Commercial debt advice firms to be regulated by October
COMMERCIAL firms that want to offer debt management services to consumers will have to meet new Central Bank rules to stay in business.
Dunne & Maxwell, Home Payments Ltd and Cornerstone are among the debt management firms that have closed. The departure of some debt managers has created huge controversy, with people left out of pocket.
There has been no regulation of debt management firms up to now.
Debt advice and management firms charge households thousands of euro to sort out their debts, such as mortgages and credit card arrears.
It is more than five years since the Law Reform Commission recommended the regulation of debt management firms.
The Free Legal Advice Centres (FLAC) legal rights body has been campaigning for rules to apply to debt managers for even longer.
Now the Central Bank has set out a list of rules and told debt management firms that they will have to seek authorisation to operate from the end of October.
It will become a criminal offence to operate without Central Bank authorisation.
Firms that want to offer advice to those deeply in debt will have to ensure staff meet minimum educational qualifications.
The companies will also have to meet strict rules on how they operate their accounts, have adequate staff and meet rigorous criteria on computer systems.
FLAC director Noeline Blackwell said the regulation of the sector was long overdue.
But she questioned why there was no move to regulate debt collectors, who have been accused of harassment.
She said FLAC had lobbied to have debt collectors included in the provisions of the Central Bank (Supervision and Enforcement) Act 2013, but without success.
The move to regulate commercial debt managers comes after the sector mushroomed at the start of the downturn, with a large number of British firms setting up here.
But many closed when the Central Bank used an EU directive to impose higher standards on them if they were handling clients’ money.
They were audited as part of a probe by the Central Bank.
The MD of Dublin-based debt management firm Money Village, Eugene McDarby, welcomed moves to impose regulations, saying it was important to raise standards to prevent consumers being exploited.
“But it is five years too late. The Central Bank has not regulated soon enough,” he said.
The Central Bank is seeking submissions on the proposed regulations by September 23.
The collapse of debt manager Dunne & Maxwell in January 2012 left 2,300 customers owed more than €6m.
The Central Bank said at the time it was concerned about Dunne & Maxwell’s operations.