FAQs

The Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022 was passed by the States of Deliberation on 14 July 2022 and came into full effect on 1 July 2023.  

The 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 need to be licensed and are regulated accordingly.

The Law replaces The Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008 with a licensing and regulation regime for businesses classed as “financial firm businesses”.

The Law also regulates and licenses firms which provide a range of services related to virtual assets and cryptocurrencies.  These virtual asset service providers (“VASPs”) offer a range of services.  

More information regarding lending, credit and finance can be found on our website.

• To protect consumers;
• To regulate virtual asset service providers (firms which provide a range of services related to virtual assets and cryptocurrency);
• To ensure the Bailiwick remains compliant with international standards; and 
• It also closes a gap in licensing arrangements by permitting fintech firms which operate crowdfunding or peer to peer platforms to be licensed.

Please consult our lending, credit and finance webpage.  This page will continue to be updated with relevant information as it becomes available.

“Part II” of the LCF Law relates to the regulation of credit business within the Bailiwick of Guernsey. Generally speaking, individuals or firms who provide credit (for example, individual loans, home finance for Bailiwick properties and credit for the purchase of goods and services), or who provide services ancillary to the provision of credit (such as broking and intermediating those loans) within the Bailiwick need to be licensed under Part II of the LCF Law (unless otherwise exempted).

Part II of the LCF Law applies specifically to “regulated agreements”.  More information can be found under the FAQ, “What is a regulated agreement?”

There are two types of regulated agreement: “consumer credit” and “home finance”.

Consumer credit is a credit agreement whereby credit is provided to an individual for purposes outside of their trade, business or profession, and where interest and/or other charges may be applied.

Home finance is a credit agreement whereby credit is provided and secured against residential property located in the Bailiwick of Guernsey, and where interest and/or other charges may be applied.

“Part III” of the LCF Law relates to the regulation of “financial firm business” and “virtual asset service providers” within the Bailiwick of Guernsey.  Generally speaking, individuals or firms who provide these services within the Bailiwick need to be licensed under Part III of the LCF Law (unless otherwise exempted).

Please see the FAQs; “What is a financial firm business?” and “What is a virtual asset service provider” if you require more information.

“Part IV” of the LCF Law relates to the regulation of financial platforms and intermediation.  This includes operating peer to peer or crowdfunding platforms which provide alternative non-bank credit or finance intermediation, whether these activities are done digitally or not.  

Generally speaking, individuals or firms who provide these services within the Bailiwick need to be licensed under Part IV of the LCF Law (unless otherwise exempted).

We have published information on our website to help you identify whether you require a licence and under which part of the Law.

Further FAQs, specific to the LCF application process, can be found below.  

You will find the relevant application forms you will need to apply for a licence on our website. 

Completed application forms can be emailed to the Commission at [email protected].

More information regarding the application process can be found on our website.

Yes.  There is an application fee and an ongoing annual fee.  The amount payable depends upon the activities being carried out. 

There is also a fee for application for a discretionary exemption.

More information can be found within the fees section of our website.

Firms need to be licenced for each type of activity they undertake. If a firm undertakes multiple activities under Part II of the Law, they only need to pay the highest applicable licence fee, not individual fees per activity.

Equivalence is an exemption from licensing available to some firms/individuals who are not based in Guernsey and who are regulated in certain other jurisdictions.

These jurisdictions must be designated by the States of Guernsey as having equivalent consumer protections as the Bailiwick of Guernsey’s LCF regime.

This exemption is only available in respect of Part II activities.  For the avoidance of doubt, Part III FFB, Part III VASP and Part IV platform activities are not eligible for exemption from licensing via equivalence.

At present, the United Kingdom is the only jurisdiction deemed equivalent.

These are retailers who may offer and promote third party credit from a single provider, effectively acting as their agent.  However, they are not licensed in their own right, and would not be subject to ongoing fees.  

