Oireachtas Joint and Select Committees
Wednesday, 1 March 2023
Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach
Investment Funds: Discussion
Bernard Durkan (Kildare North, Fine Gael)
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The minutes of the joint committee's meetings on Wednesday, 15 February 2023 and Tuesday, 21 February 2023 were agreed at the committee's earlier private meeting. Is that agreed? Agreed.
Today's meeting is to discuss issues concerning investment funds, non-banks, as they operate in the Irish market. On behalf of the committee, I would like to welcome Mr. David Hall, Irish Mortgage Holders Organisation, IMHO; Mr. Padraic Kissane, financial services adviser; and Mr. Brendan Burgess, consumer advocate.
The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses are again reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity, by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.
Members are also reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him, her or it identifiable. I remind members who are attending remotely of the constitutional requirement that they must be physically present within the confines of the place in which Parliament has chosen to sit, namely Leinster House, in order to participate in the proceedings.
I invite Mr. Padraic Kissane, who is our first contributor, to make his opening statement, to be followed by Mr. Hall and Mr. Burgess.
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.
Bernard Durkan (Kildare North, Fine Gael)
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I should have noted apologies from members at the start of the meeting. The Chairman apologises for being late. He hopes to join the meeting later.
Mr. David Hall:
I thank the Leas-Chathaoirleach and committee members for the invitation to address the committee on the topic of non-bank lenders and vulture funds. I am delighted to be here with Mr. Kissane and Mr. Burgess, both of whom continue to advocate excellently for consumers.
This is a topic close to my heart for all the wrong reasons. The IMHO has assisted approximately 20,000 borrowers in arrears, with a total debt of approximately €4.5 billion, in the past eight years. Many of us here today warned about the predatory nature of non-bank lenders and the behaviour of vulture funds. Some people seemed deluded that they were like charitable organisations. Indeed, some of the vulture funds set up a charity, but for different purposes. Some commentators and politicians were briefed by the Department of Finance and the Central Bank that vultures were good for the economy, were nice people and would look after consumers. We were told that consumer protections would follow the customer when a loan was sold to a vulture. We now know that is not true.
The Central Bank has a key role in protecting consumers but it has failed miserably. Yes, good work was done on the tracker scandal but, despite thousands of families having been affected, money taken and homes lost, no one was charged or lost their job, while many people lost their homes and experienced a negative impact on their lives. The Central Bank is horrifically conflicted in protecting banks and vultures while supposedly protecting customers. Financial customers transact billions of euro and have borrowed billions of euro but their regulatory saviour also regulates the lenders from whom the customers have borrowed. Why in God’s name would anything change? Irish financial mortgage customers have fewer rights and representation than badgers and many other animals do.
Many mortgage customers are now mortgage prisoners. Their mortgages having been sold involuntarily to vulture funds, they are now unable to get a fair mortgage or interest rates and have no control, option to move or option of a fixed-rate mortgage. Financial customers should be a powerful lobby. Their protection should not depend on a handful of advocates such as Mr. Burgess, Mr. Kissane and me, along with some politicians and journalists who try to hold banks and other financial institutions and vulture funds to account.
Vultures have continued to torture those in mortgage arrears, many of whom have been trying to engage. I say trying to engage with vultures because one experiences great difficulty trying to deal with vultures when people are in mortgage arrears. Vultures and non-bank lenders are despicable and disorganised and blame the Central Bank for bureaucracy. We were lied to when we were told that consumer protection would follow through from the mainstream banks when they sold mortgages to vulture funds. That is not the case. A massive disservice has been done to many people and a false narrative has developed. The truth can now be seen. A vulture is a different animal in many ways. I am sure every member of the committee, and every other Oireachtas Member, has tried to engage with vultures and non-bank lenders of behalf of constituents. My IMHO colleagues and I do so daily. We can only hope to get a reply, let alone a coherent process and deal on behalf of customers. Many deals have been done but there is a massive void in the competency of engaging with advocates, representatives, financial advisers and politicians. What hope does the consumer in arrears have when trying to deal with such organisations?
There are just over 21,000 customers in long-term mortgage arrears whose mortgages are now owned by vultures. The banks and vulture funds have told their regulator, the Central Bank, that up to 16,000 homes will be repossessed by voluntary surrender, silent repossession or court order repossessions. Unless these customers are going to be given a free house, there will be great difficulty ahead.
Vultures use a commercial third-party company approved by the Department of Housing, Local Government and Heritage to maximise return in circumstances where people are in mortgage arrears, eligible for the mortgage-to-rent programme and eligible for social housing. There are now 490 households in limbo as the Department scrambles to create a new expression of interest and potentially invite new vultures into the process to buy these family homes.
People in mortgage arrears who are the customers of vultures are now mortgage prisoners. They are not protected in the same way they would have been with a bank. Mr. Kissane and Mr. Burgess will touch on other issues relating to this. Those whose mortgages have been restructured have experienced interest rate increases, pushing them further to the edge. Those seeking mortgage arrears solutions are in difficulty as the rates push up any agreed repayments. Vultures do not all provide the same solutions that the bank used to offer. It is true that some vultures have begun to think creatively. A sceptic might say this is because they realised that many customers will not be able to afford to pay more than 6% in interest.
Consumer protection should be taken out of the Central Bank. The Oireachtas needs to legislate to protect customers. Those in mortgage arrears were stigmatised as sinners who had borrowed too much and, having lost their jobs, were not in a position to pay. They are now scared of being in debt again.
This is not just about people in mortgage arrears, as Mr. Kissane stated, or the customers of non-bank lenders and vulture funds generally. There are low levels of engagement with third parties and the lack of reality in the context of doing deals causes great harm. The Irish Mortgage Holders Organisation is now hearing from a significant number of people who are working and struggling and pre-empting going into arrears. This is now referred to as pre-arrears. Many of these are people who used to be with a bank but are now with a vulture fund. They assumed their interest rate would remain the same as it was with the bank with which they originally took out the mortgage. Their mortgage having been sold, they are now being fleeced by vultures. They did not deserve this and are now under pressure. They deserve to have the rate applied by the bank from which they originally took the mortgage applied to their mortgage. These people are commonly referred to as the squeezed middle. They are used to paying for everything. They are no longer being squeezed, however. Rather, they are now being crushed.
Given that the State was able to put €64 billion into banks, 298 pages of legislation in 48 hours to protect consumers should not be difficult if the willingness is there. The Central Bank has prioritised the economy, banks and vultures and is not fit for purpose to protect consumers. Giving it any further powers is an utter waste of time.
Mr. Brendan Burgess:
Mr. Kissane and Mr. Hall have covered most of the issues, so I will highlight a few points. The first is that this is not just about people in arrears. When the Central Bank appeared before the committee, it set out that it makes sure lenders adhere to the code of conduct on mortgage arrears, CCMA, and provide a range of restructuring arrangements. Some 21% of these customers are in arrears, with approximately 80% not in arrears. It is not good enough to gouge customers, regardless of whether they are in arrears. They should not be gouged. I ask the committee to pay particular attention to that.
The vulture funds will argue - the Central Bank has argued it very well on their behalf - that they have just passed on the ECB rate increases. They will argue that the Governor of the Central Bank asked them to ensure they transmit ECB monetary policy into the economy and that is what they are doing. One needs to understand the situation in respect of Irish mortgage rates through the past ten years. We have had the highest new business mortgage rates for most of the past ten years. In that period, although we had the highest new business rates, those rates were fixed rates, generally speaking. That is where the banks competed. I remember Richie Boucher, then CEO of Bank of Ireland, appearing before the committee. When Deputy Doherty challenged him on the number of people paying 4.5%, he said they did not need to pay 4.5% as they had the option to switch to a rate of 3% that the bank offered. Many customers ended up paying 4.5% variable interest rates, however, because they were not informed enough or too busy or whatever. They stayed on 4.5%. The loans of some of those customers have now been sold to vulture funds and the 3% is being added to that artificially high rate of 4% or 4.5%. Those customers are now in a very difficult position. I stated that this is not about people in arrears, but many of them will end up in arrears shortly.
I will go back to what was said at the time these mortgages were sold to vulture funds. We got reassurance from the then Minister for Finance, Deputy Donohoe, as well as the Department of Finance and the Central Bank. They asked what the problem was in the context of assurances that the contract would continue and customers would keep the same terms and conditions. The implication was that borrowers would not suffer as a result.
This is not what has happened. Borrowers have suffered and they are paying a much higher mortgage rate.
What is the solution? It is not enough for us to come in here to complain about this and to give out and say: "Aren't they dreadful?" We do need to see something happening. The first principle of the consumer protection code of the Central Bank is that customers must be treated fairly. If Mr. Kissane and I took out a mortgage with the Permanent TSB at the same time, for the same amount of money and the same loan-to-value ratio, etc., and for whatever reason PTSB chose to sell my mortgage to a vulture fund and I am paying 3% more, that is just not fair. The principle of fairness is terribly important here.
The Central Bank could impose a solution if it was minded to do so, and if it is not, then the Oireachtas could probably impose it, although that would take a little bit longer. The solution is that when any mortgage is sold by a bank to a vulture fund, the vulture fund must offer the rates being offered by the original bank. It is that simple. If in the scenario I outlined where Mr. Kissane and I took out a mortgage with the PTSB and my mortgage was sold to a vulture fund, I would be offered the same rate he is offered. I have done nothing differently. I have not agreed to the sale of my loan, so from that point of view, that is a solution I would like to see. The committee's help in imposing that would be very welcome.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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I thank the witnesses for coming before the committee today. I also thank and commend them on the work they do on behalf of mortgage holders. We are used to having financial institutions come before the committee and the Central Bank comes in, but it is very difficult for us to get individual bank customers or mortgage holders to come in. Therefore, it is very important that we have people who will advocate and speak on behalf of those people.
I will start with one or two questions to Mr. Kissane in respect of his report. This may sound like a basic question, but I am conscious that other people need to be informed in respect of this. What is the difference from a consumer's point of view if he or she has a mortgage with a vulture fund, as opposed to one of the established banks or financial institutions in the country?
Mr. Padraic Kissane:
I might answer it in a different way. There should not be a difference. That is what Mr. Burgess is trying to challenge. The reasons a mortgage is sold are outside of the customer's control but customers are nearly being blamed for causing a lot of this issue. The difference as I see it now, which nobody knows accurately, but I can guess, is that all of these funds bought the loans at a discount. I have evidence that some performing loans were included in the sale of the book of business to vulture funds and Deputy Pearse Doherty has raised this a number of times. If I have a performing loan from PTSB for €500,000 and it is sold, let us assume the purchase price is €250,000 and that the rate of interest is currently at 7%, that is 14% interest rate the vulture is getting on the €250,000 it paid for the loan. There is no way that anybody can reasonably convince me that the fairness of application to both are the same. That is despite the fact that we are assured it would be. The phrase I used that will probably become commonplace is "bank-locked". These people are bank-locked. They cannot put an extension on their house. They cannot get a top-up loan to carry out a retrofit because the vulture fund will not lend any further money. Because their asset is tied, they cannot use the asset for any purpose going forward.
Deputy O'Callaghan asked what the similarities are. It is one mortgage loan contract, and the bank is within its right to sell it, but I do not believe the implied conditions of the contract are being applied in not offering a fixed rate.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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We certainly agree that there should not be a difference. However, from the point of view of mortgage holders, am I correct in thinking that they find themselves initially dealing with a regulated bank that sees this as a 25-year or 30-year mortgage and then they find their business transferred to another financial institution that has as its primary objective the recovery of proceeds as quickly as possible? Is that a fair assessment?
