Foundations of Peer-to-Peer Lending Regulation
Peer-to-peer lending platforms in Georgia fall, in their capacity as loan-giving entities, within the supervisory scope of the National Bank of Georgia. Under article 52-2 of the Organic Law of Georgia on the National Bank, the National Bank is authorised to supervise the activity of a loan-giving entity, and the supervision comprises the registration and deregistration of such an entity, its inspection and regulation, the issuance of written instructions, and the imposition of requirements, restrictions and sanctions. The loan-giving entity itself is obliged to register with the National Bank and to satisfy the requirements established by it. The rules of registration, deregistration and regulation are laid down by a legal act of the National Bank, so before launching a platform the detailed requirements of those acts must be studied and built into the operating model from the outset.
Sanctions and Exceptions from the Registration Duty
In the event of a breach of the law, the National Bank may impose a sanction on a loan-giving entity, including a monetary fine, in the procedure it has established; the amount of the fine is directed to the state budget of Georgia. At the same time, the registration duty does not attach to every lender: by operation of the statutory exception, the obligation does not extend to a representative of the financial sector, or to a loan granted by an entrepreneur entity to a partner, shareholder or employee of the enterprise. The sanctions apparatus is broader towards microfinance organisations, which the same law places under the supervision of the National Bank under its article 50: the Bank may suspend or limit their operations, prohibit the distribution of profit and the accrual and payment of dividends, require the attraction of additional capital, suspend the signing authority of an administrator, impose a monetary fine on him and even demand his dismissal from office.
Record-Keeping for Property Taken as Security
A loan-giving entity that takes movable property as a means of securing a monetary claim carries additional special obligations: it must comply with the requirements connected with safety and with the possession and operation of a special electronic program for the record-keeping of such property, requirements established by an order of the Minister of Internal Affairs of Georgia. This norm directly concerns those platforms and lenders that secure loans with unregistered property: the record-keeping must be conducted through the prescribed electronic program, which leaves a trace of every instance of taking a movable item — for example equipment or jewellery — and reduces the risk of illegality. The exact list of requirements is contained in the order of the Minister of Internal Affairs, and its study is indispensable when planning the operational model of the platform.
Confidentiality of Borrower Information
A central element of the regulation is the protection of information about borrowers. A loan-giving entity is obliged to observe the confidentiality of information: information may be given only to the tax authority on the basis of a court decision and of the international agreement on tax compliance. Information existing about a borrower — about any transaction, performed operation, existing indebtedness or balance — may be given only to the parties to the relevant transaction and their authorised representatives, to the National Bank, to the commission examining disputes at the National Bank, in cases defined by the legislation of Georgia to the Financial Monitoring Service, and during an inspection provided for by the law on the protection of personal data, to the State Audit Office. Other persons may receive such information only on the basis of a relevant court decision or the borrower's prior written consent. Courts, investigative bodies and tax services are prohibited from transmitting this information to any other organ, including the mass media, before the delivery of the relevant court decision.
Frequently Asked Questions
Who regulates peer-to-peer lending platforms in Georgia?
The activity of a loan-giving entity is supervised by the National Bank: the supervision covers registration, deregistration, inspection, regulation, written instructions and sanctions.
Who must register with the National Bank?
A loan-giving entity. The exceptions are a representative of the financial sector and a loan granted by an entrepreneur entity to a partner, shareholder or employee of the enterprise — in those cases the registration duty does not apply.
Can a fine be imposed on a loan-giving entity?
Yes. For a breach of the law and of the legal acts or requirements of the National Bank, a sanction, including a monetary fine, may be imposed; the amount is directed to the state budget.
To whom may borrower information be disclosed?
Only to the parties to the transaction and their authorised representatives, the National Bank, the commission examining disputes at the National Bank, in cases defined by legislation the Financial Monitoring Service, and during inspections the State Audit Office; to others only by a court decision or the borrower's prior written consent.
How We Help on Legal.ge
If you plan to launch a peer-to-peer lending platform or already operate in this market, the team of Legal.ge will examine your operating model through the prism of the National Bank's regulation, help you plan the registration process, develop internal rules for the protection of borrower information and ensure compliance with the record-keeping requirements for property taken as security. Contact us — a platform fitted to the regulation is a competitive advantage.