The lender will be responsible for the conduct of the retailer, ensuring that the relevant Rules in relation to credit provision and regulated agreements are complied with.  There will need to be a written agreement in place between the lender and the appointed retailer.

The lender will be required to provide us with information regarding its arrangements with appointed retailers as part of its annual return.  The lender will be responsible for the arrangement and be required to provide appropriate training and supervision of the retailers with which it has these arrangements. 

To be clear, retailers will be allowed to pass the contact details of licensed credit brokers and/or licensed credit providers on to customers (and could charge commissions for doing so), without being an appointed retailer, or being otherwise licensed. 

While appointed retailers are not licensed and are not directly accountable for compliance with the LCF Rules, we may wish to visit them to understand how responsibilities are managed by the licensed credit provider.

These are motor traders who may offer and promote third party credit from a single provider, effectively acting as their agent.  However, they are not licensed in their own right, and are not subject to ongoing fees.  

This arrangement is limited to small firms (whose total value of loans brokered are less than £250k in that year). It is also restricted to simple loan arrangements, i.e., no personal contract purchases (“PCP”) or balloon payments.  Commission payments may continue between the lender and the motor trader, although difference in charges (“DIC”) payments are not permitted.  If the appointed motor trader identifies that the total value of loans brokered in that accounting year will exceed £250k, they are required to apply for a licence. 

The lender is responsible for the conduct of the motor trader, ensuring that the relevant LCF Rules in relation to credit provision and regulated agreements are complied with.  There needs to be a written agreement in place between the lender and the appointed motor trader.

The lender is required to provide us with information regarding its arrangements with appointed motor traders as part of its annual return.  The lender is responsible for the arrangement and is required to provide appropriate training and supervision of the motor traders with which it has these arrangements. 

To be clear, motor traders are allowed to pass the contact details of licensed credit brokers and/or licensed credit providers on to customers (and may charge commissions for doing so), without being an appointed motor trader, or being otherwise licensed.  As long as the motor trader does not provide the customer with advice, collect information, arrange the agreement, or assist the customer in completing any forms etc, then passing on contact details would not constitute regulated activity. 

While appointed motor traders are not licensed and are not directly accountable for compliance with the LCF Rules, we may wish to visit them to understand how responsibilities are managed by the licensed credit provider.

An ASP is a Part II-licensed credit or ancillary service provider, who is appointed to act on behalf of an exempt private lender.

An ASP is responsible and accountable for ensuring that the exempt private lender applies the LCF Rules and meets the AML/CFT requirements.

Any person that conducts activity listed in Part A of Schedule 1 to the LCF Law is an FFB (unless otherwise exempted).

A VASP is an entity or an individual that, by way of business:

• transfers virtual assets;
• exchanges virtual assets, either for other virtual assets or for fiat currency;
• engages in the safekeeping or administration of virtual assets; and/or
• makes initial coin offerings (“ICOs”) or participates in and/or provides financial services in relation to the issue of virtual assets.

The LCF Rules require that if you are providing advice to customers, then you must be suitably trained.

If you are providing advice to customers relating to home finance or approving home finance agreements on behalf of a licensee, then you will require any one of the Approved Qualifications listed on our website.

This depends upon the LCF licence type you hold.

Firms/individuals holding the following licence types will be required to comply with the Handbook:

• Part II credit providers*
• Part III financial firm businesses
• Part III virtual asset services providers
• Part IV platforms

Firms/individuals holding the following licence types will not be required to comply with the Handbook:

• Part II ancillary service providers
• * Part II credit providers who only provide credit for general insurance premium financing

No. The requirement in the LCF Rules to make accounts available to the public only applies to licensees that are required to produce audited accounts under the LCF Rules.

You should be aware of your obligations under Schedule 3 to the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999, including the requirement to assess the ML/FT risk of administered structures.

Licensees should maintain adequate records such that they are in a position, if requested, to furnish the Commission with information on lending activity carried out by, and the appropriate ML/FT risk ratings assigned to, administered entities which are exempt from the requirement to hold a Part III FFB licence to conduct lending.

