Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 3:

In page 4, lines 24 to 26, to delete all words from and including “or” in line 24 down to and including line 26 and substitute the following:“(c) a credit servicing firm taken to be authorised to carry on the business of a credit servicing firm by virtue of subsection (4), or

(d) a credit servicing firm referred to in paragraph (b) of section 34FA(1) that undertakes, on behalf of a person referred to in the said section 34FA, credit servicing within the meaning of subparagraphs (i), (ii) and (iii)(I) to (VIII) of paragraph (b) and paragraph (c) of the definition of ‘credit servicing’ in section 28(1);”,”.

As I mentioned earlier, these amendments are aimed at addressing a concern of the Central Bank which was notified to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach. The amendments ensure that an owner who is taken to be authorised on a transitional basis will still have to continue to employ an authorised credit servicing firm to undertake the existing regulated activities. The owner will be transitionally authorised to undertake the newly regulated activities provided for in the Bill: in paragraph (a) holding the legal title to credit granted under the credit agreement; in paragraph (b)(iii)(IX) determination of the overall strategy for the management and administration of a portfolio of credit agreements; and under paragraph (b)(iii)(X) maintenance of control over key decisions relating to such portfolio.

The existing authorised credit servicing firm will continue to undertake the other activities, that is, under subparagraphs (i), (ii) and (iii)(I) to (VIII) of paragraph (b) and paragraph (c) of the definition of "credit servicing". I do not propose to list all of those out but they are the activities that are currently regulated by the Central Bank.

The change in amendment No. 3 adds to the definition of "credit servicing firm" to include a firm that is undertaking the current activities on behalf of a transitionally authorised firm. That is needed because the definition of a "credit servicing firm" means a person who undertakes credit servicing other than on behalf of a regulated financial service provider. The new owner will be a transitionally authorised financial services provider, so we need to make sure that the credit servicing firm operating on their behalf still needs authorisation.

Under the new paragraph (b) of section 34FA inserted by amendment No. 7, the owner can only get the transitional authorisation provided these activities are being undertaken by an authorised credit servicing firm. The owner will be subject to the supervision of the Central Bank in respect of the new activities and the bank will be able to impose administrative sanctions on the owner, as it can on any regulated entity.

In essence, these two amendment are to ensure that during the transitional provisions there are no gaps in the regulation.

That is the key measure. The idea is that during the transition period a fund will be regulated for the new functions that are covered. These include holding the legal title for determining the overall strategy for the management and administration of the portfolio and maintaining control over key decisions relating to the portfolio. During the transition, the fund will be regulated for those functions. However, until the transition is over and the fund becomes fully regulated in accordance with the full set of provisions under the credit servicing legislation, the existing agent has to continue to be regulated and authorised in full. The idea is to ensure there is no gap.

I wish to be clear with people whose loans have already been sold by banks to vulture funds: these provisions will apply. They will be regulated. In that respect it is retrospective, because it deals with loans already transferred. The loan owners will now be required to become transitionally authorised and then, ultimately, fully authorised.

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