Guidance for Credit Service Providers
On July 18, 2016, the Knesset approved the Financial Services Supervision (Provident Financial Services) Law, 5776-2016.
The new law regulates the regulatory framework for supervising non-banking financial services and essentially divides the sector providing financial services into two categories:
A. Provision of non-banking credit, including loans, check cashing, and more.
B. Foreign exchange transactions.
Entities engaged in providing credit services will now be referred to as Credit Service Providers (CSPs). Entities engaged in foreign exchange transactions will continue to be referred to as Currency Service Providers (CSPs).
The new law establishes requirements for entities providing financial services, imposes restrictions on business operations, and mandates reporting obligations.
The law requires licensing for engaging in the provision of financial services, which is further divided into two categories: credit provision and provision of services related to financial assets. The law also distinguishes between two levels of licenses: “Basic License” for service providers with low financial turnover and “Extended License” for service providers with high financial turnover.
The law specifies the conditions for obtaining a license in Section 15 of the law, giving the regulator the discretion not to grant a license even to an applicant who meets the requirements detailed in the law if they are not suitable to engage in providing financial services for the public’s benefit.
The regulator also has the authority to revoke or suspend a license under the conditions specified in Section 23 of the law, provided that the license holder is given an opportunity to present their claims.
The law comes into effect on June 1, 2017, for those engaged in providing credit and on June 1, 2018, for those engaged in providing services related to financial assets.
In April 2017, regulations for licensing Credit Service Providers were published, aiming to establish guidelines regarding the application process for obtaining a license for engaging in providing credit services.