A new Bill seeking to protect borrowers on the sale of consumer loan portfolios to unregulated entities was published on 12 January 2015. The Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 is particularly relevant to purchasers of retail loan portfolios and to consumer loan servicing firms. It seeks to protect consumers whose loans are sold to an unregulated entity in a situation where that entity either undertakes the servicing of the acquired loans itself or appoints a loan servicer to service the acquired loans on its behalf. The Bill proposes the creation of a new type of regulated entity which will be known as a ‘credit servicing firm’.
It had previously been proposed to make the ownership (as opposed to the granting) of Irish retail credit a newly regulated activity requiring Central Bank authorisation. In contrast, the Bill focuses on regulating the servicing of consumer loan portfolios which are sold to unregulated entities.
The Bill is designed to protect consumers and accordingly it does not cover all types of credit agreement. Protection will be given to consumers who are borrowers under a ‘credit agreement’ where a ‘credit servicing firm’ undertakes ‘credit servicing’ activities. The Bill defines ‘credit servicing’ as managing or administering the credit agreement, while it also lists a number of activities which would fall within the scope of the definition. In addition, the Bill identifies certain activities that are excluded from the definition of ‘credit servicing’ in circumstances where those activities are undertaken by a holder of legal title to the credit or a person/firm acting on the holder’s behalf such as taking necessary steps to enforce a credit agreement (provided those activities are not undertaken in a manner which would breach financial services legislation if undertaken by a regulated financial service provider).
Under the Bill, if a consumer loan portfolio is sold to an unregulated entity the relevant borrowers will continue to enjoy the benefits of Central Bank Codes designed to protect consumers (including the Code of Conduct on Mortgage Arrears) and they will also have access to the Financial Services Ombudsman complaints procedure regarding treatment by credit servicing firms.
The Bill is expected to pass through the Houses of the Oireachtas (the Irish parliament) in the early part of 2015.