Mr. Padraic Kissane:
There will be two views taken. There will be some who say that if people can remortgage elsewhere that they might do a discount and get it out, but then there are people who cannot do that and they will become what I would call the regular payers. The case I speak about in regard to the performing loan has been sold three times since it left PTSB.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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How did the person get into the category of non-performing loans?
Mr. Brendan Burgess:
There are three categories of mortgage that ended up with the vulture funds. The first were the performing loans that were customers of Danske Bank and Bank of Scotland Ireland. They left the country and they sold those loans. We are not terribly worried about those because they are, generally speaking, on very good tracker mortgage rates. While they are paying a lot more than they were a year ago, they have had ten very good years. They are fully performing. At the other end, we have people who were in deep arrears on their mortgages. They were probably paying very little, and the banks just had to get them off their books. The banks were unable to repossess the house, deal with them or get them to pay any more money so the banks just had to sell the loans as part of the restructuring programme.
Then there is a group in the middle, primarily 6,000 Permanent TSB customers who did what they were asked to do, they engaged with Permanent TSB and Permanent TSB did what it was asked to do, it gave these guys long-term solutions. They restructured those mortgages, usually with a split mortgage where some of it was warehoused and there was no interest or repayment on it. Some 90% were performing fully and paying that mortgage and the Central Bank came along and said it was defining those as non-performing loans and the bank must sell them. Permanent TSB said that they were very profitable loans and that it was getting a monthly repayment on them and it would be able to review the warehoused part of the loan in time and get them back fully but the Central Bank said: "No, get those off your books" and to make a provision in full, which would have wiped out PTSB or to sell them. Those are the people I feel particularly distressed about. They did what they were asked. These are our neighbours. Members know many of these people but they would not know that they are in arrears or that they have any difficulty. Those mortgages have been sold and that was an absolute disgrace.
Mr. Padraic Kissane:
I will add that the stress levels here are becoming more acute, but some of the increases that are occurring are almost being blamed on what is happening with the European Central Bank. It is not quite accurate to do that. A lot of this was occurring before the increase in interest rates but they now have an excuse for it. That is what is challenging. If I base it on the real return of interest, given what the vulture paid for the loan, we are well into double figures here.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Are the witnesses aware of any mortgage holders where the cost at which their loan was sold to a vulture fund can be identified? Does the vulture fund say it bought a package and it does not identify the cost of each one?
Mr. David Hall:
To go back to Deputy O’Callaghan's earlier question, there are big practical differences between dealing with a mainstream bank and dealing with a vulture fund. This is human stuff. It is basic humanity. These are people who do and do not have the capability and competency to deal with financial matters in general. These are people who have the capacity and intelligence to be a senior lawyer, politician, or anything in the country, but when it comes to debt, banks and financial stuff, they just get surrounded by this cloud that causes great difficulty.
It can be difficult to deal with a bank that is a regulated entity that has structures in place and is governed by the Central Bank, as weak as they may be on occasion, but let us compare that with even trying to find an office for a vulture fund and then trying to deal with a service agent. Then, as Mr. Kissane mentioned, one could have one's loan sold three separate times. There are vast differences. Vulture funds do not provide restructuring arrangements in the same way as a bank. One cannot get certain restructuring arrangements such as a split mortgage or a fixed-rate mortgage and other such products. Vulture funds are less inclined to deal with insolvency arrangements.
Some are better at dealing with insolvency arrangements than others. On a human level, there is a vast difference. There is no ongoing relationship and no top-up loan available. It is a whole host of small things to individuals that are big things to customers.
On the loans on the mortgages and the prices, the average sold in Ireland is probably 50%. I have been involved in two bids. Without breaching any confidences on the specific costs and charges that were levied and what we gave, I think 50% would be about average. As mentioned earlier, it is very important to remember this when talking about a vulture fund having bought something and charging someone extortionate interest rates. Vulture funds will have bought a €300,000 loan for, say, €150,000, particularly where it was a distressed loan, although they may have paid more for a performing loan, to be fair. They either borrowed or did not borrow, as the case may be. Is it our business what the vulture funds did? That is their own business. They got involved in a gamble and that is their business. Many of them would have pumped in money from pension funds so there were no strained marketplace borrowings. They paid 50% but those loans were not offered to individual customers. None of the main Irish banks offered those individual options to customers or wrote down their loans by 50%. That is the despicable nature of what happened at the time.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Presumably, when the vulture fund goes to court, whether it is looking for repossession or an award of damages, it would have to disclose the value it paid for the loan initially in order that its alleged loss would be calculated. Is that not correct?
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Has that information come out as a result?
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Okay. The point everyone seems to be making is that a person who entered into a mortgage with an ordinary regulated bank should be entitled to the same terms and conditions on that mortgage, even if it has been transferred over to a vulture fund. That is the point everyone is making. Mr. Burgess says that is not happening. Am I correct that Mr. Kissane is saying it should legally happen when we look at the terms and conditions of the original mortgage?
Mr. Padraic Kissane:
As someone who was challenged on tracker matters and what the contract said and did not say, I am talking about reading the contract from the consumer's view. I have only just printed what the conditions state in the appendix. It tells me that the question should at least be answered. Nobody has given me a reason that the vulture funds cannot offer fixed rates. There is little point in getting a vulture fund to say it will offer fixed rates but they will be set at 14% for a five-year fix because of the risk of the investment they had to make, and so forth. I am not certain their funding requirements or sources are the same as mainstream banks and I am challenging that as well. I am nearly at a stage today of raising questions without having all the answers. I did not have all the answers back then but once the investigation starts, I say to myself that I have only looked at the terms and conditions. The policy of any transferee shall be the same as that of the relevant lender, that is, AIB. The setting of mortgage interest rates following such transfer will be the same as the lender's general policy, that is, Bank of Ireland. Permanent TSB shortens it very simply by providing that Permanent TSB "may at any time transfer the benefit of the Agreement and the Mortgage to any person in accordance with the Mortgage conditions." I am not saying that I am going to stand in a court and win all those cases but I certainly believe it could be argued.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Has anyone made that case? Is there any judgment on it yet?
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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I suppose it is very difficult for the individual mortgage holder, on top of having the distressed mortgage, to take on the cost of bringing a case.
Mr. Brendan Burgess:
The ombudsman has a wider remit than purely law. The ombudsman can make a decision on fairness. We might look at something and one side of the room will think it is fair, while the other will think it is not fair. That is a subjective thing. I was contacted by a firm of solicitors which stated there is an implied term when you take out a mortgage that you will get the terms and conditions. What the ordinary person in the street thinks when they sign a mortgage is the Deputy's area of the law, not mine. I could not argue with that. I would have more faith in the Ombudsman but maybe we need a two-pronged attack and get the High Court working on this as well.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Mr. Hall said very distinctly that the Central Bank is conflicted in protecting banks and vulture funds and is too caught up in their regulation to be independent in trying to protect consumers. Given the conflict that he says exists, should there be a separate statutory body to deal with consumers?
Mr. David Hall:
That is 100% the case. One just cannot have a situation where in one building there are good people dealing with consumer protection, and I have said this to them, but where the majority of the people in the building are looking after the regulation of main banks, vulture funds and a whole host of other financial products. It is remarkable, given how much we all owe, transact and borrow, that we do not have a separate entity that can look after consumers properly and effectively. These types of challenges could be funded by such entities to remove that difficult situation in which customers find themselves when trying to challenge genuine legal situations.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Mr. Burgess said this is not just about people who are in arrears but also people who are paying and are subject to the imposition of what would be viewed as extortionate rates of interest. Is that correct?
Mr. Brendan Burgess:
There are people who cannot move to another lender because they are in arrears but there is a whole cohort of others who may have restructured mortgages or their family circumstances may have changed since they took out the mortgage and they cannot switch. They may be living in a house with mica, for example. There is a whole pile of reasons people cannot switch. They are absolutely stuck and there is nothing they can do. There is a group of people with performing mortgages who are paying these higher rates and could switch but just do not get around to it.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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They could move.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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Inertia does not just exist in Irish finance, I can assure Mr. Kissane.
Mr. Padraic Kissane:
That is absolutely true too. Anyone who can move should move. It may seem minor in the context of the broader issue but people are nearly labelled because their loan is with a vulture fund. Whether that is through design on the part of the borrower, as in whether they are in arrears or have a performing loan, these people are nearly tagged with a label.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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There is a stigma associated with it.
Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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I thank all three witnesses.
Pearse Doherty (Donegal, Sinn Fein)
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I welcome everyone to the committee. Pepper announced in the last fortnight that it will increase its interest rates again. The increase of 1% for the majority of its customers will bring its average rate up to 6.2%. That is before another increase in the ECB rate in a fortnight. As reported at the time, Pepper's stated "Pepper does not receive any commercial benefit from the increase in interest rates, which are being directly passed on.". Is it not the case that is because Pepper is just servicing this. The reality is that it is Pepper, Lone Star and those other organisations that are benefiting from this. Mr. Kissane mentioned the cost of credit and the source of funds. These are not European entities in the main. They have a global presence. They are based in the US and they raise money in the international markets in many different ways. While we have banks here that have been able to absorb variable interest rate hikes in the main, does Mr. Kissane take the view that the owners of these loans, rather than the servicers of the loans, are actually creaming it by charging these extortionate interest rates?
Mr. Padraic Kissane:
There are a couple of things there. First, I am always intrigued when I hear that Irish banks are absorbing interest rates. That is the greatest misnomer of all time. The reason they are is that they were way above the proper level of interest rates in the first place. They were able to absorb because their rates have been historically high, probably since about 2012, particularly in regard to Bank of Ireland and Permanent TSB which had variable rates that were way out of kilter with the marketplace. When a bank says, as though it deserves a prize or an award, that it was able to absorb - that is the word the banks use - the ECB increases, it is rubbish.
With regard to Pepper and the setting of interest rates, how can Pepper can put out communication with regard to interest rates when it probably has 300 interest rates to set? That is a guess but Mr. Hall can confirm the number.
It is a credit servicing firm in the main. If Pepper owned the loan, it would have an interest in the setting of the interest rate. The interest it has in the setting of the interest rate for the credit firms is dictated by both the credit firm and what it does. It is absolutely right in saying that as a credit servicing firm it does not matter what the entity charges for the interest rate, it still has to do its job. I am not sure, and Mr. Hall might confirm, whether Pepper actually owns a particular loan but it is a credit servicing firm for hundreds of these entities. There are the tracker rates, which automatically follow the European Central Bank, ECB, there are standard variable rates, there are vulture funds and so forth. Does Mr. Hall want to come in?
Mr. David Hall:
No, I think Mr. Kissane said it. A number of these loans are owned by individual service agents, as well as servicing on behalf of third parties. It is simple gouging and there is no other way around it. Some of these entities, as the Deputy mentioned, have money from different jurisdictions. That is there own money and they have not even borrowed it. Yet, they are at 7%. It is just raw gouging.
The Central Bank, for some bizarre reason, has decided it has no interest in getting involved in this. Mr. Burgess mentioned earlier that this is a cohort of people who are being crushed with everything else that is going on that the Oireachtas has collectively been dealing with regarding the cost of the living. While no one needs a lecture on the cost of living, many people now are looking at day-to-day living and surviving and are making big decisions in their families and in their lives. In the meantime, there is the stigmatisation of being communicated with multiple times by these vulture funds that are looking for increased rates. Now they have to make basic decisions, such as whether they feed or clothe themselves, turn on the heat, travel, go to a job or pay a bank or a vulture fund. There is huge pressure on people and this is not ending. People are really at an end game, but there are no hard questions being asked.
