Irish Minister of Finance Brian Cowen has revealed that he intends to bring forward legislative proposals to ensure that all consumer lending, including what is described as sub-prime lending, is subject to the Financial Regulator's Consumer Protection Code (CPC).
Cowen and the Financial Regulator have been concerned for some time that the lending activities of some non-deposit taking lenders fall outside the scope of the Financial Regulator’s Consumer Protection Code (CPC), and that therefore borrowers do not benefit from the additional safeguards which the CPC provides. Accordingly, the Department of Finance has been working on developing legislative proposals to allow for the application of the CPC to the activities of non-deposit taking lenders. The Financial Regulator has been consulted in the development of these legislative proposals.
The Third Money Laundering Directive, which is due to be transposed into Irish law by 15 December 2007 (in Criminal Justice legislation), requires that financial institutions, as defined in the Directive, be subject to effective monitoring to ensure compliance with the requirements of that Directive. The Directive also requires that in this context, the competent authorities should have enhanced supervisory powers, including the possibility to conduct on-site inspections. All non-deposit taking lenders and mortgage providers fall within the terms of this Directive. The Financial Regulator has agreed to undertake monitoring of compliance with the customer due diligence (identification, record keeping and account monitoring) provisions being drafted to give effect to the Directive. The minimum requirement to undertake this role is either registration with, or notification by, such firms of their presence to the Financial Regulator.
Although credit institutions lending depositors’ funds have long been regulated under the Banking Directives, there is currently no EU or domestic requirement for firms to be authorised to lend money from their own resources at their own risk. However, Article 20 of the draft Directive on credit agreements for consumers, on which the Council of Ministers adopted a common position last May, states that: "Member States shall ensure that creditors are supervised by a body or authority independent from financial institutions or regulated." If this is adopted in the final reading, it will form part of the transposition of that Directive.
A joint working group of which the finance department and the Financial Regulator are members has been examining the question of regulating providers of home reversion products and equity release mortgages, and has concluded that there is a strong case for regulation, mainly in the interest of consumers. Home reversion products involve the sale of an interest in the family home and are not strictly speaking a financial service. However, they compete directly with equity release mortgages, and are frequently offered by the same firms. Home reversion and equity release providers are anxious that the sector be regulated.
The full text of the consultation on the regulation of non-deposit taking lenders in Ireland can be found in the Tax News Resources section.
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