As the Deputy is aware, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 deliberately did not include owners of credit within its remit. However, 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, code of conduct on mortgage arrears, code of conduct for business lending to small and medium enterprises and the minimum competency code, 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 comes into operation on 1 July 2016.
I introduced amendments on Committee Stage in the Dáil to ensure owners could not do anything which a regulated firm could not do. Those amendments ensure 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. They also prevent the owner of credit from instructing a regulated credit firm to perform such an action.
Contravention of these provisions could lead to a fine not exceeding €250,000 or imprisonment for a term not exceeding five years, or both. Therefore the borrower is protected because the owner cannot give an instruction that would breach the rules. Also, the instruction cannot be implemented by the regulated credit servicer, over whom the Central Bank has oversight as a regulated entity. If the owner does not appoint a regulated credit servicing firm to service the credit or the owner wants to undertake some of the functions of credit servicing, then the owner himself or herself must be authorised and regulated.
Given that the owner is prevented from asking the credit servicing firm to do things which would be prohibited and the regulated credit servicing firm cannot perform the action in any case, it is not clear what additional benefit would accrue by imposing the regulatory requirements on the owner.
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It is clear that the additional regulatory requirements would put additional costs on owners and could inhibit people from taking over ownership of loans or reduce the price that they are willing to pay for them. The legislation deliberately regulated the interface with the borrower. The sale 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 programme for Government provided that, "We will provide greater protection for mortgage holders and tenants and SMEs whose loans have been transferred to non-regulated entities, vulture funds". This is a year one action in the programme. The detailed nature of exactly the greater protections to be provided to mortgage holders, tenants and SMEs whose loans have been transferred to non-regulated entities will be decided after further consideration of the issues. The nature of proposed changes will decide who in the Government will take the lead responsibility for the implementation of these protections. I do not consider that extending the scope of the credit servicing legislation to owners is the way to go.
