I move: "That the Bill be now read a Second Time."
This Bill will implement the key recommendation in the November 2018 review of personal contract plans, authored by Mr. Michael Tutty, which was to extend the relevant provisions of the Central Bank's consumer protection code to all the providers of hire purchase and personal contract plan agreements to consumers. Personal contract plans, which are generally referred to as PCPs, have become particularly prevalent in the financing of new car purchases by consumers.
Mr. Tutty made a number of clear recommendations in his review. These concerned issues such as establishing whether PCPs come within the definition of "hire purchase" and the collection and publication of hire purchase and PCP statistics. With regard to the former, the Office of the Attorney General has confirmed that PCPs do fall within the definition of "hire purchase". With regard to the latter, additional provision is being made within this Bill to provide that the Minister for Finance may request the Central Bank, using its existing powers, to collect and publish information on credit, hire purchase, including PCPs, and consumer-hire agreements.
While many, if not the majority of, consumers taking out hire purchase and PCP agreements do so from entities regulated by the Central Bank, Mr. Tutty highlighted in his review that consumers were not covered by the consumer protection code because providers of hire purchase and PCP agreements were not required to be authorised by the Central Bank. The possibility of including hire purchase and PCP consumers in the consumer protection code despite the position that not all such providers are regulated was investigated. As this was found not to be possible, the simplest solution is to require that all providers of hire purchase and PCPs be authorised by the Central Bank. This change means that the Central Bank will have the power to apply its consumer protection code, in particular the part that requires firms to assess the suitability of the product for the consumer and the ability of the borrower to repay the debt over the duration of the credit agreement, to such providers.
In addition, the Bill will require providers of indirect credit to consumers to become entities regulated by the Central Bank. Indirect credit, which has become much more available in recent years, is so called because the lender provides credit to the borrower by paying a retailer for the purchase of a good, often as part of a buy now and pay later offer. Providers of indirect credit are not regulated at present because the current definition of "retail credit firm" in the Central Bank Act 1997 requires that credit in the form of a cash loan only must be advanced directly to the borrower. The Bill changes the definition of credit to add a deferred payment or similar accommodation to the existing cash loan and by adding "directly or indirectly" to the provision of credit. The Bill will also provide for the regulation of entities that service or own these agreements. This is to ensure that the provisions that already apply to the sale of credit agreements for cash loans will also apply in respect of sales of hire purchase or consumer hire agreements.
The Bill makes some consequential and related amendments to the Consumer Credit Act 1995. These include extending an existing cost of credit cap of up to 23% APR on credit provided to consumers by certain firms to all entities within the scope of the Act that provide credit or hire purchase - other than moneylending agreements, which have their own regulatory framework - to consumers.
A letter of consultation has already been sent the European Central Bank, ECB. This process is required because the Bill will affect the Central Bank by increasing its responsibilities and workload. I anticipate that the ECB will respond prior to the commencement of the autumn session of the Dáil and its response will be outlined to the House before the closure of the Second Stage debate. Given the relevance of PCPs for the new car market, the Government intends, with the co-operation of the Houses, to complete the passage and enactment of the Bill in time to have the new authorisation regime implemented by the end of year and in advance of the major sales peak that occurs when the registration changes next January.
The Bill contains 17 sections, which I will run through briefly. Section 1 defines the Consumer Credit Act 1995 and the Central Bank Act 1997 as the "Act of 1995" and the "Act of 1997", respectively. These are the two main Acts that will be amended by the Bill.
Section 2 amends section 28 of the 1997 Act by inserting additional definitions and amending definitions. These include expanding the range of agreements that fall within the regulated business of a "retail credit firm" and a "credit servicing firm". As a result, other forms of credit, such as the indirect provision of credit, hire purchase, including PCPs, and consumer hire agreements, will be added to the existing authorisation requirement in respect of the provision of credit in the form of a cash loan.
Section 3 makes a technical amendment to section 29 of the 1997 Act. It confirms that any entity that is covered by any of the new subsections (5)(a) to (d) is not prohibited from carrying on such a regulated business.
Section 4 amends section 29A of the 1997 Act, which provides limited discretion to the Central Bank to exempt certain entities or classes of entity from the requirement to become authorised as retail credit firms in respect of the provision of credit in the form of cash loans, to take account of other changes being made in this Bill and extend it to cover the additional types of financial agreements that will come within the regulated business class of "retail credit firm".