It is important the Commission understands the extent to which the exemption is used and the overall risk profile of entities using this exemption.

In order to carry out any of the activities specified in the LCF Law a firm must obtain a licence from the Commission (unless otherwise exempted).  The licence will only cover these particular products or services, and not necessarily all of the firm’s business activities.  For example, if a motor trader was licensed as a credit broker, its licence would only relate to the firm’s credit business.

Before a licence is issued, we will establish whether the business fulfils the minimum licensing criteria.  If these are fulfilled, the firm will be issued with a licence.  At this point it becomes a ‘regulated entity’ and is required to comply with the relevant regulatory requirements in respect of the financial products or services that it offers. 

We carry out our supervision of regulated entities through several means, including regulatory returns, site visits and meetings with licensees.  However, this is done on a risk based approach, concentrating our finite resources on those businesses that are perceived could create the most harm.

This is to ensure that they continue to meet the minimum licensing criteria and are not likely to negatively impact the reputation of the Bailiwick of Guernsey as a finance centre.   

Where a financial services business does not comply with the relevant requirements, we, as regulator for the Bailiwick, may take a range of actions.  However, this would depend on the level of seriousness of the issue and could result in having licence conditions imposed, financial penalties, or public statements being issued.  Ultimately, an entity could have its licence revoked by the Commission.    

A list of all entities regulated by the Commission can be found on our website. 

Yes.  There is nothing to prevent you as a consumer from accessing services from the UK or elsewhere. Look carefully at the contractual arrangements and consumer protection provisions because the protection offered by the new Law applies to firms licensed in the Bailiwick, and not to those licensed elsewhere.

No, buying and selling for yourself is exempt.

However, if you buy cryptocurrency for another person or business, or provide other products or services related to virtual assets, then you will need a licence.

No.  We recognise that APRs may not be relevant to Lombard lending and would not expect firms to carry out APR calculations or to calculate the total cost of credit in respect of such arrangements for HNWI customers.  The Commission would not expect rules on APRs, annual reporting and the total costs of credit to apply to Lombard Lending to HNWI customers, provided that they have consented to be treated as HNWI customers and that rules in respect of vulnerability and the need to treat customers fairly continue to apply.  

We recommend that you refer to the Authorisations section of our website before submitting an application, in order to understand the requirements relevant to you and to ensure a complete application is submitted, thus avoiding any potential delays.

Please refer to our website in the first instance.  

We include guidance on what is covered, what is exempted, as well as links to the relevant decision tree(s).

The LCF Law sets out which activities are covered.  For potential financial firm businesses, Schedule 1 of the LCF Law sets out what constitutes a financial firm business.

To help potential applicants we have also provided a number of worked examples as additional FAQs below.

We require the relevant application fee to be paid in full before an application can be processed.

In the event that an application is successful, and a licence is issued, a pro-rated licence fee is payable for the remainder of the year.  Thereafter, at the start of each calendar year, an invoice will be issued for the relevant full annual fee amount.

The list of fees can be accessed on our website.

The relevant LCF application form can be found on the Authorisations section of our website.  Please ensure that you complete the correct general application form (i.e., do not complete the application form for individuals).

Ordinarily, the following will need to be submitted as part of the application:

• General form (for all applicants to complete);
• Relevant sector-specific annex(es) which are dependent upon the type of regulated activity you conduct.  For the most part, these request additional supplementary information (for all existing businesses, dependent upon the type of regulated activity you conduct);
• Online Personal Questionnaires and Online Appointment forms for relevant individuals (through the Commission’s PQ Portal); and
• Payment of the relevant application fee by BACS.

Application forms should be submitted to [email protected].  General information regarding the licence application process can be found on the Commission’s website, as well as specific information regarding LCF applications.

The relevant LCF application form can be found on our website.  Please ensure that you complete the correct general application form (i.e., do not complete the application form for companies/partnerships).

