Debt Management Services
What are Debt Management Services?
For the purposes of the National Credit Act and the credit licensing requirements, a 'Debt Management Service' (DMS) broadly covers the kinds of activities listed below, provided:
- the activity is in relation to consumer credit contracts, and
- a fee, charge or other amount is paid, or payable by or on behalf of, the consumer in relation to the service.
Activities related to consumer credit contracts
- Debt Management Assistance: suggesting and/or helping a consumer to:
- apply for a change to a credit contract for which the consumer is a debtor
- apply for a postponement of enforcement proceedings
- make a complaint or claim to a credit provider, AFCA, ASIC or the Information Commissioner
- Credit Reporting Assistance: suggesting and/or helping a consumer to apply for a change to information collected by a credit reporting body about a credit contract for which the consumer is a debtor
Note: The activities described above will also be considered to be a DMS if they are provided to consumers who have given a guarantee to support a consumer credit contract.
How does this impact you?
The Government has introduced new laws requiring providers of a DMS to hold a credit licence with an authorisation to provide these services. From 1 July 2021, a credit licensee who provides debt management services that are ancillary to other credit services will be required to vary their licence.
The Loan Market Group Australian Credit Licences (which include: BLSSA Pty Ltd, Loan Market Pty Ltd and LM Broker Services Pty Ltd) will not be varied to include DMS and therefore no credit representative of those licences will be able to charge a fee for DMS.
As a broker, if you provide or wish to provide, DMS and charge the consumer a fee - you will be required to be licenced, or to be authorised to do so by a licensee whose licence has been varied to include the provision of these services.
If you do not have the appropriate authorisation, as a broker you must not charge a fee if providing DMS. Providing debt management or credit reporting assistance at no cost to the consumer is acceptable.
As a broker, to meet the DMS obligations, you’ll need to:
Understand what is considered DMS
Likely services considered DMS include (but are not limited to):
- Credit Repair Services: offering to 'repair', 'clean' or 'fix' entries in a consumer’s credit report that relate to a consumer credit contract
- Debt Negotiation Services: offering to help a consumer negotiate repayment arrangements or changes to a debt under a consumer credit contract with the credit provider
- Dispute Lodgement Assistance: helping a consumer lodge a dispute with a credit provider or AFCA in relation to the consumer's credit contract
- Hardship Notice Assistance: helping a consumer give a hardship notice to a credit provider where they are having difficulties meeting their repayment obligations under their credit contract
Not charge the consumer a fee for the provision of DMS.
If you wish to charge a fee, contact email@example.com to discuss next steps.
If you as a broker hold your own ACL - be sure you have applied to vary your licence to allow you to offer this service. ACL holders can reference ASIC Info Sheet 254 for more details.
If you refer your clients to a DMS provider:
It’s ok to refer your customer to a DMS provider. It's best practice to ensure that the entity to whom you are referring has the requisite licencing provision.
How to check: Via the ASIC website, or using this link for a list of entities that have applied for, or been granted, a licence to provide DMS
If you are unsure about whether you offer DMS, or need more information you can contact firstname.lastname@example.org