Authorisation Process for Retail Credit Firms and Home Reversion Firms

Introduction to Retail Credit Firms

Regulatory Regime for Retail Credit Firms

Retail Credit Firms are defined in Part V of the Central Bank Act 1997 (as amended) (the Act). Retail Credit Firms are firms that carry out a ‘relevant activity’ as defined in the Act by providing credit to relevant persons or entering into a consumer-hire or hire-purchase agreement with relevant persons. Please see the definitions of ‘retail credit firm’, ‘credit’, ‘relevant activity’ and ‘relevant person’ in the Act and included below for further detail in this regard. Under the Act a person who meets the definition of a Retail Credit Firm is required to obtain authorisation from the Central Bank of Ireland (the Central Bank) in order to provide these services. The Act sets out circumstances where the Central Bank may exempt a person, or persons belonging to a specified class of persons, from being required to hold an authorisation as a retail credit firm. 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 Retail Credit Firm and require authorisation by the Central Bank. Firms are advised to seek legal advice if they are 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.

All firms seeking authorisation as a Retail Credit Firm will be required to demonstrate to the Central Bank that they are in a position to meet the authorisation requirements set out in the Act.

It is an offence for such persons to commence the provision of retail credit firm activities until authorisation as a Retail Credit Firm has been obtained.

Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022

The Act has been further amended by the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (the 2022 Act). The 2022 Act has amended the definition of a Retail Credit Firm in the Act, and means that the activities of a Retail Credit Firm now include entering into a consumer-hire agreement or hire-purchase agreement, and other forms of indirect credit such as Buy Now Pay Later.

Unregulated firms that have been engaging in activities which now fall within the scope of “relevant activity” under section 28 of the Act may avail of transitional arrangements where a completed Application for Authorisation as a Retail Credit Firm and a completed Declaration Form for availing of Transitional Arrangements as a Retail Credit Firm are submitted to the Central Bank no later than 16 August 2022. Firms that make the required submissions of these documents may avail of transitional arrangements whereby they may continue to provide those activities until their application is decided upon. The documents to be submitted are provided below under “Documentation Required to Make an Application for Authorisation”.

All application submissions to avail of transitional arrangements under the 2022 Act should be submitted via [email protected]. Physical copies of the documentation do not need to be submitted.

Key Definitions under the Act

The Act defines a "Retail Credit Firm" as meaning:

‘retail credit firm’ means a person whose business consists wholly or partly of any relevant activity but does not include—

(a) a person who is a regulated financial service provider authorised, otherwise than under this Part, by—

(i) the Bank, or

(ii) an authority that performs functions in an EEA country that are comparable to the functions performed by the Bank,

to carry out any relevant activity in the State,

(b) a person who is a credit intermediary authorised under the Act of 1995,

(i) credit that was originally provided by another person, a person to whom all or any part of that other person’s interest in the credit is directly or indirectly assigned or otherwise disposed of, or

(ii) a consumer-hire agreement or a hire-purchase agreement that was entered into by another person, a person to whom that other person’s interest in the agreement concerned is directly or indirectly assigned or otherwise disposed of,

(d) a person who carries out relevant activities on a once only or occasional basis and, in so doing, does not represent or create an impression (whether in advertising, marketing or otherwise) that the person would enter into agreements with other persons on the same or substantially similar terms as the agreements under which those relevant activities are carried out,

(e) a person who is exempted, or a person who belongs to a class of persons that is exempted, for the purposes of this paragraph, under section 29A,

(f) a person whose business consists partly of a relevant activity, but only by virtue of the person providing credit in the form of trade credit, or

(g) a local authority

The Act defines "Credit" as meaning:

‘credit’ means—

(a) a deferred payment,

(b) a cash loan (whether or not provided on the security of a mortgage or charge over an estate or interest in land), or

but does not include—

(i) credit of a class specified in section 3(2) of the Act of 1995,

(ii) credit granted or made available under an agreement of a class specified in section 3(2) of the Act of 1995,

(iii) credit arising under a transaction of a class specified in section 3(2) of the Act of 1995,

(iv) a payment of a class specified in section 3(2) of the Act of 1995, or

(v) bailment of goods to a hirer under an agreement of less than 3 months’ duration under which the property in the goods remains with the owner;

The Act defines a "relevant person" as meaning:

‘relevant person’ means a natural person within the State, other than-

(a) 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 2007 (S.I. No. 60 of 2007), or

(b) a person who is a regulated financial service provider.