It is a disgrace that those entities have never appeared before the Oireachtas. It is the greatest insult, not just to the Oireachtas and to the members of this committee, but to all their customers and clients around the country that they have given the two fingers and have never appeared in this House or before this committee to answer those questions. Those are the key questions that need to be answered. They need to be answered by the funds, as the Deputy has asked and as we will always ask. Why do they not appear before the committee and answer those questions honestly for the customers who are under immense pressure? These are people who are under savage pressure. Everybody here, including myself, Mr. Kissane, Mr. Burgess, the committee members, their staff and their colleagues, is being contacted by people every single day who are now under pressure from all fronts. Why are so many charging 7%?
Mr. Padraic Kissane:
I will make another key point. All you have to do is look up the website of some of the firms. They identify the stressed economies worldwide and they come in to gouge on the carcass of the failing economy, particularly around mortgages. It is their business. They are in it for one reason and one reason only. Trying to marry that with consumer protection, consumer requirements or consumer laws is always a difficulty, because they are in it for profit and nothing else. The better they can get the deal at the outset, the more they can make. The more interest they can charge, the more they can make. That is the only requirement, in case any one believes it is anything different. There was an indication that it did not matter if you were with a vulture fund or a mainstream bank, and that they were both the same. That would have applied if Mr. Burgess's solution was applied. The same rates as the originating bank keep them available. Then you can sell it to who you like.
Pearse Doherty (Donegal, Sinn Fein)
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I agree completely. I sat in this same seat many years ago and made the point but the Central Bank told us that they have the exact same protections. They do not have the exact same protections because these vultures can increase interest rates. Banks can do so also, but banks have a longer-term interest in your mortgage, in your loan, in your student loan and in your farming loan. The vultures have an interest in profit and feeding off your carcass. That is basically it.
Mr. Padraic Kissane:
I will put a challenge to the committee on that. I started the tracker mortgage issue in 2009 when nobody listened. It took me until 2015 for people to listen. These people cannot wait six years for me to bang my head against the wall to get the door open. The Deputy is absolutely right. Something has to be done because these people are no longer 45 years of age. They are now 55, 65 and 70 years of age. As Mr. Hall said, this is middle Ireland who pays for everything. You are not going to see them marching on the street. They do not have the time to do it. However, maybe it will be appropriate to hear from some of the affected customers, similar to what happened with the tracker mortgages, to hear what reality is. When you have a performing loan that has been sold three times since it left Permanent TSB, all that has remained constant is the credit servicing firm. It is picking up its costs. Look at their staff levels have gone through the roof because it is a marketplace at the moment.
Pearse Doherty (Donegal, Sinn Fein)
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Permanent TSB is a case in point, because many of those individuals did exactly what we all asked customers to do, which was to engage with their banks and try to find a solution. They engaged with their banks and they were put onto an arrangement. They were never in default of their original contract in the first place, but they engaged early. Then, because of the way it was structured by a State-owned bank, it was sold to a vulture fund.
Pearse Doherty (Donegal, Sinn Fein)
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How AIB was able to split mortgages and Permanent TSB was not able to do them is still a mystery to me. We are not dealing with a small number of people. Some 113,688 mortgages are in the hands of vultures. Some 45,000 of those are with variable rates. Another 37,000 of them are on tracker rates and others are fixed rates.
Mr. Burgess gave a good example. We ran our own calculations, because loads of people contact us. We talk about the cost-of-living crisis. We know what it is like to put petrol or diesel in your car, or to have extra bills for food, or, God forbid, electricity or gas. However, there is actually nothing that compares to the increase in your annual mortgage rate when it is in the hands of the vultures. These individuals are paying €5,000 more per year now than they were in June of last year. That is going to increase again next March. That is probably the single biggest increase across any of the items that a household would face. If you are still with Permanent TSB, you will be paying 3.5%. With Pepper, it is 6.9% and we know that will go up again in the second week of March to 7.5%. Some people have contacted me who are already on 7.5% and it will go to 8%.
The Taoiseach said in December 2018 that mortgage holders would be "no worse off" if their mortgages were sold to vulture funds. He said they would continue to have the exact same consumer protections, as they would if their loan had still been owned by banks. In April 2019, the then Minister for Finance, Deputy Donohoe, told us he would be happy for his mortgage to be sold to a vulture fund and he said the "evidence shows that protections are in place and that citizens are treated equally". Do any of the witnesses agree with those statements?
Mr. Brendan Burgess:
Legally, that is correct. The terms and conditions are exactly the same. They are protected by the code of conduct on mortgage arrears. They are protected by the consumer protection code. However, in practice, the terms and conditions, generally speaking, other than in the case of a tracker mortgage, allow the lender to charge what it wants. When I raised that at the time, that is, it was okay to say the say that the terms and conditions are transferring over but the rates could be increased, both the Department of Finance and the Central Bank stated there was no evidence that this is happening. That, to me, is not an answer to the question. It was four or five years ago that it was said that there was no evidence that the vulture funds were charging more or were pushing up rates. Yet, now it is happening. I wanted for action to be taken back then to protect these customers. Now it is happening and we are scrambling. The Central Bank stated it has no power and the Government has no power to control these. This issue should have been addressed back then. It is not too late. Let us address it now.
Pearse Doherty (Donegal, Sinn Fein)
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I will pick up on that point, and someone else might want to come in. The former Minister for Finance, Deputy Donohoe, said he would be happy for his mortgage to be sold to a vulture fund and he said that citizens are treated equally. I ask the witnesses how citizens could be treated equally. I have dozens of letters saying, "I am paying 7.5% with Pepper, which is servicing on behalf of Lone Star, or some other fund and I cannot fix. If I were with Permanent TSB I would be fixing today". They do not have the same rights, waterfall and options that are there with a retail bank, and they never had. When their loans were sold, they never had those options either.
Mr. David Hall:
Even in circumstances where you run into difficulty, the rate you are at to try to help to form a solution is critical.
As the Deputy said, it is not the same. I do not know what the Minister was thinking. There is nobody in their right mind who would want their loan sold to a vulture fund. That is not something you would want. I am onto them every single day and I cannot get through to somebody. Many people in the Houses have been in touch with me asking, for example, if I had dealt with Start before and whether it or Pepper had replied to me. If someone is not replying to an organisation, an advocacy group, organisations that are dedicated specialists in this area or indeed public representatives, that is an issue. This is not anecdotal stuff. They do not engage appropriately or fairly. Their whole motive and mechanism of dealing with things is completely different from a bank.
Pearse Doherty (Donegal, Sinn Fein)
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That goes to the core of it. I know Mr. Kissane wants to come in. We put this to the Central Bank and it is now going to start a process of engagement with the vulture funds. It is quite late in the day but we would welcome any engagement. If we talk about the existing laws, the consumer protection code states very clearly that firms must act honestly, fairly – which is the word Mr. Hall used in that it is not happening – in the best interest of the customers and the integrity of the market. It goes on to state that where a borrower is experiencing repayment difficulty, a regulated entity must explore all of the options for alternative repayment arrangements offered by the entity. We have countless examples that that does not happen, and not only that it does not happen, but these firms are not engaging with individuals. Do the witnesses have any experience with that?
I believe that some are operating in the Central Bank and Government under the illusion that this is all working perfectly and if a person falls into arrears, that person will get all these different supports from the vultures. Perhaps we are only hearing of the hard cases, but we are getting case after case saying that they are stuck, trapped, prisoners, not getting engagement and that they are absolutely being fleeced. Some of them did absolutely nothing wrong and never missed a single cent on their mortgage repayments from the day they took it out.
Mr. Padraic Kissane:
With regard to the first part about the belief of how vulture funds were going to act, I have a grave concern as to the reasons the interest rates are increasing. It will only increase the arrears problem. My concern is if the laws regarding the payment and arrears of loans are not being applied, what will happen when the loan defaults and it is with a vulture? There are concerns. In other words, I will just pose a question. Is it a broader target or intention of what is happening with it? Can any one of these firms increasing interest rates expect that something over 7% can continue to be paid without an arising issue of an increase in their arrears problem? Pepper, at the moment, will have to double its staff again because the level of arrears will only go up, and that is from performing loans with the banks. I posed the following question in my submission. What happens when the non-performing loan, NPL, figures start to rise again with the main lenders? Do we go through the same rigamarole again?
On the second part regarding the vultures and drawing the full circle of intentions of what is being done here, that is where I would be challenging. However, looking at Lone Star, it is making a substantial return for its shareholders and that is all that matters. The Deputy is absolutely right. The intentions of the code of consumer protection are not being adhered to. There is a “spirit” in the code. That is how it is worded. I think it is something that should change if they rewrite it again because a spirit and trying to transpose it into factual behaviour will always be fluffy. There is more target. I refer, for example, to the three people who are here today. If that is the start of a reaction, the vulture funds can stop this and correct this. I do not see what the reluctance is to offering fixed rates from these vultures. Are they funding from the same sources as the mainstream banks, as they keep telling me, or are they funding just to get a better return? I think many of these funds purchased were already established investments for their shareholders. Look at Lone Star’s website and see the return on investments from its pension or investment funds.
Pearse Doherty (Donegal, Sinn Fein)
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I have one fine question on the tracker matter. The Central Bank has no interest and it told us this for years. I brought forward legislation on capping interest rates. Deputy McGrath, when he was here, brought forward legislation as well, which progressed further, until it was dropped. It has no interest in restricting interest rates that can be applied by financial institutions. I would argue that if Pepper came around tomorrow and said it is putting up the interest rates to 15%, the Central Bank would still say the same. That is the problem. It believes it should not meddle in the market and so on and so forth. I tabled other legislation that was stopped, which was the No Consent, No Sale Bill, which was a regulation of the Central Bank stating that loans should not be sold without the borrower’s consent. In fairness, some in the Central Bank privately said to me that should be the case for private homes. Your home debt should not be in the hands of somebody who only has a short-term financial interest. It is too important to you and your family.
The issue here is if the vultures cannot be forced to reduce their rates and the Central Bank will not intervene and it is independent, then what can be done? The witness touched on this in terms of the contract. They are supposed to be setting the interest rates the way that the originator set them. There is much space to interpret that. Is that something that could be explored?
Mr. Padraic Kissane:
There is an infamous case that I quoted umpteen times into tracker investigation called the Bogdan Matei case on the unfair terms in the consumer contract and the unforeseeability of increasing rates. That is European legislation, which will probably have to be enacted if it was with the ombudsman or the courts. That legislation states that if the foreseeability of the interest increasing is not within the means of affordability, it can be challenged as being unlawful.
Mr. David Hall:
I will say a little on this. We will deal with that in due course and short course as an organisation on behalf of three people. It needs to be tried and tested. The exposure needs to be underwritten. There is much support required for anyone who takes on a case such as that and there needs to be correct standing associated with it. To Mr. Kissane’s point, I would 100% agree with him on that interpretation. I believe the only place for that properly to be tested rather than guessing about it is in court. I think we will see some movement on that in due course.
The Central Bank just wants to sit around with a guitar and sing songs for customers. Customers are humans. There cannot be a building full of people whose sole purpose is to regulate that does not want to help consumers or intervene. Why not give members the problem of trying to find legislation to help them protect customers? That is what they should be doing. Instead, it is a hands-off approach to say “No”. The code of conduct of mortgage arrears is a code. The High Court and Supreme Court have deemed it not legally binding. This keeps getting bandied around as if this is the gospel or a bible. It is not. It is an aspirational code. I am not convinced the Central Bank actually knows what is going on within credit firms or vulture funds on a day-to-day basis.
Mr. Padraic Kissane:
I will make one point before I pass to Mr. Burgess. With regard to the capping - which is the word I would use – of interest rates, I would urge much caution. We are trying to get more entities to enter this market, not exit. Looking at limiting the ability of an entrant on what it can look at as terms of mortgages and restrict - which is not this or any other case - the only thing that should happen in this country regarding homeowners is to give full-term fixed rates at the outset. That way, people will know from day one what their mortgage will cost and have the flexibility there is in the US that if you trade up, you do not have a massive penalty for breaking from that fixed rate. Give full-term fixed rates. That is where it should end. Let us then see which entities are interested in that. I do not know in this country how we cannot have a 20-year fixed rate if you buy a 20-year mortgage. You have it if you rent a council house. The rent is set and off you go for the 20 years. You do not have it with mortgages – the biggest undertaking that any family will undertake. Put certainty on the cost of that and it is the interest rate at the time. Remember, in 1988, interest rates were 15% and people were paying it.