Section 5 inserts a new section 34EA into the 1997 Act to provide for the transitional arrangements for firms that will for the first time come within the scope of Central Bank authorisation as retail credit firms. The section, which mirrors similar provisions in the past, provides that, subject to applying to the Central Bank for authorisation within a period of three months from the commencement of the relevant provisions, they will be deemed to be transitionally authorised by the Central Bank and that authorisation will continue until the Central Bank has granted or refused authorisation.
Section 6 amends section 34FA of the 1997 Act to take account of changes in the definition of "credit servicing firm" as set out in section 2 of the Bill.
Section 7 inserts a new section 34FB into the 1997 Act and mirrors the provision in the new section 34EA in respect of transitional arrangements for firms that will for the first time come within the scope of Central Bank authorisation as a credit servicing firm. As with section 5 in respect of retail credit firms, subject to applying to the Central Bank for authorisation within a period of three months from the commencement of the relevant provisions, existing credit servicing firms will be deemed to be authorised by the Central Bank and that authorisation will continue until the Central Bank has granted or refused authorisation.
Section 8 amends section 34G of the 1997 Act to take account of the wider range of financial agreements, including hire purchase and consumer hire agreements, that will now fall within the scope of "credit servicing firms".
Section 9 inserts a new section 36EA into the 1997 Act to provide that the Minister for Finance may request the Central Bank, using powers it already has under the Central Bank Acts, to collect and publish information on credit, hire purchase, including PCPs, and consumer hire agreements. This will facilitate the publication of statistical data on the level of financial accommodation provided by regulated businesses.
Section 10 amends section 2 of the Consumer Credit Act 1995 by inserting additional definitions and substituted definitions. Currently, the Act provides that the Central Bank may prescribe individual firms to be a credit institution for the purposes of that Act. The amendment will provide that the authorisation category of "retail credit firms" will replace this provision, as such an individual listing will become redundant in light of the new authorisation requirements provided for in section 2 of the Bill. A limited technical change is also being made to the definition of "APR" in the 1995 Act as well as a cross reference to the Central Bank Act 1997.
Section 11 amends section 9 of the 1995 Act to make clear that the APR provisions shall apply to credit and hire purchase, including PCP, agreements and that the Central Bank may, by regulation, amend the method of calculating the APR in respect of credit or hire purchase agreements.
Section 12 amends section 12 of the 1995 Act to provide that a contravention of Part IIA of that Act constitutes an offence.
Section 13 inserts a new Part IIA, which comprises sections 28A and 28B, into the 1995 Act. The purpose of these new sections is to confirm and extend a provision in the Act that limits the cost to consumers of credit provided by certain retail credit firms to 23% APR. Accordingly, section 28A provides that, in respect of a credit agreement, other than a moneylending agreement, that falls within the scope of the 1995 Act, the APR on the agreement shall not be greater than 23%. It also provides that a creditor shall not be entitled to enforce a credit agreement against a consumer where this requirement is not met except where a court is satisfied that a failure to comply with such a requirement is not deliberate and has not prejudiced the consumer and that it would be just and equitable to decide that the agreement shall be enforceable.
Section 28B provides that the requirements, as contained in section 28A in respect of credit agreements, will also apply to hire purchase agreements. Section 14 inserts a new requirement in section 58 of the Consumer Credit Act 1995 to provide that the hire purchase agreements shall, along with other information specified in that section, state the APR. This enables confirmation that a hire purchase agreement complies with the new section 28B. No such amendment is needed for credit agreements because they already require the statement of APR under the Act.
Section 15 amends section 3 of the Central Bank (Supervision and Enforcement) Act 2013 to provide that a "hirer" in respect of a hire purchase or personal contract plan, PCP, or consumer-hire agreement shall be a "customer" for the purposes of that Act. Section 16 amends section 2 of the Financial Services and Pensions Ombudsman Act 2017 to provide that a "consumer" for the purposes of that Act includes a consumer who was in respect of, inter alia, a hire purchase, including PCP, or a consumer hire agreement, a customer of the financial services provider in the case in which a credit servicing firm undertakes credit servicing in respect of that agreement. Section 17 sets out the Short Title and provides for commencement provisions.
This Bill tackles a gap in consumer protection identified in the Tutty report in the protections available to consumers entering into hire purchase and PCP agreements, as well as those entering into indirect credit agreements.