Generally, any person in the business of providing a financial service (including providing credit under a credit contract) is required to register as a financial services provider. In addition, if a person provides financial services to “retail clients” then that person must also be a member of a dispute resolution scheme (these schemes are established to hear complaints).

“In the business of providing a financial service” means carrying on a business of providing or offering to provide a financial service (whether or not the business is the provider’s only business or the provider’s principal business). Accordingly, if a retailer carries on a business of providing credit, or offering to provide credit, under credit contracts, then the retailer is required to be registered as a financial services provider. And, due to the nature of a retailer’s business (i.e. most likely involving “retail clients”), the retailer will most likely be required to become a member of a dispute resolution scheme as well.

I am not sure whether these obligations are an intended consequence of the new law as they could be quite onerous for certain retailers (particularly the requirement to belong to a dispute resolution scheme). I will keep an eye out for any developments on this topic.

Also, presumably, the obligations to register and belong to a dispute resolution scheme will not apply to a retailer that provides, or offers to provide, credit under credit contracts provided that the retailer is not carrying on the business of doing so. However, drawing a clear distinction between the circumstances when a retailer who provides credit will be/will not be carrying on the business of providing, or offering to provide, credit under credit contracts seems difficult.

Financial service providers should consider joining a dispute resolution provider as possible so they can apply to the Financial Service Provider Register well in advance of the due date. Unregistered financial service providers trading on 1 December 2010 will be breaking the law. The offence is a serious one and the penalties are significant.