I move: "That the Bill be now read a Second Time."
The Credit Reporting Bill 2012 puts in place the legislative framework for a central repository of credit information, to be known as the central credit register. A credit register is a database of credit information based on credit applications and credit agreements. It assists lenders in making informed lending decisions and protecting higher-risk borrowers from excessive debt. The creation of a central credit register was sparked by reports produced in recent years by the Law Reform Commission, the expert group on mortgage arrears, the Central Bank and the Government's banking inquiry, which illustrated the prevalent weaknesses in the Irish reporting system and highlighted the potential benefit of having an effective credit reporting system. Some privately run credit bureaus are operating in Ireland, but there is no central repository of credit data on a statutory basis. The private credit bureaus require their members to report credit information. As a number of credit providers are not members of any credit bureau, the information gained does not present an accurate picture of how much creditors are lending and how much an individual borrower is borrowing. Consequently, the full extent of a borrower's indebtedness is not apparent.
The current system does not allow the Central Bank of Ireland to see the overall borrowing situation in this country. This may lead to lenders' being unable to assess total borrower exposure properly. Equally, the current system does not allow for the identification of systemic risk. This unsatisfactory situation led to the establishment of an inter-agency working group tasked with developing a strategy to put in place an effective credit reporting system in Ireland. The report of the inter-agency working group on credit histories was presented to me at the end of June 2011. The recommendations contained in the report, which were developed following consultation with stakeholders, helped to inform the Department of Finance in drafting the general scheme of this Bill, which was published at the end of August 2012. Following the publication of the general scheme, further consultations were held with representatives of the finance industry, the Central Bank and the Data Protection Commissioner. Their comments were taken on board in developing the general scheme into the Credit Reporting Bill now before the House, as published on 28 September 2012. The achieved deadline of the end of September 2012 was a structural benchmark under the EU-ECB-IMF financial support programme. The changes that were made to the general scheme were in the interests of enhancing consumer protection. Some technical changes were also required.
I wish to outline the key elements of the Credit Reporting Bill 2012 and set out the benefits that will be afforded to consumers as a result of the establishment of the central credit register. The key elements of the Bill are the establishment of a central credit register, to be maintained and operated by the Central Bank of Ireland, and the creation of a statutory credit reporting system under which lenders will be obliged to report information regarding loan applications and loan agreements that reach a threshold in excess of €500. The Bill provides for the categories of personal and credit information to be held on the register and the purposes for which it can be used. Detail is provided regarding when that information may be accessed and by whom. The Bill requires lenders to check the register when considering giving approval to credit applications of over €2,000. The circumstances in which information on the register can be amended are provided. The Bill prohibits misuse of the information held on the register.
The creation of a central credit register is in the best interests of the consumer and the financial services industry. The register supports the financial services industry by providing greater understanding of a consumer's total indebtedness. This will help lenders to make informed lending decisions which are based on accurate and up-to-date information. The consumer benefits by being able to keep track of his or her creditworthiness by reviewing his or her record on the register. Consumers will be entitled to one free copy of their own record every 12 months. By allowing for this transparent process, consumers will be able to see their credit situations clearly and identify any errors or inaccuracies on the register. A mechanism has been provided for in the Bill to allow a consumer to apply for inaccurate information to be removed, amended or supplemented. This will assist in maintaining a high quality of data on the register and providing a true representation of the consumer's credit situation. The drafting process was influenced by the advice of the Data Protection Commissioner to ensure the rights of the consumer are always protected. The Bill enhances consumer protection by limiting access to the information held on the register to specified circumstances and reasons.
Before I explain the provisions of the Bill in further detail, it is important to point out that the Government intends to seek a number of amendments on Committee Stage. Some of these amendments will be explained as I outline the provisions of the Bill section by section. Further amendments are being developed by my officials. The Office of the Attorney General will advise on completion of the deliberations. Part 1 of the Bill is the preliminary and general part. Section 1 provides for the Short Title and the commencement provisions. Section 2 is the standard interpretation provision, defining a number of terms used in the Bill, such as "credit agreement", "credit application" and "credit information subject". Section 2 also sets out the circumstances in which the Bill will apply and brings within the scope of the Act those parties that have acquired the rights of a credit information provider. Section 3 provides that any regulation or order made under the Act may contain incidental, supplementary or consequential provisions. Any such regulations or order made other than under section 1(2) must be laid before each House of the Oireachtas and either House may annul that regulation or order within 21 days. Section 4 is the standard section for expenses incurred in the administration of the Act. Section 5 provides that the Central Bank of Ireland will establish, maintain and operate a database of information, to be called the central credit registry, which will contain both personal and credit information.
