Retail Credit & Servicing

Retail Hire Regulation

The primary objectives of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2021

• to amend the Central Bank Act 1997 in order to extend the Central Bank of Ireland authorisation requirements to persons carrying on hire-purchase or consumer-hire business or providing credit indirectly and persons carrying on business relating to hire-purchase or consumer-hire agreements or the indirect provision of credit,
• to provide for the collection and publication of information by the Central Bank of Ireland on credit agreements, hire-purchase agreements and consumer-hire agreements and for other related purposes.

• to amend the Consumer Credit Act 1995 to provide for a limit on the interest rate that consumers may be charged under credit agreements and hire-purchase agreements, to provide for a requirement to include the annual percentage rate in a hire-purchase agreement and for other related purposes.

The Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2021 expands the range of agreements which  fall within the regulated business of a “retail credit firm” and “credit servicing firm” so that, in addition to the existing authorisation requirement in respect of the provision of credit in the form of a “cash loan”, it  encompasses other forms of credit, including the indirect provision of credit, hire-purchase, including personal contract plans (PCPs) and consumer-hire agreements.

Scope of Exclusions Narrowed

Any entity which is excluded from the requirement to be authorised as a certain class of a Central Bank of Ireland ‘regulated business’ is not prohibited from carrying on such a ‘regulated business’.

The existing limited discretion available to the Central Bank of Ireland to exempt certain entities (or classes of entities) from the requirement to become authorised as “retail credit firms” in relation to the provision of credit in the form of cash loans was extended to cover the additional types of financial agreements that will come within the regulated business class of ‘retail credit firm’.

One class of entity formerly  exempted by the Central Bank of Ireland from the requirement to become authorised were local authorities but given the importance local authorities play in a certain segment of the mortgage market. They are explicitly specified as not being a “retail credit firm” in the amended definition of “retail credit firm” .

Subject to applying to the Central Bank of Ireland for authorisation within a period of three months from the commencement of the Act they will be deemed to be authorised by the Central Bank of Ireland and that authorisation will continue until the Central Bank of Ireland has granted or refused authorisation.

Expansion of Credit Servicing Scope

The Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2021 amends the definition  of ‘credit servicing”. Subject to applying to the Central Bank of Ireland for authorisation within a period of three months from the commencement of the relevant provisions, existing credit servicing firms are deemed to be authorised by the Central Bank of Ireland and that authorisation will continue until the Central Bank of Ireland has granted or refused authorisation.

The Minister for Finance may request the Central Bank of Ireland, using powers it has under the Central Bank Acts, to collect and publish information on credit, hire-purchase (including PCP) and consumer-hire agreements. This  facilitates the publication of statistical data on the level of financial accommodation provided by “regulated businesses”.

The  authorisation category of “retail credit firms” replaced the earlier provision that the Central Bank may prescribe individual firms to be a “credit institution” for the purposes of that Act. Such an individual listing will become redundant in the light of the new authorisation requirements.

The APR provisions  apply to credit and hire purchase (including PCP) agreements and that the Central Bank of Ireland may by regulations amend the method of calculating the APR in relation to credit or hire purchase agreements.

Credit Agreement Rate

In respect of a credit agreement, other than a moneylending agreement, which falls within the scope of the Consumer Credit Act 1995, the APR on the agreement shall not be greater than 23 per cent.

A creditor shall not be entitled to enforce a credit agreement against a consumer where this requirement is not met except where a court was satisfied that a failure to comply with such a requirement was not deliberate and has not prejudiced the consumer and that it would be just and equitable to decide that the agreement shall be enforceable.

These requirements, as contained in respect of credit agreements,  also apply to hire-purchase agreements.

Key Definitions

Hire-purchase agreements shall, along with other information specified, state the APR. A “hirer” in relation to a hire- purchase (PCP) or consumer-hire agreement shall be a “customer” for the purposes of that Act.

Financial Services and Pensions Ombudsman Act 2017 provides that a “consumer” for the purposes of the Act includes a consumer who was in relation to, inter alia, a hire-purchase (including PCP) or a consumer-hire agreement, a customer of the financial services provider in a case where a credit servicing firm undertakes credit servicing in respect of that agreement.