To whom does the Credit Reporting Act 2013 apply? The Act applies to two key entities:

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1 To whom does the Credit Reporting Act 2013 apply? The Act applies to two key entities: (1) credit - information provider (the Provider ) regulated financial services provider 1 NAMA local authority any person not within the above entities who provides credit (2) credit information subject (the CIS ) a person who has made a credit application a person who has made a credit agreement for the provision of credit to the person a guarantor One key concept is that: A credit application 2 or credit agreement 3 is covered by the Act where: the applicant for provision of credit or the person for whom the credit is provided under the credit agreement is resident in the State at the time when the credit application or credit agreement is made; or the law governing any credit agreement made pursuant to the application would be, or the law governing the credit agreement is, the law of the State Anyone involved in credit 4 must appreciate that this legislation applies to anyone providing credit and anyone who is borrowing or, more interestingly, guaranteeing such credit. This last limb will bring 1. regulated financial service provider has the meaning given by Section 2(1) of the Central Bank Act 1942 (a) a financial service provider whose business is subject to regulation by the Bank or the Regulatory Authority under this Act or under a designated enactment or a designated statutory instrument, or (b) a financial service provider whose business is subject to regulation by an authority that performs functions in an EEA country that are comparable to the functions performed by the Bank or the Regulatory Authority under this Act or under a designated enactment or designated statutory instrument, or (c) in relation to Part VIIB only, any other financial service provider of a class specified in the regulations for the purposes of this paragraph. 2. Credit application means, subject to subsection 2, an application for the provision of credit made to a Provider and completed in accordance with the application processes of the Provider. 3. Credit agreement means, subject to subsection 2, an agreement made between a Provider and another person for the provision of credit for the other person. 4. Credit includes a loan, a deferred payment or other form of financial accommodation, other than any provided (a) by one credit institution to another, (b) to any entity classified within general government in relation to the State within the meaning given by the Fiscal Responsibility Act 2012, the government of any other country or territory or any international organisation, (c) by a company to a related undertaking of the company, (d) by a person who does not provide credit except to the person s employees, (e) in connection with the provision of a utility or other service on a continuing basis,

2 within this legislation many parties issuing guarantees / indemnities relating to credit who may not have thought to comply with the Credit Reporting Act Anyone receiving credit from NAMA may now also be subject to the reporting requirements under this legislation. How long is the information stored on the Register? Information about (i) a credit application will be stored for six months and (ii) a credit agreement will be stored for five years or until the end of the term of the agreement. Anonymised information may be held indefinitely. When does the information have to be supplied to the Central Bank? On two occasions: Before any credit is approved During the life of the credit agreement This is logical. The Central Bank must maintain a Register that shows up to date information which can highlight any defaults under any credit arrangements and not solely the day one position when the credit was granted. Whilst Providers now need to set up a system to supply the relevant information to the Central Bank at a time when credit is given day one, it is key that Providers also understand their on-going obligations because any substantive changes to the credit arrangements must also be notified to the Central Bank. What information will be stored on the Register? Four key types of information will be stored. 1 Personal information Individuals Entities 2 Credit information Credit information which relates to any: - credit application - credit agreement made by a CIS - credit agreement in connection with which a CIS is a guarantor 3 Links Details which link a CIS who has made a credit agreement for the provision of credit to any other CIS who has given a guarantee/ indemnity in connection with such credit agreement or also has liabilities under such credit agreement. 4 Credit scores Produced by the Central Bank about a CIS (f) for facilitating the purchase of goods or services from the person by whom the credit is provided or (g) without any requirement to pay interest or any other charge (in any circumstances). 2

3 Our chart below sets out the detailed information which must be provided to the Register. You will quickly see that the scope of this legislation is broad. It needs to be, to ensure that the Register is a valuable tool for lenders. It is clear that much the same information as was previously given to the ICB needs to be provided to the Register. However a more systematic collation is now in place. Interestingly, the Central Bank may produce credit scores and other analyses in relation to any CIS (and general reports from which a CIS cannot be identified). If any such information is not kept on the Register, the Central Bank may sell or publish it. No limits currently apply to the identity of the purchaser or as to where publication can take place (whether in Ireland or externally). Advocates of the ICB s credit bureau score argue that an application is processed faster (because it is quicker for a lender to process a number than a credit report), and it leads to a fairer and more consistent decision as both negative and positive information from the credit report is taken into account. What must a Provider do? A provider has several duties and powers under the Credit Reporting Act Here are the main ones: Duty to provide information Duty to access information Once the amount of credit sought is in excess of 500, For any application made by a CIS for a loan in excess of 2,000, Providers have a duty to provide the Central Bank with all personal and credit information relating to: (1) any qualifying credit application made to the Provider; (2) the CIS by whom such application was made; (3) any qualifying credit agreement made by the Provider; (4) the CIS with whom the qualifying credit agreement was made; or (5) any CIS who is a guarantor in connection with the credit agreement. Providers have a duty to apply to access information about such CIS from the Register 3

