BLA - Credit providers

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General Information
If you provide money to purchase goods, services or land, or to lease goods, then you are providing credit.

The Consumer Credit (Victoria) Act 1995 regulates the provision of credit in Victoria. The Act applies the Consumer Credit Code in Victoria, which standardises consumer credit law throughout Australia, and sets out credit providers' rights and responsibilities.

Current Registration Requirements
In Victoria, it is an offence for a person to carry on the business of providing credit under credit contracts, unless the person is registered as a credit provider. A "credit contract" is one under which credit is provided and to which the Consumer Credit Code applies. The Code does not apply to all types of credit or all types of credit contract. The Code applies if you charge for the credit provided and your customers are individuals or residential strata corporations who use the money mostly for personal, household or domestic purposes.

Changes to the Registration Requirements to Come Into Operation in 2009
In March 2008 the Consumer Credit (Victoria) and Other Acts Amendment Act 2008 was passed by the Victorian Parliament. Implementing a range of recommendations accepted by the Victorian Government in its response to the Report of the Consumer Credit Review by the 2008 Act. This will introduce an enhanced registration scheme with strict eligibility requirements for credit providers and a requirement to register with an ASIC approved external dispute resolution scheme. The amendments will bring credit providers more into line with the other licensed occupations for which the BLA has responsibility. These amendments will take effect before or on 1 July 2009.

Frequently Asked Questions about the changes
For all other information about the changes go to the Consumer Affairs Victoria website.

Current Penalties For Being Unregistered
In Victoria, you risk a penalty of up to 500 penalty units (one penalty unit = $110.12), if you carry on a business of providing credit under credit contracts, or a penalty of up to 250 penalty units if you hold yourself out as a person carrying on a business of providing credit under credit contracts, and you are not registered as a credit provider.

You may be considered to be trading as a credit provider even if you provide credit in connection with running another business.

People/bodies providing short-term credit such as 'pay-day loans' need to be registered as a credit provider. Heavy penalties can apply for providing credit if not registered when required to be. For information on the changes to the Consumer Credit Code go to
Consumer Affairs Victoria or www.creditcode.gov.au

For information on how to register as a credit provider, access 'credit providers' above. Registration is free.

Exemptions
1. Types of Credit Providers Exempted from Needing:
The requirement to be registered does not apply to certain persons or bodies, including:

Pawnbrokers registered under the Second-hand Dealers and Pawnbrokers Act 1989, but only insofar as they carry on business of advancing money against pledged goods;
Commonwealth, State or local governments or statutory bodies;
Authorised Deposit taking Institutions (ADI's) within the meaning of the Banking Act 1959 (commonwealth).
Registered or authorised insurance or life insurance bodies;
Pastoral finance companies; and,
People empowered by Commonwealth legislation to lend money or provide credit.

For more information, see section 12 of the Consumer Credit (Victoria) Act 1995.

2. Types of Credit exempted or partially exempted:
Additionally, registration as a credit provider may not be required when providing credit to which the Consumer Credit Code does not apply.

The Code does not apply to all provision of consumer credit: some types of credit contracts are excluded from the definition of a 'credit contract' under the Code. Where an individual or a company is only providing the following types of credit, the credit provider may not need to be registered because the Code does not apply to the credit being provided under these types of contracts. This includes:

Credit provided for 62 days or less but only where the maximum credit fees and charges are less than 5% of the amount of credit and the maximum interest charges are not more than 24% p.a.;
Credit provided without prior agreement (for example, when a cheque account becomes overdrawn and there is no agreed overdraft facility);
Continuing credit where the only charge that is made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided;
The debit part of a joint debit and credit facility;
Credit arising from bills of exchange or promissory notes;
Credit provided by an insurer for the payment of insurance premiums by instalment (in certain circumstances);
Credit provided by either pawnbrokers as an advance against pledged goods or by trustees of deceased estates, except when transactions are unjust;
Employee loans in certain circumstances (some provisions of the Code still apply);
Loans solely for investment or business purposes.

While a credit provider may not need to be registered if they are only providing one or more of the above types of credit, they will still need to be registered if they are also providing any other type of credit to which the Code does apply.

For more information, see sections 4, 6 and 7 of the Consumer Credit Code

You should seek legal advice if uncertain whether or not you need to be registered as a credit provider, or uncertain as to how the Code applies to your business.

Australian Corporations Legislation
If you intend to operate a business through a company, you need to be aware of both the Director's and Company Secretary's responsibilities under the Australian Corporations Legislation. Visit the Australian Securities and Investments Commission website to find out more about the legislation requirements.

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Last Updated: 08/07/2008