Regulating private lease: AFM requests Dutch Secretary of Finance for introduction license regime

The Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten (AFM))  recently requested the Dutch Secretary of Finance in its legislative letter of 30 March 2020 to introduce a market conduct supervision regime (gedragstoezicht) for private lease products. The AFM further explained the background to its request in its newsletter of 8 May 2020. Private lease products became more and more popular in recent years. A private lease is an increasingly used form of financing used as an alternative for buying cars, but is also more and more used for buying e.g. wash machines, television, computers. Currently, the provision of private lease products, unlike consumer credit (consumptief krediet) and hire purchase (huurkoop), is not subject to supervision imposed by the Dutch Financial Supervision Act (Wet op het financieel toezicht (FSA)). Although the product in principle qualifies as credit within the meaning of the FSA, it is exempted from supervision under section 1:20 paragraph 1 sub c FSA, because it has been decided that rental and letting of movable property should not be subject to financial supervision. The AFM is of the opinion that the impact of a private lease in general can be as significant as that of consumer credit and hire-purchase products. Private lease would in fact have many similarities with product credit (goederenkrediet), a form of consumer credit, to which extensive regulatory provisions apply. The lack of supervision and rules with regard to e.g. (pre) contractual information means that it is not always clear to consumers which obligations they enter into and which costs are involved in entering into a private lease. Consumers run the risk of financial difficulties when they can no longer meet the obligations under the lease. The AFM has identified a growing number of consumers who experience such problems. "To summarize there is an uneven playing field with the current regulated consumer credit with similar risks for consumers" according to the AFM. The AFM therefore advocates regulation and supervision of private lease products by requesting the Secretary of Finance to introduce a license and continuous supervision regime for offerors of private lease products. A regime that should be similar to the current regime that applies to consumer credit offerors. The AFM is currently working out the details of such regulation. As possible measures the AFM mentioned:

• applying loan standards as used in the context of consumer credit
• mandatory registration of (long-term) lease contracts with BKR (the Dutch credit registration agency)
• conditions regarding costs (statutory maximum)
• rules regarding advertising

The Ploum Banking & Finance team will keep you informed of the developments regarding the introduction of financial supervision of private lease products by means of newsflashes. If you have any questions regarding this newsflash, please contact Matthijs Bolkenstein (m.bolkenstein@ploum.nl or +31646630866), Lucas Lustermans (l.lustermans@ploum.nl or +31619850096) or Joost Kool (j.kool@ploum.nl or +31610177339).