The Implementation and Changes to Lending Credit and Finance in Guernsey

The recent introduction of the Lending Credit & Finance (Bailiwick of Guernsey) Law, 2022 (“the Law”) has enhanced the Bailiwick’s approach to regulation of the credit and finance sector and provide further consumer protection. The Commission recently issued a Consultation Paper> in order to set out and establish its proposals for the new Rules made under the Law. This will be the biggest day-to-day change for affected firms and the GFSC is seeking feedback from a range of stakeholders, including potential licensees.

Does this apply to me?

These changes apply to businesses who are currently registered with the Commission under the Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 as a ‘Non-Regulated Financial Services Business’ (“NRFSBs”) and to all holders of licences issued under the Law.

If your business falls under this category, this is your opportunity to engage with the Commission during the 8-week consultation period as well as make any comments on the proposed rules. This consultation gives you an opportunity to raise questions about anything that you do not understand.

If you are an existing NRFSB, how will the changes affect you?

Currently, as a NRFSB undertaking credit activities, you are subject only to a registration framework for the purpose of meeting international standards on Anti-Money Laundering and Combatting the Financing of Terrorism (“AML/CFT”), hence the Commissions powers of supervision outside of AML/CFT are limited.

The new Law seeks to enhance consumer protection through the following three pillars:

1. Pillar One – Regulation of the provision of credit, and ancillary services. This will be achieved by:
   1. The establishment of a licensing framework.
   2. The introduction of the concept of “regulated agreements”.
   3. The introduction of a definition of retail customer.

2. Pillar Two – Additional rules for providers of credit and other financing by businesses via digital services (in essence non-traditional “bricks and mortar” lenders) or similar related services. The following services undertaken by any person by way of business in, or from within, the Bailiwick of Guernsey, shall require licensing:
   1. Operating a peer-to-peer electronic platform.
   2. Operating a crowdfunding platform.
   3. Providing alternative non-bank credit or finance intermediation.
   4. Operating an AML/CFT platform.

3. Pillar Three – Revisions, for AML/CFT purposes, of the coverage for financial services businesses currently falling within the scope of the NFRSB Law. The main impact of this is that all activities that currently require registration under the NRFSB Law will, in future, require licensing under the New Law.

If you haven’t been regulated before or are looking for help and guidance on the future regulation of the sector, please contact us.  Our team of Compliance & Regulatory Professionals at Aspida will be glad to support you.