If you are involved in the financial services industry in Australia, specifically in the credit sector, you may come across situations where you need to vary your credit licence. Understanding the process and requirements for varying your credit licence is essential to ensure compliance in the financial services industry.
Below are some key facts about varying your credit licence in Australia, including the reasons for applying for a variation, the necessary forms, the application process, common questions asked, reasons for application refusal and how Madison Marcus, with our team of experienced financial services lawyers, can assist you throughout the process.
Why Would You Need to Apply for a Variation of Your Credit Licence?
When operating in the credit sector, changes in your business circumstances or activities may necessitate the variation of your credit licence. Some common reasons for applying for a variation include:
- Expanding Product Offering: If your business plans to introduce new credit products or services that are not covered by your existing licence, you will need to apply for a variation to include these additional offerings.
Example: Let’s say you run a small lending company that currently offers personal loans but wants to expand into business loans. To legally offer business loans, you would need to vary your credit licence to include this new category.
- Restructuring: If you plan to restructure your business, such as merging with another company, acquiring or selling a business or changing the legal entity under which you operate, you will need to apply for a variation to reflect these changes.
Example: Imagine you own a credit brokerage firm and decide to merge with another brokerage to enhance your market presence. As part of the merger process, you would need to vary your credit licence to align with the new entity resulting from the merger.
- Change in Responsible Managers: Responsible managers play a crucial role in the credit industry, and if there are changes in the individuals holding these positions within your organisation, you must apply for a variation to update your licence accordingly.
Example: Suppose the current responsible manager for compliance in your credit business decides to move on to another role. To meet the financial services compliance requirements, you would need to apply for a variation to appoint a new responsible manager.
What Form Do You Need to Apply for Variation of Your Credit License?
To apply for a variation of your credit licence in Australia, you will need to complete and submit Form CL03, which is provided by the Australian Securities and Investments Commission (ASIC). This form is specifically designed for credit licensees seeking to vary their licence.
How Do You Apply for the Variation of Your Credit License?
To apply for a variation on your credit licence, follow these steps:
1. Review the ASIC Regulatory Guide: Before beginning the application process, it’s important to familiarise yourself with ASIC’s Regulatory Guide 204, which provides guidance on applying for a credit licence variation. This guide outlines the information and documents you will need to include in your application, as well as other financial services compliance requirements.
2. Complete Form CL03: As mentioned, Form CL03 is the official application form for varying your credit licence. Make sure to fill it out accurately and provide all the required information.
3. Compile Supporting Documents: Depending on the nature of the variation you are seeking, you may need to provide additional documentation. This may include financial statements, business plans, compliance manuals and any other relevant information requested by ASIC.
4. Submit the Application: To apply for a variation of your credit licence, you must complete and submit the application online. You can access the variation application either through the credit portal or, if you are an Australian financial services (AFS) licensee, through the AFS licensees portal.
What Questions Will Be Asked During Application?
During the application process for varying your credit licence, you can expect to be asked various questions related to your business and the proposed variation. These questions will be the same as in the initial licence application. Some common questions include:
1. What specific changes are you seeking to make to your credit licence?
2. How will the proposed variation impact your business operations?
3. Do you have appropriate systems and processes in place to ensure compliance with the financial services compliance requirements?
4. Have you identified any risks associated with the proposed variation, and how do you plan to mitigate them?
5. Have you conducted a thorough analysis of the potential impact on consumers and considered any necessary safeguards?
When Do Variation Applications Get Refused?
While most credit licence variation applications are successful, there are instances where applications may be refused. Common reasons for refusal include:
- Significant risks to consumers
- Lack of adequate documentation
- Non-compliance with regulatory requirements.
If the ASIC staff member assessing your application determines that you lack the capacity to engage in the additional credit activities you have requested authorisation for, or if they deem your proposed changes to other non-authorisation conditions as inappropriate, ASIC may refuse your variation application. However, before they can refuse to grant the variation to your credit licence, they are obligated to provide you with a hearing opportunity. In this case, you may need financial services lawyers to assist you.
How Madison Marcus Can Help You
At Madison Marcus, our team of financial services lawyers is ready to assist you in achieving compliance and realising your ambitions in the financial services industry. Our financial services division is dedicated to helping clients in the banking and finance industry like you to meet your compliance obligations and achieve your business goals. We offer a range of services that include Australian credit licence applications and variation applications.
Contact us today to explore how we can help you with your credit licence variation needs.