Brian Cowen (Laois-Offaly, Fianna Fail)

I explained in my initial contribution that this section deals with the introduction of further legislative arrangements to cover these firms in respect of home reversion products and so on. We are adding to what is already provided for under Part V of the Central Bank Act 1997. Part V already provides the framework for the supervision of regulated businesses and applies to bureaux de change and money transmitters. The amendments will add home reversion and retail credit to the activities regulated under Part V by including them in the definition of regulated business, which they have not been up to now. We cover that point by defining home reversion and retail credit firms in the Bill.

The definitions of credit and some of the components of credit are also included as they are needed to support the definitions of retail credit firms and are based on existing statutory definitions or EU directives. For the purpose of regulation, a retail credit firm is defined as one which is not already regulated as a bank or other authorised lender and is in the business of making loans to persons who would fall within the protection offered by the consumer protection code if dealing with a regulated financial service provider.

Home reversion schemes involve the sale of a share in real property, usually a residence, which can only be realised by the purchaser on the death or vacation of the property by the vendor. Though not strictly speaking a credit product, they have a similar effect to equity release or lifetime mortgages and are offered by some of the same providers to a similar clientele so they should be subject to similar regulation. The regulatory requirements of retail credit and home reversion firms are different from those for bureaux de change or money transmission businesses, particularly in the area of consumer protection and competency. As a result, the Financial Regulator may impose conditions or requirements on authorised firms which are not explicitly provided for in the 1997 Act in respect of all the other regulated businesses so we are adding to the regulatory provisions, not just with Part V in respect of these operations, but with further requirements that can be imposed by the Financial Regulator, if necessary. That means adding four new sections to the Central Bank Act 1997 to deal with these concerns. Far from there being a reduced regulatory burden the Bill will provide more ammunition because the products and firms in question, which were previously outside the regulatory framework, are now inside where they can be dealt with accordingly.

The four new sections to which I referred are based on provisions in other legislation, such as the Investment Intermediaries Act 1995. I have referred on previous occasions to the extra flexibility and power these provisions give the Financial Regulator. For example, the regulator can grant different classes of authorisation, conduct a thorough investigation of applicants, set out in some detail the criteria a firm will have to satisfy to obtain or retain authorisation and have regard to the relevant supervisory requirement imposed on the firm. Other sections enable the Financial Regulator to impose requirements in the interests of consumer protection and orderly regulation, including powers to oblige firms to provide specific information in respect of consumer credit and home reversion agreements and to extend the consumer protection code to retail credit and home reversion firms.

We are making every effort to ensure these firms come under the regulatory regime in an effective way and to give the Financial Regulator the powers by which it can deal with issues as they arise so that when firms obtain regulatory approvals and authorisations they do so in a way that best ensures they conduct their business in accordance with the consumer protection codes that are in place.

The application of the consumer protection code will strengthen the initial relationship of due care and diligence. If securitisation or other funding mechanisms operated by a regulated retail credit firm are likely to adversely affect the consumer or the orderly conduct of financial service business, the provisions of the 1997 Act, together with the amendments now being introduced in this Bill, will enable the Financial Regulator to deal with them. I assume that is the concern which Deputies have with regard to the section.

Deputy Burton said that regulation needed to apply to lending offered to sectors such as farming and the definitions of "credit" and of "retail credit firm" are sufficient to capture this. Following the amendment, farmers and other unincorporated traders will be covered by the consumer protection code and the Financial Services Ombudsman scheme in their dealings with non-deposit-taking lenders, as they are in their dealings with all other regulated financial service providers.

The consumer protection code sets down both general principles and detailed rules in respect of the conduct of business by financial institutions. Its principles require such institutions to act fairly, honestly and professionally in the best interests of customers. Detailed rules cover matters such as advertising, identifying customers' needs and providing information. The Financial Regulator can investigate breaches of the code and impose sanctions under Part III of the Central Bank Act 1997 for any such breaches. The process of authorisation means that retail credit firms and home reversion firms will become, as I said, regulated financial service providers for the purposes of the code and therefore come within the umbrella of regulatory supervision which we believe to be in the public interest. We are trying in this Bill to provide the necessary regulation in view of matters which have occurred elsewhere, though they are not germane to this country.

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