The Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (the “Act”) was signed into law by the President in April 2022 and commenced on 16 May.
The Act, among other things, brings a number of currently unregulated credit providers into the scope of the Central Bank of Ireland’s (“Central Bank’s”) regulatory remit.
Who Does it Apply To?
The Act expands the definition of a “retail credit firm” requiring a Central Bank authorisation under the Central Bank Act 1997 (as amended) to also include any person whose business consists wholly or partly of (a) directly or indirectly providing credit to or (b) entering into a consumer-hire agreement or hire-purchase agreement with, a “Relevant Person”.
A “Relevant Person” is defined under the Act as a natural person within the State, other than “a natural person who is, or satisfies the criteria to elect to be treated as, a professional client for the purposes of the European Communities (Markets in Financial Instruments) Regulations (S.I. No 60 of 2007) or … a person who is a regulated financial services provider”.
In this regard, it is important to note that:
(i) “credit” means any deferred payment, cash loan or other similar financial accommodation (save as specified in Section 3(2) of the Credit Consumer Act 1995 or hire purchase/finance lease arrangements for a term less than 3 months);
(ii) the meaning of “hire purchase agreement” is sufficiently broad to include finance lease agreements which provide the relevant lessee with a purchase option at the end of the lease term;
(iii) a consumer-hire agreement is an agreement of more than three months duration for the bailment of goods to a Relevant Person (not necessarily a consumer) in return for periodical payments where title to the goods remains with the owner; and
(iv) no exceptions have been made for natural persons acting in the course of their business, trade or profession i.e. non-consumers.
Any persons now coming within the broadened meaning of a “retail credit firm” will be required to apply to the Central Bank for an authorisation and to comply with the Consumer Protection Code as well as other codes and standards administered by the Central Bank.
The Central Bank may exempt a person or class of persons from the requirement to seek an authorisation if they carry out sufficient related activities for their borrowers or hirees, as the case may be, such that those borrowers or hirees would be considered:
(a) sophisticated counterparties; or
(b) able to obtain independent legal advice.
This exemption may be granted on the Central Bank's own initiative or upon application by the person or persons in question.
Persons who will, for the first time, be required to secure a Central Bank authorisation will be required to submit an application to the Central Bank within three months of the coming into operation of the relevant provisions of the Act. Such persons will, however, be permitted to continue to conduct their existing business until the Central Bank has granted or refused their authorisation. New entrants or persons that have not been previously engaged in such regulated activities on the applicable date will not be able to conduct such activities from that date until they obtain the required retail credit firm licence.