Batt O'Keeffe (Cork North West, Fianna Fail)

The primary purpose of section 19 is to enable the Financial Regulator to regulate and oversee the conduct of business by firms in the non-deposit-taking lending sector, which lend to the general public and to small businesses. It does so by bringing non-deposit-taking lenders engaged in retail lending within the Financial Regulator's authorisation and ongoing supervision regime by way of an amendment to Part V of the Central Bank Act 1997.

As indicated on Second Stage, the technical drafting of this legislation has presented significant legal and technical challenges, particularly in the areas of the definition of credit and retail credit firms. The purpose of amendments Nos. 1 to 4, inclusive, is to address these difficulties in a way that ensures the Financial Regulator can focus as a matter of priority on any activities in respect of which there is a legitimate concern. In addition, it ensures other entities, or credit activities, which are not intended to be the subject of these measures and about which the same concerns do not arise are not inadvertently brought into the scope of this aspect of financial regulation.

To achieve this, "credit" in page 20 is being redefined as credit extended to individuals, including consumers. This captures the core business of the firms that are subsequently defined as "retail credit firms" for the purpose of their regulation. In page 21, I propose to delete lines 6 to 44, inclusive, and in page 22, to delete lines 1 to 11, inclusive. These interpretations are no longer required as they refer to forms of credit now excluded from the definition.

While it may be desirable to have a more comprehensive definition of credit extended to individuals and to encompass retail credit extended to small companies, it is not possible to do so without including a much wider range of wholesale financial transactions, which are not the focus of the current measure. This would also open the risk that the Financial Regulator's time and resources would be taken up in dealing with applications and inquiries from people and firms who are not the objects of the proposed regulation. It would divert the Financial Regulator's resources from the core concern of extending the level of protection available to customers of firms dealing in cash loans and mortgage lending to vulnerable individuals. It could also have the effect of constraining the normal availability of commercial and business-to-business credit provision to the detriment of the business sector and the economy generally.

Several amendments to definitions are required on foot of the necessity to limit the scope to natural persons. The definition of "retail credit firm" in page 22 therefore focuses on firms that are in the business of providing credit, as defined, to individuals. However, it also includes those firms that have, for whatever reason, sought prescription as "credit institutions" under the Consumer Credit Act 1995. This clarifies that credit provided by these lenders — which may be of a wider range than consumer credit — is governed by the general provisions applicable to consumer credit. It is appropriate, therefore, that they fall under the definition included in this amendment. The definition excludes several categories that are otherwise authorised or do not need authorisation on the basis that they do not interact with the primary customer or offer credit to the public.

The amendment on page 22, after line 21, is also consequently necessary to ensure the scope of section 19 is confined to consumer lending. The amendment inserts a new provision to allow the Financial Regulator to exempt from the requirement to be authorised individuals and categories of person whose transactions might in some circumstances appear similar to retail credit but which do not pose any real regulatory or customer protection concerns.

These new definitions will bring non-deposit lenders engaged in retail lending into the regulatory system, particularly those firms and lending business in respect of which regulatory concerns have been raised, in a targeted, effective and proportionate manner without giving rise to unintended adverse impacts. The Department of Finance will continue to liaise with the Financial Regulator as this new regime is implemented and to monitor developments in this area to ensure an appropriate regulatory regime is in place.