is missed, and ask for more information if anything is unclear. And for a business loan, the ASBFEO’s tip is to choose a lender that belongs to the Australian Financial Complaints Authority (AFCA), which it says protects the business from unfair outcomes.
The ASBFEO describes AFCA as free and independent dispute resolution, open to small businesses, and covering complaints about loans, insurance, banking deposits and investments, financial advice, and superannuation. It lists the AFCA phone number as 1800 931 678, which it marks a free call.