The Act defines a “relevant activity” as meaning:

‘relevant activity’ means—

(a) directly or indirectly providing credit to, or

(b) entering into a consumer-hire agreement or hire-purchase agreement with,

a relevant person

The Act sets out a number of exemptions for persons which may be exempt from the definition of a retail credit firm:

Section 29A-

(1) The Central Bank may exempt a person for the purposes of paragraph (e) of the definition of 'retail credit firm' in section 28(1) if, in the opinion of the Central Bank-

(a) the total amount or value of the relevant activities that are to be carried out by the person is such that it is reasonable to assume that the borrower or hirer, as the case may be, will be in a position to negotiate on equal terms or to obtain appropriate legal and financial advice, or

(b) the person is one who, under section 8(2) of the Central Bank Act 1971, is exempted, or is a member of a class of persons that is exempted, from being required to hold a banking licence, or

(c) the person is one who carries out relevant activities solely for charitable or public purposes and at a rate of interest or on other terms more favourable than those that are currently available commercially,
and the exemption would not be inconsistent with the proper and orderly regulation of relevant activities and the protection of customers of retail credit firms.

(2) The Central Bank may also exempt the persons belonging to a specified class of for the purposes of paragraph (e) of the definition of 'retail credit firm' in section 28(1) if, in the opinion of the Central Bank-

(a) the total amount or value of the relevant activities that are to be carried out by those persons is such that it is reasonable to assume that the borrowers or hirers, as the case may be, will be in a position to negotiate on equal terms or to obtain appropriate legal and financial advice, or

(b) the persons are ones who, under section 8(2) of the Central Bank Act 1971, are exempted, or belong to a class of persons that 5 is exempted, from being required to hold a banking licence, or

(c) the persons are ones who carry out relevant activities solely for charitable or public purposes and at a rate of interest or on other terms more favourable than those that are currently available commercially,
and the exemption would not be inconsistent with the proper and orderly regulation of relevant activities and the protection of customers of retail credit firms.

Introduction to Home Reversion Firms

Regulatory Regime for Home Reversion Firms

Home Reversion Firms are defined in Part V of the Central Bank Act 1997 (as amended) (the Act). Home Reversion Firms are firms that provide home equity release in the form of home reversion agreements to people in order to give people access to the value which they have built up in their home for their own use. Please see the definitions of Home Reversion Firms and home reversion agreements in the Act and included below for further detail in this regard.

Under the Act a person who meets the definition of a Home Reversion Firm is required to obtain authorisation from the Central Bank in order to provide these services. 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 Home Reversion 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.

All firms seeking authorisation as a Home Reversion Firm will be required to demonstrate to the Central Bank that they are in a position to meet the authorisation requirements set out in the Act.

It is an offence for such persons to commence the provision of home reversion firm activities until authorisation as a Home Reversion Firm has been obtained.

Key Definitions under the Act

The Act defines a "Home Reversion Firm" and "Home Reversion Agreement" as follows:
‘home reversion firm’ means a person carrying on a business of entering into home reversion agreements;’
‘home reversion agreement’ means an agreement between a vendor and a home reversion firm that provides-

(a) for the conveyance by the vendor to the home reversion firm of an estate or interest in land (which includes the principal residence of the vendor or of the vendor’s dependants) for a discounted sum or an income (or both), and

(b) for the vendor to retain the right to live in the residence until the occurrence of one or more events specified in the agreement.’

Application Process for Retail Credit Firms and Home Reversion Firms

The purpose of this section is to provide information to firms considering applying for authorisation as a Retail Credit Firm and as a Home Revision Firm. The Central Bank is the competent authority in Ireland for the authorisation and supervision of Retail Credit Firms and Home Reversion Firms under the Central Bank Act 1997 (as amended) (the Act).

Each applicant seeking authorisation must satisfy the Central Bank that it can meet the authorisation standards set out in the Act, as appropriate. In fulfilling its statutory role in this regard, the Central Bank adopts a robust, structured and risk-based process that seeks to ensure that only those applicants that demonstrate compliance with the relevant authorisation requirements are authorised.

The Central Bank seeks to process each application as expeditiously as possible while meeting its obligation to operate a rigorous and effective gatekeeper function. It aims to ensure that the application process is facilitative and accessible from the perspective of applicants and, importantly, that applicants have clarity with regard to the process, its requirements and timelines.

