Following the enactment in July 2015 of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (the “2015 Act”), the Central Bank has published its Authorisation Requirements and Standards for Credit Servicing Firms (the “Requirements”).
The primary purpose of the 2015 Act is the protection of consumers on the sale of loan portfolios to unregulated entities.
All applicant credit servicing firms must first meet the standards set out by the Central Bank in the Requirements.
Part A of the Requirements sets out the conditions of authorisation which must be complied with on an on-going basis.
Part B of the Requirements consists of a non-exhaustive list of certain other applicable regulatory requirements.
In an attempt to streamline the application process, the Central Bank will afford applicants the opportunity of a ‘pre-application’ meeting whereby the applicant may raise queries or seek clarification in relation to the process.
A sample of the Requirements applicable to all applicants are set out below:
- Demonstrate that the applicant’s business structure is capable of supervision.
- Ensure that adequate professional indemnity insurance is in place.
- Demonstrate that the applicant is in a position to conduct its affairs in a manner which ensures that the best interests of its customers are protected.
- Ensure that adequate IT systems are in place to conduct its credit servicing business.
- Maintain an open and cooperative relationship with the Central Bank, to include, notifications of any breaches of the Requirements, the commencement of any legal proceedings and the provision of audited accounts.
- Notification of any material change in ownership and the proposed outsourcing of any activities which would impact on the credit servicing firm’s ability to meet all applicable regulatory requirements.
All applicants must demonstrate to the Central Bank how they meet each of the Requirements.
It is the responsibility of the credit servicing firm to ensure adherence to the following, non-exhaustive, list of legal and regulatory requirements:
- Consumer Protection Code 2012.
- Code of Conduct on Mortgage Arrears 2013.
- Code of Conduct for Business Lending to Small and Medium Enterprises 2012.
- Fitness and Probity requirements.
- Central Bank Act 1942 in relation to the annual levy charged by the Central Bank.
- Minimum Competency Code 2011.
Consequences of Non-Compliance
Failure to comply with any provision of the Act may result in the credit servicing firm being subjected to the Administrative Sanctions Procedure of the Central Bank and/or the revocation of its authorisation. Further, Section 35 of the Act provides that it is a criminal offence for the holder of an authorisation to fail to comply with the Requirements.
Credit Servicing Firms and Loan Owners
The credit servicing firm must now ensure that all regulatory requirements are met in accordance with the Requirements. This includes the credit servicing firm writing to any holder of legal title over loans for which it acts to inform them of the credit servicing firm’s obligations under financial services legislation, to include any applicable Codes of Conduct.
Credit Servicing Firms and Consumers
On the transfer of a loan book to an unregulated transferee, it is a requirement of the Consumer Protection Code that the consumer be notified of which regulated entity will be servicing the loan.
Credit servicing firms should review internal structures to ensure maximum compliance with the Requirements. The ability to immediately and comprehensively satisfy the standards required will result in an expedited authorisation process for credit servicing firms.