INTRODUCTION
- The Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (the “Act”) was signed into law on 11 April 2022.
- The Act extends the scope of firms which are required to secure authorisation from the Central Bank of Ireland (the “CBI”) as a retail credit firm and as a credit servicing firm.
- In this briefing we provide:
- an overview of the extension of the scope of firms requiring authorisation as a retail credit firm; and
- a summary of the requirements, process and timing for securing authorisation as a retail credit firm in Ireland.
EXTENSION OF SCOPE OF THE RETAIL CREDIT FIRM REGIME
- The Act extends the scope of firms requiring authorisation as a retail credit firm beyond those which already fall within the scope of the retail credit firm regime, namely, firms providing credit in the form of cash loans directly to natural persons in Ireland.
- The Act will extend the requirement to secure authorisation as
a retail credit firm to:
- providers of hire-purchase and consumer-hire agreements (including PCP agreements) to natural persons (with limited exceptions) in Ireland; and
- other providers of indirect credit (e.g. buy-now-pay-later agreements) to natural persons (with limited exceptions) in Ireland.
- The Act provides for transitional arrangements for firms which are brought within the scope of the retail credit firm authorisation requirement by the Act. Such firms will have three months from the commencement of the relevant provisions of the Act to apply to the CBI for authorisation as a retail credit firm.
- The CBI has requested that firms engaging in these activities which intend to apply for authorisation as a retail credit firm should signal their intention to seek authorisation to the CBI as soon as possible by emailing rcf@centralbank.ie.
AUTHORISATION AS A RETAIL CREDIT FIRM - PROCESS AND TIMELINES
Stage |
Timeline |
| Initial preparation of application for authorisation | Up to 2-3 months may be required to prepare a sufficiently detailed application for submission to the CBI. |
| Optional pre-application meeting between CBI and applicant | The draft application should be at an advanced stage when this meeting takes place. |
| Key information check | Within a further 10 working days, the CBI assesses whether the application submission contains the key information and documentation required to progress to the assessment stage. |
| Submission of individual questionnaires (“IQs”) | The applicant then has 20 working days to submit all IQs and Garda Vetting Form. |
| Assessment phase | The CBI has committed to completing the assessment phase within 90 working days of receipt of the completed application. However, if the CBI seeks further information, this 90 day ‘clock' is paused until such information is received by the CBI. |
| Notification of assessment | The CBI will notify the applicant of whether its assessment of the application is favourable or not. A further round of submissions may be required from the applicant. |
| Notification of decision in respect of the application | The CBI's final decision in respect of the application is made (i.e. approval, approval subject to conditions, or refusal). |
MAIN FEATURES OF THE APPLICATION
- Fully completed and signed application form.
- Business plan.
- Programme of operations.
- Structural organisation.
- Financial information.
- Compliance procedures.
- Outsourcing arrangements and oversight (where applicable).
- Fitness and probity of directors and managers.
- Shareholders/members (including qualifying shareholders).
- Regulatory background (where applicable)
MAIN PRINCIPLES OF THE CBI'S CONSUMER PROTECTION CODE 2012
- In March 2022 the CBI confirmed its intention to broaden the scope of the Consumer Protection Code 2012 (as amended) (the Code) to bring the types of firms which will require authorisation as a retail credit firm under the Act within the scope of the Code.
- Regulated entities which are subject to the Code are required to comply with the “letter and spirit” of the Code which provides that a regulated entity must, in all its dealings with customers act honestly, fairly and professionally in the best interests of its customers and the integrity of the market.
- Regulated entities must also act with due skill, care and diligence in the best interests of their customers and must not recklessly, negligently or deliberately mislead a customer as to the advantages or disadvantages of any product or service.
- Firms must also ensure they have and employ the resources, policies and procedures, systems, control checks and staff training necessary for compliance with the Code.
- Firms must provide customers with all relevant information including in relation to charges.
- Firms must correct errors and handle complaints speedily, efficiently and fairly, avoid conflicts of interests and must not exert undue pressure or influence on customers.
- The Code also imposes requirements in relation to outsourced activities and prohibits firms from preventing access to basic financial services without prejudice to firms' legitimate commercial aims.
- Firms must ensure that they gather and record sufficient information about the consumer and assess whether the product is suitable for that consumer.
KEY ISSUES FOR THE APPLICANTS
- SUBSTANCE IN IRELAND
“Mind and management” must be based in Ireland including board meetings and heads of certain senior management functions (finance, legal, compliance, risk) located in Ireland. - OUTSOURCING
Firms must demonstrate adequate supervision and oversight of outsourced functions through comprehensive outsourcing agreements which are compliant with regulatory requirements. - SHAREHOLDERS
Detailed information will be required regarding qualifying shareholders, including direct, indirect, legal and beneficial qualifying shareholders all the way up the chain of ownership. - CONDUCT OF BUSINESS AND SAFEGUARDING CLIENT
FUNDS
Firms must evidence compliance with Irish regulatory conduct of business rules and minimum standards for safeguarding client funds.
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.
