Mr. Maurice Crowley:

I thank the Chairman and members for affording the Banking & Payments Federation Ireland the opportunity to appear before the joint committee as part of the pre-legislative scrutiny of the general scheme of the sale of loan books to unregulated third parties Bill 2014. The federation and its member banks support in every guise the objective of seeking to ensure consumers are protected. In this regard, our members have implemented or are signatory to a range of consumer protection protocols, including the consumer protection code, code of conduct on mortgage arrears, the Money Advice & Budgeting Service operational protocol and the protocol on multi-banked small and medium enterprise debt, which we issued earlier this year.

In the context of the proposed Bill, which is being prepared and drafted by the Department of Finance, certain issues require careful consideration. For the purposes of this meeting, we will briefly draw attention to one or two of these issues. A ongoing process of de-leveraging in the banking sector involves bolstering banks' capital and strengthening their balance sheets to make them more fit for purpose and allow them to continue to lending into the economy. We are cautious to ensure that new legislation does not adversely impact on these efforts, while achieving the appropriate balance of protection for consumers. We are concerned that the legislation, as drafted, may deter potential purchasers of or investors in the loan portfolios that are being made for sale and present a risk that such investors may turn their attention to other European markets.

We feel very keenly that a balance is needed in the legislation between not deterring the deleveraging and sale process and ensuring that appropriate consumer protections are maintained irrespective of the owner of the portfolios. We have concerns about potential unintentional consequences from the legislation, which we outlined briefly in our submission.

We share Mr. Joyce's concerns that the way in which SPVs and SSPVs are pulled together may undermine the protections this Bill proposes to offer. We are of the view that where a purchaser of a loan portfolio outsources the servicing of that portfolio to a third party which is itself a regulated entity, the purchaser should be exempted from the legislation. A number of well-run loan services now operate in this country and they provide considerable employment. We believe they are a more appropriate focus for this legislation. The Bill refers to purchasers having a physical presence in Ireland. At present under Central Bank regulations there is no requirement on physical presence. They focus on the ability to supervise and regulate these entities. The reality, as Mr. Joyce noted, is that many SPVs and SSPVs will not have a physical presence in this country and, therefore, the focus should be on those who service the loan books. We are aware, based on earlier discussions with this committee, that the Department of Finance is planning to introduce amendments to alter the focus from purchasing entities to those entities who take responsibility for servicing and managing loan portfolios. Given our previous submission in August, we would welcome that approach because it would deal with the issues we outlined. It would recognise the primacy of protecting consumers and borrowers under the CCMA and the consumer protection code but it would also address the other commercial issues to which I alluded in the context of banks seeking to deleverage and strengthen their balance sheets.