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Australian Marketplace Lending Update

In a recent report on licensing applications the Australian Securities and Investment Commission (ASIC) revealed that it has granted 7 Australian financial services licences (AFSL) and 3 Australian credit licences to marketplace lenders between January and June 2016. A further 3 AFSL applications are currently being considered. Previously, 6 licenses were granted between 1 July 2015 and 31 December 2015. This indicates that the number of entrants to the Australian market continues to grow.

Unlike other jurisdictions such as New Zealand, Australia does not have specific marketplace lending legislation. Marketplace lenders have had to adapt to fit within the existing financial services framework. There are a number of business models that can be used to facilitate marketplace lending.

However, managed investment schemes are most commonly used and to operate a managed investment scheme you need an AFSL. Under such arrangements lenders invest in the scheme and choose which loan their investment will be allocated to. The scheme then lends that money to the borrower directly or through another lending entity.

Marketplace loans can also be caught by the consumer credit regime and the lending entity will require an Australian Credit Licence if the borrower is a natural person and the purpose of the loan is predominately personal, household or domestic use or if it involves residential property.

The UK Financial Conduct Authority has recently announced plans to change the regulations for marketplace lenders following its review of the UK’s more mature loan based and investment based crowdfunding market last year. ASIC is undertaking a voluntary survey of marketplace lenders in Australia however a full review of sector has not been announced.

Copyright 2020 K & L Gates

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
Michelle Chasser, KL Gates, financial services compliance lawyer, disclosure obligations attorney

Ms. Chasser is a corporate and regulatory lawyer with a focus on the superannuation and financial services industries. Ms. Chasser advises clients on a range of issues including compliance with Australian regulatory and licensing requirements, financial services compliance issues and disclosure obligations.

Ms. Chasser's clients include superannuation fund trustees, banks, wholesale and retail fund managers, as well as financial service providers.

61-3-9205-2086