The Consumer Credit Regime

Jersey’s Government should shortly be publishing the feedback from its consultation on the proposed Consumer Credit Regime.

It is proposed that this regime will be introduced to bring consumer credit business under the supervision of the Jersey Financial Services Commission (JFSC), following an amendment to the Financial Services (Jersey) Law 1998. This will bolster the protection already available to consumers under the Consumer Protection (Unfair Practices) (Jersey) Law 2018.

For the purpose of this regime, the term “consumer” is expected to include individuals (providing they are acting wholly or mainly outside of their trade, business or profession) and persons (including legal persons such as companies) who are acting by way of business where the person employs fewer than ten full-time equivalent personnel and is a micro-enterprise (with a balance sheet or turnover less than £2million) with a £30,000 limit to the protection for micro-enterprises. 

As well as lending, it is proposed that the following activities will be caught within the regime:

• Advising on, administering and arranging regulated agreements and arrangements;
• Credit broking in respect of regulated agreements and arrangements;
• Debt-related activities such as debt adjusting, debt counselling, debt collecting and debt administration.

The term “regulated agreements and arrangements” is expected to include secured lending (such as mortgages), unsecured credit agreements and unsecured hire agreements (such as a hire purchase agreement). Providers of relevant products including mortgages, car finance, hire purchase, pay day loans and local store cards therefore need to be aware of the proposal and monitor developments throughout 2024 as the proposed secondary legislation and regulation is subject to further consultation.

It is envisaged that Consumer Credit Firms will be required to adhere to requirements under the following nine core principles:

1. Integrity;
2. Due skill, care and diligence;
3. Good governance;
4. Fair treatment of customers;
5. Communication that is clear, fair and not misleading;
6. Suitability checks;
7. Management of conflicts;
8. Adequate protection of customer assets; and
9. Open and co-operative dealings with regulators.

The regime is also expected to introduce pre-contract and contractual requirements including:

• Disclosure of information to customers;
• Features of the regulated agreement or arrangement;
• Vulnerability and affordability checks;
• Restrictions over high set-up costs, high interest rates and unfair fees; and
• Cooling-off periods.

Consumers will also have recourse to additional remedies in the event of any unfair terms or practices by Consumer Credit Firms, including via the Channel Islands Financial Ombudsman (CIFO).

Government has said that there will be a number of exemptions available under the regime, including an exemption for overseas lenders, which will be subject to consultation in due course.

Registration with the JFSC is expected to open in the summer of 2024, with the law coming into effect on 1 January 2025. With the potential for some lenders to have to make changes to their customer agreements, processes and governance, we recommend that affected lenders play close attention to developments in 2024 in order to prepare in good time.

Please get in touch if you wish to discuss what the proposed regime may mean for you.