Lending, Credit and Finance

Lending, Credit and Finance

The Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022  

This is a new Law, various provisions of which will come into force on 1 January 2023.  One purpose of the new Law is to protect customers who make use of consumer credit, which includes individual loans, home finance for Bailiwick properties and credit for the purchase of goods and services.  Firms offering or intermediating such services in or from within the Bailiwick will need to be licensed and will be regulated accordingly.  

In addition, the Law and accompanying Rules cover Fintech platforms operating crowdfunding and peer to peer platforms as well as virtual asset service providers (“VASPs”) - firms which provide trading, custody and other services in relation to cryptocurrency and other virtual assets. It introduces licensing for a wide range of activities related to crypto. The Bailiwick is introducing the Law and these Rules, in part, to ensure it remains compliant with international standards.  

The Law will also replace the existingRegistration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008, and introduce instead the licensing and regulation of “financial firm businesses”.  

What the Law will mean for consumers in the Bailiwick 

The Law introduces consumer protection measures for individuals who take out consumer credit or home finance, through what is termed a “regulated agreement”, from those licensed by the Commission.   

Consumers will be entitled to, and lenders must provide, information in advance of entering into a regulated agreement, clear statements of monthly payments, the total cost of credit and interest rates.  This must be done in a way that allows customers to make meaningful comparisons between different types of credit, and also credit being offered by different lenders. 

Licensees will be required to follow various rules, including to treat customers fairly, to take account of customer vulnerability, and where appropriate, carry out checks that customers can afford the credit arrangements they sign up to.  This is in addition to continuing to carry out customer due diligence in relation to the services they provide to their customers , as part of their regulatory requirements. 

Customers will have the right to make early repayment of a credit agreement, which entitles them to repay in full, and terminate the agreement, without facing excessive charges.  Partial repayment of a credit agreement will be at the lender’s discretion.  Customers will also have the right to be treated fairly if they get into financial difficulty and will have certain rights in respect of unfair contract terms.   

This does not prevent a Bailiwick consumer from approaching a firm based outside the Bailiwick, but if they do, they will not benefit from the protections in the Law and Rules.  They would have to rely on the protections in that firm’s jurisdiction, which may or may not protect a customer from the Bailiwick.   

What's next? - Feedback, Final Rules and Exemptions 

In July 2022, the Commission consulted on its proposed approach to regulating these sectors and on a set of draft Rules.  Although the consultation period is now closed, the Consultation Paper contains information that you may find useful, including links to the draft application forms

The Commission is working through the numerous responses to its Consultation Paper, and will issue a feedback paper, together with the finalised Rules and guidance, a list of exemptions from the requirement to apply for and hold a licence, and frequently asked questions.  This is intended to be published by the end of January 2023. 

What's next? - Applications

Information on the application process will be published alongside the final Rules, and the Commission will invite applications from prospective licensees at that time. 

Early submissions will be encouraged with discounted application fees, to allow applications to be processed ahead of the commencement of the requirement to hold a licence under the Law.  From 1 July 2023, firms without a licence may not operate until the appropriate licence is in place.  Further details in this regard will be published as they become available.

Queries  

This page will continue to be updated with relevant information as it becomes available.   

However, if in the meantime you have any queries, please contact the Lending, Credit and Finance team by email at [email protected].  

Date published:  28 November 2022