As part of the government’s consumer credit reforms, Debt Management Services will now be categorised as a Credit Activity regulated under the National Credit Act and providers of these services will now be required to hold an Australian Credit Licence (‘ACL’). This new regulation aims to bring Debt Management Service Providers (‘Providers’) under same level of scrutiny as Credit providers to ensure consumers are protected throughout the entire credit lifecycle, including repayment of debt.
An increased number of consumers have had, continue to experience, financial stress throughout the pandemic. It is currently estimated that approximately 10% of consumers who enter hardship have sought assistance from such Providers.
Under this new regulation, from 1 July 2021, Providers must hold an ACL with a Debt Management Authorisation or satisfy conditions of transitional arrangements to continue providing these services without a credit licence - until a licence is granted.
To meet transitional arrangement conditions, by 30 June 2021, Providers must:
From 1 July 2021, provision of these services without holding an ACL or satisfying the conditions of transitional arrangements will breach Section 29 of the National Consumer Credit Protection Act 2009 (National Credit Act) leading to a civil penalty of up to 5000 Units ($1.11M).
 www.legislation.gov.au (2021), National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021, Explanatory Statement ;<https://www.legislation.gov.au/Details/F2021L00521/Explanatory%20Statement/Text>Page 13 of 31.