Bernard Durkan (Kildare North, Fine Gael)
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94. To ask the Minister for Finance the extent to which he can ensure compliance with full Irish and European banking regulations by the purchasers of distressed or other loan books from the banking sector; and if he will make a statement on the matter. [28005/16]

Michael Noonan (Limerick City, Fine Gael)
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As Minister for Finance, I am responsible for the development of the legal framework governing financial regulation which includes transposing into Irish law certain European Directives and Regulations.

This legal framework provides for Irish and EU consumer protections when a consumer takes out a loan from a regulated lender ("the original lender").If that loan is subsequently sold onto a regulated entity, the relevant Irish and EU consumer protections continue to apply.

In the past, if the original lender sold a loan to another person who was not regulated by the Central Bank ("an unregulated firm"), the consumer could lose the protections they previously had under the various Central Bank Statutory Codes of Conduct. In July 2015, the Consumer Protection (Regulation of Credit Servicing) Act 2015 ("the 2015 Act") was introduced to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm.

Under the 2015 Act if the firm who bought the loans from the original lender is an unregulated firm, then the loans must be serviced by a 'credit servicing firm' (Credit Servicing Firms are typically firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities). Credit Servicing Firms are required to obtain authorisation from the Central Bank in order to conduct credit servicing activities as defined in the 2015 Act.As a result, all firms who either currently operate in this area or intend to operate in this area (and meet the definition of a Credit Servicing Firm) require authorisation by the Central Bank.  

Credit servicing firms must act in accordance with Irish financial services law that applies to 'regulated financial service providers'. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank including;

- the Consumer Protection Code 2012 ('the Code');

- the Code of Conduct on Mortgage Arrears 2013 ('the CCMA');

- the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Small and Medium-Sized Enterprises) Regulations 2015;

- the Minimum Competency Code 2011 ('the MCC');

- Part V of the Central Bank Act 1997; and

- Fitness and Probity Regulations and Standards issued under Part 3 of the Central Bank Reform Act 2010.

I would note that if a firm is servicing a portfolio of loans on behalf of a regulated lender then they do not need to be separately authorised by the Central Bank as a credit servicing firm, as this arrangement is covered under existing rules covering outsourcing that apply to all regulated financial services firms.

In addition, where the purchasers of distressed or other loan books are a financial institution (either Irish or European) they are subject to Capital Requirements Directive IV (CRD IV) which was transposed into Irish law by S.I. 158/2014 - European Union (Capital Requirements) Regulations 2014. It is the responsibility of the relevant competent authority to ensure that any entity is meeting its obligations under CRD IV, including those related to loans held on the entity's balance sheet.