Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Deputy for his amendment and intervention. The occurrences he describes are totally unacceptable and the purpose of the legislation we are discussing is to ensure they will no longer be in accordance with law and will be prohibited under the terms of the Bill. The service provider, rather than the owner, interfaces with the customer who has the mortgage. In the legislation we are controlling the agencies that interact with mortgagees, but if the owner of the asset decides to do this, it will be treated as the provider and subject to the same regulation.

My briefing note on the amendment will explain the point more fully. The amendments are broadly aimed at the regulation of owners of credit. As I have made clear in previous discussions on this topic, this issue has been given much consideration. As I outlined on Second Stage, the best protection for consumers will be accorded if credit servicing firms, rather than owners, are regulated. My purpose is to regulate the activity of credit servicing and I do not propose to regulate ownership, unless the owner is undertaking activity which would result in a prescribed contravention if it were undertaken by a regulated firm. However, if the owner does not appoint a regulated credit servicing firm to service the credit, the owner must be authorised and regulated.

The purpose of the Bill is to ensure consumers retain the protections they had prior to the sale of their loans. The Bill will require entities dealing with consumers to be authorised by the Central Bank and subject to its codes of conduct. Dealing with a consumer is credit servicing and the definition of credit servicing is broad. Owners of loan books who deal directly with consumers, that is, those who are servicing their own loan books, will be regulated. Otherwise, they can have the loan book serviced by a regulated credit servicing firm. Either way, the entity dealing with the consumer will be regulated and this is the most appropriate and effective way to protect the consumer.

We spoke on Second Stage about the potential for a lacuna to develop if a foreign-based unregulated owner was to use a local credit servicing firm which was not regulated. It, therefore, became clear in the consultation process that if we were to protect consumers effectively, it was better to regulate the process of credit servicing as that was the customer-facing activity. In addition, in amendment No. 20 we are imposing a new statutory obligation on owners not to instruct a regulated credit servicing firm to do anything which would be a prescribed contravention if undertaken by a regulated retail credit firm. There is also an obligation on the credit servicing firm not to implement such an instruction.

This will prevent the owners from doing things we do not want them to do, and it will also ensure there is no way for such an instruction to be implemented. That is why I am not accepting the Deputy's amendments, but I accept the spirit in which he offers them. The credit servicing firm will be regulated, because it is the credit servicing firm that interacts with the person who has the mortgage. If the owner is passive and is working totally through the credit servicing firm, the owner does not enter into the regulatory space. If, on the other hand, the owner is not passive but acts as his own credit servicing firm, he is treated as a credit servicing firm and falls within this as a regulated entity. If the owner is a trust that is usually passive but on occasion becomes active and issues instructions to the credit servicing firm that is acting on its behalf, I would point to amendment No. 20, which we will come to later, which prohibits the owning entity from issuing any instruction which is one of the proscribed activities; therefore, we have it blocked out there as well. What we have done is now fully in line with the intentions the Deputy expressed, and the person with the mortgage is fully protected from the activities of the credit servicing firm and the owner.