Top 10 Mistakes Credit Licensees are making - and how to prevent them

Tuesday, 11 August 2015 | By Tim Nethercote
We have put together a list of the most common mistakes licensees make that we have seen, and how to avoid them.  Although some of these are specific to the credit industry, many of the points are applicable to AFSL holders as well.

1. Not having a compliance committee or not meeting regularly

Form a compliance committee to meet at least twice a year.  Ensure that the agenda for the compliance committee reflects the obligations under section 47 of National Consumer Credit Protection Act 2009 (Cth) (“the Act”) and the conditions on the ACL.

2. Not having a compliance manager

Appoint a compliance manager with responsibility for overseeing compliance measures of the business.  They should work in collaboration with the compliance committee under the overall compliance framework.

3. Not keeping up-to-date with compliance dates

Create and maintain a compliance calendar to diarise key dates.  For example, PI insurance renewal, annual policy review, annual compliance certificate due date and EDR membership renewal.  Ensure someone has responsibility to check the calendar and that key dates are met.

4. Responsible Managers not completing their CPD requirements

Ensure each responsible manager maintains their competence by fulfilling their CPD requirements for each calendar year.  

5. Not keeping the training register up-to-date

Ensure the training register for each responsible manager is kept up-to-date.  Make sure a specific person has responsibility for this and encourage your staff to send updates on their training as they complete it.

6. Not training representatives on legislative requirements

Provide representatives with ongoing training in areas such as misleading and deceptive conduct and related provisions of the ASIC Act, along with the basics of credit regulation and the consumer credit legislative regime, to increase understanding of legislative requirements for licensees.  Provide refresher training for all frontline staff on these and any other relevant concepts.

7. Not keeping track of conflicts of interest

Identify conflicts of interest in the business and consider what measures are required to manage these conflicts to ensure the consumer is not disadvantaged.  Update the conflicts of interest register accordingly.  You may want to discuss conflicts with colleagues in the industry to get a fresh perspective.

8. Not having up-to-date policies and procedures

Licensees must internally review and update all policies and procedures regularly.  These may include the risk management policy and register, internal dispute resolution (IDR) policy, conflicts policy, training policy and the monitoring and supervision policy.  We recommend reviewing your entire compliance manual (or other policies and procedures document) annually. Nominate one person to be responsible for the project and review each individual policy to ensure that they are still current.

9. Not monitoring outsourced service providers

Develop and undertake a system of review for the performance of outsourced service providers.  Ensure you have current contracts on file and use a formal system, such as a checklist to review their performance.  We recommend you review all of your service providers at least annually.

10. Not ensuring policies and procedures are compliant with the Act

Ensure that the credit disclosure documents, including a credit guide and a final assessment document, comply with the requirements under the Act.  Get advice or an independent review if you need a second opinion.

For more information about licensee obligations, refer to RG 205 Credit Licensing: General Conduct obligations or the National Consumer Credit Protection Act 2009.

Author: Tim Nethercote

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