The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, which is in operation since July, aims to provide protection for borrowers in circumstances where loans portfolios are sold on by financial institutions. The Act intends to fill the gap in regulation where loans are transferred from a regulated entity to an unregulated entity and it extends protection to small and medium-sized enterprises (SMEs) as well as to consumers.
A new category of regulated entity known as “credit servicing firms”, has been created. Credit servicing firms are firms engaged in managing or administering credit agreements. If the lender is an unregulated entity and the borrower is a consumer or an SME, the firm undertaking credit servicing activities in connection with the loan must be authorised by the Central Bank and is subject to its supervisory and enforcement procedures. The relevant borrowers will also have the protection of the Central Bank’s codes of conduct, including the Consumer Protection Code and the Codes of Conduct on mortgage arrears and on lending to SMEs. In addition, the relevant borrowers will have access to the Financial Service Ombudsman complaints procedure.
The Central Bank is currently developing authorisation requirements and on-going standards for credit servicing firms to meet. Under the current proposals, in addition to complying with the relevant Codes, credit servicing firms will be required to demonstrate that they are in a position to conduct their affairs in a manner that ensures that the best interests of the borrowers are protected and will be required to have robust governance arrangements in place.