The Deputy will be aware that the overall regulatory framework provides a significant number of protections and supports for borrowers in or facing mortgage arrears, in recognition of the distress and, in the case of mortgages secured on a borrower’s primary residence, the vulnerability of borrowers at risk of losing their home. Most loan agreements include a clause that allows the original lender to sell the loan on to another firm. When a loan is sold, the relevant Irish and EU consumer protections continue to apply.
All regulated firms, including banks, retail credit and credit servicing firms (CSFs), are obliged to comply with the Consumer Protection Code 2012 (the Code) and the Code of Conduct on Mortgage Arrears 2013 (the CCMA) in addition to a range of other provisions of Irish financial services law which are outlined more fully below. Collectively, these provide a strong consumer protection framework, providing rules with which regulated firms operating in Ireland must comply by law. The Central Bank has reviewed, advocated for and strengthened, where necessary, these rules in order to ensure that the regulatory framework remains fit for purpose and continues to ensure the protection of all consumers in their dealings with regulated firms.
The Consumer Protection (Regulation of Credit Servicing Firms) 2015 amended the scope of the Central Bank Act 1997 and brought ‘credit servicing’ under Central Bank regulation and supervision. This resulted in a significant strengthening of consumer protection for borrowers whereby all consumer protection obligations would travel with loans, if they were sold by a bank to a new non-bank owner. Under the 2015 legislation, the new loan owners themselves did not directly fall to be regulated; rather it was the company appointed to ‘service’ those loans by the loan owner.
The Consumer Protection (Regulation of Credit Servicing Firms) 2018, which came into effect on 21 January 2019, further expanded the scope of the 1997 Act and has now also brought the loan owners (holders of legal title to the credit) directly under Central Bank regulation and supervision, and within the scope of the relevant consumer protection framework.
Since 2015, CSFs have been subject to the provisions of Irish financial services law that apply to regulated financial service providers, including, but not limited to:
- The Consumer Protection Code
- the CCMA
- the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015,
- the Fitness and Probity Regime,
- the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Minimum Competency Regulations 2017, and
- the Minimum Competency Code 2017
Authorisation standards for credit servicing firms
The Central Bank also published Authorisation Requirements and Standards (the Standards) in December 2015. These Standards require that CSFs must be able to demonstrate that they are in a position to conduct their affairs in a manner that ensures the best interests of their customers are protected. The Standards were imposed on CSFs as a condition of authorisation and must be complied with on an on-going basis.
In advance of the 2018 legislation coming into effect on 21 January 2019, the Central Bank updated and published the Standards to reflect the fact that loan owners now fall to be directly regulated. The Standards provide that a CSF must structure, organise and resource its business to ensure that it is in a position to demonstrate that it can comply with applicable regulatory requirements. This includes ensuring that adequate and effective control of the firm rests in the State, that all firm records are available to the Central Bank, and that the firm is not outsourcing activities to any extent that would impact on its ability to meet all applicable regulatory requirements.
The Standards also contain additional requirements for CSFs which hold the legal title to credit granted under a credit agreement and which engage in associated ownership activities. These requirements include that each CSF must have effective processes for the development, implementation and oversight of the firm’s overall strategy for the management and administration of its portfolios of credit agreements and the maintenance of control over key decisions relating to those portfolios.
The Central Bank’s approach to supervision of the credit-servicing sector is underpinned by an expectation of high standards and a professional and consumer-focused approach to compliance.
It is the clear expectation of both the Government and the Central Bank that lenders engage effectively and sympathetically with distressed borrowers to deliver appropriate and sustainable solutions and treat borrowers at all times, including in response to COVID-19, in line with Central Bank’s robust consumer protection framework. I will continue to work with the Central Bank, and indeed also maintain contact with the main lenders, to ensure that appropriate arrangements and supports will be available for borrowers and other financial customers who continue to be impacted by COVID-19.