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Consumer Protection (Regulation of Credit Servicing Firms) Act 2015

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the Act”) came into force on 8th July 2015 and has the effect of ensuring that relevant borrowers whose loans are sold by a regulated entity to a third party maintain the same regulatory protections they had prior to the sale.

In particular, the Act ensures that the rights available under the Consumer Protection Code, the Central Bank’s Code of Conduct on Mortgage Arrears and the Code of Conduct for Business Lending to Small and Medium Enterprises (“the Codes”) are available to ‘relevant borrowers’ after their loan has been transferred to a third party, where, prior to the commencement of the Act, same would not have been available.

In brief, a ‘relevant borrower’ is a natural person within Ireland or a small or medium sized enterprise (“SME”) being an enterprise which employs fewer than 250 persons and which has an annual turnover not exceeding €50m and/or an annual balance sheet total not exceeding €43m.

Frequently when a loan or a portfolio of loans is sold by a bank/ lending institution, it is sold to an investment company that is not in the business of administering or managing loans.  Usually, investment companies outsource the administrative duties attached with servicing loans acquired (such as notifying a borrower of a change of interest rates, sending statements, dealing with complaints, managing or recovering the loan, etc) to another company or organisation.  The Act defines that other company as the ‘credit servicing firm’ (“the CSF”) and requires that entity to have an authorisation from the Central Bank of Ireland (“the CBI”) or other relevant bank.  If the investment company administers and services the loan itself, the investment company is treated as the CSF under the Act.  An authorisation from the CBI requires high service level standards to be met when interfacing with the relevant borrower and robust governance arrangements to be in place. Further details of the high service level standards and arrangements may be viewed here.

The Act goes some way towards protecting consumers, SMEs and individuals borrowing in their private capacity and is no doubt a welcome introduction for those whose loans have been transferred from established financial institution in Ireland to a relatively new non-resident investment company.
If you have any queries about the application of the above legislation to your business contact Deirdre Farrell, solicitor and AITI Chartered Tax Adviser, deirdre@amoryssolicitors.com, tel 01 213 59 40.