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The Central Bank stepped up its regulation of financial services last year and there’s more to come in 2020, writes Rowena Fitzgerald in Mason Hayes & Curran
Last year saw the expansion of the Central Bank of Ireland’s (CBI) regulatory remit to previously unregulated entities, the introduction of consumer-focused reforms and the publication of the CBI’s final report on the Tracker Mortgage Examination. We examine these developments and some proposals for 2020.
Credit Servicing
The commencement of the Consumer Protection Act 2018 in January 2019 marked the beginning of a consumer focused year. The 2018 Act aims to restrict the ability of purchasers of loan books to avoid regulation under the credit servicing regime.
The 2018 Act expanded the definition of credit servicing firms to include those who hold the legal title to credit granted under a credit agreement, those that determine the overall strategy for the management and administration of a portfolio of credit agreements, and those that have control over key decisions on those portfolios.
Entities that fall within scope of the definition are now required to be authorised by the Central Bank or, alternatively, be passporting these services into Ireland on the basis of an authorisation from another EEA competent authority.
Intermediary Commissions
In September 2019, the Central Bank announced new rules requiring financial intermediaries to disclose their commission arrangements to consumers. The rules come into effect on 31 March 2020. They will introduce greater transparency for consumers around the commission arrangements in place between financial intermediaries, such as brokers and financial advisors, and product producers, such as banks and insurance firms.
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In addition, intermediaries will no longer be allowed to call themselves ‘independent’ if they receive a commission for the provision of consumer advice. Certain hospitality and non-monetary benefits will also be prohibited.
Tracker Mortgage Report
In July 2019, the Central Bank published its final report on its Tracker Mortgage Examination which began in December 2015. Though the supervisory phase of the tracker probe has concluded, the matter is far from being concluded from a regulatory standpoint. While c.40,100 affected customers have been compensated by mortgage lenders, PTSB remains the only bank to have come out the other side of the CBI’s administrative sanctions procedure dealing with its findings from the Tracker Mortgage Examination.
The Central Bank is currently conducting further investigations into the conduct by various mortgage lenders that led to the Tracker Mortgage Examination and 2020 will see further progress and developments in this area.
Conclusion
As the regulatory landscape continues to change, it is crucial for businesses to ensure their business strategies and practices are in line with evolving regulatory requirements. 2020 is likely to see a greater emphasis on responsibility and accountability for both firms and individuals.
The Senior Executive Accountability Regime, anticipated to be introduced by the Central Bank (Amendment) Bill in 2020, will increase accountability of individuals and transparency within the financial services sector. It will require certain regulated financial service providers to clearly set out where the responsibility and decision making within their firm lies, and will enable the Central Bank to hold individuals responsible for wrong-doing, without requiring a finding against the regulated entity itself.
The Government has also recently decided to draft legislation to regulate entities offering personal contract plans, hire purchase agreements and similar credit type agreements with consumers. It is proposed that entities offering these arrangements will be required to be authorised with the Central Bank as retail credit firms.
• Rowena Fitzgerald is a Partner in Mason Hayes & Curran. Email: rfitzgerald@mhc.ie
