Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 210 and 211 together.

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 made the activity of credit servicing a regulated activity and, as such, within the regulatory mandate of the Central Bank. Credit servicing includes the management and administration of credit agreements. Because credit servicing is a regulated activity, the consumer protection regulatory framework applies to the regulated firm and the relevant credit agreements serviced by these firms.

The 2015 Act also provided that any person who holds the legal title to credit granted under a credit agreement with a relevant borrower, and in respect of which credit servicing is not being undertaken by a person authorised to carry on credit servicing, also has to be regulated as a credit servicing firm.

Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, which came into effect in 2019, the activity of holding the legal title to credit granted under a relevant credit agreement and associated ownership activities also became credit servicing and accordingly a regulated activity.

As such, the consumer protection regulatory framework also applies to these firms from that date. The 2018 Act means that the Central Bank now also regulates the person who either holds legal title to a loan or has material rights to decide how a portfolio of loans is dealt with.

Also, under the 2018 Act, the determination of the overall strategy for the management and administration of a portfolio of credit agreements and the maintenance of control over key decisions relating to such a portfolio also became a credit servicing activity subject to regulation.

While credit servicing and holding the legal title to credit is a regulated activity, beneficial ownership – in and of itself - is not a regulated activity. Firms that are beneficial owners of credit agreements are therefore not within the regulatory remit of the Central Bank. However, because credit agreements held by beneficial owners also have a legal title owner and/or a credit servicer which are regulated, the credit agreements and borrowers are in scope of the overall consumer protection framework in place.

Where a fund acquires beneficial ownership but not legal ownership of a loan, they are generally entitled to income from the loan, but legal ownership and responsibility reside with the legal loan owner. The legal owner remains regulated and responsible for steps they take in respect of the loan and do not escape that responsibility because another entity retains beneficial ownership, or the right to income from the loan.

The overall consumer protection framework in place applies to legal title ownership and credit servicing activities, including determination of strategy and control of key decisions. Where a loan is sold or transferred, the protections that were available to borrowers prior to the transaction apply under the regulatory framework as set out above.

The consumer protection framework includes the Consumer Protection Code 2012, Code of Conduct for Mortgage Arrears 2013, Code of Conduct for Business Lending to Small & Medium Enterprises 2012 and Fitness and Probity Standards (including minimum competency requirements).

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 212 to 214, inclusive, together.

The Financial Services and Pensions Ombudsman (FSPO) plays a vital role for consumers of financial services in Ireland, as part of a robust financial consumer protection framework.

The statutory functions of the FSPO are set out in the Financial Services and Pensions Ombudsman Act 2017. This governing legislation empowers the FSPO to investigate individual complaints made by consumers (including small businesses) about the conduct of regulated financial service providers. The FSPO has no jurisdiction to investigate complaints about the conduct of financial service providers that are not authorised by the Central Bank of Ireland.

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 introduced a new regulatory regime for “credit servicing firms”, which were considered new entity types by the Central Bank of Ireland.

When a complaint is received, it is reviewed by FSPO staff to determine the identity of the provider that is responsible for the conduct which is the subject of the complaint. In circumstances where the date of conduct occurred prior to 8 July 2015, the FSPO conducts a review to assess whether the financial service provider was authorised by the Central Bank of Ireland at the time of the conduct giving rise to the complaint.

• If the provider was authorised, the FSPO deems that the complaint can be maintained and can progress through the FSPO’s complaint resolution process.
• If the provider was not authorised, the FSPO deems that the complaint is not eligible, as it does not fall within the jurisdiction of the FSPO, pursuant to the 2017 Act.

In 2018, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 further expanded the definition of credit servicing to include ownership of legal title to credit granted under a credit agreement, as well as other activities associated with ownership of legal title. On the basis of the 2018 Act, an entity purchasing a loan (and legal title), is now required to be authorised and regulated by the Central Bank of Ireland.

When a complaint is received against the background of a sale to an entity that was previously unregulated, but is now regulated as a consequence of the 2018 Act, it is reviewed by FSPO staff to determine the identity of the provider that is responsible for the conduct which is the subject of the complaint, to establish:

• whether the owner of the loan was authorised by the Central Bank of Ireland at the time of the conduct complained of, and if so, the complaint is noted to come within the jurisdiction of the FSPO and can be investigated.
• If the conduct complained of took place before the loan owner became authorised by the Central Bank of Ireland as a consequence of the 2018 Act, only such element of the complaint as concerns the credit servicing of the loan, by the credit servicing firm, can be progressed by way of a FSPO investigation, i.e. where the conduct complained of relates to “managing and administering” a credit agreement as defined in the 2015 Act.

I am currently seeking legal advice to ensure clarity on the scope of the FSPO's jurisdiction, with the aim of ensuring access to the FSPO as an important part of a robust consumer protection framework.

I have always advocated for the broadest regulatory and consumer protection regime possible, including access to the FSPO, and I have made clear that I am willing to introduce further legislative amendments should that be necessary and possible.

My officials are engaging as a matter of priority with the FSPO and the Central Bank on the issues raised, and to obtain the necessary legal advice.

The FSPO informs me that the data sought by the Deputy in respect to complaints in each of the years 2013 to 2023 is not readily available, because of the way in which the FSPO collects complaint data.

In some instances, even though one element of complaint cannot proceed to investigation, the complaint file nevertheless remains open and active because another element of complaint is being progressed by the FSPO.

However, the FSPO has undertaken a manual exercise, to provide some insight on the volume of identifiable complaints where a consumer in the period from July 2015 – December 2019, was unable to progress a complaint through this Office, within the following parameters:

• The file was closed by the Financial Services Ombudsman Bureau/FSPO over that period,
• The complaint was made about the conduct of a credit servicing firm, or an SPV/Non-Bank Loan Owner, or the provider was not recorded on the FSPO system (which happens when the provider is not regulated), and
• The closure was noted as a jurisdictional reason concerning the provider (as distinct from the eligibility of the complainant) or the closure reason was categorised as a time limit issue

In the context of almost 20,000 file closures over that period, and within those parameters, the FSPO identified 101 complaints for manual review and having undertaken that review, 42 complaint files were noted to have closed for reasons including but not limited to the conduct complained of having taken place at a time that the relevant provider was not regulated by the Central Bank of Ireland.

The FSPO continues to review the data for the rest of the period indicated, i.e. 2020-2023, but owing to the time constraints for the response, this is not yet available.