Lending framework being developed

The Barbados Government is in the process of regulating lending between private individuals, Minister in the Ministry of Finance Ryan Straughn has revealed.

Straughn said his administration was reviewing the framework for what he termed peer-to-peer lending, aimed at bringing certainty, clarity and quick resolution to disputes that may arise from informal financial transactions, and to provide a measure of protection for the lender.

“We are reviewing the framework for peer-to-peer lending; but peer-to-peer lending is not the same as blessing circles or pyramid schemes. And these are things that as private individuals get into, they must understand they are taking risks outside of regular and traditional financial solutions which are regulated,” the government economist told Barbados TODAY.

“Peer-to-peer lending relates to how to regulate lending between individuals. People get into arrangements which are not recorded properly. Therefore when a dispute arises, the challenge then becomes whether I gave you the money as a grant or whether it was a loan; what were the terms of the loan and all of those types of things,” he said.

“So [with peer-to-peer lending] there is at least an acknowledgement that if I am going to lend someone money, that I should take the time to register the fact that I have done so. These are the terms in a very simplified way. If a dispute arises, both you and I know that we were parties to a specific agreement and therefore the adjudicator or mediator has the ability then to make a determination as to who is liable, for what, on the basis that there are regulations in place for peer-to-peer lending,” the minister stated.

Regarding the mechanics of the lending, Straughn said, “The lending arrangement is recorded between you and I with an independent third party and that would be one of the regulators or some assigned party. All of this will be a digital process in the sense that it is easily done. Therefore, if I don’t pay you back in the way that you were intended to be paid, you can take me to court,” the Cabinet minister explained.

However, he pointed out that the law court would be a last resort to achieving a resolution.

“Whatever the process is, whoever is doing the adjudication – court would be the last resort – we would try to mediate before we get there. So that’s something we are working on to make sure that we bring some order to this thing. But it is not the same thing in relation to these blessing circles, because fraud is fraud, is fraud,” Straughn contended.

He stressed: “Peer-to-peer lending is a separate and distinct thing. If persons are setting out to defraud persons, it doesn’t matter what system it is, they are going to defraud you. And therefore we have to treat it as such and we will require the cooperation of persons with the Barbados Police Service, as well as the Financial Intelligence Unit and with others to be able to bring these persons to justice.”

However, he said there are other elements of the proposed framework.

The minister disclosed that the proposed measure would also cover landlord-tenant relationships particularly with regards to security deposits.

“The same thing would apply, for example, to when people go to rent places and they put down security deposits…and then at the end of the tenure, there is always some dispute between the tenant and the landlord about the security deposit. It is intended to capture all of these things in order make sure there is clarity between landlord and tenant and between the person that is lending and the borrower,” Straughn explained.

“The peer-to-peer framework would allow for greater certainty and to some degree, some measure of protection for the person who lends money to people on an individual basis. It does serve as a matter of a layer of protection in the system,” the economist emphasised.emmanueljoseph@barbadostoday.bb