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Consumer Protection should be at the core of Central Bank Regulation
The Central Bank have recently issued a consultation on their Strategic Plan 2019-2021. This consultation took the form of three core questions dealing with economic risks, regulation and financial conduct. In our submission, Social Justice Ireland proposed that consumer protection be central to this Strategic Plan. Risk assessments must go beyond economic and financial risk. The Central Bank must also accept its responsibility for societal risks associated with poor institutional practices by regulated entities. Consumer protection, including special protections for the most vulnerable consumers and SME (Small and Medium Enterprise) sector, must feature strongly in any bank regulatory regime. To this end, our recommendations included:
1. Balance prudential regulation with the flexibility required to sustain enterprises within this economy in the context of Brexit.
2. Keep consumer protection at the core of new regulation. Before engaging in any new regulatory processes, the Central Bank should consider not only competitiveness from an economic standpoint, but also the impact of regulatory policies on the consumer and small and medium enterprises.
3. Provide incentives to lenders who reduce their NPLs in a sustainable way that is not only good for the balance sheet, but benefits society as a whole, making use of write-down provisions to ‘right-size’ loans in circumstances where a sustainable payment by the borrower resulting in a higher return for the lender, albeit within a longer period.
4. Review the CCMA (Code of Conduct on Mortgage Arrears) to increase the consumer protections to at least 2011 levels and place it on a statutory footing.
5. Introduce a licensing system for currently unregulated funds purchasing mortgage loan books to develop a domestic regulatory regime and safeguard consumer protection.
6. Review the CPC (Consumer Protection Code) to include financial vulnerability within the definition of ‘vulnerable consumer’.
7. Place the CPC on a statutory footing, with sanctions imposed for non-compliance and an adequate right of recourse to the courts for borrowers who can prove damage as a result of negligent lending practices. This would act as a form of ‘pre-action protocol’ similar to those in other jurisdictionsban.
8. Adopt the principles contained in the BPFI / MABS Operational Protocol into any revision of the CPC to ensure the protection of an adequate standard of living for those experiencing repayment difficulties in respect of unsecured debts.
9. Track levels of financial exclusion and build and monitor policies and practices aimed at eliminating it in its entirety by 2020.
10. Expand the Central Credit Register to include all household debt, in line with practice in the UK, which records both a positive and negative payment history; including utility payments, rents to local authorities and non-bank debts, would allow consumers to build a credit history, enabling them to move from high-cost credit to mainstream and low-cost alternatives, while at the same time providing all the detail needed by prospective lenders to make informed underwriting decisions.
Protection of the most vulnerable by eliminating or mitigating financial risks is good for the individual, society and the economy.