Dáil Éireann Debate, Thursday - 26 April 2018
61. Deputy Michael McGrath asked the Minister for Finance if there are legal or regulatory barriers that prevent a licensed credit institution here lending to a person or company that may have had an issue with their credit history in the past; and if he will make a statement on the matter. [18394/18]
Amharc ar fhreagraThe decision to grant or refuse credit is a commercial decision on the part of a regulated entity and there is no legal or regulatory barrier that prevents a licensed credit institution from lending to a person or company that may have an issue with their credit history. However, lenders are required to conduct thorough affordability or creditworthiness assessments. There are a number of rules/regulations in place in this regard which must be complied with by regulated firms when providing credit.
Prior to offering a product or service, a regulated entity must gather and record sufficient information from the consumer before offering, recommending, arranging or providing a product or service appropriate to that consumer. The level of information gathered should be appropriate to the nature and complexity of the product or service being sought by the consumer, but must be to a level that allows the regulated entity to provide a professional service and must include details of the consumer’s needs and objectives, personal circumstances and financial situation.
The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 transposed the Mortgage Credit Directive. The Mortgage Credit Regulations impose certain obligations regarding assessment of the creditworthiness of consumers. The Regulations provide that before concluding a mortgage credit agreement, a lender must make a thorough assessment of the consumer’s creditworthiness. The assessment must take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement. The lender must ensure that the procedures and information on which the assessment is based are established, documented and maintained. The Regulations provide that a lender should only make credit available to a consumer where the result of the creditworthiness assessment indicates that the consumer’s obligations resulting from the credit agreement are likely to be met in the manner required under that agreement. The assessment of creditworthiness must be carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which are necessary, sufficient and proportionate.
The European Communities (Consumer Credit Agreements) Regulations 2010 apply to the provision of certain credit for amounts between €200 and €75,000. Part 2 of the Regulations include an obligation on creditors to assess the creditworthiness of consumers, on the basis of sufficient information obtained from the consumer and where necessary, on the basis of a consultation of the relevant database.
With regard to the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) Regulations 2015 (the SME Regulations) provide that, prior to entering into a credit facility agreement with a micro or small enterprise, a regulated entity must gather and record sufficient information from the borrower to assess whether that credit is suitable to that borrower. The level of information gathered must be:
- appropriate to the nature and complexity of the credit facility agreement being sought by the borrower, and
- to a level that allows the regulated entity to assess the borrower’s likely ability to repay the debt over the duration of the agreement.
The SME Regulations provide that a regulated entity can offer a credit facility agreement to a micro or small enterprise borrower only where it has satisfied itself on reasonable grounds that:
- the credit is suitable to that borrower, and
- the borrower will likely be able to repay the debt over the duration of the credit facility agreement
It should also be noted that the Central Bank’s Consumer Protection Code 2012 (the Code) must be complied with by all regulated entities providing financial services in the State. The Code requires assessments of affordability to be carried out when providing credit to consumers. These requirements apply to credit agreements to consumers as defined in the Code which do not fall within the scope of the various Regulations outlined above.
A regulated entity must take account of the result of the affordability assessment when deciding whether a personal consumer is likely to be able to repay the debt for that amount and duration in the manner required under the credit agreement.
