Key provisions of the Credit Reporting Act 2013 (the CRA) have taken effect from 30 June 2017. Most lenders will then begin submitting information to the new Central Credit Register (the Register) operated by the Central Bank of Ireland (the Central Bank). The information collection will be implemented on a phased basis between 2017 and 2018, with an initial focus on collecting information relating to consumer lending, followed by obtaining information relating to business lending.
The CRA establishes a central database for credit information, which will enable the Central Bank to create a complete credit report for relevant borrowers. It will also provide lenders with a greater level of information to assist them in assessing credit applications. Whilst the CRA was passed in 2013, specific rules on the type and level of information to be captured by the Register were only published in late 2016.
The legislation requires both regulated and unregulated lenders to provide specific information to the Central Bank on their borrowers (individuals and businesses) and persons providing guarantees or indemnities in respect of such lending. "Credit" is broadly defined in the CRA and includes cash loans, deferred payments and other forms of financial accommodation. It is important to note that the CRA will only apply where a borrower is resident in the State at the time the credit application or agreement is made, or where the credit agreement would be, or is, subject to Irish law.
What information will be held on the Register?
All information provided to the Central Bank by lenders will be made available on the Register. The Register will also contain additional details, such as information on the borrower's credit performance over a set period and details on any borrower default. Access to the Register will be restricted and the level of accessible information will depend on who is applying to the Register and for what purpose. Information from the Register may only be used for specified purposes, for example, to verify information as part of a credit application.
The CRA imposes a number of obligations on lenders.
- Reporting requirements: Lenders must provide specific personal and credit information in respect of credit exceeding €500, as set out in legislation. The information to be provided varies depending on whether it relates to an individual or a corporate, and a borrower or a guarantor.
- Compulsory consultation of the Register: Lenders must consult the Register before determining a credit application exceeding €2,000 in value. However, this is not an immediate requirement and it is expected that the Register will begin producing credit reports for consumer lending after 30 September 2018. Lenders also have a power to access the information held on the Register in other situations from time to time, for example where a credit application is less than that €2,000 or where a borrower has requested a change to the nature or term of the credit agreement, guarantee or indemnity.
- Verification of borrower information: The CRA obliges lenders to take "all reasonable steps" to verify the identity of a borrower and individuals who propose providing a guarantee or indemnity. It also requires lenders to verify the accuracy and completeness of credit information provided by a borrower. Detailed legislation has been published setting out how a lender can verify such information. This is broadly similar to identity verification in an anti-money laundering context (for example, borrowers should produce a valid passport or driving licence to verify their identity).
- Engagement with borrowers: Lenders must ensure that borrowers and guarantors are made aware of their rights and duties under the CRA, and must inform them if the lender reasonably believes that the borrower or guarantor has been impersonated. Qualifying credit application forms must include a prescribed notice that the CRA requires the provision of certain information to the Central Bank.
Borrowers will be also to request their credit report from the Register, and request correction of any inaccuracies.
The initial collection of data relates to consumer lending and captures credit applications made, and credit agreements in force, from 30 June 2017. Lenders will also need to provide details on existing back book customers if the credit agreements meet certain criteria and the agreements remain outstanding at the time the report is made. Lenders will have until 31 December 2017 to provide the information required in respect of consumer lending. It is anticipated information relating to business lending will be collected between 31 March 2018 and 30 September 2018. Periodic reporting requirements will then be imposed by the Central Bank on a phased basis.
The CRA's requirements pose practical and legal issues for lenders. The legislation is prescriptive in the type of information which must be provided to the Central Bank and lenders will potentially need to update systems to ensure that all required information is captured and capable of reproduction. Lenders should also be mindful of information requirements introduced by the CRA, such as the obligation to include a specific notice on its credit application forms. This will require lenders to ensure that their customer-facing documents are updated accordingly. Lenders should consider whether they are entitled to benefit from any of the exemptions under the CRA; for example, the CRA does not apply to credit provided in connection with facilitating the purchase of goods or services from the person by whom the credit is provided.