Cental Bank moves to rein in debt companies
The bank is acting “in the public interest and as part of a general review of the debt management sector”
The Central Bank has outlined a series of new rules for debt management firms
The Central Bank is preparing to move against debt management companies which have been allowed set up in the Republic in recent years without offering consumers any level of protection despite handling tens of millions of euro each year.
The regulator has outlined a series of new rules on how such businesses operate and has published a consultation paper on draft standards for the sector.
Several companies which collected money from consumers with the promise of better managing their finances and paying their bills in a timely fashion have gone out of business in recent years with those who relied on them for support losing millions of euro without being given any chance of recompense.
One of the most high profile was Dunne & Maxwell. Last year the Central Bank wrote to hundreds of customers of the Dublin-based debt management company and strongly recommended they suspend all payments to it immediately and said people should “consider contacting the Garda” if bills to be paid on their behalf by the company were not up to date.
The bank acted “in the public interest and as part of a general review of the debt management sector”. It had inspected the company and had “reasons to be concerned” about the nature of its operations and its “handling of customers’ money”.
Absence of legislation
Dozens of other debt management firms have set up in recent years offering to help people scale personal debt mountain. An absence of legislation – which has been strongly criticised by groups such as Mabs and the Free Legal Advice Centre – has allowed some operate without any training or oversight into how they managed vulnerable consumers’ money.
The new rules mean all such agencies will have be granted a licence by the Central Bank to operate by the end of October and running such a business in the absence of such authorisation will be a criminal offence.
Debt management companies which offer any advice to those struggling to manage their finances will have to prove their staff have a basic level of financial expertise while new rules on how the companies manage their own accounts will have to be put in place.
According to the Central Bank’s director of consumer protection Bernard Sheridan, the proposals set out a robust set of requirements for what is an important sector.