Thursday, 7 November 2019
Department of Finance
I have been advised by the Central Bank of Ireland (the Central Bank) that when a consumer takes out a loan from a regulated lender (“the original lender”) it is subject to all the relevant Irish and EU consumer protections. Most loan agreements include a clause that allows the original lender to sell the loan on to another firm. When a loan is sold, the relevant Irish and EU consumer protections continue to apply.
Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, which came into effect on 21 January 2019, if a loan is transferred, the holder of the legal title to the credit must now be authorised by the Central Bank as a credit servicing firm. Such 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, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013 (CCMA).
The Central Bank wrote to industry in August 2019 to set out its expectations of all firms in respect of loan sales, including the transfer of alternative repayment arrangements (ARAs). In order to ensure a culture where consumers’ best interests are protected, where a cooperating borrower is complying with the terms of an ARA and the loan is subsequently sold to another regulated entity, the new regulated entity cannot unilaterally change the ARA agreed between the borrower and the original lender. The new regulated entity should continue to honour an ARA until review, expiry or by agreement, as appropriate. This includes honouring timelines and terms and conditions for reviews of the ARA. In circumstances where the borrower’s circumstances have changed, any change to the ARA must comply with the CCMA and be appropriate, sustainable and proportionate to any change(s) in the borrower’s circumstances.
I wrote to the Joint Committee on Finance, Public Expenditure and Reform, and An Taoiseach on 25 September 2019 in relation to a number of issues raised during a meeting of that Committee. In my letter I stated that "where a co-operating borrower is complying with the terms of an ARA put in place, and the loan is subsequently sold to another regulated entity, the new regulated entity cannot unilaterally change the loan contract as agreed between the borrower and the original lender.In short, anything binding on the original lender is binding on the purchaser and it should continue to honour an ARA that’s in place until review and/or expiry. Any breach of contract would give rise to a liability to all the remedies available under contract law". I hope this clarifies the situation for the Deputy.