Aideen Hayden (Labour) | Oireachtas source

I would like to ask a couple of questions. A number of them were asked by Deputy Spring earlier. I first came across securitisation some time around the early to mid-1990s. My understanding of securitisation at the time was that if a person had a loan with Bank of Ireland and it securitised part of his or her loan, he or she continued to deal with that bank and that was grand. As far as that person was concerned, there was no difference in what was happening. As Mr. Joyce has set out, we are now dealing with three very different situations.

I am aware that there are people watching this programme on Oireachtas TV whose loans have been sold as part of a package to an unregulated entity, or who fear that their loans will be sold on in that way. They are wondering how such sales change their positions. We have covered some of that ground. As we have said, there is uncertainty about loans that are sold before any legislation is enacted. Is that correct? I think that is correct. Officials from the Department of Finance have told this committee that most of the loan books that have been sold to date have been sold to entities that have voluntarily said they will comply with the code of conduct on mortgage arrears. As a solicitor, I question how robust that would be as a security to me if I was tossing and turning in bed at night and worrying about my debts.

We have covered the question of whether the terms of the original contract with the lender will continue to hold water as we go forward. Deputy Spring mentioned the issue of interest rates in this context. When that came up last week, the Governor of the Central Bank made it clear that the Central Bank has no role in setting interest rates. Is it not the case, therefore, that there appears to be no protection in terms of interest rates? An entity that buys a loan book might decide, for whatever reason, to vary the terms of interest on some of the better-performing loans to beef up the return on the books. There does not seem to be any prohibition on doing that, in spite of Miller, which is under appeal. That is my first question.

My second question is one that many people ask. Why would a bank want to sell a performing loan book? I think the answer is that many of these loans are not performing. Therefore, there has to be another agenda. That is what people are afraid of. In the current improving property market, there is a fear that those who buy loan books, particularly those who might want to maximise on them, are not effectively prohibited from acting in an aggressive fashion, refusing to engage in forbearance and going to sale as quickly as possible. My reading of this is that there is no effective prohibition. My engagement with the code of conduct on mortgage arrears leads me to believe it is so easy for a borrower to be in breach of the code that a lender, or indeed somebody managing the loan book on behalf of its owner, can simply decide to step in at any number of points during the process.

Mr. Joyce made the point that approximately 10,000 cases have gone into the courts in the last short period of time. Questions have to be asked about aggressive behaviour. How can we protect consumers? Obviously, we can beef up the code of conduct on mortgage arrears. Problems arise when those who buy loan books that are not necessarily in the most robust condition decide they want to cash in on rising property values. Mr. Crowley made a point about reputation in this context. That is fine when it comes to existing institutions, as there is still a great deal of trust in the market between some of the traditional lenders and customers. Many of those who have sold on loan books no longer have skin in the game, as somebody said. They do not really give much thought to their reputations. Reputation will not save anybody. As we know from other types of credit and the activities of some credit collectors, for want of a better word - some of them would be closer to the sheriff's office, or wherever it happens to be - the behaviour of the people who are administering loans can vary substantially. The behaviour of one person who is acting to enforce a loan can be very different from the behaviour of another person who is seeking to do so.

I will put my overall question. Will what is being proposed here protect people whose loan books have already been sold? I think the answer we have been given to that question is "No". I believe the code of conduct on mortgage arrears is still way too weak and too easy.

In the case of joint borrowers, for the sake of argument, where there is one non-co-operating borrower, it is easy to abandon the code of conduct on mortgage arrears at any point in time. In spite of the legislation and the Government's stated desire to protect people, is there any real, effective protection in the legislation for vulnerable borrowers in the face of someone who buys a loan book and is only interested in maximising its value?