Guernsey is already well known and respected for its strong financial services sector and regulatory framework.
Adding to this status, the island recently passed new legislation: the Lending, Credit and Finance (Bailiwick of Guernsey) Law 2022. All lending firms must comply with this new law by 1 July 2023.
These changes aim to enhance consumer protection, promote responsible lending practices, and ensure a fair and transparent lending environment.
Here’s what the changes mean for you.
Strengthened consumer protection
The law introduces stricter guidelines for lenders.
Lenders are now required to provide clear and transparent information about loan terms, including interest rates, fees, and repayment schedules.
This empowers consumers to make informed decisions and avoid the risk of any hidden costs or unfair practices.
Responsible lending requirements
Lenders are now obligated to conduct a thorough affordability assessment to determine whether a consumer can afford the loan.
This assessment considers the borrower’s income, financial commitments, and other relevant factors.
By ensuring that loans are affordable, the law aims to protect consumers from financial hardship.
Regulation of high-cost credit
The law introduces stricter regulations for high-cost credit, such as payday loans and other short-term, high-interest loans. These types of loans can result in vulnerable consumers falling into a cycle of debt.
The law imposes a cap on the amount of interest charged by lenders linked to the loan amount, preventing excessive charges.
Introduction of licensing requirements
From July 1, lenders in Guernsey are required to obtain a license from the Guernsey Financial Services Commission (GFSC) to operate. This licensing regime ensures that lenders meet certain standards and safeguards. It also makes sure that all documentation is fair, clear, and not misleading.
Enhanced supervision and enforcement
To ensure compliance with the new regulations, the law strengthens the supervisory and enforcement powers of the GFSC.
The GFSC is responsible for overseeing the conduct of lenders and ensuring they adhere to the provisions of the law. The GFSC can conduct inspections, impose fines, and, if necessary, revoke licenses of non-compliant lenders. These enhanced supervisory measures contribute to a more robust regulatory framework and increase protection for consumers.
The Lending, Credit and Finance (Bailiwick of Guernsey) Law 2022 represents a significant step forward in consumer lending regulation in Guernsey. It introduces crucial changes to enhance consumer protection, promote responsible lending practices, and regulate high-cost credit.
Through stricter guidelines, licensing requirements, and enhanced enforcement measures, Guernsey aims to create a fair and transparent lending environment for its residents. These changes not only protect consumers from unfair practices but also contribute to the stability and integrity of the financial sector on the island.
Thankfully, many lenders operating in Guernsey already follow the key clauses in the law and have their customers’ best interests at heart.
If you have any questions about the changes coming in on July 1, please get in touch with your lender or contact the Guernsey Financial Services Commission.