The Irish Financial Services Regulatory Authority is to go ahead with its proposed ban on unsolicited pre-approved credit, in a move that consumer groups believe will reduce the numbers becoming over-indebted.
Under the ban, credit card providers will not be permitted to automatically increase a customer's credit limits unless the customer requests an increase.
The ban was first proposed in the financial regulator's draft consumer code in February. Financial institutions, including Bank of Ireland and credit card provider MBNA, objected to the proposal, arguing that it would be anti-competitive and not always in consumers' best interests.
But organisations such as the Money Advice and Budgeting Service (Mabs) and the Consumers' Association of Ireland welcomed the move, agreeing that unsolicited pre-approved credit can tempt consumers into overspending and debt that they would otherwise avoid.
Yesterday, the director of consumer affairs at the regulator, Mary O'Dea, confirmed its intention to bring in the ban, as it published its response to the public consultation on the draft code.
The consumer code is to come into effect in July next year, subject to consultation with the Minister for Finance. The code replaces existing codes of conduct and will ensure that the same level of protection is given to consumers, regardless of which type of firm they approach, the regulator said.
The regulator hopes the code will help avoid the mis-selling of financial services. All firms will be required to gather information about customers' financial background before giving advice and they must ensure any product they recommend suits a particular customer's needs.
The Irish Brokers' Association (IBA) welcomed the regulator's response and said the new code would create a level playing field.
"To date, our members have been operating under a very strict regulatory regime which has not been applied to other providers of financial services," said IBA chief executive, Paul Lynch.
Other key provisions in the code relate to payment protection insurance, cold calling, complaints handling, debt consolidation and mortgage refinancing.
The banking industry's voluntary code for switching bank accounts will not be put on a statutory footing unless the regulator decides it is not satisfied that the voluntary code is sufficient to encourage switching.
Only the general principles of the code will apply to moneylenders, who are also subject to the provisions of the Consumer Credit Act. The regulator is to conduct a review of the moneylending market next year. Credit unions will only be governed by the code if they offer non-core services, for example if they act as an insurance intermediary.
The regulator said it would commence discussions with the Department of Finance, credit union representatives and other parties next year with a view to applying a separate code for the core saving and lending services of credit unions that will take into account the movement's not-for-profit and voluntary ethos.
