As the Deputy will be aware, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 was enacted in July 2015. It was introduced to fill the consumer protection gap where loans were sold by the original lender to an unregulated firm. The Act introduced a regulatory regime for a new type of entity, known as a credit servicing firm. Credit servicing firms are now subject to the provisions of Irish financial services law that apply to regulated financial service providers.
Under the Act, purchasers of loan books must either be regulated by the Central Bank or the loans must be serviced by a credit servicing firm regulated by the Central Bank. The significant point is that we regulate at the point of contact with the customer. Therefore, relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes such as the consumer protection code and the code of conduct on mortgage arrears issued by the Central Bank of Ireland and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015, which came into operation in July 2016. It is important to highlight that the transfer of a loan from one entity to another does not change the terms of the contract or the borrower's rights and obligations under the original contract.
The Central Bank is now the competent authority for the authorisation and supervision of credit-servicing firms.
Credit-servicing firms must comply with all relevant requirements of financial services legislation, including the various codes and regulations mentioned already and fitness and probity standards, including minimum competency requirements.
In addition to compliance with Central Bank codes of conduct, credit-servicing firms will have to demonstrate to the Central Bank that they have robust governance and adequate resources to ensure compliance; agreements with loan owners that enable the credit-servicing firm to fully comply with its obligations under Irish financial services legislation; and adequate and effective control of loan servicing in the State to enable Central Bank oversight.
Additional information not given on the floor of the House
In addition, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 ensures that a regulated credit-servicing firm cannot do something, or fail to do something, which would be a prescribed contravention if performed, or not performed, by a retail credit firm. The legislation also prevents the owner of credit from instructing a regulated credit-servicing firm to perform such an action. Therefore the borrower is protected because the owner cannot give an instruction that would breach the rules but also the instruction cannot be implemented by the regulated credit servicer, over whom the Central Bank has oversight as a regulated entity.
Nonetheless, my Department will continue to keep all relevant legislation under review in order to ensure that borrowers whose loans have been sold are properly protected and do not lose any protections which they previously enjoyed. In addition, the Department of Finance expects that the Central Bank, as regulator of credit-servicing firms, will be vigilant in this area and raise any specific instances where it has found consumers have not had their protections upheld or that their positions have been disadvantaged.