This concise legal update on the new Central Credit Register is of equal interest to Consumers, Lending Institutions and Businesses.
The new centralised system for collecting personal and credit information for consumer loans came into effect on 30 June 2017, pursuant to the Credit Reporting Act 2013. Effective from that date, the Central bank has begun collecting information on Consumer Credit Loans in excess of €500 from Lending Institutions. It is due to be rolled out in respect of Business Loans from 31 March 2018
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Under the EU and IMF programme of Financial Support for Ireland, the government agreed to establish a system to ensure future stability in the credit sphere. As such, the Central Credit Register (the “CCR”) will be maintained by the Central Bank in respect of loans in excess of €500.
This was legislated for in the Credit Reporting Act 2013 (the “Act”) and became effective in respect of consumers in June 2017; initially with regards to credit cards, overdrafts, personal loans and mortgages but with plans to be rolled out for other types of loans including personal contract plans and hire purchase agreements.
The scheme places a positive obligation on any lender, referred to in the Act as the Credit Information Provider, to update the new CCR in respect of any credit or security, in excess of the aforesaid amount, given to a Credit Information Subject.
The scheme will become effective for business facilities from 31 March 2018.
This scheme will provide valuable insight on a credit applicant’s credit history to lending institutions. The Central Bank will also use the data collected to published anonymised studies on the lending industry which will assist in policy decisions going forward.
We have broken down its relevance in respect of various interested parties in this update.
This CCR ought to be of particular interest to consumers as it provides a centralised system for analysing an individual’s credit rating. While records were individually maintained in the past, there has not previously been such a robust and centralised system.
Consumers and Lending Institutions will have the right to request a credit report from early 2018. This will provide detailed information on an individual’s credit history. Hypothetically, were an individual to default on a credit card loan in 2017, this could come to bear on their mortgage application in 2022.
Information which identifies an individual can only be held on the register for a period of 5 years pursuant to section 8 of the Act. Under section 15, this information may be accessed by Lending Institutions, broadly speaking, in circumstances where the information on the CCR may come to bear on a particular decision.
Only the individual consumer and lending institutions will be permitted to request a report, and each request will be recorded as a footprint on the CCR in respect of that individual.
Thus, a consumer will not only be entitled to their individual credit score, but also to information regarding other parties interested in their credit score.
When credit reports become available from early 2018, Consumer. There will also be a positive duty on consumers, pursuant to section 12 of the Act, to provide information on any aggregate debt in excess of €5,000 to their lending institution when making a credit application. This will apply to foreign debt.
Should they so wish, under section 13 consumers will be entitled to submit a 200 words or less explanation to the CCR explaining information that appears on same.
Naturally, this new framework creates as increased administrative burden on Lenders and Lending institutions. On a monthly basis, banks and other lending institutions will be obliged to make a return to the CCR on all existing and new consumer credit facilities in excess of €500.
The definition of Lender within the act stretches beyond traditional banks to local authorities and firms which have acquired loan books from Irish financial institutions in recent years. Loans given by the majority of businesses do not as yet fall under the remit of the CCR, but there is nothing contained within the Act to prevent businesses being brought under the definition of Credit Information Provider in due course.
Under section 9 of the Act, lending institutions will have the ability to apply to the Central Bank in order to amend inaccurate information on the CCR. Whether this ability will create a further burden on lending institutions to respond to consumer requests to amend information remains to be seen.
Where a Lending Institution is provided with section 12 information regarding accumulated foreign debt in excess of €5,000, they will be obliged to update the register in this respect as well as in respect of the current application.
Under section 14 of the Act, lending institutions are obliged to make a request to the CCR for a credit report in respect of a consumer who requests a credit facility. This obligation shall apply even in circumstances where the Lending Institution is unlikely to reject the application for credit, such as where there are pre-existing overdraft facilities or on a Credit Card account.
While Business Facilities do not come under the remit of the June 2017 roll out, it will be interesting for businesses to take note of how this system operates in the consumer sphere ahead of the March 2018 date for business loans.
In like manner to Consumers, Businesses are defined as Credit Information Subjects and, as such, much of the information provided in our section on consumers above shall apply equally Businesses.
As discussed above, the vast majority of businesses will not fall under the definition of Lender in the initial roll out. However, there is nothing in the act to prevent the definition widening to encompass business which make loans to employees or in a Business to Business capacity.
From September 2019, businesses will be obliged to request a Borrower’s Credit Report when applying for a loan in excess of €2,000.
Should you have any queries in relation to the CCR, Lending Practices or Banking & Finance Law please get in touch with: