knowledge 30 March 2022 |

CBI to extend Regulatory Codes to Hire Purchase, Consumer Hire and new Types of Credit

Once enacted, the Bill will require an authorisation as a retail credit firm or credit servicing firm for the provision of (i) a broader category of “credit” (including buy-now-pay-later products), and (ii) hire-purchase and consumer-hire agreements.  This constitutes a very significant change to the Irish financial services regulatory landscape.  For further discussion of the Bill please see our earlier briefing (here).

Notice of Intention

In the Notice of Intention (dated 29 March 2022) the CBI focuses on planned amendments to (i) the Consumer Protection Code 2012 (“CPC”) and (ii) the Minimum Competency Code 2017 and Minimum Competency Regulations 2017.

Consumer Protection Code 2012

The principal change being made to the CPC is the extension of its scope by deleting exclusions for:

• credit of a total amount of €200 or less; and

• hire purchase and consumer hire agreements.

The Central Bank may also be intending to make specific provision for “buy-now-pay-later” credit agreements (“BNPL”).  The Notice states that a separate definition for BNPL will be included in due course and it appears that the Central Bank also intends to disapply a smaller number  of CPC provisions for BNPL versus those disapplied for credit agreements generally (where the credit agreement is subject to the European Communities (Consumer Credit Agreements) Regulations 2010). 

No specific changes to the CPC are suggested for hire-purchase or consumer-hire agreements but the Central Bank states that it may consider later whether additional consumer protection rules are required in relation to these (and BNPL).

Minimum Competency Standards

The provision of certain financial services by a regulated entity requires staff to meet minimum professional standards (eg holding recognised qualifications) and places obligations on the regulated entity, which are largely aimed at ensuring all necessary competency standards are met.  These are set out in the Minimum Competency Code 2017 and the Minimum Competency Regulations 2017.¹

The Central Bank intends to amend the Code so that it expressly includes the newly regulated activities (ie the provision of a broader category of “credit”, or the provision of hire-purchase or consumer-hire agreements). 

The Central Bank expects these minimum standards to be met as soon as possible following enactment of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Bill 2021.  However, it has also indicated that a transitional period of a maximum of four years will be provided to persons providing the newly regulated activities.  Certain (as yet unspecified) changes will also be made to the 2017 Regulations in relation to the transitional period.

Timing

The Central Bank states that it will publish the Addenda to the CPC and the Minimum Competency Code 2017 and the amendments to the Minimum Competency Regulations 2017 as soon as possible following enactment of the Bill.  At the time of writing the Bill is in the final stages of approval by the legislature and is expected to be enacted (though not necessarily immediately commenced) in the near future.

The Central Bank requests businesses that intend to apply for an authorisation (either as a retail credit firm or a credit servicing firm) to signal that intention to them by email.

Comment

The indicated changes to the CPC and the minimum competency framework are important developments and should be factored into plans to comply with incoming authorisation requirements.  However, affected businesses should also bear in mind that the scope of regulatory obligations that apply to a regulated firm is much wider than just those two topics.  Potentially affected businesses should also ensure that they have clarity on the aspects of their business that may trigger authorisation requirements (once the Bill is enacted) and whether any restructuring of certain business lines would be appropriate.

Based on the Notice of Intention, it appears that the Central Bank may not plan on running a consultation process with affected industry participants.  To the extent affected entities have any queries or concerns regarding aspects of the incoming changes (including the timing for application of regulatory standards), this Notice of Intention may provide an opportunity to open a discussion with the Central Bank.