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

I thank Deputies Michael McGrath and Denis Naughten for tabling thee amendments and all of the Deputies who have contributed to the debate thus far.

On amendment No. 2, I understand the Deputy's intention is to impose regulation on firms which take an active role in managing their relationships with borrowers, even when a borrower is not in financial difficulty. However, I am glad to be able to inform him that the amendment is unnecessary because the definition of credit servicing is broad enough to capture what is proposed. What we all want to do is strengthen protection for consumers whose loans are with unregulated entities by restoring them to the position they were in before the loans were sold.

We have been careful to ensure clarity in the Bill on what is and is not credit servicing. There is a specific set of activities outlined in the Bill which, if performed, are considered to be credit servicing. If a firm is carrying out any one or all of these activities on behalf of an unregulated owner, it must be authorised as a credit servicing firm. The definition of credit servicing is deliberately broad and means "managing or administering the credit agreement". It includes a non-exhaustive list of specific actions which are credit servicing, one of which is managing or administering any alternative arrangement for repayment or other restructuring. In addition, owners of loan books who deal directly with relevant borrowers, namely, those servicing their own loan books, will be regulated. Otherwise, they can have the loan book serviced by a regulated credit servicing firm. A situation could also arise where an owner appoints a regulated credit servicer but is also actively involved in managing or administering the loan and, therefore, needs to be authorised. The transfer of a loan from one entity to another does not change the terms of the contract and the borrower's rights and obligations under the contract cannot be changed without agreement. Enforcement of security on a loan is subject to the conditions of the contract and can only happen in accordance with it. The sale of the loan book does not impact on this.

On page 4, lines 17 and 18, of the Bill credit servicing is specified as any alternative arrangement for repayment or other restructuring. What the Deputy is suggesting is that this be limited to situations where a credit agreement was in financial difficulty. If the proposed amendment were to be accepted, it would restrict the action of managing or administering any alternative arrangement for repayment or other restructuring to those restructuring arrangements which resulted from financial difficulties. This would have the unintended consequence of managing or administering any alternative arrangement for repayment or other restructuring in respect of an agreement that was not in financial difficulties not being included in the definition. Therefore, it could be argued that this activity was not credit servicing and did not need to be authorised because it was not a regulated activity. That would weaken the position of the borrower. We want to ensure borrowers, whether in financial difficulty, retain their current protections. The Bill, as drafted, provides for this. I am unable to accept the amendment because it would not strengthen the position of the borrower, as appears to be the intention.

Similar arguments apply to amendment No. 5. Enforcement only arises where a lender goes to court for failure to comply with the terms of a credit agreement. As I have said, the transfer of a loan from one entity to another does not change the terms of the contract and the borrower's rights and obligations under it cannot be changed without the agreement of both sides. We have deliberately left only a limited number of actions which an owner can perform without requiring authorisation. These can only be performed if they would not amount to a prescribed contravention if performed by a regulated entity.

We have also strengthened the protections for borrowers by way of inclusion of the new statutory obligation in section 5 which prevents an owner from instructing a credit servicing firm to do anything that would be a prescribed contravention and also prevents the credit servicing firm from carrying out such an instruction. Essentially, we have cornered owners on this issue in that they must be regulated or appoint a regulated credit servicing firm to service their loans. On this basis, I am unable to accept the amendments.

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