Mr. Padraic Kissane:

Good afternoon everybody. I thank the Leas-Chathaoirleach and the committee members for allowing us to present to the committee today on the matter of credit firms and the purchasing of mortgages and distressed debt. I am joined by Mr. David Hall, who is co-founder of the Irish Mortgage Holders Association, and Mr. Brendan Burgess, who is a consumer advocate and founder of the website AskAboutMoney.com. It should be noted that the three of us presenting today have been involved in areas of consumer matters - finance-wise - and mortgages, for more years than any of us want to remember. We consulted on the matter before today, for the purpose of brevity.

As I said in my original letter, it is important to represent the position of customers when it comes to the area of credit firms and the purchasing of debts from mainstream banks. They are generally known as vulture funds. It is important to note the role of these firms in the wider context of mortgage lending and the key role they play, especially in the area of non-performing loans.

Defining a non-performing loan, NPL, is a debatable issue, as many accounts that had working arrangements with their original banks had to be moved on to a vulture fund because the European Central Bank, ECB, decided that they were also to be classified as NPLs.

As a brief background, all Irish banks held sizeable percentages of these loans following the financial crisis, and over time there was a drive from the ECB to have the numbers decreased for Irish banks, which in the main led to a rise in the involvement of these credit firms. Who are the firms? Some of the standard names are Lone Star, Mars Capital, Start Mortgages and others like Promontoria, Oaktree, and Havbell are just some. However, most customers will only know of what are called credit servicing firms like Cabot, Pepper and Certus, which in the main service these loans for the owners of the loans, namely the credit firms which purchased them.

I will not fully go through the points to be considered, but they are outlined in the opening statement. There were some issues and concerns that I had on the classification of loans, and it is an issue that will arise as we speak further.

All active entities in this area, that is, the credit firms, came in for these books at a price that we do not know, but it was a frenzy in the marketplace. Most of these firms now only charge variable rates and do not give a fixed rate option, and this causes a problem in terms of certainty and security for the loanee, especially as variable rates are now going up with no real explanation or logic to the increases seen by some of the rates being portrayed by the firms. I also believe it is wrong not to offer fixed rates to these customers. Rates in many cases are now in excess of 6.5%, and this is before the next planned or expected increase in March.

The consumer protection code is required to apply here, and it states among other matters that firms must act honestly, fairly and in the best interests of their customers and the integrity of the market, so I ask the committee: how has it been applied here?

Many of the customers are in repayment arrangements, and increasing rates by the levels seen will pile the pressure on these arrangements, requiring many to be revisited and reassessed to establish the correct levels of affordability now. Mr. Hall will cover that in greater detail.

There are other issues emanating which need to be highlighted in conjunction with the high interest rates being charged, and I will mention some of them. On the residual balances that remain on many of these arrangements, what happens at the end, especially for people in their homes? On the portions of the loans that have been interest only for full term, or interest only as part of an arrangement, nobody is asking a question about what happens at the end of the arrangement, and how it will be repaid. The lack of regulation powers over these investment funds, or the reluctance for regulation powers to be given, when it comes to the setting of interest rates, is of concern to me. Where are these firms sourcing their money? That is a further question I would ask. Are the funds actually funding from the same marketplace as the regular banks, as we are being told?

The problem that this is happening to people who literally have no option but to suck up any interest rate increases that arise. An ever-growing question people ask me is about what will happen to them now and at the end of the term of their loan. Nobody has addressed this question and no answers are available for these customers. They are not customers who will be looking for personal insolvency arrangements, and that is important to state.

When people started contacting me, I started to look at the original loan conditions that were in place for many of these loans, which I have attached as an appendix to my submission. I have concerns when the terms and conditions are reviewed, as following some research - much like what I did with regard to tracker loans and those terms and conditions - I believe there is an issue here also, and it is important for the committee to understand what it is the original contract states about the sale of a loan or the securitisation of the mortgage.

The conditions for the three main banks remaining are attached in the appendix to my submission. They are taken directly from the loan conditions of each bank and are listed to assist the committee in understanding where I believe there are concerns may arise in not offering fixed rates of interest. While I am aware that these conditions are only for the three remaining banks, the same would apply to others, especially in terms of the large books recently sold by KBC and Ulster Bank, and those previously sold by Danske Bank and Bank of Scotland Ireland as part of their exits from the Irish market.

What is clear from the attached conditions is that in addition to the express terms of the mortgage contract, there are certain implied terms that may be deemed to be part of the contract by operation of law. Arguably, when a customer decides to take out a mortgage with a bank, for example Permanent TSB, it is an implied term of that contract that if the bank decided to exercise its right to sell or transfer the mortgage, then the customer will not be deprived of mortgage options that would have been available had the loan remained with the originating bank. I see this as an entirely reasonable position. The customer entered the contract with a clear expectation that both fixed and variable rate options would be available through the life of the loan, and both types of interest rates were available up to and including until the loan being sold. The originating bank still offers both fixed and variable rates for existing customers as options of interest rates.

If, post the transfer or sale of a loan to a credit firm or vulture fund, a customer, in not being able to select a fixed rate of interest, is being deprived of interest rate options currently available with the originating bank. If so, then there is a good case that the successor in title, that is, the vulture fund, is in breach of the terms of the mortgage loan contract, as outlined in the appendix attached to my submission, and certainly with regard to the implied terms of that contract.

I look forward to the questions members may have. As I stated, this is important because behind every account is a family and a household who simply do not know what to do. They are, in essence, bank-locked - a word that will become more prevalent. They are stuck on rates that are variable only, as well as being very high in some cases. I hope I have shown that the credit firms may have questions to answer. As stated, it is not good enough to simply offer fixed payments when that is not remotely the same thing as a fixed rate of interest. Clarity and certainty moving forward is what customers require. I believe they are entitled to expect that, irrespective of who owns the loan or mortgage.

I will hand over to Mr. Hall and Mr. Burgess to outline further and in more detail issues of concern in this area and what the committee and the wider political house may need to do to assist these customers unless the firms correct matters first.