Enactment of The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015
22 September 2015
The Consumer Protection (Regulation Of Credit Servicing Firms) Act 2015 (the “Act”) was enacted on the 8 July 2015. The primary purpose of the Act is to protect borrowers whose loans are sold to an unregulated entity. The Act ensures that all regulatory protections, such as the Central Bank of Ireland (the “Central Bank”) codes will continue to be available to those borrowers.
Credit Servicing: A New Regulated Business
The Act introduces a new form of regulated business called “credit servicing”. Credit servicing is broadly defined, but in summary means the management or administration of loans to a “relevant borrower” i.e. consumers and SMEs. As the range of activities that fall within the definition of credit servicing is very broad, entities should give careful consideration as to whether they are engaged in these activities.
A “credit servicing firm” is a firm that carries out credit servicing on behalf of an unregulated entity or the owner of the legal title to a loan. An entity that acquires a relevant loan will need to apply for authorisation from the Central Bank, or if they delegate the credit servicing to another person, they will need to ensure that person has the appropriate authorisation.
Regulated financial services providers are automatically authorised to carry out credit servicing and will not need to apply to the Central Bank for an authorisation.
Under the Act, it is an offence to carry out credit servicing unless the person carrying out that activity has obtained an authorisation from the Central Bank.
Unregulated entities engaged in credit servicing in Ireland must now apply to the Central Bank for authorisation. If an entity was carrying out credit servicing prior to the coming into force of the Act, then it has a period of three months to apply for authorisation. Any entity currently undertaking credit servicing may continue this business until its application has been approved or refused. It must apply for this authorisation by 8 October 2015.
An entity that is involved in credit servicing should review all of their activities to clarify if they come within the Act. Any entity that performs credit servicing without the necessary authorisation should apply to the Central Bank by 8 October 2015 for authorisation.
The Act gives further protection to consumers and credit servicing firms will need to be aware of and comply with all requirements of the Acts and the Central Bank codes.
The Central Bank is currently undertaking a consultation process on the authorisation requirements and standards for credit servicing firms. This consultation process will close on 30 September 2015. The Central Bank has also published an interim from of application form and a guide to applying to receive authorisation as a CSF.
For more information, please contact a member of our Financial Services team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.