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FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.
Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time.
As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.
Introduction
Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services
The use of FinTech for the purposes of loan services has been well received as it is well recognised the benefits the technology brings to the lending process with improvements to both the efficiency and in providing more accurate loan figures with the greater access to information.
The government is supportive of the use of FinTech technology within this category, encouraging further development of the comprehensive credit reporting data (CCR). CCR is seen to be vital to the future economic infrastructure and provides lenders with further information to determine a customer’s credit capacity.
Legal affairs
Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
An AFSL is not required in the lending and brokering industry, however there are regulations which must be complied with.
This includes holding an ACL where credit is provided for consumer purposes. ACLs are required only for consumer credit, with lending for business purposes exempt. The government fee to obtain an ACL is set out under the National Consumer Credit Protection Act (Cth) 2009 and depends on if it is an individual or someone other than an individual applying. An Individual credit provider applying will cost AU$3468, whereas someone other than an individual applying as a credit provider cost is AU$4624.
The application for a credit licence must be made to ASIC. As part of the application, it must be shown that the FinTech has the systems and capacity to engage in credit activities and comply with Australian regulations. The entity must also be able to demonstrate relevant experience or have employees who have that experience. The application process may take up to 6 months.
FinTech companies do have the option of acting on behalf of a credit licence holder as an authorised credit representative. They also have the option of applying for a regulatory sandbox under the National Consumer Credit Protection (FinTech Sandbox Australian Credit Licence Exemption) Regulations 2020 which allows for the business to test their innovative credit activity for up to 24 months without obtaining a licence.
Loan providing businesses are further required to comply with Australia’s Anti Money laundering laws, which are set out in the Anti Money Laundering and Counter-Terrorism Financing Act (Cth) 2006 and the Anti Money Laundering and Counter-Terrorism Financing Rules 2007.
Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area
Some credit activities that are undertaken by FinTechs will not require an Australian Credit Licence as they are not related to consumer credit.
SME lending and invoice financing are not for personal household or domestic purposes, so are not covered by the national credit