In a landmark decision in the Circuit Court in Killarney, Co Kerry, this week, the first ever appeal by a mortgage intermediary against the decision of the Director of Consumer Affairs to refuse to grant him a licence under the 1995 Consumer Credit Act was turned down. Barrister Mr Ronan Murphy for Mr John Martin Naughton, of Rangue, Killorglin, Co Kerry argued that a refinancing loan for a Tipperary farmer at the centre of the case could not be covered by the Consumer Credit Act because part of the loan was for farm /business purposes.
The court initially heard that Mr Naughton was refused authorisation to act as a mortgage intermediary in September 1999 because "he was no longer a fit and proper person to carry out the business of mortgage intermediary".
But the case took an unexpected turn when the Tipperary farmer, Mr Edmond O'Donnell, from Clonmel, said his original loans were for extensions to his house, silage and cattle facilities and farm buildings.
"If this was an application for finance for his farm, it has nothing to do with the Consumer Credit Act," Mr Murphy argued. The Director of Consumer Affairs was working under a misapprehension under the Consumer Credit Act and had no role in the case, Mr Murphy contended. A loan made to someone for his business was not covered under the Consumer Credit Act, he said.
But Ms Carmel Foley, the Director of Consumer Affairs, told the court that refinancing a loan was a consumer type transaction, particularly as the advertisement in the Farmer's Journal to which Mr O'Donnell responded clearly displayed the licence number from her office. In addition, the loan was secured on Mr O'Donnell's house, Ms Foley argued.
"It's possible that a loan can be taken out on a house and not be for consumer purposes," Mr Murphy responded. However, Judge Hogan rejected Mr Murphy's argument. "A consumer is a natural person acting outside his trade business or profession," he said.
"If I am a car dealer and I want to buy a car, I am not a consumer. "If I am a car dealer and I want to raise a mortgage, that is outside my business," Judge Hogan said.
Mr Murphy was granted leave to appeal the question of what is or is not a consumer under the Credit Finance Act.
Judge Hogan also upheld the director's decision to refuse authorisation to Mr Naughton on the grounds he was not a fit and proper person to hold the licence under the Act.
While Mr Naughton was the sole person authorised to act as a mortgage intermediary, on behalf of the Wise Mortage Company and Wise Finance Company, persons other than himself, namely his father Mr Seamus Naughton and sister Ms Margaret Theresa Naughton were in fact carrying out much of the business. In July 1998, an inspector from the Consumer Affairs Office found mortgage application forms pre-signed by Mr John Martin Naughton in Mr Naughton's office in the family home. Ms Foley said it was a matter of the greatest concern to her that a person under financial stress could be dealt with by an unauthorised person.
Mr O'Donnell complained to the Office of Consumer Affairs in May 1998 when there appeared to be no movement on the mortgage application he had submitted in February. Subsequently, he discovered the person with whom he had been dealing over a period of some months was not in fact Mr John Martin Naughton, but Mr Seamus Naughton.