Ordinarily, the following will need to be submitted as part of the application:

• General form (for all applicants to complete);
• Relevant sector-specific annex(es) which are dependent upon the type of regulated activity you conduct.  For the most part these request additional supplementary information (for all existing businesses, dependent upon the type of regulated activity you conduct);
• Online Personal Questionnaires and Online Appointment forms for relevant individuals (through the Commission’s PQ Portal); and
• Payment of the relevant application fee by BACS.

Application forms should be submitted to [email protected].  General information regarding the licence application process can be found on the Commission’s website, as well as specific information regarding LCF applications.

Firms need to be licenced for each type of activity they undertake. If a firm undertakes multiple activities under Part II of the Law, they only need to pay the highest applicable licence fee, not individual fees per activity.

It may take several weeks for us to review and process a licence application, provided that it is of good quality - accurate, complete and including all the relevant detail.

If an application is poor quality, incomplete or we have to request additional information it can take significantly longer.   We will advise if the submission requires further expansion or clarification.

Yes.  We can disapply the licence requirements and exempt a person or class of persons from requiring a licence. 

Please also refer to the FAQ, “Who is exempt from licensing?”  More information can also be found on our website. 

It depends on the activities you carry out.

We have published a list of class exemptions available to those firms and individuals who conduct activities that would ordinarily require a licence under the LCF Law.  You do not need to apply to, or otherwise notify, us to use a class exemption. 

In addition, any person may apply for an individual, discretionary, exemption.  We have indicated certain circumstances where we would be minded to grant such exemptions:

• Non-bank “private lenders” may be able to apply for a discretionary exemption from licensing, if their lending business falls within certain parameters.  Please see the “private lenders” section of the FAQs for more information.
• Firms or individuals who previously conducted lending, but who have ceased writing new business, and who are running off their loan books, may also be able to apply to the Commission for a discretionary exemption from licensing.  Please see the FAQ, “My loan book is in run-off.  Do I need a licence?” for more information.

Please note that discretionary exemptions are assessed on a case-by-case basis upon application, for which there is a fee (£1,270 for a company or partnership, or £570 for an individual).  The discretionary exemption application form can be found on our website.

In order to apply for a discretionary exemption from licensing, please complete and submit the relevant form to [email protected], along with payment of the relevant application fee by BACS.  The LCF discretionary exemption form can be found on our website.

More information regarding discretionary exemption applications can be found on our website.

If granted, an exemption would last for a maximum of 3 years, after which time you would need to renew the exemption. 

It may take several weeks for us to review and process a discretionary exemption application, provided that it is of good quality - accurate, complete and including all the relevant detail.

If an application is poor quality, incomplete or we have to request additional information it can take significantly longer.   We will advise if the submission requires further expansion or clarification.

No, the disapplication of licensing requirements for lending to named beneficiaries is not limited to named individuals.  It is intended to include individuals who satisfy the class requirements for beneficiaries of the trust, such as employees of a firm for whose benefit the trust has been set up.

Existing loans (i.e., those in place before 1 July 2023) do fall within the scope of the LCF Law.  This means that those borrowers with existing loans must be treated in accordance with the same procedures and processes that have been introduced to be compliant with the new LCF Rules. 

For example, where a borrower makes a complaint about an existing loan, their complaint should be dealt with in line with the relevant LCF Rules around complaints handling.

However, there is no need to re-write existing loan agreements or carry out new creditworthiness assessments, unless there is a trigger event (such as re-financing of the loan).

It depends.  Part II covers regulated agreements.  These include the provision of credit where interest or other charges are, or may be, levied.  If the BNPL arrangement involves no interest or charges and no possibility for future interest or charges, then it would not meet the definition of a regulated agreement.

However, if it did include potential charges or fees, then it would be considered a regulated agreement and would be covered by Part II of the LCF Law, regardless of the length of the agreement.  This would also include agreements that can be switched by the provider into standard credit agreements, in the event of non-payment.

