Feedback - Following the Commission's Consultation on the Lending, Credit & Finance Rules, Guidance and Implementation (January 2023)

Summary

This is the GFSC's feedback paper following its 2022 consultation on implementing the Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022. It summarises stakeholder responses (58 in total) and sets out the changes made to the final Rules, Guidance and class exemptions before the new licensing regime takes effect.

• Commencement: The licence application window opened 1 February 2023; the Law, and the licensing requirement, come into operation on 1 July 2023, when the NRFSB Law is repealed.
• Licensing categories: Four licensing strands apply: Part II Consumer Credit and Home Finance, Part III Financial Firm Businesses (FFBs), Part III Virtual Asset Service Providers (VASPs), and Part IV peer to peer/crowdfunding platforms; dual licensing applies where activities span categories.
• Fee changes: Credit and home finance broker fees are restructured into three tiers with reduced amounts (e.g. small/medium credit brokers reduced from £3,000 to £1,000); applications submitted before 31 March 2023 receive a 50% application fee reduction.
• Exemptions added: New class exemptions cover employee loans, lending to family members, administered private equity/investment structures, established Bailiwick businesses lending ancillary to their main business, and smaller motor traders working directly with a lender.
• Run-off firms: Firms in run-off at 1 July 2023 may apply individually for a time-limited exemption from licensing.
• VASP outsourcing: VASP licensees will require the Commission's prior consent before outsourcing functions outside the Bailiwick.
• P2P/crowdfunding limits: The individual investor limit for peer to peer and crowdfunding platforms is increased from the originally proposed level to 15% of net assets; charity donation platforms fall outside the Law's scope.

Firms already conducting credit, home finance, FFB, VASP or P2P/crowdfunding business in the Bailiwick must obtain the relevant licence (or qualify for an exemption) to continue operating from 1 July 2023, even where they are not entering new agreements; going forward they must apply the applicable conduct rules to existing arrangements.

Key obligations

• Any person or firm carrying on consumer credit, home finance, FFB, VASP or peer to peer/crowdfunding activity within the scope of the Law must hold an appropriate licence (or qualify for a class or individual exemption) by 1 July 2023 to continue conducting that business.
• Firms with existing (pre-1 July 2023) credit or regulated agreements are not required to retrospectively review those agreements but must apply the relevant conduct rules and treat customers fairly going forward.
• Firms intending to rely on the run-off exemption must individually apply to the Commission for that time-limited exemption.
• VASP licensees must obtain the Commission's consent before outsourcing functions outside the Bailiwick.
• Peer to peer and crowdfunding platform operators must ensure individual investor exposure does not exceed 15% of the investor's net assets.
• Applicants should submit licence applications by 31 March 2023 to benefit from the 50% application fee reduction and to have a reasonable chance of full consideration before 1 July 2023.

Applies to

consumer credit providers, home finance providers, credit brokers, home finance brokers, motor traders, high street retailers, private lenders, Financial Firm Businesses (FFBs), Virtual Asset Service Providers (VASPs), peer to peer and crowdfunding platform operators

Deadlines

• 1 February 2023: Window for licence applications under the new Lending, Credit & Finance Law formally opens.
• 31 March 2023: Applications received by this date benefit from a 50% reduction in application fee and will receive the Commission's reasonable endeavours to be fully considered before 1 July 2023; applications received after this date may not be processed in time.
• 1 July 2023: The Lending Credit and Finance Law comes into operation and licensing commences; firms conducting in-scope business must hold a licence or exemption by this date; the NRFSB Law is repealed.