Central Bank publishes Consumer Protection Outlook Report
On 6th February 2015 the Central Bank published its first Consumer Protection Outlook Report. The report sets out a number of consumer protection themes the Central Bank will be focusing on, in the context of its overall strategy and also the risks the Bank sees to its consumer protection objectives.
Director of Consumer Protection, Bernard Sheridan, said: “Financial products and services play such an important part in the everyday lives of consumers and while they can deliver consumer benefits, they can also present risks if the right product is not sold in the right way to the right consumer. This Report sends a clear message to all regulated firms of our expectations of them. This includes embedding a consumer-centred culture from the top of the organisation, right through to the staff delivering products and services to their customers. We expect firms to go beyond tick-box compliance and to be able to demonstrate that they are acting in the best interests of consumers at all times and treating them fairly and with dignity and respect.”
You can read the full report here.
In terms of some of the key priorities, there is a lot of focus on extending the same protections of Irish financial services legislation (including the Code of Conduct on Mortgage Arrears), to borrowers whose loans are sold on to non-regulated lenders. The report acknowledges that while the CCMA provides strong protection to borrowers struggling with mortgage repayments, these protections only apply where the lender is a regulated firm. These protections therefore do not remain in place if their mortgage is sold to a third party which is non-regulated. According to the Central Bank's most recent Statistical Release on 3rd December 2014, 117,889 of mortgages (15.5 per cent of accounts) for principal dwelling houses were in arrears for Q3 and some 109,911 mortgages were classified as restructured. Given this and that sale of loan books is not an uncommon occurrence, there is a clear probability that considerable numbers of people are not covered by the Code.
These were clearly the considerations involved in the drafting of The Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 which was published in January. The Central Bank has been working closely with the Department of Finance to develop legislation including this bill, which came as a result of that Department's public consultation process on the issue. The consultation paper released in July 2014 acknowledged that a number of entities obtaining loan books had indicated voluntary compliance with the relevant codes; however it further noted that this does not ensure compliance and certainly does not allow the Central Bank to effect any type of adequate supervision of these entities.
The new legislation requires 'credit servicing firms' to be authorised by the Central Bank and therefore the relevant Codes will then apply to such firms including the CCMA and the Consumer Protection Code. Customers will also have access to the Financial Ombudsman. Section 7 will ensure the Codes will also apply to credit union credit that is sold to an unregulated entity. The explanatory memorandum notes that this section was the result of a recommendation by the Financial Services Ombudsman during the consultation process which is indicative that issues have previously arisen from a consumer complaints perspective. In line with the Central Bank's indication in its report to introduce additional protections for Small and Medium Enterprises (SMEs) when accessing credit and requirements for firms dealing with SMEs when they get into financial difficulty, the Bill also includes SME's and ensures the application of the Code of conduct for Business Lending to Small and Medium Enterprises.
It remains to be seen when this legislation will be enacted and how effectively it will be implemented but it is very clear that there is a commitment to fill this existing lacuna in the protections. This can only ever be a good thing for consumers.