Opinion of the European Central Bank of 12 September 2014 on the regulation of the business of owning credit (CON/2014/69)
Date: 2014-09-12
Institutions: European Central Bank
Subjects: Ireland, consumer credit, consumer protection, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 12 September 2014 

on the regulation of the business of owning credit 

(CON/2014/69) 

Introduction and legal basis 

On 11 August 2014, the European Central Bank (ECB) received a request from the Irish Department of 

Finance for an opinion on the Consumer Protection on the Sale of Loan Books Bill 2014 (hereinafter the 

‘draft law’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  third  and  sixth  indents  of  Article 2(1)  of  Council  Decision 
98/415/EC1,  as  the  draft  law  relates  to  the  Central  Bank  of  Ireland  (CBI)  and  to  rules  applicable  to 

financial institutions insofar as they materially influence the stability of financial institutions and markets. 

In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 

Bank, the Governing Council has adopted this opinion. 

1.  

Purpose of the draft law 

According to the public consultation paper, the draft law seeks to ensure that borrowers whose loans are 

sold  by  a  regulated  entity  to  a  currently  unregulated  entity  continue  to  have  the  benefit  of  the  same 

regulatory protections as they had prior to sale, including those protections in various CBI codes, e.g. the 

Code of Conduct on Mortgage Arrears.  

The  ownership  of  credit,  defined  in  the  Central  Bank  Act  1997  as  a  ‘cash  loan’2,  is  to  be  a  newly 

regulated  financial  activity requiring  authorisation  by  the  CBI.  This  is  to  be  implemented  by  extending 

the  definition  of  ‘retail  credit  firm’  in  section  28  of  the  Act  to  cover,  inter  alia,  both  the  business  of 
providing credit directly to ‘relevant persons’3 and the business of owning such credit. 

An entity that is a ‘Securitisation Special Purpose Vehicle’ (SSPV) will be excluded from the effect of 

this expanded definition of ‘retail credit firm’. As proposed, the definition of the term ‘SSPV’ appears to 

be  based  on  the  definition  of  Securitisation  Special  Purpose  Entity  in  Article  4(66)  of  Regulation  (EU) 
No 575/2013  of  the  European  Parliament  and  of  the  Council4.  However,  if  the  entity  carries  out  ‘loan 

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2  
3  
4  

Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
See section 28 of the Central Bank Act 1997. 
Defined, with certain exceptions, as ‘natural persons within the State’. 
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1). 

 
 
 
 
                                                 
 
ECB-PUBLIC 

book  servicing  activities’,  such  as  communicating  with  borrowers  to  notify  the  borrower  of  changes  in 

interest rates or payments due under a loan contract, making decisions in relation to contracts including 

enforcement  and  changes  to  interest  rates,  taking  any  necessary  steps  for  the  purposes  of  collecting  or 

recovering  payments  due  under  a  contract  from  the  borrower,  or  taking  any  necessary  steps  for  the 

purposes of enforcing the security on a loan, it will not fall within the definition of the term ‘SSPV’ and 

therefore will not benefit from this particular exclusion. Furthermore, the existing exclusion of ‘regulated 

financial service providers’ from the definition of retail credit firm will be narrowed. Under the draft law, 

such providers are only excluded if they are authorised by the CBI or another European Economic Area 

regulator ‘to provide or own credit otherwise than under this Part [of the Central Bank Act 1997]’. 

Transitional  provisions  will  apply  to  relevant  entities  that  are  currently  unregulated  while  the  CBI 

assesses their application for authorisation.  

2. 

Observations  

The ECB welcomes the measures to be introduced by the draft law, as they aim to strengthen consumer 
protection and thereby contribute to preserving confidence in the marketplace5.  

The ECB understands that this newly regulated financial activity, requiring authorisation from the CBI, 

will not affect the principle of central bank independence, which requires Member States to ensure that 

national central banks have sufficient financial resources to perform Eurosystem-related tasks as well as 
their national tasks6. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 12 September 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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6  

See Opinion CON/2013/14, paragraph 2.1. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
See the ECB’s Convergence Report 2014, p. 31. 

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