Before Applying for Authorisation

In advance of submitting an application for authorisation, the firm should satisfy itself that:

Its proposed business model requires authorisation pursuant to the Act, as appropriate;
It can comply with the relevant authorisation requirements under the Act;
It can comply with the Authorisation Requirements and Standards for Retail Credit Firms;
It is capable of complying with, and adhering to, the authorisation requirements and on-going supervisory requirements that must be satisfied on an on-going basis;
It has determined the appropriate application form to complete, i.e. whether it is appropriate for the firm to complete:

the “Application Form for Authorisation as a Retail Credit Firm" or
the “Application Form for Authorisation as a Home Reversion Firm”;

It has read the appropriate Guidance Note i.e.

the “Guidance Note for the Completion of an Application for Authorisation as a Retail Credit Form" or
the “Guidance Note for the Completion of an Application for Authorisation as a Home Reversion Form”

and has taken the information provided therein into consideration when completing the relevant application form.

Firms are advised to seek legal advice if they are unsure as to whether their proposed activities require authorisation pursuant to the Act, as appropriate, or if they are unsure as to how they should comply with the relevant authorisation requirements. If, after having received and considered such advice, firms have any doubt about their status, they are advised to submit an application for authorisation.

Summary of the Key Stages in the Application Process

The applicant submits a completed application form, as appropriate, with supporting documentation;
The Central Bank acknowledges receipt of the application submission;
The Central Bank will assess whether the application submission contains the key information and documentation required;
Where all key information and documentation has been provided, the application submission progresses to the Assessment Phase;
As part of the assessment phase the applicant is provided with login details for the Central Bank's returns service on the Central Bank of Ireland Portal to facilitate the submission of Individual Questionnaires (IQs) via the ONR and will be requested to submit a Vetting Invitation Form (including proof of identity), where appropriate. It should be noted that a Garda Vetting Form is required where the applicant is a Sole Trader or a company with a single director. For information on the submission of a completed Garda Vetting Form, please refer to the Sole Traders/Single Directors section of ‘PCF Assessment for Regulated Financial Service Providers Page”;
The Central Bank assesses whether IQs have been completed;
The Central Bank completes an assessment of the application submission and may issue detailed comments and/or seek additional information;
The applicant is provided with the opportunity to address the comments and requests issued by the Central Bank in a revised application submission(s);
The Central Bank will assess these subsequent application submission(s) and notify the applicant of its assessment and next steps. The applicant is provided with a further opportunity to address any concerns arising at this stage in the process (if any); and
The Central Bank will notify the applicant of its decision in respect of the application submission.

In the sections set out below, the applicant will be able to learn about the different stages of the application process in more detail.

Documentation Required to Make an Application for Authorisation

Applicants should submit the following documentation which should be fully completed:

The relevant application form including the specific information / documentation requirements set out in the relevant application form;
Transitional Declaration Form (RCF transitional applicants only)
Application for Authorisation as a Retail Credit Firm Form
Application for Authorisation as a Home Reversion Firm
Individual Questionnaires (when requested to do so);

Applicants are advised to read our Guidance Notes prior to submitting an application:

Once an application is submitted and the applicant has been provided with login details for the Central Bank of Ireland Portal, the applicant will need to ensure that all relevant individuals proposed to hold a Pre-Approval Controlled Function (PCF) role (typically board members, senior management, key function holders) complete Fitness and Probity IQs - more information and guidance material on completing the IQ can be found here. IQs must be submitted electronically via the Central Bank of Ireland Portal by all relevant individuals.

Please note that, for new applicants, access to the online IQ only becomes available after an application has been deemed to contain all the key information and documentation required.

Important:

Where incomplete application forms and IQs are submitted they will be returned to the applicant.
Where IQs are not submitted in a timely manner, the application will be returned to the applicant.
An application will only progress to the Assessment Phase of the authorisation process where all key information and documentation required has been provided.
It is therefore important that the applicant has read the guidance material provided to assist applicants in completing this documentation, and has taken the information provided therein into consideration when completing the application form.

Submission of an Application

The completed application form, along with all relevant accompanying material, should be submitted via email to [email protected] or to [email protected], as appropriate.

Key Stages in the Application Process

Stage 1 - Acknowledgement

The Central Bank will acknowledge receipt of an application for authorisation submitted by the applicant within 3 working days of receipt.

