Ireland: New Developments On The Regulation Of Credit Servicing Firms Bill

Last Updated: 10 June 2015
Article by Josh Hogan, Ambrose Loughlin, Adrian Farrell and Darragh Murphy

On Wednesday, 27 May 2015, the Select Sub-Committee on Finance voted in favour of a number of amendments to the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 ("Amended Bill"), which was published on 15 January last. As a result of one of these amendments, the Amended Bill no longer covers credit agreements originally entered into between small and medium enterprises ("SMEs") and unregulated lenders.

Overview of the Original Bill

As set out in our briefing note of 16 January 2015, the primary purpose of the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 ("Original Bill") is to address concerns regarding the loss of regulatory protections for borrowers when credit agreements entered into with regulated entities are subsequently sold to unregulated entities.

Consumers and SMEs who borrow from regulated entities enjoy a number of regulatory protections including those provided under the Central Bank of Ireland's ("Central Bank") Code of Conduct on Mortgage Arrears, the Consumer Protection Code and the Code of Conduct for Business Lending to Small and Medium Enterprises ("Codes"). In addition, eligible customers of a regulated entity have the right to complain to the Financial Services Ombudsman ("FSO") about that entity's conduct. However, some or all of these protections may be lost if the relevant loan book is sold by a regulated entity to an unregulated one. Moreover, customers of unregulated entities do not have access to the FSO. The Original Bill ensures that borrowers retain all of their regulatory protections in the event of a loan sale from a regulated entity to an unregulated one, by regulating "credit servicing firms". These are firms which manage or administer the credit agreement with the consumer or SME on behalf of the unregulated purchaser on an outsourced basis. An entity that does not outsource the activity of credit servicing will itself have to be regulated to conduct that activity. In addition, the Original Bill provides that eligible borrowers whose credit agreements are being serviced will have a right of access to the FSO. The Original Bill does not contain any exemptions for loans to SPVs, syndicated lending or intragroup lending.

SME Lending

As mentioned, the central purpose of the legislation is to ensure that a person who borrows from a regulated entity does not lose regulatory protections following the sale of a loan book to an unregulated entity. In other words, the legislation seeks to preserve the status quo which existed at the time the credit agreement was entered into.

However, the Original Bill took a more extensive approach, which gave rise to concerns in terms of its possible impact on SME lending. Specifically, the Original Bill applied to all credit agreements with SMEs irrespective of whether or not the original lender was a regulated financial service provider. In essence this would mean that credit agreements between SMEs and unregulated lenders would need to be serviced by a regulated entity and would be subject to regulatory protections.

Had the Original Bill been enacted, it would have significantly affected the legal landscape for much corporate lending in Ireland. Amongst other things, it was widely feared that the Original Bill could deter unregulated lenders from providing loans to SMEs by making it more difficult for these lenders to service and sell those loans. In addition, it would no longer have been possible for an unregulated lender to advance credit to SMEs without appointing a third party regulated servicer.

The Amended Bill

Following the 27 May meeting of the Select Sub-Committee on Finance, the Original Bill has been amended in several respects. While some of these amendments are textual in nature, others are more significant. In particular, as mentioned, the Amended Bill excludes from its scope loans originally entered into between SMEs and unregulated lenders. The Amended Bill is only concerned with credit agreements entered into between an SME and a financial service provider authorised to provide credit in the State.

In addition, the Amended Bill defines the term "credit servicing firm" so as to include all regulated financial service providers authorised by the Bank or by a comparable authority in an EEA country to provide credit in the State. This means that, to the extent that a credit servicing firm is subject to specific requirements, these will also apply to all such financial service providers (eg, banks and retail credit firms).

Finally, the Amended Bill contains a new Section 34G to be inserted into the Central Bank Act 1997. According to that section, a credit servicing firm must not take or fail to take an action that would be a prescribed contravention if a retail credit firm took or failed to take that action. In addition, it is an offence for a person who holds the legal title to credit granted under a credit agreement to instruct a credit servicing firm to take or fail to take an action, if it would be a prescribed contravention for a retail credit firm to take or fail to take that action. A prescribed contravention includes a contravention of the Codes.

Comment and Next Steps

The exclusion of loans entered into between SMEs and unregulated lenders from the scope of the Amended Bill appears to be fully in accordance with our understanding of the purpose of the legislation, namely to address concerns regarding the loss of regulatory protections for borrowers when loans originally entered into between the borrower and a regulated entity are subsequently acquired by an unregulated entity. Nevertheless, some concerns remain as to the Amended Bill's scope. For example, unlike the SME Code, the Amended Bill does not carve-out from its scope lending to financial institutions, syndicated, club or multi-lender transactions or lending to SPVs.

The Amended Bill will now continue its passage through the Houses of the Oireachtas. Once the legislation comes into operation, a grand-fathering regime will apply to existing credit servicers subject to making an application to the Central Bank for authorisation no later than three months thereafter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.