This Briefing gives an update on the status of the Register, and the Central Bank’s plans to phase in credit reporting.
The purpose of the Act is to establish the Register (to be managed by the Central Bank) which will hold information about credit applications, credit agreements and the parties to those agreements, and oblige lenders to report certain information on those applications and agreements.
The Act came into operation on 27 January 2014, but the Register is not yet up and running and the various regulations required under the Act have yet to be published. Now that the Central Bank has engaged a third party service provider to assist with the operational aspects of developing the Register, implementation is expected to progress quickly.
The Central Bank has emphasised, as regards preparing the various regulations, the importance of it conducting privacy impact assessments and consulting with the Data Protection Commissioner so as to balance the Central Bank’s desire for a single borrower view to be available to lenders against the privacy rights of the borrowers concerned.
- In-scope lenders: Lenders in scope include regulated financial services providers (such as banks, credit unions and retail credit firms), NAMA, local authorities and other persons who provide credit (including unregulated lenders). Purchasers of loans from one of these entities are also in-scope. Central banks and pawnbrokers are out of scope. The Central Bank expects more than 500 lenders to come within the credit reporting regime.
- In-scope credit: Loans, deferred payment arrangements and other forms of financial accommodation are all in scope with certain exceptions (such as the provision of employee-only credit by an employer, intra-group credit, interest-free charge-free credit and credit provided in connection with the continuing provision of utilities). Where loan books are closed, or have been sold, the related credit agreements remain in scope. For the Act to apply, the borrower must be resident in the State when the application is made, or the governing law of the credit agreement must be Irish.
- Lender obligations: Lenders will be subject to reporting obligations where the credit is at least €500. The information that they must report will differ depending on whether the obligor is an individual or a corporate, and whether it is a borrower or a guarantor. Where lenders receive a credit application for at least €2,000, they will also be obliged to check the Register prior to advancing credit.
- Borrower rights: Borrowers will be able to check their credit records. They will also be able to ask for their record to be amended if it is inaccurate, incomplete or out-of-date, and may submit explanatory statements of up to 200 words to the Central Bank for inclusion on the Register beside their information.
- Foreign credit: The Act provides that borrowers, if they have more than €5,000 outstanding under foreign credit agreements, must notify an in-scope lender when applying for credit.
While the Act sets out the framework for the new credit reporting regime, much of the detail will instead be set out in regulations to be made by the Central Bank (following consultation with the Minister for Finance and the Data Protection Commissioner). Those regulations will cover the type of personal information and credit information that must be provided (which is expected to differ as between different classes of applications, agreements, lenders and obligors (borrowers and guarantors)) and the form and content of credit reports. The Central Bank may also make regulations changing the monetary thresholds set out in the Act – the €500 and €2,000 thresholds mentioned above were the subject of much debate as the Act progressed through the Houses of the Oireachtas due to concerns that moneylenders could fall outside of scope.
The Register is expected to be self-financing, and the Central Bank will also issue regulations setting out what fees and levies will be imposed and whether these will differ depending on the type of lender.
Arising out of the Consultation and the Feedback Statement, the following points have been clarified:
- Phased implementation: Implementation will occur on a phased basis (as expected) starting in September 2016.
- Operational guidance: The Central Bank is expected to issue operational guidance shortly.
- Implementation plans: The Central Bank is expected to seek implementation plans and progress reports from relevant lenders after it issues its operational guidance.
- Phase 1 (consumer credit) and Phase 2 (business credit):
- Timing: The initial focus will be on loans to consumers (in 2016), with business credit being dealt with after that (in 2017). The table at the end of this Briefing sets out key implementation dates.
- Partnerships: A number of respondents to the Consultation indicated that there are significant challenges in capturing all of the relevant details for unincorporated entities such as clubs, partnerships and associations. The Central Bank has acknowledged that, because reporting on partnerships is likely to be complex, the second phase (business credit reporting) will require data on the partnership itself to be reported, but data on the individual partners will not be sought until a further, later, phase.
- Moneylenders and loan authorities: Loans by moneylenders and local authorities will be dealt with in the second (business credit) phase.
- Reporting credit applications: Apart from personal data, only a limited amount of information will be sought (i.e. type of product and amount of credit). The Central Bank does not intend to require lenders to keep the Register updated on the status of an application.
- Reporting credit agreements: The reporting obligation is expected to arise on drawdown (or, in the case of overdrafts and credit cards, on the date that they are first available for use).
- Foreign credit: The Central Bank is not proposing to deal with the requirement that information be sought and provided regarding foreign credit in excess of €5,000 in the initial implementation phase. This is because it received feedback that the requirement is impractical and overly-dependent on the honesty of borrowers and that it would be difficult to keep such data up-to-date.
- Guarantors: The Central Bank does not intend to start collecting guarantor data until after the business credit phase has been implemented (so most likely not until 2018).
Key Implementation Dates:
|Central Bank to complete privacy impact assessments||February 2016|
|Design of Register and related technical specifications to be completed||March 2016|
|Regulations to be made||March 2016 (intended date, but may be slightly delayed)|
|Operational handbooks to be finalised||April 2016|
|Testing of Register||January – August 2016|
|Lenders (such as banks, credit unions and retail credit firms) must begin to submit consumer credit data to the Register||30 September 2016 onwards|
|Lenders to finish reporting existing and new consumer credit agreements (backdated to 30 September 2016)||By 31 March 2017|
|Lenders to be allowed request credit reports (subject to the Central Bank being satisfied with the quality of data submitted)||31 March 2017 onwards|
|Borrowers to be able to request copies of their own credit reports (subject to the Central Bank being satisfied with the quality of data submitted)||March 2017 onwards|
|Lenders must begin to submit business credit data to the Register1||30 June 2017|
|Lenders to be required to check Register before advancing consumer credit (subject to the Central Bank being satisfied with the quality of data submitted)||31 December 2017|
|Lenders to finish reporting existing and new business credit agreements (backdated to 30 June 2017)2||31 December 2017|
|Lenders to be required to check Register before advancing business credit (subject to the Central Bank being satisfied with the quality of data submitted)||30 June 2018|
We will continue to issue updates as regulations are published and the implementation date for the first phase approaches. In the meantime, if you would like to discuss the impact of the Act and the Register on your business, please contact Rob Cain or Orla O’Connor.
1. Reporting obligations for moneylenders and local authorities will also begin on this date.
2. This will also catch any in-scope credit provided by moneylenders and local authorities.