Section 6 defines the personal information relating to credit information subjects which may be held on the register. The type of personal information which can be held is determined by whether that subject is an individual, an individual carrying on a business or not an individual. Personal information includes names, addresses, place and date of birth, telephone number, PPS number - subject to a commencement order - employment status and value-added tax registration number. Power is given to the Central Bank to make regulations to specify additional personal information which may be held on the register. To ensure the addition of personal information is appropriate and beneficial, the Central Bank must consult with the Data Protection Commissioner and is also required to obtain the consent of the Minister for Finance before specifying any additional information.
In addition to the personal information referred to in section 6, the register may hold credit information relating to a credit information subject. Section 7 provides that the type of information held will depend on whether the information is obtained in regard to a credit application or a credit agreement. Credit information includes the nature and term of the credit applied for, the nature of any guarantee, indemnity or security, and the rate of interest payable. Section 7 also provides details as to what constitutes "credit information" which will be held in regard to a credit agreement made by a credit information subject or a credit agreement of which the credit information subject is a guarantor.
The Central Bank also has the power under this section to make regulations specifying additional credit information which may be held on the register. As in section 6, the Central Bank must consult with the Data Protection Commissioner and receive the consent of the Minister before making such regulations. This procedure will safeguard the interests of the consumer.
Section 8 provides time limits for the holding of personal and credit information on the register. Where the information identifies a subject and relates to a credit application, it may be held for six months, beginning with the day on which it is entered on the register. Where the information identifies the subject and relates to a credit agreement, it may be held for five years from the date it is entered on the register in respect of debt arrangements.
The current situation in regard to personal information in regard to closed credit agreements is incorrect. What had been intended was for such personal information in regard to closed credit agreements to be retained for five years after the agreement is closed. We will be amending this to reflect what was originally desired. In regard to anonymised information, this section permits the information to be held on the register indefinitely.
Section 9 illustrates the application procedure to make an amendment to the information held on the register. Applications from credit information subjects or credit information providers to amend information held on the register must be made on the basis that the information is inaccurate, not up to date or incomplete. Enhancements to this section have been suggested by the Data Protection Commissioner and the Central Bank to ensure that appropriate procedures are available for subjects to seek the amendment of inaccurate or incomplete information. These are currently under consideration and my officials will examine all of these proposals.
Where the Central Bank makes the decision to amend the credit information held on the register, a number of parties must be advised of this decision, as provided for in section 10. Notice of the decision, along with a copy of the amended information, must be given to the following: the borrower who is the subject of the information or the credit information provider who requested the information; any person who is party to an ongoing credit agreement; and any credit information provider who has made an application to access information on the credit information subject. Where the Central Bank decides not to amend the register, it must, if required to do so by the credit information subject, enter on the register a record of the amendment sought.
Section 11 applies the provisions of the Data Protection Acts 1988 and 2003 to credit data held on the register for individuals and bodies corporate with an annual turnover of not more than €3 million. The Data Protection Commissioner will, therefore, be able to deal with complaints from micro-enterprises and SMEs in respect of their data held on the credit register. Section 11 provides that the Central Bank may make regulations, with the consent of the Minister, specifying how and by reference to what year annual turnover is to be calculated.
This section will be subject to a Committee Stage amendment. We have learned from consultation with the Data Protection Commissioner that applying the entirety of the 1988 and 2003 Acts to the Credit Reporting Bill is not necessary. As a result, it is proposed to amend this section to leave only the relevant provisions being applied to the credit data.
Section 12 obliges credit information providers to supply certain information to the Central Bank in regard to qualifying credit applications, qualifying credit agreements, credit information subjects and credit information subjects who are guarantors in connection with a credit agreement, which the Central Bank will then hold on the register. This section also provides that the Central Bank may, with the consent of the Minister, make regulations specifying the information and the form in which it is to be provided. Those regulations may differentiate between classes of applications, agreements, providers and subjects. A qualifying application or agreement is one under which the amount of credit exceeds an amount specified by order of the Minister following consultation with the Central Bank and having regard to the consumer price index, or in the absence of such an order, €500.
Section 13 obliges a credit information subject who makes a credit application to give notice to the credit information provider of any aggregate foreign debt in excess of €5,000 outstanding. This refers to credit agreements not covered under section 2(2). The aim of this section is to give credit information providers a better picture of the subject's debt commitments. The Central Bank may make regulations specifying the information and the form in which the information is to be provided. A credit information provider is then obliged to provide the information to the Central Bank, which will include the information on the register. The amount of aggregate outstanding debt provided for in this section may be amended by order of the Minister following consultation with the Central Bank and having regard to the consumer price index.
