Wednesday, 23 September 2015
Department of Finance
Financial Services Regulation
The Deputy will no doubt be aware that borrowers whose loans are sold are protected by the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 which was enacted in July this year. The purpose of the Act is to ensure that consumers retain the protections they had prior to the sale of their loan. The Act requires entities dealing with the consumer to be authorised by the Central Bank and subject to its Codes of Conduct. Dealing with the consumer is credit servicing and the definition of credit servicing is broad. Owners of loan books who deal directly with consumers, that is, who are servicing their own loan books, will be regulated. Otherwise they can have the loan book serviced by a regulated credit servicing firm.
All consumer and relevant SME loans sold by regulated financial institutions are covered by this Act. Borrowers are therefore restored to the protections they previously had, such as the Code of Conduct on Mortgage Arrears (CCMA), the Consumer Protection Code and the Code of Conduct for Business Lending to Small and Medium Enterprises. Borrowers who previously had access to the Financial Services Ombudsman also have this right restored by this legislation.
The Central Bank is currently undertaking a consultation process on the Authorisation Requirements and Standards for Credit Servicing Firms and Consequential Amendments to its Codes which closes on 30th September. Included in its proposals are provisions which will ensure that a regulated lender who sells loans subject to the 2012 Consumer Protection Code to an unregulated transferee must, ahead of that sale, identify the firm who will provide the regulated activity of credit servicing for those loans post the sale and provide the requisite notification of their details to the Central Bank and the customer in accordance with Provision 3.11 of the Code.
In addition, it should be noted that the transfer of a loan from one entity to another does not change the terms of the contract or the borrower's rights and obligations under the contract. If a borrower considers that an attempt to change the terms of the contract unilaterally is being made, they should consider seeking independent legal advice. In addition or alternatively, they could make a complaint to the regulated lender or regulated credit servicing firm as appropriate and progress to the Financial Services Ombudsman if the complaint is not resolved to their satisfaction.