Consumer and mortgage credit providers and intermediaries: new regulatory and supervisory regime
A new regulatory and supervisory regime for providers and intermediaries involved in providing consumer and mortgage credit on the Belgian market came into force on 1 November 2015, bringing with it an increased focus by the Belgian financial regulator on conduct of business rules in this field (the New Regime). The new rules are integrated into the Economic Law Code, as amended by a law of 26 October 2015 (the ELC).
FSMA oversight: increased focus on conduct of business rules
The supervision of providers and intermediaries involved in the provision of consumer and mortgage credit is now centralised in the hands of the Financial Services and Markets Authority (FSMA), the Belgian conduct-of-business supervisor. The conduct of business rules are therefore likely to have increased prominence for these types of credit provider and intermediaries.
The Federal Ministry of Economy continues to play a role; for example, it will still have to approve standard form contracts used by credit providers and maintains investigative and sanctioning powers for breaches of the ELC rules. The National Bank of Belgium (NBB) becomes involved if the FSMA or the Ministry wants to withdraw the licence of a financial institution under prudential supervision by the NBB.
Credit providers need a new licence
Providers of consumer or mortgage credit in Belgium must obtain a licence from the FSMA. Licences, obtained before the introduction of the New Regime, have become provisional, and credit providers must lodge an application for a new licence with the FSMA before 30 April 2017. A Royal Decree of 29 October 2015 gives further detailed guidance on the licencing requirement (for credit providers) and the registration requirement (for intermediaries). For example, applicants for a licence as credit provider must:
- provide a business plan, a detailed description of the governance structure and information on members of its board of directors, executive committee or effective leaders and the identity of controlling entities/persons;
- indicate whether they will also act as credit intermediary, in which case they will need to declare who are the so-called "responsible persons for the distribution", and demonstrate that these persons are "fit and proper" and possess the adequate professional knowledge and expertise;
- provide proof of their adherence to a system of alternative dispute resolution for consumer matters.
Persons or entities who would like to acquire or increase qualified participation with a licenced consumer or mortgage credit provider must notify the FSMA in advance. The FSMA may oppose the planned transaction and enforce such an objection via the suspension of voting rights, a request to sell the participation or sequestration.
Intermediaries also covered
All intermediaries in providing consumer or mortgage credit are now subject to supervision under the New Regime. Note that the concept of credit intermediary under the ELC is very broad. It covers every natural or legal person who does not act as a credit provider and who in the course of its business or professional activity against a remuneration or benefit:
- proposes or offers credit agreements to consumers;
- helps or supports consumers entering into a credit agreement; or
- concludes credit agreements with consumers in the name of the credit provider.
In their application for registration, intermediaries must indicate whether they act as broker, tied agent or sub-agent. In addition to a series of governance and minimum capital requirements, intermediaries must appoint, from within their organisation, a number of "persons responsible for the distribution" who need to be "fit and proper" as well as "persons in contact with the public". All these persons must demonstrate that they have adequate professional knowledge and expertise.
Meaning of consumer and credit provider The definition of "consumer” and “mortgage credit provider" under the ELC expressly refers to the granting of credit to "consumers". Under the code, these are natural persons (individuals) acting for purposes other than for their commercial, business, craft or professional activity. Therefore lending to SMEs or corporates is not covered by the New Regime. However, a law of 21 December 2013 on SME financing introduced a separate series of conduct-of-business rules for lending to professionals and SMEs. Under the ELC "credit providers" are persons or companies acting in the course of a commercial or professional activity. This implies that natural persons who occasionally lend money, not in a commercial context, to other natural persons, as may be the case in a peer-to-peer lending context, do not qualify as credit providers under the New Regime.1
New Regime does not replace prudential supervision
Providing credit is a core activity of many service providers in the financial and insurance sector who are already under prudential supervision by the NBB.
As the supervision regime introduced by the New Regime focuses on the conduct-ofbusiness rules, the prudential licence provided by the NBB does not exempt these institutions from having to obtain a licence from the FSMA where the credit provision activity is within the scope of the New Regime.
Any application to the FSMA by a Belgian entity already supervised by the NBB will not need to contain the prudential elements – such as minimum capital requirements or rules related to governance or group participations – if these conditions are already assessed by the prudential supervisor.
Non-Belgian EU-based credit institutions – and certain specialised financial institutions, e-money institutions, payment institutions and investments firms benefiting from an EU passport to grant consumer or mortgage credit – may exercise this activity in Belgium by way of the establishment of a branch or the free provision of services, without having to obtain a licence from the FSMA under the New Regime.
1. This is confirmed by case law – Gent 6 February 2008, NJW 2008, 804, note R. STEENNOT.