The Revised Code
On 19 October 2011, the Central Bank of Ireland published a revised Consumer Protection Code to come into effect from 1 January 2012. The code, first introduced in August 2006, sets out various protections for the customers of financial institutions in Ireland.
Application and Scope of the Code
The code applies to, and is binding upon, regulated entities including credit institutions, insurance undertakings, investment firms and investment intermediaries (but not including credit unions, other than when acting as insurance intermediaries, or licensed moneylenders which are governed by a separate code). The general principles set out at the beginning of the code apply to all customers of such entities in the State, but the remainder of the code applies only to such customers who fall within the definition of "consumer" under the code (a natural or legal person or group of persons, including small businesses) and a number of provisions are specifically restricted to those customers who fall within the definition of "personal consumer" (a natural person acting outside his or her business, trade or profession).
Certain provisions of the code do not apply to the extent that the loan is a mortgage loan to which the Code of Conduct for Mortgage Arrears applies. (The Code of Conduct for Mortgage Arrears, introduced in 2009 and updated with effect from 1 January 2011, applies to mortgage loans secured by the borrower's primary residence.)
The changes to take effect on 1 January 2012 follow feedback received during two public consultations co-ordinated by the Central Bank. The amendments are aimed at increasing and strengthening consumer protection in a number of areas. Among the key amendments are the following:
- The revised code sets out various additional provisions for personal consumers who are in arrears under any loan (including credit card loans, personal loans and buy-to-let mortgages), which are similar in part to those protections introduced by the Code of Conduct on Mortgage Arrears in respect of primary residences. In particular, where an account is in arrears, a regulated entity must seek to agree an approach with the consumer, and must provide more detailed information to the consumer than previously required, for example in relation to any impact which continued non-payment might have on other accounts held by the consumer with that regulated entity. Where the consumer makes an offer of a revised repayment arrangement that is rejected by the regulated entity, the regulated entity must formally document its reasons for rejecting the offer and communicate these to the consumer. There are also additional provisions in relation to the level of contact and communications from the regulated entity which must be "proportionate and not excessive", with unsolicited communications with a consumer in arrears limited to three only in any calendar month. However the revised code stops short of the Code of Conduct on Mortgage Arrears in terms of the protections it sets out for such loans. For example, there is no provision preventing institutions from taking legal action for repossession within a certain time period following default, as there is in place for primary residences under the Code of Conduct on Mortgage Arrears.
- There are a host of new provisions aimed at promoting more responsible lending. Unsolicited personal or "doorstep" visits for the purpose of selling financial products to consumers are now banned. Further regulation is introduced around the information which regulated entities must gather about a particular consumer for the purposes of assessing whether a product or service is suitable for the consumer. Regulated entities can no longer accept self-certified declarations of income. Product producers must give detailed information to intermediaries in relation to the investment products they sell on behalf of the product producers in order to assist the intermediaries in assessing whether a product is suitable for a consumer. The revised code also now includes a new provision that the judgement of employees of regulated entities as to whether a particular product or service is suitable for a consumer, and whether it meets their needs, must not be allowed to be influenced or impaired by employee remuneration arrangements.
- More rigorous requirements are imposed in the area of errors and complaints resolution. Up-to-date logs must be maintained of all errors and complaints. An analysis of the patterns of complaints from consumers must be undertaken by the entity on a regular basis and highlighted to senior management, and this analysis must include an investigation into whether complaints indicate an isolated issue or a more widespread concern.
Enforcing Compliance with the Code
The Central Bank stated in its press release in relation to the revised code that it is committed to ongoing monitoring of compliance with the code by institutions and has increased its resources in order to deal with this. It also states however that, for the first six months of the new code, it will be cognisant of the fact that institutions will need to roll out new systems and procedures in order to ensure compliance with the revised provisions.
The Central Bank derives the power to issue this revised code from various legislation - the Central Bank Act 1989, the Investment Intermediaries Act 1995, the Consumer Credit Act 1995 and the Insurance Act 1989 - and can administer sanctions for a contravention of the code under Part IIIC of the Central Bank Act 1942.
Links and Contacts
For a link to the new Consumer Protection Code 2012, please click here.
For a link to the feedback document published following the Central Bank's consultation papers, please click here.
For a link to the Central Bank press release on the new code, please click here.