Credit Servicing Firms

Regulatory Regime for Credit Servicing Firms

Part V of the Central Bank Act, 1997 (“the Act”) was amended by the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the 2015 Act”) to introduce a regulatory regime in respect of Credit Servicing Firms, bringing such firms within the Central Bank’s regulatory remit, and the activity of credit servicing became a regulated activity in Ireland. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 (“the 2018 Act”) amended Part V of the Act to expand the activity of credit servicing, as defined in the Act, to include holding the legal title to credit granted under a credit agreement and associated ownership activities. The Act was further amended by the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (the 2022 Act), effective 16 May 2022, meaning that credit servicing now includes other activities such as consumer-hire and hire-purchase. Persons carrying out certain “specified credit matters” or “specified hire matters” may avail of transitional provisions provided for in the 2022 Act, as explained further below.

The definitions of a ‘Credit Servicing Firm’ and ‘credit servicing’ as set out in the Act are set out below. 

These legislative amendments ensure that relevant borrowers whose loans are sold maintain the regulatory protections they had prior to the sale including the protections provided by the Central Bank’s statutory Codes of Conduct. Under the Act a person who meets the definition of a Credit Servicing Firm is required to obtain authorisation from the Central Bank in order to engage in the activity of credit servicing. As a result, all firms who intend to operate in this area should ascertain if they fall within the scope of the definition of a Credit Servicing Firm and require authorisation by the Central Bank. Firms are advised to seek legal advice if in any doubt regarding whether their activities fall within the scope of the legislation. If, having received and considered such advice, firms have any doubt about their status; they are advised to submit an application for authorisation. A Stakeholder Questions and Answers document in relation to the regime that applies to Credit Servicing Firms is available.

European Union (Credit Servicers And Credit Purchasers) Regulations 2023

The European Union (Credit Servicers And Credit Purchasers) Regulations 2023 came into operation on 30 December 2023. The Central Bank is currently in the process of updating the ‘Credit Servicing Firms’ and ‘Registers’ sections of our website and updating the relevant application forms following the introduction of these Regulations. 

Authorisation Requirements and Standards for Credit Servicing Firms

The Central Bank published its Authorisation Requirements and Standards for Credit Servicing Firms on 10 December 2015.  The Central Bank amended these Authorisation Requirements and Standards to reflect the changes required thereto following the enactment of the 2018 Act.

All firms seeking authorisation as a Credit Servicing Firm will be required to demonstrate to the Central Bank that they are in a position to meet each of the Authorisation Requirements and Standards prior to an authorisation being granted.  The Authorisation Requirements and Standards are imposed on all Credit Servicing Firms as a condition of authorisation and must be complied with on an on-going basis. 
 
View details in relation to the authorisation process.

Transitional Provisions 2022

Section 34FB(1) of the Act provides that a person carrying on the business of a Credit Servicing Firm (in so far as that business relates to “specified credit matters” or “specified hire matters”) immediately before the commencement of the 2022 Act is taken to be authorised to carry on the business of a Credit Servicing Firm until the Central Bank has granted or refused an authorisation, provided that the person applies to the Central Bank under section 30 of the Act for authorisation no later than 3 months after the commencement of the Act. Persons seeking to avail of the transitional arrangements are required to complete the following:

New Applicants

Persons who cannot avail of transitional arrangements and intend to engage in such activities are required to complete and submit an application for authorisation to the Central Bank and will not be able to engage in such activities until the Central Bank has granted authorisation to the person.  The Central Bank may also refuse to grant authorisation.

It is an offence for such persons to commence engaging in credit servicing until authorisation as a Credit Servicing Firm has been obtained.

Key Definitions under the Act

The Act defines a ‘Credit Servicing Firm’ as meaning:

(a) a person (other than the National Asset Management Agency or a NAMA group entity (within the meaning of the National Asset Management Agency Act 2009)) who undertakes credit servicing other than on behalf of an owner of credit,

(b) a regulated financial service provider taken to be authorised to carry on the business of a credit servicing firm by virtue of subsection (3),

(c) a credit servicing firm taken to be authorised to carry on the business of a credit servicing firm by virtue of subsection (4), or

(d) a credit servicing firm referred to in paragraph (b) of section 34FA(1) that undertakes, on behalf of a person referred to in the said section 34FA, credit servicing within the meaning of clauses (I), (II) and (III)(A) to (H) of subparagraph (ii) and subparagraph (iii) of paragraph (a) of the definition of ‘credit servicing’.

The Act defines ‘Credit Servicing’:
‘credit servicing’, means-

(a) in relation to a credit agreement, subject to subsection (2)(a)— 

(i) holding the legal title to the rights of the creditor under the credit agreement,

(ii) managing or administering the agreement, including—

(I) notifying the relevant borrower of changes in interest rates or in payments due under the agreement or other matters of which the agreement requires the relevant borrower to be notified,

(II) taking any necessary steps for the purposes of collecting or recovering payments due under the agreement from the relevant borrower, or

(III) managing or administering any of the following:

(A) repayments under the agreement;

(B) any charges imposed on the relevant borrower under the agreement;

(C) any errors made in relation to the credit agreement;

(D) any complaints made by the relevant borrower;

(E) information or records relating to the relevant borrower in respect of the credit agreement;

(F) the process by which a relevant borrower’s financial difficulties are addressed;

(G) any alternative arrangements for repayment or other restructuring;

(H) assessment of the relevant borrower’s financial circumstances and ability to repay under the agreement;

 (I) determination of the overall strategy for the management and administration of a portfolio of agreements;

(J) maintenance of control over key decisions relating to such portfolio,

or

(iii) communicating with the relevant borrower in respect of any of the matters referred to in subparagraph (ii), and

(b) in relation to a hire-purchase agreement or a consumer-hire agreement, subject to subsection (2)(b)—

(i) holding the legal title to the rights of the owner under the agreement,

(ii) managing or administering the agreement, including—

I. notifying the hirer of changes in payments due under the agreement or other matters of which the agreement requires the hirer to be notified,

II. taking any necessary steps for the purposes of collecting or recovering payments due under the agreement from the hirer, or

III. managing or administering any of the following:

    (A) repayments under the agreement;

    (B) any charges imposed on the hirer under the agreement;

    (C) any errors made in relation to the agreement;

    (D) any complaints made by the hirer;

    (E) information or records relating to the hirer in respect of the agreement;

    (F) the process by which a hirer’s financial difficulties are addressed;

    (G) any alternative arrangements for repayment or other restructuring;

    (H) assessment of the hirer’s financial circumstances and ability to repay under the agreement;

    (I) determination of the overall strategy for the management and administration of a portfolio of hire-purchase agreements, consumer-hire agreements or a mixture of hire-purchase and consumer-hire agreements;

    (J) maintenance of control over key decisions relating to such a portfolio,

    or

    (iii) communicating with the hirer in respect of any of the matters referred to in subparagraph (ii).