Sub-prime lenders in Ireland will shortly face the same oversight as mainstream lenders, if the Irish Financial Services Regulatory Authority has its way.
The regulator is in talks with the Government about changing legislation to allow it to regulate mortgage lenders that target people with poor credit histories.
Currently the so-called sub-prime mortgage market falls outside the remit of the regulator and concerns have been raised about the practices of these institutions that lend money to people who fail to meet the criteria of traditional lenders.
The regulator, which issued its annual report for 2006 yesterday, said it believes these types of mortgage products should be regulated in the same way as traditional mortgage products.
The report also noted that a further €49 million of overcharging by Irish banks was uncovered last year. The overcharging relates to customer accounts in the 1990s, according to the regulator.
While the regulator's consumer director Mary O'Dea declined to name the institutions involved, she noted that the figure had fallen and that no individual case was as significant as the cases of overcharging by AIB and Bank of Ireland that were reported by the regulator in 2005.
The €49 million brings the total amount of overcharging uncovered by the regulator to €167 million. The money is being returned to the customers involved or, where they cannot be identified, given to charity.
Addressing journalists at a briefing to coincide with the release of the report, chief executive Patrick Neary urged financial institutions to step up their approach to risk management in the light of the tightening economic environment.
He said that, given the high level of household debt and rising interest rates, people are sure to come under pressure to meet their financial obligations and, as a result, it is essential that banks have inbuilt alerts aimed at addressing such issues before they get out of hand.
"It is more important now than ever, in a climate where interest rates have increased and where consumers hold more borrowings, savings and investments, that the financial services industry maintains a clear focus on its commitments to consumers," he told reporters.
Meanwhile, Ms O'Dea expressed concern about the lack of competition in the credit card market, saying that three companies, AIB, Bank of Ireland and MBNA, control almost 80 per cent of the business.
She said the lack of competition means that interest rates range from as low as 9 per cent to as high as 18 per cent, a spread that wouldn't be possible in a truly competitive market. She also expressed concern that half of credit card users don't know how much they are paying and said the regulator will be seeking to raise awareness on this issue.
