Proposed Change to Credit Servicing Regulatory Regime
Amid the expected sale by several major Irish financial institutions of their respective non-performing loan books, there is increasing political pressure on the Government to revise the existing credit servicing regulatory regime implemented pursuant to the terms of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (the “2015 Act”). The regime set out in the 2015 Act requires that, where a loan is purchased by an unregulated entity from a regulated financial services provider, the entity who engages in the servicing (i.e. management and administration, as opposed to ownership) of the loan be authorised to do so by the Central Bank of Ireland. On 22 February a private members’ bill was introduced in the Dáil by Fianna Fáil Deputy Michael McGrath which proposed changes to the existing regulatory regime by way of amendments to existing legislation, to include the 2015 Act. The new bill is entitled the Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018 (the “2018 Bill”). Under the proposed changes to the existing regime contained in the 2018 Bill the most significant is the requirement that all “credit agreement owners” be licensed and regulated by the Central Bank of Ireland. A credit agreement owner is defined in the 2018 Bill as:
“a person (other than the National Asset Management Agency) who:
- holds legal title or credit in respect of a credit agreement or a portfolio of credit agreements and or,
- determines the overall strategy for the management and administration of a credit agreements and or,
- determines the interest rate of the credit agreements and or,
- makes the key decisions relating to the credit agreements and or,
- enables the undertaking of credit servicing by another person or,
- enforces credit agreements.”
It should be noted that the requirement for authorisation will not apply to entities that acquire loans by way of “securitisation”, however that term is not defined in the 2018 Bill.
Other noteworthy changes to the existing regulatory regime proposed by the 2018 Bill include:
- Providing the Central Bank of Ireland with the authority to direct that appropriate redress be made to customers where in circumstances where an immaterial breach of loan conditions has been used to engineer a default.
- The imposition of certain restrictions on entities that acquire loans where the borrower operates as a competitor to that entity.
- The requirement that the credit agreement owner provide certain information to a borrower pertaining to their loan within 30 days of the acquisition of that loan by the credit agreement owner.
As of 6 March the 2018 Bill was referred to a Dáil Select Committee. It has been indicated by the Minister for Finance that significant amendments may be required to the existing text before the 2018 Bill moves to the Committee Stage.