OREANDA-NEWS. July 15, 2015. The Central Bank of Ireland today issues a Consultation Paper (CP 96) on proposed authorisation requirements and standards for Credit Servicing Firms.

Following the enactment of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 on 8 July 2015, the Central Bank is now the competent authority for the authorisation and supervision of Credit Servicing Firms. These are firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities.

The key proposed authorisation requirements and on-going standards for Credit Servicing Firms include:

  • Credit Servicing Firms must comply with all relevant requirements of financial services legislation, including the Central Bank’s 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).
  • A Credit Servicing Firm is required to demonstrate that it is in a position to conduct its affairs in a manner that ensures that the best interests of borrowers are protected.
  • A Credit Servicing Firm is required to have robust governance arrangements in place including effective processes with well defined, transparent and consistent lines of responsibility and adequate controls to monitor compliance with legislative and regulatory requirements. 
  • A Credit Servicing Firm is required to demonstrate how its agreement in place with the loan owner enables it to fully comply with its obligations under financial services legislation.

Director of Consumer Protection, Bernard Sheridan, said: “Through these requirements, we aim to put in place a robust regulatory regime to ensure that credit servicing activities are carried out in a fair and professional manner, where the best interests of consumers are protected”.

CP96 is open for submissions from interested parties until 30 September 2015. Submissions can be made to creditservicingfirms@centralbank.ie.

Further information in respect of the authorisation process can be found here, along with an Application Form for firms wishing to apply for authorisation.

Notes to editors

1. Any person who acts as a Credit Servicing Firm should consider, in conjunction with their legal advisors, if their activities fall within the scope of the legislation and therefore will require to be authorised by the Central Bank. Section 34F of the legislation provides that a person carrying on the business of a Credit Servicing Firm immediately before the coming into operation of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015  is taken to be authorised to carry on the business of a Credit Servicing Firm until the Central Bank has granted or refused authorisation to the person, provided that the person applies to the Central Bank under section 30 of the Central Bank Act 1997 for authorisation, in a form specified by the Central Bank, no later than 3 months after that commencement.

2. The authorisation process requires individuals seeking authorisation to be of good repute and to have appropriate experience and competence as satisfying Fitness and Probity requirements will be required.

3. Firms which complete and submit an Application Form to the Central Bank by 8 October and have been providing credit servicing prior to the commencement of the legislation will stand authorised on an interim basis subject to a decision being taken on the firm’s application.

4. A Credit Servicing Firm is defined as:
a. a person (other than the National Asset Management Agency or a NAMA group entity (within the meaning of the National Asset Management Agency Act 2009) who:

  • I. undertakes credit servicing other than on behalf of a regulated financial service provider authorised, by the Bank or an authority that performs functions in an EEA country that are comparable to the functions performed by the Bank, to provide credit in the State, or
  • ii. holds the legal title to credit granted under a credit agreement in respect of which credit servicing is not being undertaken by a person authorised to carry on the business of a credit servicing firm, and

    b. a regulated financial service provider taken to be authorised to carry on the business of a Credit Servicing Firm by virtue of subsection (3).

5. Credit Servicing, in relation to a credit agreement, means managing or administering the credit agreement, including:
a. notifying the relevant borrower of changes in interest rates or in payments due under the credit agreement or other matters of which the credit agreement requires the relevant borrower to be notified,
b. taking any necessary steps for the purposes of collecting or recovering payments due under the credit agreement from the relevant borrower,
c. managing or administering any of the following:

  • i. repayments under the credit agreement;
  • ii. any charges imposed on the relevant borrower under the credit agreement;
  • iii. any errors made in relation to the credit agreement;
  • iv. any complaints made by the relevant borrower;
  • v. information or records relating to the relevant borrower in respect of the credit agreement;
  • vi. the process by which a relevant borrower's financial difficulties are addressed;
  • vii. any alternative arrangements for repayment or other restructuring;
  • viii. assessment of the relevant borrower’s financial circumstances and ability to repay under the credit agreement, or

    d. communicating with the relevant borrower in respect of any of the matters referred to in paragraphs (a) to (c).