Mr. Cormac Butler:

Certainly. IIB Homeloans Limited passed itself off as a bank. It often referred to itself as “the bank” and in some trade articles referred to itself as “the bank”. It may well be a subsidiary of another bank but that is not important. What is important is that if IIB Homeloans Limited enters into a contract with customers and says it is a bank, then it must hold a licence under section 7 of the Central Bank Act 1971.

One of the consequences of advancing a loan without a licence is that the customer may not be able to avail of the Consumer Protection Act. That aside, the legal requirement from what I can see is that under section 7 of Central Bank Act 1971 a body describing itself as a bank and-or engaging in banking business is required to hold a licence. Several customers are currently before the repossession courts and I believe they should not be there. IIB Homeloans transferred its activities to KBC Bank, but KBC Bank cannot avail of the Bankers' Book Evidence Act from what I can see because IIB Homeloans does not have a licence.

I imagine that the remedy for IIB Homeloans, given that it advanced a loan without a banking licence, is that it may be entitled to get its principal back, but I cannot see how it is entitled to charge interest if it has advanced a loan without a licence. It is important to emphasise that the Central Bank has a different view on this.

Returning to the Chairman's question, the group of IIB Homeloans customers asked IIB Homeloans to provide the licence and it was reluctant or refused to do so. They then wrote to the Central Bank of Ireland asking it to provide confirmation that IIB Homeloans had the licence when they took out our loans. The Central Bank wrote back on numerous occasions stating that IIB Homeloans did not need a licence. When these customers went to court, the court maintained it is not up to IIB Homeloans to confirm it has a licence but it is up to the customers to prove it does not have a licence. It is clear that the courts are taking the view that IIB Homeloans is always right.

After persistent questioning by this group, a letter appeared around 26 May in which the Central Bank confirmed that IIB Homeloans did not have a licence. It also stated in the same letter, which will make things difficult for those in the repossession courts, that IIB Homeloans did not need a licence and is regulated under the Investment Intermediaries Act. I dispute that, but to keep the argument simple I believe it is up to the Central Bank to confirm where in the legislation section 7 of the Central Bank Act does not apply to IIB Homeloans Limited. It may be that it comes under different regulations and it is quite entitled to make that point, but it needs to answer that question specifically. If it does not answer it, we could end up with many more repossession cases. As I speak, these cases are going through the courts.

One of the problems that the IIB Homeloans customers have is that even when evidence is presented to the courts, they tend to claim it has gone too far and has now gone to the appeals stage, the High Court or the Supreme Court. In other words, whatever evidence the customers have, it is now too late. This is why Central Bank intervention is necessary. The Central Bank has already confirmed that IIB Homeloans does not have a licence, but it needs to clarify why IIB Homeloans Limited was exempt from the requirements of section 7 of the Central Bank Act 1971. Until it does that, there is the risk that these customers will face illegal repossessions.

The matter was also raised with the Minister for Finance, who answered a parliamentary question in May. The question asked if IIB Homeloans Limited had a licence prior to 2008. It is very clear that the Minister was evasive in his answering. He simply copied the Central Bank rhetoric, which states that it did not need a licence. He may be entitled to say that, but that was not the question asked. We can only resolve this if the Central Bank states that a section 7 does not apply because there is alternative legislation which means that in certain circumstances an entity may lend money, call itself a bank and engage in banking business but does not need a licence. We need to get that information. Given that we have been looking for it for a while, the Central Bank should treat this as a priority.