I want to make one final point about the connectivity and shoddiness of the taking out of mortgages on family homes that did not have a portfolio split from a firm and are now with a vulture. One can imagine the difficulty that is posing for any development of the farmland, etc.
Pearse Doherty (Donegal, Sinn Fein)
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I know Mr. Burgess wants to come in but I will ask my final question. Perhaps he can come in on that because others want to come in as well. Final, final question. I have raised this with some of the financial institutions, the Central Bank and the Financial Services and Pensions Ombudsman. In addition, I have written recently again to the Central Bank. I do not think it is something that can be dropped.
More than 40,000 people had their loans impacted as a result of the tracker mortgage scandal and overcharging by banks. That caused much more than financial pain, as we have heard down through the years. A number of those individuals had their loans sold on to vulture funds before they were compensated and restored. I will go into this in greater detail at some other time.
The principle of restoration is one of the most powerful tools the Financial Services and Pensions Ombudsman, FSPO, has. In fairness to the Central Bank, when it came to the table it said the banks had to put those individuals back to the position they were in. If we are genuinely to believe in the principle of restoration, then people whose loans are now in the hands of vulture funds, and who are paying more than 7%, should be back with the financial institutions those loans originated from. I am talking about people whose loans were sold on, either before or during the process, before the bank paid them back the money they overcharged them in the first place. Mr. Kissane was a leader in all of this and represented many of the families, which is not to take away from what Mr. Hall and Mr. Burgess did. Mr. Kissane mentioned the tracker issue, which is why I ask him to address this, but I am willing to hear from others on that issue.
Mr. Padraic Kissane:
People on a tracker mortgage are not on a 7.5% rate. I believe tracker mortgages are 1.25%, 1.5% and below. The Deputy will know my views on the 3.25% made-up tracker. The PTSB 3.25% mortgage is not a tracker but something else. I challenged that and have lost faith in the ombudsman's office in that regard because discounted trackers were not even discounted trackers. I am told I am wrong again. I strongly and vehemently disagree. Those rates are incorrect and now coming home to roost because that 3.25% margin is now 7.5%, or about to go to that rate. These mortgages were not even stress tested. They were stress tested at the ECB rate of plus 2% when they originated.
I will come back to the matter of the tracker cases deemed to be impacted. I assume these were variable rate mortgages that should have been on tracker rates. The Central Bank was categorically clear on what has happened regarding restoration to the original loan. The loan must be put in the position it would have been in had the error not occurred. That was the foundation of the investigation. That includes the undoing of anything that subsequently happened while the wrong was being taken out, whether the property was a sole or lost property. I have dealt with many of those cases. The accounts for those cases that were wrongly sold in the middle of an investigation should be restored to the originating loan and whatever arrangement and sales process happened should be undone. That is just paperwork. The loan goes back in, goes back to where it should have been, and there is a refund of the sale to the value of the purchase price, etc. It should not be hard to sort out.
Mr. Brendan Burgess:
My solution is if a mortgage is sold, it should not matter whether it is in arrears. If borrowers are offered the same rates as the originating institution are currently offering, that would not matter.
I am highly critical of the Central Bank's role in this. It has forced the sale of mortgages when they should not have been sold and has taken no action to put any sort of control or limit on mortgage rates. It discouraged the Oireachtas and everybody else from doing that. Last week, or the week before, when the Governor appeared before the committee, he more or less said to please pass on the rates.
For a little balance, however, Irish consumers are much better off as a result of the work of the Central Bank. Very few people affected by the tracker mortgage issue would have got restitution without the Central Bank. It pushed its powers to the limit on that and, in some cases, went a little beyond its limit. The mortgage measures have been very good. The Code of Conduct on Mortgage Arrears, again, has helped many people. There are lots of problems with it but I believe in credit where it is due. I am extremely critical of the Central Bank but, overall, it has done a good job in a lot of areas. I am disappointed that it is just not copping on.
As Mr. Kissane pointed out, it took the Central Bank five or six years to get going on trackers, but it then did a great job. We cannot wait five or six years for it to get going on this issue and then do a great job. We want it to do a great job now.
Mairead Farrell (Galway West, Sinn Fein)
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I also thank the witnesses for the work they do. I know first-hand the impact it has had on people's lives. Mr. Hall mentioned how this issue impacts on people's lives. Sometimes, when we talk about issues at committee, we do not think about the real life impact they have. One of the witnesses said how much more acute this is becoming. We know all the different pressures people are facing at present. We see people coming to our clinics who are at the end of their tether. It has happened to me a number of times that wives have come in who might not have been aware of the fact their husbands were not able to meet the mortgage and so on. It is when it is far too late that it suddenly becomes obvious and apparent to them. We see the stress and strain in people's lives. People have other stresses and strains in their lives but when this comes about, it has an impact. In that context, what has been said is powerful. Mr. Burgess referenced gouging. The plain and simple situation is that raw gouging is happening.
I will pick up on what was referenced in his opening statement but my questions are for everybody. Central Bank representatives come before the committee on a regular basis, as the witnesses will be aware. I often noticed that when some kind of issue arises, or a matter related to financial regulation occurs, and we call in the Central Bank, its representatives will say they require additional powers. Other times, it sometimes seems reluctant to use the powers it has. I am interested in hearing views on the powers the Central Bank has, whether it has failed to exercise them so far, or if it just has not used them with the required vigour.
Mr. Brendan Burgess:
There was some proposed legislation from, I think, Sinn Féin and Fianna Fáil, to give the Central Bank the power to control mortgage rates. The Central Bank often wants to increase mortgage rates so I would not let it have the power to control those rates. If members are minded to do so, they might say that the maximum mortgage rate should be 3% above an institution's incremental borrowing rate, IBR. If an institution wants to charge a higher rate and can justify it, the institution can get the authority of the Central Bank to do so. The Central Bank takes a long time to make an exception. To force it to make an exception the other way, rather than this way, would be one way of doing it. I would not give the Central Bank any more power in that regard.
One of the Central Bank's best powers is its persuasive power. If it turned to the vulture funds and said its reading of the consumer protection code is these funds must treat customers fairly, that they are not doing so and the Central Bank thinks they should, it could put on a lot of pressure. However, I do not think it will do that. I get no sense from the Central Bank that it sees this as an important issue. It talks about it as such but then says, "What can we do? Let the market decide mortgage rates." That is why there may have to be primary legislation outlining that where a mortgage has been sold, the terms and conditions offered by the originator of that loan goes with it. That would be the solution.
Mr. Padraic Kissane:
The challenge to that, however, is these books of loans are already sold and a sale of agreement is in place. I will make a point I consistently state, which is that it is never too late, when it comes to arrears on a mortgage, to deal with whoever owns the loan. I again put that out to the public. Irrespective of someone only finding out today that a husband has not paid the loan in ten years, it is never too late to contact somebody. There are certainly plenty of protections and entities in place - one is sitting to my right - including the Money Advice and Budgeting Service, MABS, and consumer information units. I implore any customer who even has a hint or knowledge that he or she is in arrears or about to go into arrears, that it is never too late to contact somebody, even if that customer has not paid anything. The entities I have always challenged are the people who do not do anything and are paying nothing. They should lose their homes. It is hard to say that, but if they are not engaging with everything that is there to help them, they should because non-engagement causes a further problem for the genuine cases.
The one issue with the setting of interest rates is we have to be careful regarding competition.
We have seen what has happened in banking in Ireland. Four entities have left, namely, Danske Bank, Bank of Scotland, Ulster Bank and KBC. They did not leave because this was a profitable place to be. They left for reasons of capitalisation requirements and so on, so we have to be very careful that we do not have an end to the circle that we cannot see and that we do not end up with unintended consequences as a result of these capped rates and so forth.
I met a fund manager who had ethical funds to invest. I asked her if she lent me €1 billion to lend to the Irish mortgage market, what she would want in return and the answer was "our money". There are entities out there that would be keen to come to Ireland and I would rather focus more attention on getting the competition increased in this country than on saying that the Central Bank should do this or that. We now have only three mainstream entities left. Thankfully the credit unions are starting to move into this space, and the involvement of the post office and the arrival of Avant are also helpful to the broader market going forward. We cannot forget the first-time buyers today who are trying to get on the ladder and the difficulties they are experiencing. I know it is a broader question but it is important to state that the removal of competition could have very serious unintended consequences.
Mr. David Hall:
An interesting question in the context of the Deputy's reference to the Central Bank coming before the committee is who regulates the regulator. It is a serious question in respect of the Central Bank. Who regulates the regulator? The Central Bank has statutory powers for consumer protection on one floor and the floor above regulates vulture funds and banks. There are excellent staff in the Central Bank and the same is true of the vulture funds. The vulture funds have excellent staff and a number of the funds have recently changed their dynamic and changed how they do business and have been quite positive in their co-operation with insolvency arrangements and other such creative solutions. It is not all bad, but if I am a customer and I am under massive pressure, my debt is a powerful thing. It is difficult to explain how debt can surround people, pull them down and completely paralyse them, no matter how strong, powerful, big or small they are. We have all seen it. We see it everyday, with some of the biggest and most powerful people in the world getting crippled and crucified by debt. They can go off and have a big debate somewhere, go off and play a football match or something but they cannot speak to someone in a bank. That is a massive challenge.
Mr. Kissane referred to people who are not engaging. There are people who are not engaging and the key there must be that there are no unnecessary repossessions. Is it not unusual that we have 500 housing charities, 700 cancer charities but only two charities in the country dealing with debt? Billions upon billions of euro are involved but there is no safe haven for people to go to. There is MABS, the Insolvency Service of Ireland and the IMHO, so there is no excuse not to seek help. That is our area of expertise. One of the biggest reliefs we provide for people is taking the phone call from the bank. The simplest, most basic and elementary function we provide is getting an authority from somebody for the phone calls. That said, a bank may not engage on every occasion. Sometimes it will ignore those authorities but who then can challenge the Central Bank to ensure that bank is penalised for that? Who regulates the regulator? In the absence of any independent scrutiny of the regulator, customers cannot have confidence in that entity.
Mairead Farrell (Galway West, Sinn Fein)
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I take the point regarding how debt is a cloud for people and how it paralyses them with fear because they do not know how to deal with it or are too terrified to do so. That is a powerful point.
Mr. Kissane is saying that we do not need to give more powers to the Central Bank for enforcement but what we need to do is increase competition and I take that point. What work can this committee do on that? What other entities are relevant here? The witnesses will be aware of which entities come before this committee. What do we need to be saying to them, if increasing competition is what we need to focus on?
Mr. Brendan Burgess:
I would look at primary legislation and see if the committee can come up with primary legislation that requires an institution that acquires a loan to offer the same rates that are being offered by the institution that sold the loan. I would put that into primary legislation. If such legislation was drafted and if the Government threatened to introduce it, we might see the Central Bank moving a bit more quickly or we might see the vulture funds moving in the right direction. On the other hand, they might just laugh and say that it cannot be done, that it is unconstitutional or whatever.
Mairead Farrell (Galway West, Sinn Fein)
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We are talking about two separate issues now. My question was for Mr. Kissane on increasing competition. That said, I take Mr. Burgess' point about primary legislation. Indeed, I was going to ask a question about that but Mr. Burgess has given me an answer. I take his point about primary legislation but it does not answer my question about increasing competition.
