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

I thank Deputy Michael McGrath for tabling the amendment and Deputies Sean Fleming and Tóibín for speaking to it. Although the issue was discussed fully on Committee Stage, I am glad to have the opportunity to reassure the House again on the matter. The model which currently operates for regulation by the Central Bank is that a single entity is responsible and answerable to the bank for actions it undertakes or which are undertaken on its behalf. Given that the model works well, there is no reason to change it here, with the single exception of the need to address loan books which are sold. If a firm is undertaking credit servicing solely or exclusively for a firm which is already regulated, such as a bank based in Ireland, it does not need to be regulated itself. The regulated firm is answerable to the Central Bank for any actions it takes or that are undertaken on its behalf. The regulated financial service provider must ensure firms undertaking services on its behalf follow all relevant regulations. In this scenario, the borrower is adequately protected given that there is always one regulated entity dealing with its loan and, therefore, subject to Central Bank supervision. As such, I do not consider that the amendment is needed.

One might, therefore, ask why we do not regulate the owner outside Ireland that purchases new loans. I have already outlined that the policy decision was taken to regulate the credit servicing firm rather than the owner. This 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. I fully appreciate that the model is different where the loan book is sold and the new owner does not have to be regulated if the servicing is undertaken by a regulated credit servicing firm. This reflects the new scenario of loans being sold and the new owner not necessarily needing to get involved in the relevant regulation unless it becomes actively involved in managing the loan. It is likely that firms which are credit servicing exclusively for a regulated firm, and therefore do not need to regulated, may nonetheless decide to seek Central Bank authorisation in order possibly to expand their customer bases.

In section 5 of the Bill, which was added on Committee Stage, there is a statutory obligation which strengthens borrowers' protections again. It will ensure that a credit servicing firm cannot do something, or fail to do something, which would be a prescribed contravention if performed or not performed by a regulated retail credit firm. This obligation also 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. For those reasons, I am not accepting the amendment.

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