24 January 2012
Following the failure of Home Payments Limited in mid-2011, the Central Bank has inspected the bill payment and debt management industry to assess whether firms providing these services are carrying out any activity that falls to be regulated by the Central Bank and whether consumer funds may be at risk. Following identification of a dozen companies providing these services, the first phase of the Central Bank’s review has concluded with the Bank writing to a number of companies notifying them that their activities are subject to regulation by the Central Bank and requiring that immediate steps be taken to provide additional protection to client funds. In one case the Central Bank has also intervened to communicate with clients and creditors. [1]This process is continuing.
Those companies that are subject to Central Bank regulation need to determine whether they wish to apply for authorisation from the Central Bank or whether they will change their business model. In the meantime the Central Bank is requiring that certain controls are in place regarding client assets which are overseen by an independent third party.
Depending on the exact business model undertaken by a firm, it may or may not be subject to regulation by the Central Bank. Debt management firms which process payments on behalf of clients are subject to regulation under payment services legislation. The Central Bank believes that it would be appropriate to implement the recommendation of the Law Reform Commission to ensure that the debt management and debt advice services of all firms in the sector are subject to regulation. The Minister of Finance has asked his officials to prepare legislation for the future regulation of the bill payment, debt management and debt advice sector. It is intended, subject to Government approval, to include this new legislation as a Committee Stage amendment to the Central Bank (Supervision and Enforcement) Bill 2011.
The Central Bank is taking this opportunity to remind firms that they are obliged to establish whether or not they are carrying out activities that may be regulated by the Central Bank. If they do not hold the appropriate authorisation, they should contact us immediately.
Advice to Consumers
The Central Bank is advising consumers to be aware that the bill payment and debt management companies they are using may not be regulated by the Central Bank. Where they provide funds to an unregulated company for onward payment to a creditor, the handling of this money will not be subject to segregation and safeguarding rules. Customers of bill payment and debt management companies who have any concerns regarding their money are advised to check directly with their creditor (e.g., utilities provider, mortgage provider, credit card company, etc) without delay.
Consumers should note that many credit unions provide budgeting and bill paying services and are subject to regulation. Anyone having difficulty keeping up repayments on any loans should consider contacting MABS helpline on 0761 07 2000.
The Central Bank would welcome assistance from consumers to ensure it has identified all companies providing bill payment and debt management services in order to determine whether they should be subject to regulation. Consumers may contact the Central Bank on 1890 777777.
[1] See separate statement on Dunne & Maxwell, issued on 24 January 2012