National Consumer Agency (NCA) chief executive Ann Fitzgerald has called on the Government to fast-track legislation covering money management and debt management companies.
She warned that unless the sectors were regulated many thousands of vulnerable people could be exposed to significant financial losses.
Ms Fitzgerald was speaking this morning in the wake of the Home Payments company closure yesterday that left some 2,300 consumers exposed to financial losses of up to €12,000.
The family firm, founded in 1963, offered household budgeting and saving services to customers, many of whom were on low incomes and paid all their household utility bills through it. The company said it was a victim of the collapse in the property market.
Ms Fitzgerald said she had convened an urgent meeting of a working group of regulators and industry bodies to try and prevent further financial problems developing for customers of the firm.
The NCA has received a commitment from the Money Advice and Budgeting Service (Mabs), the Central Bank, the Commission for Energy Regulation, the Communications Regulator, the Irish Banking Federation (IBF) and the Irish Insurance Federation to discuss the implications of its closure and to explore ways in which relief could be made available to the people who lost money.
“People paid money to Home Payments for their utility bills and mortgages, and I don’t want to see them having to pay on the double,” she said.
Ms Fitzgerald said she was not in a position to make any commitments about the outcome of the meeting and described it as a “let’s see what we can do meeting”.
A spokesman for the IBF said that it could not comment on the stance banks would take. "We are certainly willing to sit down and look at the situation, but it is too early to comment on what the outcome of the discussions might be," he said.
"There needs to be regulation of money management and money advice companies. Home Payments was a good company and one which was in business for 40 years and provided a really good service, but there was no regulation and no protection for people who used it," Ms Fitzgerald told The Irish Times.
The absence of regulation meant there was no prospect of investor compensation nor deposit protect, and Ms Fitzgerald pointed out the Financial Ombudsman was also powerless to intervene.
She stressed the need for a greater emphasis to be placed on educating people on how best to manage their money. "People were using it as a savings club but were getting no interest on their money. Some of those people have lost as much as €12,000 which they will never get back. These were prudent people, but they were operating outside of the regulated system."
She said that successive governments had been so focused on dealing with larger financial crisis, managing the bailout and trying to rescue the banking system that they had ignored the growing problem of a deregulated sector handling tens of millions of euros of consumers money.
“Debt management companies have only sprung up in Ireland in the last couple of years since the financial crisis took hold; many of them came in from the UK and have been making promises which they can not deliver on,” she said.
“Many of the people they are targeting are very vulnerable and on their uppers and are being lured by false promises and are paying money they don’t have to unregulated companies for services they don’t need. We have been pressing for legislation for a very long time now, and we will continue to press for it. I don’t think it should have to take that long for legislation to be passed.”
She said it was not acceptable delay until 2012 or later. “We should not have to wait until next year for this. We have to get it done in the autumn. It is not complex and much of the framework is already in place at the Central Bank.”
In June Minister for Finance Michael Noonan said he was examining the question of regulating all firms offering debt-management and debt-advice services.
The Department of Finance said this morning that it was “moving as fast it can” to introduce legislation governing debt management companies. A spokesman said, however, it was an extremely complex area and would take some time. “There are many Government priorities and this is one of them and we are trying to get it done as quickly as possible.”
