The Australia Securities and Investments Commission (ASIC) has released its licensing and professional registration activities 2021 update, in which it has reported that between July 2020 and June 2021, it received 1,883 Australian Financial Services Licence (AFSL) and Australian Credit Licence (ACL) applications.
This was a significant increase from 1,346 applications lodged the previous year.
ASIC attributed the increase to recent regulatory changes that have required new persons or entities to hold an AFSL or ACL, including debt management service firms, superannuation trustees, insurance claims handling and settling services, litigation funding scheme operators, and foreign financial services providers.
In April 2021, the National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 classified certain debt management services as credit activities under the National Credit Act.
The reforms formed a part of the federal government’s proposed plans to overhaul responsible lending obligations, and were aimed at protecting consumers from the “predatory practices of debt management firms”.
As a result, debt management service providers must now hold a credit licence authorisation that covers debt management services.
As at 30 June 2021, ASIC had received 82 applications for authorisations that covered debt management services.
ASIC said: “As a result of the large number of applications received in May and June 2020 relating to the insurance claims handling and debt management services reforms, the volume of applications under assessment is currently relatively high. This may delay the assessment of some applications in 2021-22.”
The corporate regulator approved 458 new AFSLs and ACLs (compared to 394 last year), and approved 537 variation applications by existing licensees (unchanged since last year).
In addition, it granted 995 AFSL and ACL applications, and finalised 392 that were not approved (these were mostly withdrawn or rejected for lodgement, with one refused after hearing).
It finalised 50 per cent of credit licence applications within 14 days, 70 per cent within 44 days, and 90 per cent within 110 days.
In addition to AFSL and ACL approvals, 391 applications were withdrawn or rejected for lodgement, one was refused, 563 licences were cancelled, and 23 were suspended.
ASIC also outlined its approach to licensing during the coronavirus pandemic, stating that between April 2020 and January 2021, it made additional requisitions of all AFS and credit licence applicants to clarify the impact of the COVID-19 crisis on their businesses to ensure that it had no reason to believe that an applicant would likely contravene its licence obligations.
ASIC explained that making the requisitions enabled it to consider whether the applicant had sufficient resources available to provide financial services and conduct supervisory arrangements (including financial, technological, and human resources).
In January 2021, ASIC stopped these requisitions based on the assumption that applicants had now adopted to operating under COVID-19 pandemic circumstances.
ASIC also outlined that while the law enables it to cancel a licence when a licensee has not commenced operation within six months of the licence being granted, it had extended this period to 27 licensees as at 30 June 2021 due to pandemic-related issues.
For example, it provided a case study where it cancelled the ACL of Australian Golden Securities Pty Ltd in January 2021 on the basis that the licensee did not commence credit activities within the stipulated time frame.
The business held the ACL from 13 April 2015 but ASIC said that it found that the licensee had not engaged in credit activities by 18 August 2020.
The cancellation of the ACL followed the cancellation of the entity’s AFSL because of concerns about its failure to meet AFSL obligations, ASIC said.
ASIC chief operating officer Warren Day said that the report has outlined ASIC’s function in ensuring that licence and auditor applicants are fit and proper, competent, and appropriately licensed or registered for their business activities.
He added: “This is to ensure that the quality of participants and their businesses providing financial services or auditing services have satisfied the statutory requirements.
“In 2020-21, ASIC implemented reforms requiring litigation funding scheme operators, insurance claims handling services and debt management services firms to be licensed.
“Importantly, the report acknowledges the impact of the ongoing COVID-19 pandemic and our continued flexibility during these times.”
ASIC releases its licensing report annually to “provide guidance to licensees, registrants and prospective applicants about ASIC’s licensing and professional registration decision making”.
The report outlines what ASIC considers when reviewing applications, why certain information is required, and what factors may increase the time taken to assess an application.
To read more about changes to the credit reporting sector, including licensing reforms in the debt management services space, click here or pick up a copy of the September edition of The Adviser magazine.
[Related: ASIC provides licence applications update]
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.