Subprime lenders in Ireland will now be subject to the same oversight as mainstream lenders and have three months to register with the Financial Regulator under new legislation due to come into force today.
From today sub-prime lenders will face arrears provisions, and these lenders will now be subject to inspection. The Regulator has the enforcement power to sanction the lenders with fines of up to €5 million.
Subprime lenders appeared in the Irish market place around four years ago and differ to the standard mortgage lending by offering loans to customers rejected by the mainstream banks in return for higher interest rates.
The market for this type of loan product is estimated to be around €4 billion a year, and at the moment is valued at an estimated €1.5 billion.
However, because the subprime market in Ireland is primarily run by non-deposit taking institutions, they have fallen outside the remit of the regulator with the result that the Regulator's consumer protection provisions did not apply.
Concerns have been raised about the practices of these institutions with the regulator keen that these products be regulated in the same way as traditional mortgage products.
Speaking on RTÉ Radio's Morning Ireland,consumer director with the Financial Regulator Mary O'Dea said the consumer protection code will have to comply with a suitability provision - whether the loan sought appropriate to the applicant's circumstances.