New Central Bank authorisation requirements for Hire-Purchase, PCP, Consumer Hire and Indirect Credit Providers and ServicesMay 2022
From 16th May 2022, firms providing hire purchase, PCP, consumer hire, indirect credit (e.g. buy-now-pay-later (BNPL
) products and services are required to be authorised by the Central Bank of Ireland (CBI
Firms providing these services will be required to seek authorisation as a Retail Credit Firm (RCF
) or as a Credit Servicing Firm (CSF
) as appropriate, though firms already operating in the market will be given time to transition.
The new authorisation framework for RCF/CSF follows the enactment of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (the Act
) which requires:
- Any person carrying on a business of offering hire purchase products or consumer-hire products to consumers, and any other person providing credit directly or indirectly to consumers, to be authorised by the CBI as a RCF (if not already subject to CBI authorisation); and
- Any person who services such products to be authorised by the CBI as a CSF.
The Act also introduces an interest rate cap of 23% APR on all credit agreements provided to consumers (other than money lending agreements which have a separate regulatory framework). The Act also ensures that all retail credit firms must comply with Section 149 of the Consumer Credit Act 1995 and notify the CBI if they wish to introduce any new charges or increase any charge that has been previously notified to the CBI.
The Act also enables the CBI to enhance the new authorisation requirements through new rules contained in the Consumer Protection Code 2012, the Minimum Competency Code 2017, and the Minimum Competency Regulations 2017 to ensure consumers are protected by the CBI’s consumer protection framework.
Changes to Consumer Protection Code 2012 (the “CPC”)
A new addendum amending the CPC requires regulated firms to assess the suitability of the product for the consumer and the ability of the borrower to repay the debt over the duration of the credit agreement, to such firms.
The CPC is also amended to include definitions of “BNPL agreement”, “consumer-hire agreement” and “hire-purchase agreement”, as well as other amendments inserted under the Headings of the CPC’s Scope, General Principles and Advertising rules.
The new changes to the CPC are effective from 16th July 2022
Changes to Minimum Competency Code 2017 (the “MCC”)
The MCC has also been amended by way of an addendum bringing the newly regulated activities within its scope whereby the CBI expects RCF/CSF firms and their staff to meet the necessary minimum competency standards as soon as possible following commencement of the new Act (but no later than four years post-commencement).
These transitional arrangements are also set out by the insertion of Regulation 16A in the Minimum Competency Regulations 2017 i.e. the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Minimum Competency) (Amendment) Regulations 2022 [S.I. No. 234 of 2022].
RCF/CSF staff are required to meet minimum professional standards (e.g. holding recognised qualifications) and places obligations on the regulated entity, such as agreeing a plan for obtaining a relevant recognised qualification with the person availing of the transitional arrangements and monitoring compliance with those conditions, to ensure all necessary competency standards are met.
For instance, such firms will be required to ensure that a person exercising a controlled function in relation to a new RCF/CSF activity who does not hold a recognised qualification in respect of that function, obtains same by 16th May 2026.
All firms seeking authorisation as a RCF/CSF will be required to demonstrate to the CBI that they are in a position to meet the CBI’s authorisation and standards prior to an authorisation being granted and its supervisory requirements on an on-going basis thereafter.
Do not hesitate to contact RegSol if you are in any doubt whether the activities of your firm fall within the scope of the legislation or compliance with the CBI’s authorisation requirements. Furthermore, we can draft policies and procedures documents to ensure all applicable amendments to the CBI Codes are up-to-date and tailored specifically to your business.
We can be contacted at email@example.com