Whilst there will be no obligation to report individual breaches of the National Credit Code to ASIC as they occur, compliance reporting is a fundamental part of the new credit licensing system as individual breaches could be a breach of a general credit licence condition.
Applying for a credit licence
RG 204 states:
RG 204.236 You will be asked a group of questions that are designed to obtain your confirmation that you have in place, and will maintain, adequate compliance arrangements and systems, including whether:
(a) you have a written plan that documents your arrangements and systems;
(b) the arrangements specify how often compliance with procedures is monitored and reported on; and
(c) there are people internal to your business responsible for ongoing monitoring and reporting.
RG 204.237 If you indicate that you do not have in place arrangements and systems to ensure compliance with the obligations, you will not be able to continue with the application because you would not meet the minimum requirements to be granted a credit licence.
Ongoing licence conduct obligations
RG 205.32 We understand that, in some instances, your monitoring and reporting will be built into your business processes. We also acknowledge that your compliance measures might reflect your business’s overall approach to compliance. Whatever the case, you need to be able to show us how you are able to monitor your compliance and appropriately address any compliance breaches.
RG 205.53 The broad compliance obligations are both stand-alone obligations and obligations that encompass the other general conduct obligations. This means that:
(a) if you fail to comply with one or more of the other general conduct obligations, you are also likely to breach the broad compliance obligations; and
(b) even though you may be complying with all of the other general conduct obligations, you may still be in breach of the broad compliance obligations. This is because the broad compliance obligations are also stand-alone obligations...
RG 205.56 However, the ‘efficiently, honestly and fairly’ obligation is also a stand-alone obligation that operates separately from the other general conduct obligations. For example, if you have contractual obligations to clients and breach them, this might not be a breach of the other general conduct obligations, but it could amount to a failure to engage in credit activities efficiently, honestly and fairly...
RG 205.58 You must comply with any licence conditions that we impose: s47(1)(c). In addition, you must also comply with the licence conditions set out in reg 10 of the National Consumer Credit Protection Regulations 2010 (National Credit Regulations). The conditions on your credit licence reinforce some of the general conduct obligations, so breaching a licence condition will sometimes also be a breach of the general conduct obligation to which the condition relates.
Suspension, cancellation or variation of a licence by ASIC
The regulations are still in draft form. Draft regulation 15 states:
When a licence can be suspended, cancelled or varied — grounds to suspend or cancel licence
For paragraph 55 (2) (e) of the Act, the following are matters that ASIC must have regard to:
(a) a licensee failing to lodge an annual compliance certificate under section 53 of the Act;
(b) a licensee lodging an annual compliance certificate that contains information that:
(i) is false or misleading; or
(ii) can not reasonably be believed to be true by the person signing the certificate under subsection 53 (3) of the Act.
Failure to fully disclose compliance breaches in an annual compliance certificate may lead to suspension, cancellation or variation of a credit licence.
Under section 53 of the National Consumer Credit Protection Act, it is a strict liability offence if a licensee fails to lodge a compliance certificate with ASIC within 45 days after the licensee’s licensing anniversary in each year.
If you need assistance with your registration or license application or compliance policies, contact Patrick Dwyer or David Jacobson.
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Posted 5th January 2010
by David Jacobson