Lenders should prepare themselves for the next phase of credit reporting obligations, which will extend to credit advanced to non-consumer borrowers. The reporting of non-consumer credit to the central credit register (“CCR”) will commence on 31 March 2018. All in-scope lenders must report data on non-consumer credit to the CCR by 30 September 2018.
As set out in our previous briefings from October 2016 (here) and March 2017 (here), the Credit Reporting Act (the “CRA”) imposes obligations, primarily related to credit reporting and credit checking, on certain providers of credit referred to in the CRA as ‘credit information providers’ (“CIPs”). The CRA also confers certain rights on borrowers (and guarantors), known as ‘credit information subjects’.
Am I subject to the CRA?
CIPs are widely defined to include both regulated and unregulated lenders, credit unions, local authorities and NAMA. The only providers of credit who are out of scope are the Central Bank of Ireland (“CBI”), central banks of other countries and pawnbrokers.
Although the application of the CRA to CIPs is very wide, there are two principal limitations to its scope:
- an applicant for credit, or the person for whom credit is provided under the credit agreement, must be resident in Ireland; and/or
- the law governing the credit application or credit agreement must be Irish law.
Scope of credit in the CRA
“Credit” is broadly defined and includes a loan, deferred payment or other form of financial accommodation.
There are a limited number of exceptions to the definition of credit under the CRA, including:
- intra-group credit;
- inter-bank lending; and
- credit provided for facilitating the purchase of goods or services from the person by whom the credit is provided.
The CBI has confirmed that “credit provided for facilitating the purchase of goods or services” includes hire purchase agreements, personal contract plans, leasing agreements or any other type of credit agreement where the credit is being advanced by the owner of the financed good or service. Accordingly, these types of credit are currently outside scope of the CRA. However, the CBI has stated that it intends, subject to appropriate legislative amendment being made, to bring these credit agreements into scope.
Apart from the above exceptions (and subject to any specific CBI guidance - see further below), most forms of credit will be in scope.
“Phase 1” credit reporting commenced on 30 June 2017 and related to consumer borrowers only (ie natural persons acting outside the course of their trade business or profession).
“Phase 2” reporting will expand the scope of the CCR and apply reporting obligations to borrowers of all kinds (including corporates, partnerships and other business entities).
CIPs can report these credit agreements from 31 March 2018 but must report those agreements by 30 September 2018 (with the relevant information backdated to 31 March 2018).
Further CBI guidance on scope of “credit”
Any CIP registered with the CCR can access the lenders’ area of the CCR website which provides non-publically available guidance manuals for CIPs reporting data to the CCR.
The CBI published guidance available on the CCR website has indicated that the following types of credit are not in scope for Phase 2 credit reporting:
“credit advanced through alternative means, such as through bonds, derivatives or deposits”.
Post Phase 2 reporting
The CBI may bring guarantors into scope of the reporting regime at a later date. The CBI is yet to advise if and when this might happen.
Verification and information obligations
In addition to reporting obligations, the CRA and its implementing regulations impose a number of obligations on CIPs relating to verification.
The CRA requires a CIP to take ‘all reasonable steps’ to:
(i) verify the identity of a credit information subject; and
(ii) ensure the accuracy of the personal and credit information to be provided to the CCR.
CIPs must also take ‘reasonable steps’ to verify the accuracy and completeness of the information obtained from the credit information subject.
The policy aim of the new credit reporting regime is to provide a comprehensive single borrower view showing a borrower’s total exposure in order to assist CIPs in making lending decisions and to protect a credit information subject. Therefore the accuracy of the information submitted to the CCR is considered critical to its effectiveness.
Failure to comply with the CRA
A registered CIP (and its relevant officers or managers) who provides information to the CCR knowing it to be false or misleading or uses information accessed from the CCR for a non-permitted purpose, could be subjected to criminal prosecution. For CIPs regulated by the CBI, a breach of the CRA’s requirements could trigger action under the CBI’s administrative sanctions regime. In short, ensuring compliance with the CRA should be an important 2018 priority for all in-scope lenders.
Next steps for lenders
It is important that in-scope lenders ensure they are in a position to comply with “Phase 2” of the CRA.
We suggest considering the following steps:
- contact the CCR to arrange for each in-scope lender to be registered;
- identify and correctly classify in-scope credit as ‘consumer’ or ‘non-consumer’ so that the ‘consumer flag’ (a mandatory CCR requirement) can be satisfied;
- review loan documentation to obtain missing information and verify the accuracy of the information collected;
- notify customers of their rights and duties under the CRA; and
- commence monthly collection/submissions of in-scope credit for phase 2 (non-consumer) customers from 31 March 2018, ensuring that the initial submission is made on or before 30 September 2018.