Mairead Farrell (Galway West, Sinn Fein)
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It was Mr. Kissane who said that our focus needs to be on increasing competition in the market, which is why I was asking-----
Mairead Farrell (Galway West, Sinn Fein)
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I understand that but what I am asking is-----
Mairead Farrell (Galway West, Sinn Fein)
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Obviously I am aware of that but Mr. Kissane mentioned increasing competition, which is why I posed my question. I totally take Mr. Burgess's point on that and on the primary legislation. That is a very good point and is something that this committee can take on board.
Mr. Brendan Burgess:
On a separate issue, to deal with competition, what I have been advocating for ten years is that existing customers of a bank - I am talking about the main banks, not the vulture funds - must be offered the same rates as new customers; in other words, promote competition, force the banks to compete on mortgage rates alone, with no cash back offers and no special deals for new customers. The banks would have to treat all of their customers, both existing and new, the same. That is an important issue that is not covered by today's discussion but I would love to come back in again to talk about it.
Mairead Farrell (Galway West, Sinn Fein)
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It was Mr. Kissane who raised the competition issue. Mr. Burgess is answering as if I brought it up out of nowhere. Mr. Kissane said it and I just asked a question, that is all.
Mr. Padraic Kissane:
There are simple solutions to everything. There is the KISS formula: keep it simple stupid. First, if legislation is introduced, all it will do is affect the price the vulture fund pays for the loan and nothing else. The problem we have is that these loans have been sold so retrospectively applying any legislation is going to be difficult because the basis under which the purchase was made would then become a matter of legal concern.
On the broader question of competition, something that still amazes me is that even though Ireland is a member of the EU, I cannot borrow in Paris, Belgium or Rome, which I can do if I am purchasing in France. Nobody has explained to me why that is so. There are banks that would lend into Ireland for the appropriate qualifications and the appropriate customers. We are meant to be one market when it comes to the European Central Bank but we are not one market because we cannot partake in the interest rates in the European Union. That is something that should be looked at in more detail at a more advanced level but I do not want to move way from the main purpose of today's meeting.
Mr. David Hall:
This goes back to who regulates the regulator. When entities applied for banking licences - Revolut is the most high-profile recent example, as well as one of the Spanish banks - why did they not get regulated? We cannot have a situation where we are told there is no competition when two named entities have publicly said they have applied for a licence. We do not know who else has applied and has not been successful and for what reason. Maybe there is good reason. Maybe there is too much bureaucracy. Revolut has 1.9 million Irish customers transacting billions of euro every year. As a layperson, I find it remarkable that it can do that but it cannot pass a test in the Central Bank. Something is wrong and questions need to be asked about encouraging competition but who has the authority to ask the Central Bank? It does not look like anyone has that authority at the moment but the Central Bank has to be held to account. It is in all of our interests that it be held to account.
Mairead Farrell (Galway West, Sinn Fein)
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Do the witnesses have any international examples as to how the regulation of the regulator or central banks works in other jurisdictions?
Mairead Farrell (Galway West, Sinn Fein)
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I take that point and that is definitely something we can examine and raise with others. That is really welcome and it is something that we will have at the back of our minds the next time we meet representatives of the Central Bank. On the question of regulating the regulator, as mentioned by Mr. Hall, do any our guests have an international perspective on that?
Mr. Padraic Kissane:
If one is challenging the regulator, there is European regulation, which is the umbrella over the Irish regulation but they are interconnected.
It is the Oireachtas, to some degree, that regulates the regulator. That would probably be the one regulator that is there. The Houses of the Oireachtas regulate for the interests of those such as the consumers we are talking about today. If they are not getting satisfaction, there is the ombudsman process, the complaint process and access to other entities people would have heard about. Mr. Hall is asking who challenges the Central Bank with legislation on decisions it makes or codes it brings in. Its public submissions process has definitely improved. It is looking at the consumer protection code again and is inviting submissions. If something is fundamentally wrong, it is not blind to realising that. It is a question of how long it will take for it to do so. That is the challenge that will hopefully be dealt with as a result of what is happening today. It is not enough to come in here and say, as has happened, that it offers fixed payments when this has nothing to do with fixed interest rates. It is not enough to say that the bank cannot interfere in the area of interest rates when we have legislation that interferes in it anyway. I will be careful. The Central Bank needs to question itself more. I do not know what the answer is. European legislation is there as a support. The directive on unfair terms in consumer contracts has been in place since 1993.
Mr. David Hall:
There needs to be transparency as regards who is on the Central Bank's board, including whether there are customers on the board. This is basic stuff. The Central Bank has to be challenged. It was stated that people could transfer mortgages to vulture funds. At the time, as Deputy Doherty outlined, a number of Ministers made reference to that. Indeed, the Central Bank reassured people that the terms transferred with the mortgages. Why not openly say that the funds could increase the interest rates? That is a statement of fact; it is not anyone's opinion. Why was that not openly and honestly stated at the time? Why was it not confirmed thereafter? There needs to be scrutiny as to how things are done. The word "mystery" was used with regard to certain things. This committee is the appropriate place for these matters, but there is a lot of loose language and vagueness on the part of and political answers given by the Central Bank when it comes before this committee and others. There needs to be bluntness around protecting consumers. The consumer protection model should be taken out of the Central Bank completely.
Mairead Farrell (Galway West, Sinn Fein)
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I was struck by something Mr. Hall said. The other witnesses may have mentioned it as well. I always think that if the people on one street or in one neighbourhood spoke to each other and told each other the issues they were going through when it comes to things like this, and if people knew how much it impacts others across their communities, they would feel a lot less alone. I take the point that if anybody comes to us we should be very clear as to who they can contact.
Peadar Tóibín (Meath West, Aontú)
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Míle buíochas leis na finnéithe as teacht anseo inniu. Tá fáilte rompu. A question was asked about who regulates the regulator. My instinct is that it is meant to be our job to regulate the regulator. I do not believe that we, as Deputies, have done that job properly. The most frustrating thing about this is that none of it has happened by accident. This is all part of a political strategy. There was a strategy on the part of the Fine Gael Government in the past to protect the pillar banks by making sure they were resilient and could function properly. That is one of the reasons we have such little competition in this country. Competition would have challenged the pillar banks' positions within the market. They currently occupy a position of oligopoly. They exploit this in that they dictate most of the prices, most of the conditions of engagement and most of the locations of business. They have massive supplier power within the market.
The vulture funds were invited into this country by the Government to which I refer. I remember speaking to Michael Noonan at the time. His attitude was that ecosystems need vultures. He was very clear about that. That Government at the time railed against the idea that individual families could potentially buy the debts for the same discount prices at which the vulture funds were buying them. People who had invested their livelihoods in farms, businesses or their own homes were explicitly prevented by the Government from purchasing those loans at the same discount levels that the banks had achieved. At the last count, the vulture funds visited the Department of Finance at least 150 times. The number of times they have come before this committee in that period is zero. That shows the approach of the vulture funds. One of the key problems is that their particular banking or credit model is not open to the retail market. They do not have a long-term view over their development. They are not exposed to the natural winds that control the other banks and their behaviours. The State, therefore, must jump in and control those behaviours. One of the big problems is that people cannot switch from these vulture funds. They are basically prisoners of these funds when it comes to their mortgages. As a result, they are paying, as stated earlier, about €5,000 extra a year. That is pure gouging. It is exploitation. It is an abuse by these funds of their position. They are allowed to continue to abuse it.
I have a couple of questions. This system was built by one of the partners in the current Government. It was an explicit strategy of that party. In light of Mr. Burgess's desire for legislation to force continuity of the terms and conditions, has he had any conversations with the Government in that regard? Are there any willing ears among the members of the Government when it comes to legislation of that sort?
Mr. Brendan Burgess:
I have raised that with the Department of Finance, but there is no interest. Its focus seems to be around switching. The officials will refer to the great reports the ESRI or the Competition and Consumer Protection Commission compiled on switching or to the retail banking review and will talk about encouraging people to switch their mortgages. I have been trying to say to the Department that that is not the issue. Most of these people cannot switch. The Department just seems very reluctant to engage on this issue at all. It wants to do more research. In the context of the 95,000 mortgage holders or 113,000 accounts, it wants to find out how many of them can switch but just will not do so. It wants to go off and collect data and do research and analysis. Does it matter whether it is 9,000 or 19,000? We still want those people to be protected. The Department is not enthused by this. It was also not enthused by the previous Bills that were brought in to control mortgage rates. It wanted nothing to do with that either. It will be blocking any development, but this is not about the Department of Finance. It should be the Oireachtas that calls the shots. It is up to it to draft legislation and so on.
Peadar Tóibín (Meath West, Aontú)
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It is in the DNA of at least one of the Government parties not to interfere with the market in any way whatsoever. There is almost a laissez-faireattitude to the effect that the market will right itself. Mr. Kissane alluded to the fact that some of these contracts were agreed and that they might come a cropper in the context of any new legislation. In other words, if new legislation is brought forward, will it apply to the sale agreements already in place?
Mr. Padraic Kissane:
It cannot. Those books and businesses are sold on the basis of a set of terms and conditions. If new legislation were applied retrospectively, it would be challenged forever. I do not see how it could happen.
There are a couple of points I want to make. We talk about the Irish entities and the pillar banks, but people forget that KBC was bailed out by the Belgian Government and Ulster Bank was bailed out by the British Government. We talk about the pillar banks in Ireland, but the other banks are pillars as well. They were just bailed out by other states and have now decided to pull out. I wrote this down as the Deputy was speaking. When an entity like a vulture fund becomes involved in an area such as homeownership or home mortgages, there is an inherent responsibility that must be carried with that. It is different from what happens with a commercial unit or a rental property.
Homeownership and borrowing for homeownership carry an added level of responsibility for whomever owns the property. Perhaps we should be challenging these entities to look at themselves and ask how they can expect a family to pay at 7.5% or whatever the rate may be. It is fine if inflation continues to come down and interest rates drop. Too often, however, the rates do not fall as quickly as they went up.
Peadar Tóibín (Meath West, Aontú)
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In other words, the primary legislation might come a cropper in the context of contracts that have already been agreed and it would follow that those contracts would come within the remit of that legislation. A regulation could change, and all contracts would have to be in compliance with that regulation. We could achieve the same thing in a regulatory fashion. This would mean that we would not be hamstrung by those contracts.
Mr. Padraic Kissane:
I am not saying that it is a definite. I am saying that if I was involved in a vulture fund and was listening to what is being said here, I would get on to my legal department to ask it to have a look at the conditions under which the fund bought the loans now in its possession. That would be the obvious reaction. It does not mean that the outcome, irrespective of how it is achieved, should not happen. We cannot let these people just sink or swim.
Mr. David Hall:
There is a way of tackling this. The committee may remember the tracker mortgage situation. In that context, the Central Bank was lied to by the lenders. This is our own regulator. When the tracker issue was uncovered, it must have caused deep discomfort to the Central Bank and everybody else involved that the initial responses were not honest and were then misinterpreted. We must ensure that there is a regulatory framework in place that tackles the Central Bank head on. That is the responsibility of the Oireachtas and the Members of the Oireachtas.
I agree with the Deputy. I do not believe it has been done correctly. A hands-off approach has been taken. They have been here before the committee on multiple occasions. A deeper dive needs to be taken. The same can be achieved, as Mr. Kissane and Mr. Burgess said, by looking at opening things up and having things contracted. If, as some predict, we are entering a cycle of further arrears based on what is happening at the moment, there is nothing wrong with trying to future-proof matters in order that this will never happen again. There is a cohort of people we absolutely need to try to protect and help, perhaps by tackling the Central Bank head on. As Mr. Kissane and Mr. Burgess stated - and they are 100% correct - the Central Bank has massive influence, irrespective of the powers it has. It has massive influence to change the behaviour of banks and it can do so without legislation. That needs to be done. If we have someone who regulates the regulator, then that becomes a lot more effective. Legislation to protect these conditions, in the context of their not ever being protected, would also be of benefit.