4 Power to access information Providers have the power to access the Register for any information which relates to: a person who (a) has made a credit application to the Provider that is not a relevant credit application or (b) is proposing to give a guarantee/ indemnity in connection with a credit application which has been made to the Provider a CIS in relation to a credit agreement made with the Provider if such CIS (or another person who is CIS in relation to the credit agreement) requests that a Provider change the nature / term of a credit agreement (which CIS has made with the Provider or another Provider) OR guarantee /indemnity given in connection with such credit agreement has failed to comply with any obligation under the credit agreement or any other credit agreement made with any other Provider or guarantee /indemnity given in connection with such credit agreement AND such failure has not been corrected. Any information which is accessed may only be used by the Provider in order to help them to evaluate the risk in extending credit to such CIS or taking guarantee from the CIS or changing the terms of credit already extended and to monitor failure by any CIS to comply with any obligation such credit agreement. The Central Bank will make regulations about how the access process will work in practice and such regulations may make different provisions about different classes of persons who are applicants to access information held on the Register. In addition, such regulations will clarify what fees are to be paid for access to information. In addition, a Provider has the following responsibilities to: take reasonable steps to verify that the information obtained from a CIS is accurate and complete. inform a CIS if a Provider reasonably believes that a CIS has been impersonated. ensure that a CIS is made aware of their rights and duties under the Credit Reporting Act. include on its forms for the making of qualifying credit applications a notice stating that the Credit Reporting Act 2013 requires the provision of information to the Central Bank relating to the qualifying credit application and qualifying credit agreements for entry on the Register. All Providers should take note of these duties and ensure that they are implemented at a practical level within their establishments. It is not yet clear what reasonable steps may be considered sufficient for the purposes of the legislation. As a starting point, a Provider could ask that a CIS not only supplies the relevant information but also supplies evidence to prove that such information is 4

5 accurate and complete. However the legislation arguably demands something more, namely a Provider needs to take action itself to find out if such information is accurate and complete. The legislation has noted that the Central Bank shall, with the consent of the Minister, may make regulations to specify the requirements as to verification which are to be met. Can a Provider or CIS change information held on the Register? Yes, on the basis that the information is inaccurate, incomplete or not up to date. What must a CIS do? A CIS must do the following: Duty to provide information about foreign credit Any CIS who makes a credit application to a Provider must give notice to the Provider if such CIS has an outstanding aggregate debt in excess of 5,000 under agreements that would be credit agreements but for section 2(2) of the Credit Reporting Act 2013 (ie. section 2(2) requires that the applicant is resident in the State or the law governing any credit agreement is the law of the State) The Provider is then obliged to provide the information contained in such a notice to the Central Bank together with a statement that the information has been provided in compliance with such a notice. This is a particularly interesting provision as it specifically concentrates on credit granted outside of Ireland. This means that the Register will capture fuller information about the overall credit status of any person or entity wishing to get credit in Ireland because they will have to supply information about their non-irish debt. This is logical as information about foreign credit would not otherwise appear on the Register. Who pays? The Credit Reporting Act also proposes that the Central Bank may make a regulation to set a levy which Providers will have to pay for the purpose of meeting expenses properly incurred by the Central Bank in the performance of its functions under this legislation. More detailed regulations will be issued about how the levy will be paid, how much it will be and penalties for non-payment. 5

6 Who will regulate the Credit Reporting Act 2013? The Central Bank of Ireland will regulate it. Offences under this legislation will cover a Provider who (i) provides information knowing it to be false or misleading or (ii) uses information which it has accessed from the Register for a purpose other than one permitted by the Credit Reporting Act What information will be stored on the Register? PERSONAL INFORMATION Answer CIS = Individual name mother s birth surname address and previous addresses date and place of birth telephone number PPS number other tax reference numbers (whether in State or other countries) employment status occupation and sector of economy CIS = individual carrying on activities otherwise than as an employee, the following information will also be stored any trading name nature of the entity CRO registration number address of the place where activities are carried on telephone number for any place where activities are carried on Timing This information must be supplied to the Central Bank before credit is approved PERSONAL INFORMATION CIS= NOT an individual names nature of the entity CRO registration number address of the entity / registered office (if entity is a company) telephone number all reference numbers allocated for tax purposes ( whether in the State or in any other country) sector of the economy in which the activities are carried out 6

7 CREDIT INFORMATION Credit information will be stored on the Register if it relates to any: - credit application - credit agreement made by a CIS - credit agreement in connection with which a CIS is a guarantor This information must be supplied to the Central Bank before credit is approved. nature and term of the credit applied for or agreed conditions about payment or repayment of credit amount or max amount of credit currency nature of any guarantee, indemnity or security given and details of any associated valuation rate of interest payable details of any risk rating undertaken in relation to the application details of any securitisation of the credit agreed identifying number given to credit application or credit agreement by Provider The following information is also credit information in relation to any: - credit agreement made by a CIS - credit agreement in connection with which a CIS is a guarantor 7

8 Changes to the nature /term of the credit Changes to guarantee, indemnity or security given in connection with the credit agreement Proposal or arrangement with respect to debts under the credit agreement This information must be supplied to the Central Bank during the duration of the credit agreement. Proposal or arrangement with respect to any guarantee or indemnity given in connection with any credit agreement Other information relating to the performance of obligations under or relating to the credit agreement Other information relating to the performance of obligations under or relating to any guarantee or indemnity given in connection with the credit agreement. LINKS CREDIT SCORES Details linking any CIS who has made a credit agreement to provide credit with another CIS who has given a guarantee or indemnity in connection with such credit agreement or also has liabilities under such credit agreement. A credit score is defined within the Credit Reporting Act 2013 as a numerical value assigned to a CIS on the basis of information on the Register relating to the CIS to indicate the level of risk of the CIS defaulting on financial obligations. 8