Yes, an overdraft meets the definition of a regulated agreement.

Yes, an existing or new overdraft is covered by provisions of the Law and its Rules.

If a collective investment scheme enters into regulated agreements, then it will require a licence under Part II of the Law. 

If a scheme acquires a book of loans that include regulated agreements, then it would also require a licence under Part II.

In the majority of cases, no. Owning an MBS or CLO or similar security would not make the fund a credit business, as defined in the LCF Law.

However, if owning said securities makes the fund party to the underlying credit agreements with consumers, and those agreements are regulated agreements, then it is likely the fund will be a credit business and require licensing under Part II of the LCF Law.

In the unlikely event this is the case, please contact the Commission.

This depends.

Insurance intermediaries licensed under the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002, who offer insurance payable in instalments, where the credit facility is an arrangement made directly with the insurance provider, are exempted from the requirement to hold a licence under Part II of the Law. 

This is a section 40 class exemption, so no application or notification to us is required.

However, insurance intermediaries who provide credit for the financing of insurance premiums themselves will be required to obtain a Part II licence for the provision of credit.

Additionally, insurance intermediaries who arrange (or offer to arrange) credit with alternative credit providers for the financing of insurance premiums will be required to obtain a Part II licence to provide services ancillary to the provision of credit.

This depends.

If no interest or other charges are applied to the credit agreements, then these arrangements will not fall within scope of the LCF Law.

If you are licensed to provide credit within an equivalent jurisdiction, then you will not require a licence under the LCF Law. You will, however, need to notify us of your equivalence.  Please see the “Do I need to apply to use the equivalence exemption?” FAQ for more information.

If you are not eligible for equivalence, and interest and/or charges are applied to the credit agreement, then these premium financing arrangements would constitute regulated agreements under Part II of the LCF Law.  As such, you will require licensing as a credit provider.

Yes.  The key question is whether or not the credit is secured against the borrower’s home, not the purpose of the loan.

All credit agreements secured against Bailiwick residential property (i.e., someone’s home) are considered home finance arrangements, regardless of how the credit facility is used.  For example, if your customer takes out a loan to finance the purchase of a car, and that loan is secured against residential property which is your customer’s home, then the agreement would be considered home finance for the purposes of licensing.

Provided that the business premises are not also the borrower’s home, then a credit agreement secured against the borrower’s business would not be a regulated agreement and would not fall within scope of Part II licensing.

However, you may still require a Part III FFB licence.

If credit is secured against a buy to let property (and not the borrower’s home), then the credit agreement is exempt from Part II licensing.

However, you may still require a Part III FFB licence.

No.  We do not specifically regulate funeral plans.

However, if the method of payment for the funeral plan involves providing credit or a loan to an individual, then it is likely that it would be a regulated agreement and the business arranging the loan would need to be licensed.

Probably not.  Most litigation financing arrangements are not credit products.  However, if the litigation financing did involve a loan, then it is likely that the credit provider would require a licence under Part II or Part III of the LCF Law (depending on the nature of the lending).

The total cost of credit includes all costs, including interest, commissions, taxes and any other kind of fees which are required to be paid by, or on behalf of, the customer or a relative of the customer in connection with the consumer credit agreement, whether payable to the credit provider or to any other person, and which are known to the credit provider, except for notarial costs.

Equivalence is an exemption from licensing available to some firms/individuals who are not based in Guernsey and who are regulated in certain other jurisdictions.

These jurisdictions must be designated by the States of Guernsey as having equivalent consumer protections as the Bailiwick of Guernsey’s LCF regime.

This exemption is only available in respect of Part II activities.  For the avoidance of doubt, Part III FFB, Part III VASP and Part IV platform activities are not eligible for exemption from licensing via equivalence.

At present, the United Kingdom is the only jurisdiction deemed equivalent.

If you are authorised by the UK’s Financial Conduct Authority to conduct activities which, within the Bailiwick, fall under Part II of the LCF Law, then you may be eligible for equivalence.