Peadar Tóibín (Meath West, Aontú)
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Absolutely. Mr. Hall mentioned something I have also heard. I have dealt with more than 400 families who have been in mortgage distress and have helped them to negotiate with banks and vulture funds. Sometimes we get mixed results from our dealing with the banks. Sometimes we also get mixed results from our dealings with vulture funds. Mr. Hall referred to two people who, by means of taking a court case, were able to identify the write-down that the budget fund had achieved. Can other people achieve such write-downs or do they have to go to court in order to do so?
Mr. David Hall:
It is fair to say that everyone has had bad experiences with banks. I am aware that today's discussion is mostly about vulture funds and non-bank lenders, but some of the banks are not any better in relation to dealing with things. Let us be clear about that. If we are being honest and fair, we must ask whether what the loan was bought for is relevant. This is about affordability and being able to repay a loan. If we do not have the power to investigate and go back to have a look at those sales, there is a distraction. Many people get distracted and obsessed - a red mist descends - about what was paid for the loan. I had an entertaining ding-dong with a reporter one day. I was asked whether I ask what the owner of the shop paid for the cornflakes when I go in to buy a box. As sarcastic as he was being, I am very nervous of people getting distracted about what the loans were. There was no power for anybody to actually reset the clock on that.
Peadar Tóibín (Meath West, Aontú)
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I understand that, but I believe there is a sense of justice involved as well.
Peadar Tóibín (Meath West, Aontú)
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If a family have been put to the pin of their collar, if they are in danger of losing their home and if the interest rate that is set is dependent on the price that was paid, in order for me to be able to negotiate - as I do at times - with the bank, if I know what was paid for the loan, it helps with the negotiation. Maybe it helps in my mind but does not in real terms.
Mr. Brendan Burgess:
Vulture funds bought portfolios of loans. If one goes back, one can see, that Permanent TSB sold €6 billion worth of loans to Pepper, CarVal or whoever. The nominal value was €6 billion but the amount paid was €4 billion. One can see the overall figures most of the time. When there is a large enough amount involved, they would have to report it to the Stock Exchange. It is not the case that they sell Brendan Burgess's loan or Peadar Tóibín's loan, and that if yours is a better quality loan than mine, they would give 90% for yours but only 30% for mine because the property is in negative equity. There is a whole batch of loans and some are better quality. There were loans sold by Bank of Scotland and Danske Bank. They sold the performing loans as one cohort and then they sold the really bad loans for 10% or 20%. Again, I am not 100% sure how relevant that is.
Mr. Padraic Kissane:
One thing I would say with regard to arrangements and somebody finding out is that non-disclosure agreements would have been signed in respect of all of these transactions. The people would have to be careful about ever disclosing information. Even if it happened by word of mouth, they could put themselves in breach of the terms of their own agreements.
Peadar Tóibín (Meath West, Aontú)
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I am interested in Mr. Kissane's view on full-term, fixed-interest mortgages. How would that work in light of the fact that a bank will have fluctuating interest rates that it would have to deal with over a given period? Would such a mortgage be on the basis of the initial interest rate and the initial loan being achieved at a certain level?
Mr. Padraic Kissane:
I am intrigued. Some banks fund it and roll it out every six months or three years or whatever. A bank can fund a bond for 30 years without any issue. There is a mechanism of funding it. I do not buy the suggestion that there is a difficulty in it being available. If that were the case, then every American bank is wrong.
Mr. Brendan Burgess:
If one takes out a mortgage out with Avant Money today, one can borrow for up to 30 years at a fixed rate. This is not always a good idea, however, because the rate for 30 years is going to be quite a bit higher than if a person fixes for five years or ten. A 30-year rate would usually be higher. It could happen, but it is not always a good idea.
Peadar Tóibín (Meath West, Aontú)
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It is clear that there is a two-tier mortgage market at the moment. There is no doubt that the people who went through the most difficulty in the past ten years are again being put to the pin of their collars. I do not believe there is anything being offered by the Government. The Government is not defending them. The Central Bank is not defending them. Nobody is protecting them. The vulture funds have free rein in the context of what they are doing to these families. This is going to have an enormous effect on how they live their lives. The suggestion about making sure the conditions of the original mortgage are adhered to by the subsequent owner is excellent. We should try our best to make sure we can have that included in either legislation or regulations as soon as possible.
Bernard Durkan (Kildare North, Fine Gael)
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I will deal with the cornflakes question first. This deserves a comment at least. From my point of view and from the customer's point of view, the answer to would be that I would not ask the owner of shop what they had paid for the box of cornflakes before they sold it to me. If I thought there was a fairly good chance of them having got it for 10% of the value, I certainly would ask. I would also reserve the right to ask on every occasion. This is one of the glib answers they give when they want to justify what they are doing to people and what they are going to do.
Like everybody else here, for the past ten years at least I have been involved in dealing the cases we are discussing. In recent times, I have noted an impervious ruthlessness on the part of those involved to realising their assets and liquidating the debt as quickly as possible and selling it on to somebody else by whatever means necessary. In order to comment on that, I must also comment on the manner by means of which we have arrived where we are. Whether it was with the approval of the Central Bank, by means of a nod and wink on the part of the Central Bank or whatever, people got into debt that they should not have got into.
They were subprime loans on the day they were offered. They were outside the market and could not be funded anywhere without causing serious damage to the economy in general. There are still some cases of that.
I will briefly comment on those that are outstanding and how to resolve them. I believe that the customer counts to some extent and that the banking sector in general does not want to talk about customers any more. It wants to talk about the end result insofar as it is concerned. A typical example is the fact that ATMs were removed in many places, including here in the Houses of Parliament. Decisions were taken that suited the banks but there was no reference to customers. They could not give a sugar about the customers. They did not exist and still do not exist.
There were some who took an interest in all the banks. Much depended on who a person was dealing with. If people were dealing with the wrong person on the other side of the counter, it was hard and there would be no change or movement. Others made an effort, to be fair to them, and went to great trouble to try to work out a means by which the customer could survive. Some provided resources for alternative banking and made various arrangements to facilitate the customer. There were some who did not and could not think of anything but realising the value of what they saw as their investment in the customer as quickly as possible, by way of selling on the loan, repossessing the property, or whatever the case may be.
The other issue that I have noticed is that there is a tendency at this stage to change tactics. My colleague mentioned that a previous Government introduced vulture funds. We forget quickly that there was very little financial movement in the system in this country for a long time, at a very serious time, so the obvious thing to do was to introduce some sort of movement by encouraging somebody who had the ability to produce that sort of fluidity in the system when the country needed it. I saw that first-hand. I was out of the country at one stage, in another EU country where the ATMs had dried up and had nothing in them. That country had a similar situation to ours but it was worse. There was no money circulating in the system. When no money is circulating in the system, things get rough quickly.
The other thing I noticed is that the measures used to repossess by all organisations, including pillar banks and everybody else, had scant regard for the fact that they had loaned the money to the customers in circumstances where it should not have been loaned at all. There was no basis for doing it and no long-term ability on the part of the borrower to continue to make payments. In those circumstances, I think the lending institutions should have been automatically penalised by legislation. That still remains an issue.
Another issue is competition. The introduction of some of the competition we had in this country was not a help to the system at all. Insurance companies and lending institutions came into this economy, undercut the existing market to a considerable extent, pretended to offer terms that were not available locally, then pulled the plug and ran away. That is a fact of life. There was almost irreparable damage done to the economy and system, and to public confidence in the system in this country. Proof of that is the fact that banks have changed their attitudes. They have almost gone underground and disappeared from the main street. One can no longer walk into a bank and talk to a bank manager as used to be the case. The bank manager used to be the official financial adviser to the community and general public. That does not exist any longer.
On the price the vulture funds paid for the debts, I am conscious of the oft-quoted concern that if the public knew their next-door neighbour had a write-down or reduced liability, the prospect of moral hazard arose. That in itself created a difficulty and I understand that. However, there has to be a way, since it is just a business, where one acquires at the lowest possible cost and sells at the highest. It is not that way in banking. That is not the way it should be, particularly when banking covers the entire community in one way or another. Like everybody else here, I have dealt with those with small loans and those with larger loans. It gets worse with the larger loans because the systematic isolating of the customer was such that early acquisition, early foreclosing and the selling off of a property that was useless at the height of the recession all happened. The property suddenly acquired a much greater value. We do not know to whom the property was sold. We know it could have been sold to an entity in which the original borrower had an interest or relationship. There are many things we do not know.
I mentioned the continued importance of customers but I am not sure we are getting to the stage where we can relax. However, at this stage, I think we have to rebuild public confidence in the system. I am not certain that is being done or that the measures being taken are sufficient. I do not feel the case-by-case resolution that we have had in operation to try to resolve indebtedness of individuals has been as successful as it should be. It could have been done by way of primary legislation on the basis of a template or formula. It would have achieved far greater results at a lower cost to the State and the customer.
I want to mention something else the witnesses may not be too happy about. In recent times, I have read in the media that some customer has had a massive write-down and now every customer wants a massive write-down. That is the simple fact of the matter. All of the customers I am dealing with want this write-down from the banks too. They read about it in the newspapers. They do not realise that the customer got no write-down at all except in cases where there was nothing to write down. They were mythical debts that could never be collected from the time of the crash until now. We can write that down as much as we like and call it a write-down, but it does not make a whit of difference to anybody because that financial bundle is gone, finished and kaput. I have had the experience where, having done considerable work and secured an agreement with lending institutions, I have then found out that the customer has suddenly seen that a particular management fund or service has achieved something that nobody could achieve, in my book. The customers will obviously then say that they would like to have some of that, so they then equivocate. In some cases, they end up on the wrong side of the track by getting a lesser deal than they thought they saw in the newspapers.
There are many pitfalls that we still have to deal with. As far as I am concerned, we have gone through the whole gambit, including the situations of people who were allegedly not engaging. I assure people that all of the customers I dealt with engaged. We did not always achieve the result we wanted and we did not get a result in some quarters. There are still many ongoing cases and much hardship being created by the activities of the lending institutions in pulling back from where they were and demanding that people vacate their property, only to sell it from over their heads, including selling it online with the minimum of information.
It is all very fine to say to the spouses and children of individuals that they knew this would happen because they were not paying, but that fails to recognise that they were in full employment when they were first expected to pay this amount of money and, perhaps after a family member passed on, they were suddenly unable to handle the debt. It is not that they were refusing to pay. Rather, they could not. It is in this instance that the lending institutions have to live up to their responsibilities and deal humanely with the people concerned. I am not suggesting for a moment that everyone has the right to walk away. Everyone has a duty to do something to address the debts he or she incurred, even though it was not his or fault in the first place and he or she had received bad advice.
Mr. Brendan Burgess:
I will take up two of those issues. Mr. Kissane and Mr. Hall will take up the others.
The Deputy spoke about the price of corn flakes. I agree that the price paid by a fund for the debt it bought is not particularly relevant and is not an argument I would ever use, but if the committee manages to have the vulture funds appear before it, it should not let them use the argument that the Central Bank and the Department of Finance use on their behalf, that being, they increased the rates by 3% because they had a different funding model. These are two sides of the same coin. If the vulture funds are not going to tell you the price of the corn flakes, they should not say they have a different funding model. Imagine if we went across the road to Buswells Hotel after this meeting to have a pint of Guinness and Buswells told us it would cost €10, I said it only cost €6 when I was there the previous week, and then Buswells replied that it had been a family-owned business the previous week, it had since been bought out by a vulture fund and we had to pay up the €10. Do not let the vulture funds raise the issue of their funding model. It is not relevant. That a lender sold a mortgage or changed its source of funding is not relevant to the price someone is paying today.
