The Credit Reporting Act 2013, as amended, established a central credit information database in Ireland known as the Central Credit Register or the ‘CCR’.
All non-bank business lenders and non-bank leasing businesses, to include those involved in the aviation industry, will be required to fulfil certain financial services regulatory reporting obligations.
The CCR is managed by the Central Bank and its aim is to obtain greater visibility to the level and quantum of activities and patterns of lending and credit in the Irish economy.
Scope of the Act
The Act permits the Central Bank to implement the CCR in phases with focused effort on capturing particular segments of the market incrementally.
The Markets in Financial Instruments Act 2018 amended the definition of ‘credit’, the effect of which brings hire purchases, personal contract plans or ‘PCPs’ and asset financing (to include finance leases) where the value of the contract is €500 or more within the scope of the Act. The obligations introduced by this Act are therefore relevant to parties entering aircraft finance leases as lessors.
In particular to those involved in asset financing, the effect of the change means that there shall be a new layer of reporting to the Central Bank for qualifying businesses or CIPs who engage in ‘credit agreements’ which include entering into finance leases as lessors with Irish resident lessees or where such finance leases are governed by Irish law.
Under the Act, the obligation is placed on a CIP to register and report certain information to the Central Bank with financial and legal consequences for failure to comply.
Who is a ‘CIP’ / ‘CIS’?
Credit information providers or ‘CIPs’ include regulated financial service providers, NAMA, local authorities or any other persons providing qualifying credit to another person or entity. The particular persons or entities applying for or in receipt of credit are referred to as credit information subjects or ‘CISs’.
In the context of the aviation industry, CIPs include special purpose vehicles in structured finance transactions, corporate lenders and leasing companies.
The Central Bank has published guidance detailing a series of questions to be considered by prospective CIPs when considering whether it falls within the scope of the Act. It is recommended that independent legal advice is obtained if there is any doubt as to the application of the Act.
Registering as a CIP
Any prospective CIP may register with the Central Bank and thereafter obtain access to the ‘CCR Handbook’ as published by the Central Bank which includes detailed practical manuals, guidance documents and FAQs as to the operation of the CCR and the method of reporting. It is recommended that prospective CIPs familiarise themselves with the CCR Guidance with regard to timelines for registration.
Information to be submitted to the CCR
From 30 June 2019, a CIP will be required to obtain and report personal information about a CIS (i.e. a relevant lessee or customer) and the credit terms and conditions related to the qualifying ‘credit application’ or ‘credit agreement’ to the CCR on a monthly basis. Furthermore, the data on qualifying existing credit agreements in scope on that date must be reported to the CCR within 5 working days and every month thereafter.
The Act places positive obligations on a CIP to verify the identity of each CIS, ensure that the credit information obtained is accurate and complete and report any changes to a CIS’s personal information.
Duty to request a credit report
From 1 October 2019, a CIP shall be required to request a credit report from the CCR if a CIS applies for hire purchase, PCP or asset financing to the value of €2,000 or more.
As a finance lease is likely to satisfy the monetary criteria, an aircraft lessor will be obliged to request a credit report in relation to a lessee from the Central Bank in advance of entry into a finance aircraft lease. As the CCR collates personal information for each CIS, a credit report will show all entries of data as reported by various CIPs and as such will provide a ‘Single Borrower View’ of all qualifying credit agreements associated with that CIS.
Access to the CCR
The following entities are entitled to access the CCR to obtain a credit report:
- A CIP requesting a credit report when a CIS applies for a new credit application or when an entity is proposing to give a guarantee or indemnity in connection with a credit application
- A CIP requesting information relating to an existing credit agreement made by such CIP
- An existing CIP where the CIS (a) applies to have its existing credit agreement re-structured or (b) fails to comply with the obligations under the credit agreement (or related guarantee or indemnity) and the failure or breach has not been corrected, and
- Any CIS or another person with the consent of the applicable CIS
Consequences of non-compliance for aviation lenders and others
The Central Bank may issue directions, orders and/or prosecute offences under the Act.
If the Central Bank considers that a CIP has failed or is failing to adhere to any obligations under the Act, it may direct the CIP to take specified steps to comply with the obligation and apply to the High Court for an order requiring the CIP to comply with the direction.
If a CIP submits information to the CCR which it knows to be false or misleading or uses information in a credit report for a purpose other than one permitted by the Act, it will on conviction be guilty of an offence and liable to the following:
- on summary conviction, to a class A fine (up to €5,000) or imprisonment for a term not exceeding 6 months or both, or
- on conviction on indictment, to a fine or imprisonment for a term not exceeding 5 years or both
Implications for a CIP entering a finance lease as a lessor
- From 30 June 2019, a CIP must register with the Central Bank and report monthly to the CCR and provide all required personal and credit information relating to its customers’ finance leases.
- A CIP will be obliged to verify the credit information supplied to them by a CIS. This may result in companies implementing and adopting policies and procedures to ensure that they are capable of meeting statutory verification obligations.
- A CIP will have a duty to ensure the preservation of commercially sensitive customer information and to safeguard this duty of confidentiality when collating and submitting this data to the Central Bank. Only information specified and required by the Act should be submitted.
- A CIP must inform CISs of their rights under the Act and including their duty to provide information to the CCR.
- From 1 October 2019, a CIP will be obliged to consult the CCR to obtain a credit report before entering into a finance lease with Irish resident lessees or otherwise where Irish law governs the finance lease.
- A CIP not engaged in any new lending, or who has ceased lending, but who retains an existing portfolio of qualifying credit agreements, in force as at 30 June 2019, is required to register and report the relevant information to the CCR.
- The conditions precedent to a secured financing facility agreement or finance lease may need to be amended to include a specific reference to the obligation of a CIP (a lessor) to obtain a credit report from the Central Bank to ensure that it is compliant with Irish laws.
- The Central Bank will have visibility over the levels of activity of CIPs and CISs and details of its customer base. As a public regulatory body such information may be accessible by other interested parties pursuant to freedom of information laws and other statutory disclosure regimes.
Implications for a CIS as a lessee party to a finance lease
- A CIS does not have to engage or carry out any action or otherwise implement any actions, procedures or policies to comply with the Act.
- A CIS may request a copy of its credit report from the Central Bank.
- A CIS may also apply to the Central Bank to amend information held on the CCR on the grounds that it is inaccurate, incomplete or not up to date.
- A potential adverse consequence of the CCR is that a credit report may provide a CIP with information not usually requested by the CIP as part of its corporate due diligence process. Consequently, as the Central Bank is a public body, this information may then be accessible on request by other interested parties or subject to statutory centralised reporting.