While you would not need to apply to the Commission to use this exemption, you would need to notify us of your equivalent status (by completing an Equivalence Notification Form – please contact [email protected] to request a copy of this). 

There are no fees associated with submitting a notification.

Yes, you must notify us that you are conducting business within the Bailiwick.  Please see the “do I need to apply to use the equivalence exemption” FAQ for more information.

Equivalent firms will also be expected to comply with the requirements applied in their home jurisdiction.  However, there will ordinarily be no further, specific requirements placed on equivalent firms/individuals locally.  For example, equivalent firms will not need to appoint individuals to any supervised roles in the Bailiwick.

No.  If you advertise in the UK national press and do not target Bailiwick customers, but they approach you, (which we consider to be ‘reverse solicitation’), then you may provide services to them without requiring an LCF licence or notifying us of your equivalence status.

Yes.  By soliciting business from Bailiwick residents (by targeting them with advertisements) you would be holding yourself out as carrying on business within the Bailiwick and you will require a licence (unless you are operating from an equivalent jurisdiction).

You will not require a licence under Part II of the LCF Law.  However, you will require a Part III FFB licence

You will not require a licence under Part II of the LCF Law.  However, you will require a Part III FFB licence.

Maybe.  This activity is in scope of Part II of the LCF Law.

However, if you do not charge extra for goods sold on credit and have a written agreement with one credit provider, then you may be considered an “appointed retailer” and would not need a licence yourself.

Yes, you are a credit provider and will need a licence under Part II of the LCF Law. 

Charging more for goods sold on credit means there is a cost for credit, and it is therefore a “regulated agreement”.  This is also the case if you charge late payment fees, interest on late payments or if you have the ability to move late paying customers onto another (interest-charging) credit arrangement.

You do not need a Part II licence to simply pass the contact details of a licensed lender or credit broker on to a customer. 

This is on the condition that you do not provide the customer with advice or quotes, arrange the agreement, or assist the customer in completing any forms, etc.  This does not constitute regulated activity, regardless of whether you receive a commission for passing on those contact details.

No, store credit is not considered “credit” for the purpose of the LCF Law.

These are retailers who may offer and promote third party credit from a single provider, effectively acting as their agent.  However, they are not licensed in their own right, and would not be subject to ongoing fees.  

The lender will be responsible for the conduct of the retailer, ensuring that the relevant Rules in relation to credit provision and regulated agreements are complied with.  There will need to be a written agreement in place between the lender and the appointed retailer.

The lender will be required to provide us with information regarding its arrangements with appointed retailers as part of its annual return.  The lender will be responsible for the arrangement and be required to provide appropriate training and supervision of the retailers with which it has these arrangements. 

To be clear, retailers will be allowed to pass the contact details of licensed credit brokers and/or licensed credit providers on to customers (and could charge commissions for doing so), without being an appointed retailer, or being otherwise licensed. 

While appointed retailers are not licensed and are not directly accountable for compliance with the LCF Rules, we may wish to visit them to understand how responsibilities are managed by the licensed credit provider.

Yes – although there are some exceptions.

You are a credit broker in respect of these agreements and will need a Part II licence for the conduct of services ancillary to the provision of credit.

These are motor traders who may offer and promote third party credit from a single provider, effectively acting as their agent.  However, they are not licensed in their own right, and are not subject to ongoing fees.  

This arrangement is limited to small firms (whose total value of loans brokered are less than £250k in that year). It is also restricted to simple loan arrangements, i.e., no personal contract purchases (“PCP”) or balloon payments.  Commission payments may continue between the lender and the motor trader, although difference in charges (“DIC”) payments are not permitted.  If the appointed motor trader identifies that the total value of loans brokered in that accounting year will exceed £250k, they are required to apply for a licence. 

The lender is responsible for the conduct of the motor trader, ensuring that the relevant LCF Rules in relation to credit provision and regulated agreements are complied with.  There needs to be a written agreement in place between the lender and the appointed motor trader.