The Deputy raised an interesting point about the need for vulture funds. There were significant levels of arrears in Ireland. As a result, the banks were zombie banks. The largest vulture fund of all was the National Asset Management Agency, NAMA. It bought the very bad big loans from the banks, which is what helped the banks get back on an even footing. It was necessary for them to get rid of home loans. We do not allow repossession in this country – we make that extremely difficult – so it was necessary to have vulture funds and to sell many of those loans. While we claimed that there were legal protections and, legally speaking, the same terms and conditions applied, the problem was that we did not protect people from interest gouging. I did not have a problem with vulture funds in the first place. Deputy Tóibín stated that it was part of a grand strategy. It was, and it was a good strategy.
Bernard Durkan (Kildare North, Fine Gael)
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I will comment on some of those points later.
Mr. David Hall:
I was hoping to get through the whole meeting without disagreeing with Mr. Burgess, but be careful what you wish for.
As Mr. Burgess mentioned, the Central Bank made decisions on what the banks had to do. Serious questions arise as to what decisions were made and whether radical restructures could have been done by the banks. Some were done successfully and different banks had different restructures of the same name but with different terms and conditions. History will judge whether the vulture funds were required and, if so, why.
Ultimately, we are speaking about are humans. They are called "customers", but they react and behave like humans. Many of us have engaged with lenders. We have had good and bad engagements. This is part of the failure of regulation and consumer protection. It is an abject failure of monitoring. This should be a production line. There should be no favouritism, disadvantage or advantage. This is an academic exercise. The world has changed again in the past ten years, in that it is very expensive to live in Ireland now and there are even greater challenges. None of us has the confidence to know whether a lender, vulture fund or bank of any shape or size will go through an engagement process from start to finish in a timely, efficient and just manner.
Regarding corn flakes and percentages, my concern about people obsessing about what price was paid is that it distracts them from engaging with the relevant organisations, be it the IMHO, MABS, the Insolvency Service or individual practitioners, to get the help that is needed. There is help and there are solutions. Mortgage-to-rent is a solution that we have advocated for and have gone through. The Department of Housing, Local Government and Heritage has decided to seek expressions of interest from more vulture funds in buying these homes despite this failing previously. It is a bizarre decision to make. Is there an alternative to mortgage-to-rent? We have affordable housing under Housing for All. Is it the case that some of these mortgages could be bought by housing bodies, with rents set at affordable home levels so that the homes are not lost?
Serious questions need to be answered, but as Mr. Burgess and Mr. Kissane have mentioned, thousands of people are affected today. We need to consider realistic solutions that deal with them today. There are solutions, there is help and people need to be encouraged to get it, but we need to take action and regulate the regulator to ensure that these vultures do not put their claws any deeper into Irish customers.
Mr. Padraic Kissane:
I will make a couple of comments. There are some facts on which I tend to focus. The lending in question stopped in 2008. We are now 15 years on. An eagerness to borrow and a willingness to lend was always going to be a recipe for disaster. The recovery from that disaster is taking time.
Mr. Burgess and Mr. Hall have covered some of the points I wished to address. There is a broader issue in the question of finance relating to the closure of bank branches. This will remain a challenge. The world of finance is changing. It has already changed in many respects. You cannot leave four branches open in a town for the four people who go into them. You cannot run a business like that. However, I see no reason there cannot be a bank depot in every village or town to replace them and from which every bank customer can operate. That is where this will go. It is what has happened abroad.
If I were ever to profess what should happen, I would point to how the one subject that is not taught in any school or university is finance and how to handle your money. This is where the problem originates. People rely on the advice of the bank of mum and dad and pick up the rest as they go along. Looking forward, a great deal must be done to educate people. They are graduating from university and walking into jobs for €50,000 per year but have no idea what to do with that money. That is crazy. Some get lucky, some do not. If we tackled the root of the problem, we would correct a great deal.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am interested in the bank depot idea. I presume Mr. Kissane took it from the political depot operated by the Government and where nothing gets done.
The three presentations were excellent and focused on the points we wanted addressed. While we might not agree on some of the points raised on either side of the discussion, there is a consensus about needing change and for something to be done.
To those watching proceedings, it should be explained that the vulture funds have been invited to the committee a number of times – they have had to be reminded of those invitations – but they refuse to attend. There is an argument about whether vulture funds were needed in the beginning – I disagree with Mr. Burgess's position – but even if they were needed, there were no rules for them initially when they arrived. It was an open country where they picked on the bones of everything. Much of what happened might have been avoided if there had been rules for what should happen. Our country was completely vulnerable. People in business and domestically were also vulnerable.
We are looking back on Covid, but we should also take a deep look at everything that happened in this context. One of the witnesses mentioned learning something from it. We need to look back on it.
The banking investigation was a whitewash, in my opinion. It did not go half far enough in getting at the truth and presenting real findings or a learning experience setting out what did or did not go wrong.
We will again ask representatives of the vulture funds to attend and we are in the process of doing that. The Minister for Finance should take note that that is what we are doing and that we are having serious difficulty in doing it. I have just been reminded we have invited representatives of several funds to attend a meeting on 22 March. I publicly appeal to those funds to allow their representatives to come before the committee and give their side of the story, that is, to explain themselves and explain how best we can engage with the funds to get information for customers who have come to us or to the IMHO. It is not right, in a small market of 5 million or 6 million people, that a set of financial entities would not engage in a public forum. That beggars belief, and I am disappointed with successive Ministers for Finance for not having set down those rules. I would hold the Central Bank to account as well, given it just wants to turn a blind eye and let things go on. Quite frankly, that too has to change.
Turning to our guests' contributions, Mr. Kissane mentioned these funds and the background to NPLs and so on. He raised a question as to where the firms are sourcing their money and asked whether the funds are open to the same market fluctuations as regular mortgage providers such as Finance Ireland. Was that just a comment or does he feel we are not doing enough as a country to attract cheaper funds of an ethical kind?
Mr. Padraic Kissane:
Mr. Burgess made a point in response to the funds’ argument that they are only passing on the 3% rate from the ECB, but there is no visual of where their funding costs originate. It is fine for them to say the ECB has asked them to pass on interest rates, but we are already 3% above the European marketplace in the first instance, so we are now 6% above that, with 3% of that coming from the ECB. I posed the question more as a thought for the committee to consider. If an entity wants to validate 7.5%, it should show how it is validated and we can then say whether it is appropriate for a set of reasons. We have no reasons.
I decided I would not refer to Groundhog Day but I will do so nonetheless. I am raising the same sorts of concerns as those I raised many years ago, yet I have not received answers and nobody is able to explain it to me. On Lone Star's website, it is almost as though the fund is holding it up as showing how good it is at picking at the carcase of distressed economies. That is its market. If somebody tells me different, I will be the first to say I got it wrong. I do not know the answer to this, but I would be surprised if some of the pension and investment funds, behind some of which there are billions of euro, are not taking a five-, ten- or 20-year view on the purchasing of that fund. If they are not, that would not make sense to me given the market they are in.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I take those points. Mr. Kissane made a point about the conditions from loan offers in respect of the securitisation of the loan. What is his view on that?
Mr. Padraic Kissane:
They are two separate issues. If it were argued that the securitisation within the entities of Bank of Ireland or PTSB required a change from, say, one Bank of Ireland designation to another, that could be implied post sale because the intention is to treat the customer fairly. I come back to this all the time. When it comes to homes, our legislation is lacking, not in repossessions, protections and so forth but at the outset. It should almost be a loss leader for banks that the creation of homeownership would be an ultimate desire of the entire country through the purchasing of homes, given it brings so much benefit to the wider follow-on regarding children in education and so on.
My point is that if the same rates do not apply, I want to know why they do not apply. If I were reading those terms and conditions as a layperson or natural bystander, I would think Mr. Burgess's solution applied. If the originating bank that owned the property has fixed rates and variable rates, the same should apply for the customer. That it was not included in the sale conditions is not the fault of the misfortunate customer. A mortgage can be sold, as a committee member suggested, where the fund can charge the customer 25% tomorrow morning and there is nobody to prevent it doing that. At what point does it become crazy, which is how the 25% rate might be deemed? Why does 7% not elicit the same reaction? Who says that is correct? I reiterate that if, on a €500,000 loan, the fund pays €250,000, the real interest return for the fund will now be 14% on a 7% loan.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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When Mr. Kissane came before the committee regarding the tracker mortgage issue arising from that and other engagements with Mr. Hall and Mr. Burgess, some customers of the banks came forward, explained their cases to us, bared their souls and gave us a better insight into what was going on. Does Mr. Kissane have examples of cases that might do likewise in terms of the treatment customers have been receiving from vulture funds, and would they come forward?
Mr. Padraic Kissane:
Yes. I have spoken previously many times about those four remarkable people because they bared their soul and it was an altering moment. The same might need to happen in this case in order for the committee to get a full grasp of the atmosphere at the dinner table in those households at night. We can only reflect third party experiences but we are all hearing about it. The committee is receiving the letters. We know it is an issue. My concern is that, taking a view of one year ahead, this is going to start again because arrears are automatically going to increase, as are the non-performing loan numbers, because of where interest rates are expected to go.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Do we have any idea of the numbers who will be affected by this?
Mr. Brendan Burgess:
In respect of vulture funds, there are a total of 95,000 mortgage holders. Mortgage holders often have a second account, so there are 113,000 or 114,000 accounts but 95,000 families have got mortgages. Approximately 31,000 of them are on trackers, so I am not concerned about them because, typically, the margin is 1%, so today they are paying 3% plus 1%, that is, 4%. When they drew down that mortgage 15 years ago, they were paying anything from 3% to 5%, so in some cases they are still paying less now. Moreover, of course, they have been paying very little interest for the past 15 years. I am less concerned about them.
There are 38,000 people on variable rates. As Mr. Kissane said, if the vulture fund decides to raise the rate to 10%, according to the current belief in the system, nobody can do anything about that and it cannot be challenged. The third category comprises about 25,000 people on fixed rates. They were on fixed rates before the mortgages were sold and those fixed rates have not yet finished, but when they expire, the mortgage holders will go onto variable rates. In total, therefore, 63,000 people will be subject to whatever the vulture funds want to charge them. Of those 63,000, I am guessing 10,000 could switch to another lender, but it is difficult to get that information.
It might be worth sending a questionnaire to the vulture funds and asking them these questions. I think the committee has asked them to come in a few times over recent years, but they have not come in. They had less to hide back then. I would love it if they came in to be asked questions. However, if the committee were to ask them a few questions I could talk to the clerk about what questions might be appropriate.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is Mr. Burgess saying that there are 63,000 mortgages with the vulture funds?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is Mr. Burgess solely talking about the vulture funds? There are 95,000 in total and then it is broken down for us.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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There are then 63,000 vulnerable.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I want to pick up one point before I go to Mr. Hall. Mr. Burgess has said that some of them might switch. My experience is that once they go to a bank and say they are with Pepper, that is it - the conversation ends there.
Mr. Brendan Burgess:
In some cases it does. That is the case if they have a restructured mortgage, if they are in arrears or if they are still restructured and have not been clean for five years. However, in some cases they can go. One of the lenders which is most open to considering people with a hiccup in their past for mortgages is Bank of Ireland. It is more flexible than the others. A lot of the others say "No." They see that a credit card payment was missed three years ago and tell the applicant to come back when it is no longer on their central credit register, CCR, record. Bank of Ireland does look at cases, so that is something worth considering.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Will Mr. Hall deal with two questions? First, is the question of switching. Will he deal with that first?