Stage 2 - Key Information Check

The Central Bank will then check that the application material submitted contains all the key information and documentation required to proceed to the submission of IQs. Within 10 working days of receipt of the application, the Central Bank will either:

I. Advise the applicant that the application contains sufficient material to proceed to the Assessment Phase; or

II. Advise the applicant that the application does not contain sufficient material to proceed to the Assessment Phase. A statement of the omitted information is also provided to assist the applicant should it wish to submit another application in the future. Any subsequent application will be considered a new application and the application process commences again.

Stage 3 - Submission of IQs

Where the application proceeds to the Assessment Phase, as outlined in Stage 2(I) above, the application will proceed to the submission of IQs. Login details to the Central Bank of Ireland Portal will be issued to the applicant and the applicant will be required to complete and submit all required IQs.

Stage 4 - Assessment Phase

In the Assessment Phase, the application material submitted will be reviewed against the relevant authorisation requirements to determine whether sufficient information has been provided to enable the Central Bank to issue a 'Notification of Assessment' letter as referred to in Stage 5 below. The Central Bank will issue initial comments to the applicant based on its review of the application material submitted and any subsequent comments based on its review of responses submitted by the applicant. The Central Bank has published service standards (see below) in respect of the processing of applications for authorisation and in the context of meeting those standards the service standard timeframe to which the Central Bank has committed for the Assessment Phase of the application process is 90 working days. However, it should be noted that in the event of further and/or subsequent information being sought, this 90 day 'clock' is paused until such information is received by the Central Bank from the applicant.

The Service Standards do not apply to transitional applications. The Service Standards also do not apply to applications (a) where another regulatory authority has to be contacted, (b) which are subject to interview, (c) where significant legal issues arise, (d) where significant fitness and probity issues arise, (e) where the business model of an applicant is complex or novel in nature, (f) where significant changes to the business model, the applicant’s shareholder structure or other key aspects of an application arise during the review process, or where the application becomes dormant, and (g) where the Bank is minded to refuse an application. The time taken by an applicant to address matters raised by the Bank during the authorisation process is excluded from the Service Standards. Applications that remain dormant with no positive engagement from an applicant are returned.

Assessment and/or specific interviews will also be conducted in respect of applications where specific fitness and probity related concerns arise.

Stage 5 - Notification of Assessment

The Central Bank will notify the applicant of the outcome of the Assessment Phase of the application process as follows:

a) Where the assessment is favourable, the Central Bank will notify the applicant by letter that it proposes to authorise the applicant on the basis of the information provided in its application submission, provided any specified final steps are taken and/or specified final items of information and evidence are received. This letter will also specify any specific conditions the Central Bank proposes to impose on the authorisation itself once granted. This letter will explain the reasons for these proposed conditions and the applicant will be afforded the opportunity to make representations in respect of the proposed conditions before the Central Bank makes any decision on the application.

b) In the event that the Central Bank is not satisfied on foot of the Assessment Phase such that it can issue a Notification of Assessment letter under (a) above, the Central Bank will advise the applicant of this by letter. The letter will set out the areas to be addressed and afford the applicant the opportunity to do so and to make any submissions it wishes to the Central Bank in respect of these matters.

Stage 6 - Notification of Decision in respect of the Application

Once the Central Bank has assessed any further information/evidence/representations submitted by the applicant following on from Stage 5 above, the Central Bank will notify the applicant, via letter, of its decision on the application as follows:

Authorisation - The Central Bank has decided to grant an authorisation.
Authorisation with Specific Conditions - The Central Bank has decided to grant an authorisation with specific conditions attached to the authorisation. The specific conditions to be attached to the authorisation will be outlined in the letter.
Proposed Refusal of Authorisation - The Central Bank is minded to refuse the application for authorisation. In accordance with the applicable legislation, the Central Bank will notify the applicant of the grounds for the proposed refusal of the authorisation. The applicant will then have an opportunity to make submissions in response to the proposed refusal. The submissions will then be considered by the Central Bank following which a decision will be taken by the Central Bank to grant or refuse the authorisation applied for, as appropriate. Details of the Central Bank's process for the refusal of an application for authorisation are available here.

If the applicant has any queries in respect of the application process it can contact the Central Bank at [email protected] or at [email protected], as appropriate.

Please find a link to the Service Standards Performance Reports page. The reports set out the Central Bank's performance against Service Standards that it has committed to in respect of (i) Authorisation of Funds, (ii) Authorisation of Financial Service Providers and (iii) Processing of Fitness and Probity applications, on a half-yearly basis.