NCCP Act + Australian Credit Licence (ACL): General Conduct Obligations Under s 47

The NCCP Act and the ACL regime

The National Consumer Credit Protection Act 2009 (Cth) regulates credit provided to consumers. It commenced on 1 July 2010 and establishes a framework for consumer credit activities in Australia. Persons engaging in these activities must hold an Australian Credit Licence (ACL) issued by ASIC, or be authorised as a credit representative. NCCP responsible lending obligations apply under this Act.

The National Credit Code (NCC) is contained within Schedule 1 of the NCCP Act and governs the consumer contract itself. This Code sets out the requirements for credit contracts. ASIC administers the licensing regime and provides guidance to ACL holders through publications such as Regulatory Guides (including RG 203, RG 205, RG 209).

Engaging in credit activity without the appropriate ACL or authorisation is a criminal offence, and carries significant penalties. This highlights the importance of compliance with the NCCP Act and the associated licensing requirements.

Section 47 general conduct obligations

Section 47 general conduct obligations

Section 47 sits in Division 5, Subdivision A of the NCCP Act and applies to all credit licensees. This section mandates that licensees undertake all actions required to ensure their credit activities are conducted efficiently, honestly and fairly. This obligation is broad and requires licensees to consider all aspects of their operations to meet these standards.

To fulfil these obligations, licensees must ensure representatives are adequately trained and competent to perform the credit activities for which they are responsible. Furthermore, licensees are required to maintain an internal dispute resolution (IDR) procedure that complies with ASIC standards, and can be found detailed in ASIC RG 271 internal dispute resolution.

Finally, licensees must be a member of an approved external dispute resolution scheme; currently, this is AFCA. This ensures consumers have recourse to an independent body should their disputes with the licensee not be resolved internally.

Compliance arrangements required

Section 47 requires Australian Credit Licence (ACL) holders to establish and maintain adequate arrangements and systems to ensure compliance with all applicable obligations. These arrangements and systems must be documented in a written plan.

Licensees are also responsible for ensuring they have adequate resources. This includes financial, technological, and human resources, to effectively carry on the credit activities outlined in their licence.

Furthermore, robust risk management systems are necessary to manage operational, conduct, and compliance risks. Adequate management and disclosure of conflicts of interest are also mandated. Adherence to the ABA banking code of practice may assist in meeting these obligations.

Enforcement and penalties

Failure to comply with general conduct obligations under s 47(1) can result in civil penalties. These penalties can extend to a maximum of 5,000 penalty units for each breach of the core paragraphs.

The Australian Securities and Investments Commission (ASIC) has the power to take enforcement action against licensees. This includes the suspension or cancellation of an Australian Credit Licence for breaches of general conduct obligations.

Licensees are required to lodge an annual compliance certificate, confirming adherence to these obligations. ASIC also publishes enforcement outcomes, including licence cancellations, in its enforcement updates, and the reportable situations regime mandates self-reporting of significant breaches.