With effect from 29 October 2018, the Credit Reporting Act 2013 (the "CRA 2013") has been amended with the result that the forms of reportable credit under the CRA 2013 has been broadened to include; hire purchase agreements, personal contract plans (PCP) or any other type of credit/leasing agreement where the lender is also the owner of the financed good or service.
On 29 October 2018, the Markets in Financial Instruments Act 2018 (the "2018 Act") was signed into law. While the 2018 Act was enacted for the principal purpose of introducing criminal sanctions for breaches of the Irish MiFID II Regulations, the 2018 Act also amends certain provisions of the CRA 2013.
Amendment of the CRA 2013
As outlined in our previous client briefing, available here, the definition of "credit" in the CRA 2013 (i.e. ''a loan, deferred payment or other form of financial accommodation") is subject to a number of exemptions.
In the CRA 2013, credit advanced "for facilitating the purchase of goods or services from the person by whom the credit is provided" was excluded from the scope of reportable credit.
The 2018 Act modifies that exemption to limit it to credit advanced "in the form of trade credit" (e.g. credit provided on invoices). Credit will be classified as "trade credit" if:
- the lender/creditor and the party to whom the credit is provided are both "acting in the course of his or her business, trade or profession";
- the lender/creditor is not a regulated financial services provider;
- the credit falls due for repayment not later than 6 months after the date it is advanced; and
- the purpose of the relevant credit is to facilitate the purchase of goods or services from the lender/creditor.
The net result of this amendment of section 2 of the CRA 2013 is that hire purchase agreements and similar credit agreements, for example hire purchase agreements, personal contract plans (PCP) and any other type of credit/leasing agreement where the lender is also the owner of the financed good or service are now reportable forms of credit pursuant to the provisions of the CRA 2013.
The other exemptions from the scope of credit included in the CRA 2013 have not been amended, including:
- inter-bank or inter-group credit;
- interest-free credit;
- employer-employee credit where the employer does not otherwise provide credit; and
- credit in relation to the provision of utilities.
Next Steps for in Scope Lenders
Credit providers who advance credit in the form of hire purchase agreements and similar arrangements should assess whether in their particular circumstances the credit will be reportable and consider the processes and procedures required to comply with any obligations under the CRA 2013, as regards consumer and non-consumer credit.
Where credit is reportable, steps should be taken to notify those relevant borrowers of their rights and duties under the CRA 2013 and consider whether relevant loan documentation needs to be updated to adequately address the requirements imposed by the CRA 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.