The lender is required to provide us with information regarding its arrangements with appointed motor traders as part of its annual return.  The lender is responsible for the arrangement and is required to provide appropriate training and supervision of the motor traders with which it has these arrangements. 

To be clear, motor traders are allowed to pass the contact details of licensed credit brokers and/or licensed credit providers on to customers (and may charge commissions for doing so), without being an appointed motor trader, or being otherwise licensed.  As long as the motor trader does not provide the customer with advice, collect information, arrange the agreement, or assist the customer in completing any forms etc, then passing on contact details would not constitute regulated activity. 

While appointed motor traders are not licensed and are not directly accountable for compliance with the LCF Rules, we may wish to visit them to understand how responsibilities are managed by the licensed credit provider.

It depends.  If you arrange loans with a value of more than £250k in any year, then you will require a licence.

However, if the total value of finance you arrange during the year is less than £250k, and the lender takes on responsibility for the conduct of the trader in promoting and providing information on the credit provided, then you may be exempt from the requirement to hold a licence.

Maybe.  This activity is in scope of Part II of the LCF Law.

However, if you do not charge extra for goods sold on credit and have a written agreement with one credit provider, then you may be considered an “appointed motor trader” and would not need a licence yourself.

This depends upon the following conditions:

• You must have a written agreement in place with one Part II licensed (or equivalent) credit provider;
• The total value of loans brokered must be less than £250k per annum; and
• You must not arrange complex transactions (such as balloon payments or personal contract purchases (“PCP”).

Yes, you are a credit provider.  The higher price you charge compared to a cash price is a hidden cost of credit.  You will need a licence under Part II of the LCF Law. 

Charging more for goods/services sold on credit means there is a cost for credit and is therefore a “regulated agreement”.  This is also the case if you charge late payment fees, interest on late payments or if you have the ability to move late paying customers onto another (interest charging) credit arrangement.

You do not need a Part II licence to simply pass the contact details of a licensed lender or credit broker on to a customer. 

This is on the condition that you do not provide the customer with advice or quotes, arrange the agreement, or assist the customer in completing any forms, etc.  This does not constitute regulated activity, regardless of whether you receive a commission for passing on those contact details.

An ASP is a Part II-licensed credit or ancillary service provider, who is appointed to act on behalf of an exempt private lender.

An ASP is responsible and accountable for ensuring that the exempt private lender applies the LCF Rules and meets the AML/CFT requirements.

If those loans are regulated agreements, then yes, you are caught.  However, non-bank “private lenders” may be able to apply to the Commission for a discretionary exemption from licensing under Part II, provided your lending business falls within certain parameters.

An exempted private lender must:

• make available no more than 2 loans per annum; and
• have a maximum loan portfolio of no more than £2m; and
• comply with all the relevant Rules in respect of their lending to customers; and
• at all times have acting on their behalf an Appointed Service Provider.

Note that the private lender exemption only allows exemption from licensing under Part II of the Law (for the provision of consumer credit and/or home finance arrangements which are “regulated agreements”).  You may still require a Part III FFB licence. 

Discretionary exemptions are assessed on a case-by-case basis upon application, for which there is a fee (£1,270 for a company or partnership, or £570 for an individual).  The discretionary exemption application form can be found on our website.

Please note that if granted, an exemption would last for a maximum of 3 years, after which time you would need to renew the exemption.

Yes, commercial lending is a Part III FFB activity, and you will therefore need a licence (unless otherwise exempted).

Note that the private lender exemption only allows exemption from licensing under Part II of the Law (for the provision of consumer credit and/or home finance arrangements which are “regulated agreements”).  Therefore, you cannot obtain a private lender exemption to exempt you from the requirement to hold a Part III FFB licence.

No, the maximum loan portfolio includes your entire loan portfolio.  For the avoidance of doubt, this includes “regulated agreements” and all other types of lending (such as commercial lending). 

