Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I move amendment No. 20:

In page 6, after line 42, to insert the following:“Obligation on credit servicing firm and holder of legal title to credit

5. The Central Bank Act 1997 is amended by inserting the following section after section 34F (inserted by section 4):

“34G. (1) A credit servicing firm shall not, on its own behalf or on behalf of, or on the instructions of, a person who holds the legal title to credit granted under a credit agreement, take or fail to take an action, if the taking of or the failure to take the action would otherwise be a prescribed contravention if a retail credit firm took or failed to take that action.

(2) A person who holds the legal title to credit granted under a credit agreement shall not instruct a credit servicing firm to take or fail to take an action, if the taking of or the failure to take the action would otherwise be a prescribed contravention if a retail credit firm took or failed to take that action.

(3) A person who contravenes subsection (2) commits an offence and is liable—

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months, or both, or

(b) on conviction on indictment, to a fine not exceeding €250,000 or imprisonment for a term not exceeding 5 years, or both.”.”.

The purpose of the legislation has, at all times, been to protect the borrower. The Minister for Finance has listened carefully to the comments made on Second Stage and the new section addresses the concerns that were raised relating to the relationship between the owner of the credit and credit servicing firm. We have already discussed the policy decision to regulate the credit servicing firm, which was considered to be the best way to protect the consumer, given that it is the credit servicing firm that is interacting with the consumer. However, in this amendment, we propose a statutory obligation that will ensure a credit servicing cannot do something or fail to do something which would be a prescribed contravention if performed or not performed by a retail credit firm and which prevents the owner of credit from instructing a regulated credit firm to perform such an action.

Under the terms of the amendment, if the unregulated owner instructs the credit servicing firm to do something which would be a prescribed contravention if undertaken by a retail credit firm, the credit servicing firm cannot implement such a decision. It is an offence by the unregulated owner to instruct the credit servicing firm to do this. We consider the obligation necessary to restore borrowers to the situation in which they were before the sale of a loan book when they were protected as they were dealing with the regulated financial service provider and, as such, would have been protected by the codes and the original lender not committing a prescribed contravention.

We are specifying an offence for the unregulated owner, while also ensuring that the breach cannot be implemented by the regulated servicer over which the Central Bank has oversight as a regulated entity. This will mean a quicker response to possible breaches. Furthermore, this oversight will allow the Central Bank to investigate cases in which an unregulated owner instructs a credit servicing firm to do something which would be a proscribed contravention if done by a retail credit firm. Such a breach is actionable by the Central Bank against the credit servicing firm. The holder of legal title could also be liable for credit servicing without authorisation under section 1(f) of the Bill. The obligation on the regulated credit servicing firm not to perform the action also means that the borrower has access to the Financial Services Ombudsman. This amendment was introduced to respond to legitimate issues raised on Second Stage and I hope it will be welcomed by members.