Written answers

Monday, 11 September 2017

Department of Finance

Consumer Protection

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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168. To ask the Minister for Finance his plans to ensure that mortgage holders, tenants and SMEs that have loans or credit from non-bank lenders or vulture funds are fully protected; if he will consider extending the provisions of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 in this regard; and if he will make a statement on the matter. [38043/17]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy will be aware, the Consumer Protection (Regulation of Credit Servicing Firms) Act, 2015 was enacted in July 2015.  It was introduced by the previous Government to fill the consumer protection gap where loans were sold by the original lender to an unregulated firm.  The Act introduced a regulatory regime for a new type of entity called a 'credit servicing firm'.  Credit Servicing Firms are now subject to the provisions of Irish financial services law that apply to 'regulated financial service providers'.

Under the Act, purchasers of loan books must either be regulated by the Central Bank themselves or else the loans must be serviced by a credit servicing firm that is regulated by the Central Bank.  The significant point is that the regulation is focussed at the point of contact with the customer.  Therefore relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes (such as the Consumer Protection Code, Code of Conduct on Mortgage Arrears) issued by the Central Bank of Ireland and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 which came into operation in July 2016.  It is also important to highlight 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 original contract.

The Central Bank of Ireland’s SME Lending Regulations (the Regulations) came into effect and apply to regulated entities from 1 July last, except for credit unions who are required to comply since 1 January 2017.  The Regulations aim to strengthen protections for SMEs from the existing SME Code in place, while also facilitating access to credit by introducing specific new additional requirements that regulated lenders must comply with.

The Regulations introduce specific requirements for regulated lenders (and credit servicing firms where relevant), including:

- Giving SME borrowers greater transparency around the application process;

- Providing SME borrowers with reasons for declining credit, in writing, that are specific to their application;

- Providing greater protections for guarantors;

- Contacting SME borrowers who have been in arrears for 15 working days;

- Warning SME borrowers if they are in danger of being classified as not co-operating; and

- Expanding the grounds for appeal and setting up an internal appeals panel.

The Central Bank has published a short guide for SMEs and guarantors on the protections available for them under the Regulations which is available on the Central Bank website.

The SME Regulations apply to all regulated financial services providers providing credit to SMEs in Ireland.  By virtue of the Credit Servicing Act, this means these protections also apply where the loan was granted by a regulated entity but has since been transferred to an unregulated entity, and is being serviced by a credit servicing firm.

I would highlight that tenant relations are governed by multiple pieces of legislation mainly under the aegis of my colleague, the Minister for Housing, Planning, Community and Local Government.

My Department will continue to keep all relevant legislation under review in order to ensure that borrowers whose loans have been sold are properly protected and do not lose any protections that they previously enjoyed. In addition, the Department of Finance expects that the Central Bank, as regulator of credit servicing firms, will be vigilant in this area and raise any specific instances where they have found consumers have not had their protections upheld or that their positions have been disadvantaged.

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