For example, if you have a loan book which consists of £0.5m of home finance lending and £1.7m of commercial lending, your total loan book is £2.2m.  Your total loan book would be above the maximum loan portfolio threshold and thus you would not be eligible to apply for a private lender exemption.

Yes, although your particular circumstances will determine which type of LCF licence you will need.

If any of the individual loans are “regulated agreements”, and you are not eligible for a private lender exemption, you will need a Part II licence (but you will not need a separate Part III FFB licence).

On the other hand, if the total value of loans is less than £2m, you may still be eligible for the private lender exemption, in which case you would not need a Part II licence.  However, you are likely to need a Part III FFB licence for your commercial lending activity. 

You will also need to appoint an Appointed Service Provider in respect of your regulated agreements.  Please refer to the FAQ, “What is an Appointed Service Provider (“ASP”)?”

Yes, any person (whether a legal person or natural person) may use the private lender exemption if their lending falls within the relevant parameters.

Yes, you, and any person you lend with, may use the private lender exemption.

The maximum value of loan portfolio of £2m applies to each of you.  This includes any joint loans.  For example, for a married couple who are both signatories to a loan agreement for £500,000; this would count as £0.5m towards each of your allowances.  You may not pool your limits for a combined £4m lending limit.  If all of your loans are carried out jointly, then you need a licence if the total value of lending exceeds £2m.

Yes, the scope of the LCF Law covers any person (whether a natural or legal person) who conducts regulated activity.  Separate licences or exemptions would be required for each person conducting LCF regulated activities (regardless of whether multiple people are named as creditors on the loan agreements).

However, if you (with your spouse/partner) choose instead to operate your lending through a company, then only the company would require a LCF licence/exemption.

Any person that conducts activity listed in Part A of Schedule 1 to the LCF Law is an FFB (unless otherwise exempted).

Virtual assets are sometimes referred to as crypto assets or cryptocurrencies.

 They are digital representations of value that can be digitally traded or transferred and used for investment or payment purposes.  They do not include digital records of ownership such as share registers or bank accounts in digital form.

A VASP is an entity or an individual that, by way of business:

• transfers virtual assets;
• exchanges virtual assets, either for other virtual assets or for fiat currency;
• engages in the safekeeping or administration of virtual assets; and/or
• makes initial coin offerings (“ICOs”) or participates in and/or provides financial services in relation to the issue of virtual assets.

If you think your firm meets the definition of a VASP please contact us at [email protected] before submitting an application. 

Yes, the exemption applies to legal persons that, on their own behalf, buy or sell (exchange) virtual assets for fiat currency or other virtual assets, hold virtual assets or trade virtual assets. This exemption is subject to the provision that the person is not engaged in an arrangement involving the offer or provision of products or services related to virtual assets to third parties and does not support or facilitate other entities which offer or provide virtual asset products or services, derivatives of virtual assets or reference virtual assets.

The exemption applies to private wealth and special purpose vehicles established for the purpose of holding or managing the property for the benefit of one or more individuals (and/or their family members*) who are its beneficial owners**. This exemption may apply, for example, to non-collective investment scheme entities such as single investor vehicles.

Note: A specific disapplication applies to Authorised or Registered Collective Investment Schemes (see below).

The example provided above is not exhaustive and other categories of person may be exempted.  

* Family member is as defined in Appendix 1 of the disapplication Notice.

** Beneficial owner is as defined by Schedule 3 of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999.

Yes, this exemption also includes private wealth vehicles held in trust by a licensed fiduciary, provided that activity is for the benefit of the beneficiaries of the trust and does not form part of an arrangement which facilitates the offering or provision of products or services related to virtual assets to third parties* or support the activity of another entity which does so. 

* Third parties would not include family members as defined above.

No, Authorised or Registered Collective Investment Schemes are specifically exempted from the requirement for licensing for investing, holding or trading virtual assets. 

See Notice of Disapplication Part III VASPs, exemption V.