Dáil Éireann - Volume 633 - 20 March, 2007

Written Answers. - Financial Services Regulation.

Mr. Crawford asked the Minister for Finance if he is satisfied that financial institutions are not walking some borrowers into over-exposed positions; and if he will make a statement on the matter. [10200/07]

  Mr. Cowen: My function as the Minister for Finance is to provide an appropriate and robust legislative framework for regulation of the financial services sector with a particular focus on the consumer. I am satisfied that, since the establishment of the Financial Regulator and the Financial Services Ombudsman, such a framework is in place.

The provision of consumer credit in Ireland is regulated by the Consumer Credit Act, 1995. The Consumer Credit Act, 1995, which is administered by the Financial Regulator, obliges credit providers to include specific information in all credit agreements in relation to such matters as the total cost of credit, the amount of each repayment instalment and the number of instalments. Additionally, in the case of housing loans, the Act specifically obliges mortgage providers to inform borrowers of the effect on their repayment of a 1% increase in interest rates in the first year of their mortgages. The purpose of obliging credit providers to provide this information is to ensure that consumers can make informed choices when making credit decisions in relation to any credit agreement they are entering into and in particular in relation to the effect that servicing a loan will have on the consumer’s household budget.

In addition, the Financial Regulator’s Consumer Protection Code requires that before providing a product or service to a consumer, a regulated entity must gather and record sufficient information from the consumer to enable it to provide a recommendation or a product or service appropriate to that consumer. Under the Code, when a credit institution is changing its interest rates, it must state the effective date of the new rate. It must also update the interest rate details on its information services as soon as the change comes into effect. Credit card limits cannot be increased unless requested by the consumer.

The Financial Regulator has prioritised the provision of information for consumers about the potential risk of excessive debt. Cost surveys have [1301] been undertaken by the Financial Regulator and are available to help consumers choose the loan product or credit card that best suits their needs. The Financial Regulator recommends in particular that consumers take on the right type of credit for the right purpose. The Financial Regulator also issues information to help people who have problems with credit card debt. This information is available through its publications, help-line and website.