Mr. David Hall:
It is universally agreed that anyone who can switch should switch. There is a personal responsibility on those within the claws of a vulture to get away as best they can. There are many independent brokers in this country that will assist them in doing that. Some lenders will be a little less favourable. As Mr. Burgess has mentioned, this depends on the circumstances of why someone is with the vulture fund. However, in the early days vultures were the subprime lenders or the people who were handed over to them. People owe it to themselves and their families. There is a massive responsibility here for anyone in difficulty, who is under pressure and distressed. There is help available through their local representatives and the different organisations mentioned. There are also other professionals there, like mortgage brokers, to assist people in making an application. They can do so directly with any of the lenders. There is no chance of any power being returned to consumers unless it is taken by ourselves. Everybody has a responsibility to themselves, their families and the entire sector to move to better their own circumstances, and make themselves safer and more secure where they can. Not everyone can, but those who can do so should absolutely do that.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The second question was about how many people in Mr. Hall's organisation are with vulture funds.
Mr. David Hall:
The number in long-term mortgage arrears with vulture funds is just over 21,000. That is the most vulnerable cohort of people. There is a handful of people who have stuck their head in the sand, as is the way of the world, out of pressure, stress and distress. There is a smaller number of messers. Ultimately, there is a number of people who are very vulnerable. There is a narrative that there have not been many repossessions. Statistically, that is true. There have been between 3,500 and 4,000 court order repossessions. There have been 6,000 voluntary surrenders, which end in the same way. A lot of the mortgage arrears stuff has turned to housing now. Nobody is interested where they are goosed and engaging with a lender who says they would like them to put their house up for sale or surrender their home. Where are they going to live? Now the housing situation has taken over dramatically as a major consequence, such as it might not have been eight years ago. There is a significant vulnerable cohort of people there. I cannot see vultures giving people free houses. I might be wrong. I am talking about the information given to the Central Bank by the vulture funds. This is very important. It is on the Central Bank's website. It is not David Hall's analysis. There is a cohort of people, including lenders, mainstream banks and vulture funds, that were asked a direct question by the Central Bank. They were asked to set out how many of the people they have engaged with as distressed customers they believed will lose their homes. They replied by saying that the figure in question was 16,000, or two thirds of the 24,000. They went a step further and gave details of how many would lose by court order repossession, which was five sixths. A further one sixth would lose their homes by voluntary surrender. That is forensic detail of assessment. From memory, the standard financial statements of 11,551 individuals were assessed, and 12,338 additional ones were deemed unco-operative. I would not set much store by a bank deeming someone to be unco-operative, let alone a vulture fund. However, there are hard data there and there are exceptionally vulnerable people at risk of losing their homes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Does Mr. Hall think some of the clients he deals with might come forward to the committee and share their experiences?
Mr. David Hall:
Mr. Kissane, Mr. Burgess and myself were discussing this earlier on. There was a seminal moment in the tracker situation when Mr. Kissane's clients came forward. It is a very difficult thing to do and I do not need to tiptoe around that. Like the committee, we appeal for the vultures to appear here. They should appear here, and understand that this environment is not as challenging as some might think it is. It would be very powerful and useful for people who were there, and who would be up to it, to come. They do not have to be experts at having conversations. Everyone here is human. That is what the committee does. It makes people feel comfortable. It is imperative that those who are able to do so contact the committee or any of us here and we would assist them. We will be asking a number of people we are currently dealing with to come forward, particularly those who are in pre-arrears and fearful of what is going to happen.
Mr. Padraic Kissane:
On the switching of mortgages, I re-registered as a mortgage intermediary because a couple of things had shifted dramatically with regard to the switching of properties. Property values have gone up. Loan to value has improved dramatically from when one could not move in 2013 or 2014, when we did not know what was going to happen. The ground is changing for people. For a lot of the people with whom I am engaging, I am preparing them for their exit from the vulture fund. It might not happen in the next month, or six weeks or six months. However, we can show them a journey to getting out. It is like a personal solvency arrangement to some degree. One nearly has to show them a roadmap of how to get away. From that moment their credit history and everything else is improving. What one has given them more than anything else is a purpose and structure for where they are going to get to. Obviously, a lot is tied into that such as the affordability of the loan and the certainty of application, qualification and so forth. However, that has been improved with the four times salary and so forth.
I will say one thing about the committee's request for vulture funds to come here. If they do not come, my alarm bells will go off. If their business model is as puppy love as the Central Bank claims, there is no reason they should not come. I have greater concerns if they refuse to come. What are they hiding? Now my detective brain or detective head says there is something of concern. If they come to address all of the issues we have raised today with reasonable and acceptable answers, that is fine. That is the business model and the mistake was selling to them in the first place. If that is the only error arising out of this, we have to live with it and try to help the people as best we can in other ways.
There is another matter I want to make a point on. It relates to tax relief and increasing mortgage interest relief. I ask that the committee does not go there. That is an interference in the marketplace that should not occur. Interest rates are going up for a reason. Mortgage interest relief is something I would not interfere with. There are consequences of it being a collective interference that will not help in the broader market. I want to make that point. Those are the things. With regard to switching, one should get out if possible or start the groundwork to getting out.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I want to return to consumer protection as a final point. Mr. Hall made a point in relation to that and the Central Bank. Where does he see the current structure failing?
Mr. David Hall:
There are many animal organisations with better advocacy protections and consumer rights than consumers of financial institutions. We are asking who regulates the regulator. We have an in-house statutory regulator to regulate entities and a whole host of other financial products and services, and at the same time it is allegedly there to protect consumers.
They do not fit given the amount of money and the amount of risk involved. We saw during the tracker mortgage scandal and we see with the mortgage arrears the impact this has on human life. The economy is way too great to have a situation where an unregulated entity, the Central Bank, can have that exclusive power. It must be segregated to ensure we protect consumers. They need to know that there is an independent body. Before I came in today, someone sent me a message. One of the key parts of the message was that they had gone to a personal insolvency practitioner and got their loan restructured but that Start Mortgages was now upping the rates, that they could not pay any more and that they have to go back to court for a variation. One of the points they raised was that they sent five letters to the Central Bank that were unacknowledged. Where do you go when you have a complaint? You can go to the Ombudsman but from a regulatory perspective, is there some place that can help someone deal with genuine concerns and genuine risks? Mr. Kissane made some points about terms and conditions earlier. Where is there an independent entity with statutory powers that can challenge the Central Bank on its behaviour and its lack of activity and take test cases, as and when required? I have an additional point that no one likes to talk mention. Many of the vulture funds have buy-to-let mortgages where individuals, large and small landlords, have seen rates going up at an obscene level. This is having a massive effect and impact from a housing perspective and they are all interlinked. I know there is a political conversation about the eviction ban and so on, which is all very well and good, but ultimately in a housing crisis, this has a massive impact. We have individuals with one, two, three or more properties where the loans are buy-to-lets but which are not in arrears. However, the interest rates are going up, putting them under immense pressure in a situation where they cannot increase rents. There will be a come-to-Jesus moment there and it is already happening with landlords who are exiting. It is relevant too. We have a major cohort of lenders who are effectively controlling or impacting on part of the housing market which is very dangerous.
Mr. Brendan Burgess:
It is an interesting question as to whether consumer protection should be with the Central Bank or with an independent body. If I was asked to vote on whether I would prefer to be with the Central Bank or a body like the Competition and Consumer Protection Commission, I would certainly would not want it to be involved. In the last 13 years since we campaigned on mortgage interest rates, trackers and arrears, the Competition and Consumer Protection Commission never once initiated anything. The only thing it ever did in that whole area was when, as part of the programme for Government, it was asked to look at mortgage interest rates or something like that. The Competition and Consumer Protection Commission has only responded to something once. It has taken no initiative in this area. As I said, the Central Bank has done a good job in some areas but it had to pushed and prodded. However, the Central Bank is doing a bad job in this area but it is doing a far better job than former financial regulator, the Irish Financial Services Regulatory Authority, IFSRA, did, which half independent. The Central Bank has done a much better job than IFSRA did because it has a lot of authority and power in terms of authorising banks and it can use soft power. The Central Bank covers fitness and probity and I am sure there are conversations going on. It could probably have this conversation with the vulture funds, which really do not like what the committee is doing here.
Mr. Brendan Burgess:
We do not know. One of the disadvantages of having consumer protection in the Central Bank is that it will never discuss what it is going, although a section in the Central Bank Act allows it to discuss consumer protection. It can disclose information if it is in the consumer's interests. That would be one advantage but overall if I was asked to vote, I think, on balance, I would leave consumer protection with the Central Bank.
Mr. Padraic Kissane:
Irrespective of who says what to whom and who challenges whom, there is a consumer protection code in place that these firms are obligated to adhere to. Firms must act honestly, fairly and in the best interests of their customers and the integrity of the market. The challenge is then very simple. Are they or are they not acting in the best interests and in the integrity of the customer and the market? They are obligated to adhere to that and to the spirit of that code. The firms all signed up to that, irrespective of what arrangement were put in place at the time of sale.
Mr. David Hall:
The lack of certainty in the discussions today and the lack of certainty around these topics with the vast sums of money and the individuals involved has to be very concerning to many. This has been going on for a long time and in the absence of an expressed certainty as to power, authority and regulatory supervision, that has to be addressed by this committee and by the Oireachtas. There needs to be firmer explanations. It is absolutely remarkable that in 2023 this committee, which has a tried and tested track record in consumer protection, is scrambling to get a bunch of vultures into a room. No one in the world would actually believe that. To go back to the Central Bank, and the Banking and Payments Federation's, their mouthpiece, it should be able to force that to happen. The fact there is a conversation happening and there are public appeals to have vulture funds, which profited and picked on carcasses, attend a democratic committee to answer basic questions, it is a joke.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The committee will pursue that strenuously. I have one final question. I do not know who said that there is no safe haven for people who are in debt. Everyone is protected but there is no safe haven-----
Mr. David Hall:
Generally speaking, if a person is in debt, the debt will catch up with them. The point is there should be a mechanism to deal with it. Deputy Durkan said earlier that we have all engaged with lenders and there are very robust, rigorous processes in place at the moment that are quite boring and tedious. Some are good and some are bad. Sometimes we get outcomes we like and sometimes we do not get outcomes we like. Sometimes we get surprisingly good outcomes but ultimately there is no safe place. There is nowhere for someone to go. There is no central organisation. The Money Advice & Budgeting Service, MABS, has an excellent function. The Free Legal Advice Centres, FLAC, does a lot of advisory work and there is the Irish Mortgage Holders Organisation, IMHO. If one thinks about it from a central perspective, when we opened the conversation around vulture funds and what happened there, there was no independent debt resolution body set up to deal with debtors. There were no counselling services or advisory functions set up. Members can contact Irish Water and get advice but there is nowhere to go in respect of these conversations. We have constant conversations with the offices of Members of the Oireachtas about referrals but we do not treat consumers who are in debt with the due respect they deserve or the protection they deserve. The Government has put nothing in place. There is the Abhaile scheme, which is not fit for purpose, and the insolvency legislation, which has still not been changed or reviewed. We need to have a safe place for someone who is in debt or who considers they will become indebted in the near future to go to get impartial, independent and full advice and to not be battling banks, vulture funds and their lawyers when it comes to courts.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank the three witnesses for attending today and sharing their experience and views on these issues. I will ask them one last thing which is to link in with the clerk to the committee. If there are any people they are familiar with who would like to come in and share their views on vulture funds with the committee, I would like to hear them.
To go back to Mr. Burgess's point, if the witnesses have questions they think should be put to the vulture funds, perhaps the committee could send them a questionnaire which would not replace a formal meeting but prepare the committee, as we normally do with the other banks, for that formal meeting. I ask the witnesses to help with the framing of those questions, so that we are accurate in our presentation to them.