Dáil Éireann Debate, Tuesday - 20 February 2024
210. Deputy Pearse Doherty asked the Minister for Finance if he is aware that loan owners (vulture funds) are not subject to the provisions of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 where they confer legal title of the loan to the credit servicing firms but retain beneficial ownership; and if he will make a statement on the matter. [7563/24]
Amharc ar fhreagra211. Deputy Pearse Doherty asked the Minister for Finance if he is aware that loan owners (vulture funds) are not required to be regulated when they maintain beneficial ownership of a loan but have conferred legal title of the loan to the credit servicing firms; and if he will make a statement on the matter. [7564/24]
Amharc ar fhreagraI propose to take Questions Nos. 210 and 211 together.
The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 made the activity of credit servicing a regulated activity and, as such, within the regulatory mandate of the Central Bank. Credit servicing includes the management and administration of credit agreements. Because credit servicing is a regulated activity, the consumer protection regulatory framework applies to the regulated firm and the relevant credit agreements serviced by these firms.
The 2015 Act also provided that any person who holds the legal title to credit granted under a credit agreement with a relevant borrower, and in respect of which credit servicing is not being undertaken by a person authorised to carry on credit servicing, also has to be regulated as a credit servicing firm.
Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, which came into effect in 2019, the activity of holding the legal title to credit granted under a relevant credit agreement and associated ownership activities also became credit servicing and accordingly a regulated activity.
As such, the consumer protection regulatory framework also applies to these firms from that date. The 2018 Act means that the Central Bank now also regulates the person who either holds legal title to a loan or has material rights to decide how a portfolio of loans is dealt with.
Also, under the 2018 Act, the determination of the overall strategy for the management and administration of a portfolio of credit agreements and the maintenance of control over key decisions relating to such a portfolio also became a credit servicing activity subject to regulation.
While credit servicing and holding the legal title to credit is a regulated activity, beneficial ownership – in and of itself - is not a regulated activity. Firms that are beneficial owners of credit agreements are therefore not within the regulatory remit of the Central Bank. However, because credit agreements held by beneficial owners also have a legal title owner and/or a credit servicer which are regulated, the credit agreements and borrowers are in scope of the overall consumer protection framework in place.
Where a fund acquires beneficial ownership but not legal ownership of a loan, they are generally entitled to income from the loan, but legal ownership and responsibility reside with the legal loan owner. The legal owner remains regulated and responsible for steps they take in respect of the loan and do not escape that responsibility because another entity retains beneficial ownership, or the right to income from the loan.
The overall consumer protection framework in place applies to legal title ownership and credit servicing activities, including determination of strategy and control of key decisions. Where a loan is sold or transferred, the protections that were available to borrowers prior to the transaction apply under the regulatory framework as set out above.
The consumer protection framework includes the Consumer Protection Code 2012, Code of Conduct for Mortgage Arrears 2013, Code of Conduct for Business Lending to Small & Medium Enterprises 2012 and Fitness and Probity Standards (including minimum competency requirements).
