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Financial Services Regulation

Dáil Éireann Debate, Tuesday - 13 November 2012

Tuesday, 13 November 2012

Ceisteanna (237)

Kevin Humphreys

Ceist:

237. Deputy Kevin Humphreys asked the Minister for Finance if the rule of 78 method of calculating interest regulated is banned here for hire purchase or leasing agreements, loans or mortgages; if he will specify where it can or cannot be used on financial transactions; if he will indicate the legislation and sections therein that regulate this area; and if he will make a statement on the matter. [49798/12]

Amharc ar fhreagra

Freagraí scríofa

The Central Bank has advised me that Section 52 (1) of Part V of the Consumer Credit Act 1995, as amended, states that "a consumer is entitled to discharge the consumer’s obligation under an agreement at any time before the time fixed by the agreement for its termination." This applies to any agreement other than a housing loan. Section 52 (3) of the Act states that “where the consumer exercises the entitlement, the creditor or owner shall allow a reduction in the total cost of credit under the agreement." Section 52 (6) of the Consumer Credit Act 1995, states that "the Minister for Finance may, after consulting the Bank, make a regulation prescribing a method or formula for calculating the reduction in the total cost of credit under agreements generally or any class of agreement." In the absence of such a regulation, the Rule of 78, which deals with agreements whose cost is calculated at the outset of the loan, is commonly used to calculate the amount of the rebate due in the event of the early repayment of the agreement.

However, since the introduction of the EC (Consumer Credit Agreements) Regulations 2010 (SI No. 281 of 2010) on 11 June 2010, Sections 52 and 53 of the Act will not apply to credit agreements entered into from that date, that fall within the scope of the Regulations. This is due to the dis-application of those sections by virtue of Regulation 4 of SI No. 281 of 2010. Regulation 4(2) dis-applies Part V of the Act to credit agreements that fall within the scope of the SI. Regulation 19 of SI No. 281 of 2010 sets out the requirements in relation to early repayment.

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