Australia’s debt management industry is finally getting the overhaul it desperately needs. Recent reforms, including the National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025, are designed to clean up unethical practices and restore balance to the relationship between businesses and consumers. Combined with ASIC’s aggressive crackdown on bad actors like Solve My Debt Now, the finance sector is bracing for a much-needed shake-up.
The case against Solve My Debt Now serves as a stark reminder of why these reforms are so crucial. ASIC’s investigation revealed a disturbing pattern of misconduct: excessive upfront fees, withheld payments meant for settling debts, and clients left worse off than when they started. It’s a cautionary tale of what happens when oversight falls short.
Cases like this underscored the need for change. Vulnerable Australians have long been at the mercy of unethical operators, and the existing rules simply weren’t strong enough to protect them. Enter the National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025, a set of groundbreaking reforms designed to close loopholes, protect consumers, and raise the standard for debt management and low-cost credit providers across the country.
For businesses in this space, the message is clear: compliance isn’t just about following the rules, it’s about earning trust and staying relevant in a rapidly evolving industry.
What’s Changing?
These new regulations, taking effect on June 10, 2025, are a complete reset for the industry. Here’s how they’re rewriting the rules of the game:
- Mandatory Licensing for Providers
If you’re offering low-cost credit or debt management services, there’s no more flying under the radar. Every provider now needs an Australian Credit Licence (ACL). This ensures that only legitimate operators can enter the market, making it harder for dodgy companies to exploit consumers. - Responsible Lending Obligations (RLOs)
Gone are the days of offering credit to anyone, regardless of their ability to repay. Providers must now conduct thorough suitability assessments, reviewing a client’s income, expenses, and liabilities to ensure the credit won’t lead to over-commitment. - Fee Caps for Transparency
Ever been hit with hidden fees that make you wonder what just happened? Not anymore. These regulations cap fees and charges, ensuring they’re disclosed upfront. No more surprises, just clarity and fairness. - Trust Accounts for Client Funds
One of the most egregious allegations against Solve My Debt Now was its mishandling of client funds. Under the new rules, payments must be deposited into trust accounts, ensuring the money is used for its intended purpose, settling debts, not padding the company’s pockets. - Clearer Default Notices
Default notices are getting a major upgrade. They now must:- Clearly explain the default, including the amount overdue and steps to resolve it.
- Outline dispute resolution options, including access to the Australian Financial Complaints Authority (AFCA).
- Highlight the consequences of non-payment, including potential credit file listings.
A New Era for Demand Letters
Demand letters, often the first step in recovering overdue debts, are no longer a simple formality. Under the new regulations, these letters must meet stringent requirements to be considered compliant. Think of them as the face of your debt collection process, if they’re not up to scratch, you’re at risk of legal and regulatory trouble.
What’s Changing in Demand Letters?
- Detailed Information Is a Must
Demand letters must clearly spell out:- The overdue amount and when it was due.
- Clear, actionable steps for resolving the issue.
- Information on both internal dispute resolution (IDR) processes and external options like AFCA.
- Transparency on Default Listings
They must explicitly state:- That non-payment could result in a default listing on personal and company credit files.
- That the default amount could include the full outstanding balance (not just the arrears), along with any fees and charges.
- Clarity on Fees
Any late charges, legal fees, or administrative costs must be fully disclosed, with clear amounts or caps. Vague terms like “additional costs” are no longer acceptable, consumers deserve to know exactly what they’re paying for.
The Opportunity for Change
The introduction of these new regulations isn’t just about compliance, it’s an opportunity to rebuild trust in an industry that has faced its fair share of scrutiny. By embracing these changes, businesses can set themselves apart as ethical, transparent, and consumer-focused.
For those still relying on outdated practices, the clock is ticking. Now is the time to review your processes, update your demand letters, and ensure your operations align with the new standards. Seek legal advice or expert guidance if needed, because failing to comply could cost more than just your reputation.
The National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025 isn’t just a regulatory update, it’s a call to action. It’s about creating a fairer, more transparent financial landscape where consumers are protected, and businesses operate with integrity.
For the debt management industry, it’s a chance to evolve. Those who adapt will not only comply but thrive in a world where trust and transparency are key. With the June 2025 deadline approaching fast, now is the time to get your house in order.
Remember: compliance isn’t just about following the rules, it’s about building a better future for your business and your clients. Don’t wait until it’s too late. The time to act is now.
Read the Exposure Draft here.