The Oireachtas recently passed two Consumer Credit items of legislation - the Consumer Credit (Amendment) Act 2022 (the CCA Act) and the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act, 2022 (the RCP Act).
Consumer Credit (Amendment) Act, 2022
The CCA Act introduces some new regulations and protections in respect of so called "high cost credit providers" and for the first time allows the Minister for Finance to set the maximum interest rate at which a high cost credit loan can be provided.
- The CCA Act, relates to credit agreements into which "high cost credit providers" enters or offers to enter into with a "consumer" in which one or more of the following apply:
- The agreement was concluded away from the business premises of the high cost credit provider or the business premises of the goods or services under the agreement;
- Any negotiation in relation to the credit work conducted in a place other than the business premises of the high cost business provider; and
- Repayments under the agreement will or may be paid by the consumer to the high cost credit provider or representative at any place other than the business premises of the high cost credit provider and the total cost of the credit to the consumer under the agreement is in excess of an APR of 23% or such other rate as may be prescribed, by regulation.
In setting a maximum interest rate, the Minster is required to have regard to the following factors and to consult the Central Bank before making such regulations:
- Competition in the high cost credit sector;
- The supply of credit in the high cost credit sector;
- The average rates of interest offered to customers in the high cost credit sector and any trends in such interest rates;
- Where setting the proposed rate would reduce the supply of credit in the high cost credit sector, the impact of such a reduction on financial inclusion.
The CCA Act provides that the cost of credit cannot be set at a rate of more than 1% per week and the maximum rate of simple interest chargeable per year can on be set at a rate less than or equal to 48 per cent.
Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act, 2022
The RCP Act will extend the retail credit and credit servicing regimes to persons carrying on a business of offering hire purchase products (including personal contract plans (PCPs)) or consumer hire products to consumers. Such persons, where not already subject to authorisation with the Central Bank will need to obtain an authorisation as a retail credit firm and those who service such products would require authorisation as a credit servicing firm.
The RCP Act also:
- Caps the APR that consumers may be charged under credit agreements and hire purchase agreements;
- Requires the APR to be specified in hire purchase agreements;
- Narrows the interest free credit exemption under the Consumer Credit Act, 1995;
- Allows the Minister for Finance to ask the Central Bank to collect and publish information on credit agreements, hire purchase agreements and consumer-hire agreements.
Under the RCP Act, any credit agreement or hire purchase agreement with an APR in excess of 23% and any guarantee or security given in respect of such credit agreement or hire purchase agreement, will not be enforceable unless a court is satisfied that the failure to cap the APR was not deliberate and has not prejudiced the consumer. This restriction does not apply to credit agreements or hire purchase agreements entered into before the passage of the RCP Act.
This change will now bring within the regulatory scope, buy-now pay later retailers or other parties who sold goods on such terms. Up to now, only the provision of a cash loan or direct credit to an individual or consumer came within the scope of the Irish regulatory regime.
For more information in relation to any of the above please contact Daniel Cashman or your usual contact in Beauchamps.