Section 14 permits a credit information subject to add to the register a short explanation, of no more than 200 words, about the subject's credit information held on the register. The Central Bank is obliged to include this information on the register.
An important aim of setting up the register is to allow for the level of indebtedness of a credit information subject to be accessible and evident. In support of this aim, section 15 obliges a credit information provider to access information on the register which relates to a credit information subject when that subject makes a relevant credit application. A relevant credit application means a credit application where the amount of credit sought exceeds an amount specified by order of the Minister following consultation with the Central Bank and having regard to the consumer price index. In the absence of such an order, the specified amount is €2,000.
The register does not have to be accessed where the credit information provider has previously accessed information relating to the subject in question within seven days before the credit application is made. Information accessed under this section may only be used for purposes specified in section 17 of this Act.
Under section 16, a credit information provider may apply to access information on the register where a person has made a credit application for an amount less than €2,000 or is proposing to give a guarantee or indemnity in connection with a credit agreement. A credit information provider may also access information on the register where a credit information subject who is party to a credit agreement has requested to change the nature or terms of the agreement or failed to comply with their obligations under a credit agreement, guarantee or indemnity and that failure has not been corrected.
Information accessed in accordance with this section may only be used for purposes specified in section 17 of this Act. Section 16 allows a credit information subject or any person who has the consent of the credit information subject to access information relating to that subject. This section also permits the Central Bank to use the information held on the register for the performance of its functions. The CSO is permitted access under section 16 to information on the register in connection with the performance of its functions.
Section 17 details the specific reasons for which information on the register can be accessed by credit information providers.
The reasons include verifying information, evaluating the risk of extending credit, evaluating the risk of changing the nature or term of a credit agreement, monitoring default under a credit agreement or evaluating whether to make an arrangement in respect of the debts of a credit information subject.
Under section 18, the Central Bank may, having consulted the Data Protection Commissioner and with the consent of the Minister, make regulations relating to applications to access information, information to which the Central Bank is required to give access in response to such an application, and the manner in which such access is to be given. A credit information provider is required to keep a record of each application made to access information on the register for a period of five years. If required to do so by the Central Bank, a credit information provider is obliged to provide information on any occasion on which that provider has been given access to information on the register. The Central Bank is required to keep a record for five years of all occasions on which access to the register was granted. Section 18 allows for a credit information subject to request from the Central Bank a report detailing each occasion access has been given to information on that subject within the previous five years, the identity of the persons who applied for access and the dates on which these applications were made.
Under section 19, a credit information subject who reasonably believes he or she has or may have been impersonated by any person may require the Central Bank to enter a notice of suspected impersonation on the register at least within 48 hours. The subject may also require the Central Bank to remove such a notice and the Central Bank shall, in any event, remove the notice after a period of 90 days, unless requested to retain it by the subject for a further period of up to 90 days. Where a notice of suspected impersonation is entered on the register, the Central Bank is required to notify the credit information subject at least within 48 hours if an application is made to access information on that subject or if information is provided for the Central Bank in connection with a credit application made by that subject. Under this section, the Central Bank is obliged, where it gives a person access to information on a credit information subject at a time when a notice of suspected impersonation is entered on the register, to make that person aware of the notice of suspected impersonation.
An amendment is being proposed in respect of section 19 to increase the protection offered by the section to the consumer by extending the section's application to impersonation which may imminently take place. This has the result of allowing a consumer who has reason to suspect impersonation is about to take place to report the possible impersonation before the harm actually takes place. The current draft only permits the consumer to demonstrate that an action resulting from compromised identity has taken place. Thus, the amendment will increase the protection offered to the consumer in the case of identity theft or impersonation.
Under section 20, a credit information provider is required to take steps to verify the identity of a credit information subject who makes a credit application or credit agreement with that provider or proposes to give a guarantee or indemnity in connection with a credit agreement to which that provider is a party. The Central Bank has the power under this section to make regulations, following consultation with the Data Protection Commissioner and with the consent of the Minister, specifying the steps credit information providers must take to verify a subject's identity.
Section 21 obliges a credit information provider to take reasonable steps to verify that the information it obtains from credit information subjects is accurate and complete. What is meant by "reasonable steps" will be set out by way of regulations.
Under section 22, a credit information provider shall notify a credit information subject where that provider reasonably believes the subject has been impersonated by any person. Section 23 imposes an obligation on credit information providers to ensure credit information subjects who make credit applications or enter credit agreements, guarantees or indemnities with that provider are made aware of their rights and duties under the Bill.
Section 24 stipulates that credit information providers are required at the application stage to notify applicants that this Bill requires information on qualifying credit applications and agreements to be supplied to the Central Bank for inclusion in the register. The Central Bank may by regulation, with the consent of the Minister, specify the form and content of the notices to be provided.
The register will not be set up to generate a profit. However, section 25 allows for a levy to be imposed on credit information providers to meet the expenses of the Central Bank in performing its functions under the Bill. The levy will be set with the consent of the Minister. Regulations made under the section may provide for the amount of the levy, the dates for payment of the levy, penalties for not paying on time, collection and recovery of the levy and refunds of the levy. They may also differentiate between classes of credit information providers. This will assist in ensuring smaller lenders are not disproportionately affected by a levy.
Section 26 instructs that the Central Bank may make regulations, with the consent of the Minister, to set out the fees to be.paid for accessing information kept on the register or being provided with a record of occasions on which access has been given. The regulations made under this section may provide for the amounts of fees, their payment, collection and recovery and refunds of fees and make different provisions in respect of different cases. Exemptions from the payment of fees may also be provided for.
Section 27 outlines how the Central Bank may compel credit information providers to comply with their obligations under the Bill. If the Central Bank considers a credit information provider has failed or is failing to comply with imposed obligations, it can direct that credit information provider to take specific steps to comply with its obligations. If necessary, the Central Bank can apply to the High Court to make an order requiring the credit information provider to comply with the direction.
Section 28 outlines the provisions of a direction under section 27. A direction by the Central Bank under section 27 shall set out the terms of the direction, including any date specified as the date by which or period specified as the period within which any provision of the direction is to be complied with and any incidental, supplementary or consequential provision for securing that direction is fully complied with.
The Bill provides for a number of offences in section 29. It is an offence for a credit information provider to knowingly supply false or misleading information that is required to be supplied under the Bill. It is an offence for a credit information provider to knowingly use information accessed by the provisions of the Bill for a different purpose than those set out in the Bill. The penalties for the offences provided for in section 29 are a class A fine and a term of imprisonment not exceeding six months following summary conviction or a fine or imprisonment for a term not exceeding five years or both following conviction on indictment.
Section 30 provides that the Central Bank may produce credit scores in respect of credit information subjects and also general reports, analyses and statistics which contain anonymised data only. This means data which cannot be used to identify credit information subjects. Section 31 requires certain staff of the Central Bank to attend before the relevant Oireachtas committee and provide the committee with information on the performance of its functions under the Bill, if so required.
Section 32 prohibits the unauthorised disclosure of confidential information received by the Central Bank in connection with the performance of its functions under the Bill. This prohibition is applicable to any person who is or has been the Governor, an officer or employee of the Central Bank, a consultant or auditor employed by the Central Bank or an agent of the Central Bank, a member of the commission, a head of function or the Registrar of Credit Unions. The disclosure of confidential information constitutes an offence. The penalties for the unauthorised disclosure of confidential information are a class A fine and-or a term of imprisonment that does not exceed 12 months following summary conviction or a fine not exceeding €30,000 and-or imprisonment for a term no longer than five years following conviction on indictment. It is not an offence under section 32 to disclose information in compliance with the Bill or other Acts to the Central Bank, the Minister by or on behalf of the Central Bank, the Data Protection Commissioner, the Garda, an officer of the Revenue Commissioners, the Director of Corporate Enforcement or the Competition Authority where the disclosure of information may reveal the commission of an indictable crime.
Section 33 disapplies section 33AK of the Central Bank Act 1942 in relation to information provided for the Central Bank under the Bill. This ensures the confidentiality restrictions provided for under the section do not apply to data obtained under the Bill. However, it is incorrect to apply a blanket disapplication of section 33AK of the Central Bank Act 1942. I intend to seek a Committee Stage amendment in relation to this matter.
Section 34 provides that summary proceedings for offences under sections 29 and 32(4) may be brought and prosecuted by the Central Bank.
The Credit Reporting Bill aims to support the removal of the deficiencies in the financial services industry by establishing a statutory credit reporting system. It aims to support the promotion of responsible borrowing and lending. It will also aid the supervisory functions of the Central Bank and enhance consumer protection measures in respect of lending. The legislation will assist in providing a tool to produce an overall picture of the level of indebtedness in Ireland. I refer to my statement when the general scheme of the Bill was published:
The establishment of a mandatory credit reporting and credit checking system, regulated and operated by the Central Bank of Ireland, will ensure that lenders have access to the most accurate and up to date information regarding a borrower's total exposure. This provision will benefit both borrower and lender and will ensure that lenders are in a position to make informed lending decisions. This establishment of a Central Credit Register will also help to support policies to combat over-indebtedness.
I commend the Bill to the House and look forward to the contributions of Deputies.