Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I congratulate Deputy Michael McGrath on bringing forward this legislation. Having heard the response from Government, this is beginning to be like playing handball against a haystack. In other words, the Government knows it is wrong, so it will not vote this Bill down because it knows that if it was to do that, the public would never forgive it. It hopes that by acquiescing to the principle of the Bill and by doing nothing about it, the issue will go away and that somehow it will be forgiven for not providing the protections afforded in this Bill.

One must ask the following simple question. If this is not important, why is the code of conduct there? If the mortgage agreements people have with mortgage companies were adequate, why did we have to bring in the code of conduct? As the Minister knows, the truth is that the code of conduct is there because, as Deputy McGrath said, if we left it to the agreements most people have with the mortgage companies, all of the cards would be stacked in favour of the mortgage companies and not the person in difficulty, and many people are in difficulty.

People took out loans in good faith which were transferred to a State entity, namely, IBRC, and they are now being sold off to the private sector which is being told it can do as it wants but that the Government would like it to give a verbal commitment to honour the code of conduct. I find that absolutely extraordinary given the Government's Pauline conversion on regulation. It was very critical of the previous Government for having gone with light touch regulation. It said one cannot trust the financial sector with light touch regulation and that what needs to be done must be stitched in in very specific terms but here is the Government saying that in this case, zero regulation will do, word of honour will be enough and that this will protect the customers of the IBRC, originally Irish Nationwide Building Society, and other loan books which will be sold in the future by the covered institutions. The reality is that loan books are being sold by the day. People think they have mortgages with certain banks but what is happening is that the loan books are being sold on. Those who buy the loan books buy them at a discount - at their value today - and are, therefore, in a much better position because there is no write-off involved for them.

The write off has already taken place before the purchase. They are in a much better position because the loans do not impair their balance sheets. They can realise the assets without incurring major losses. As Deputy McGrath pointed out, if they decide to repossess and sell the property, they will not be at a loss because they bought the loan at way beneath its original nominal value. Therefore, there is a much greater chance that repossessions will take place and that people will be exposed.

The Government is neither coming with us nor going against us. It is trying to put this into cyberspace in the hope that it goes away. Obviously the Government cannot oppose this Bill because it knows in its heart and soul that this legislation is a no-brainer. On the other hand, as I understand it, no firm commitment has been given on a date for the enactment of this legislation and for other legislation that would be needed to ensure that everybody who took out a mortgage would be protected in the event of their loans being sold on to third parties that are not regulated at the moment.

This must create enormous worry for those who have borrowed and are now exposed. In terms of trying to measure risk, one must ask why the Government is not legislating and making sure that legislation is in place before the sale actually takes place. The argument that has been put forward is that it would impair the value of the loan book to do so. If the loan book is not as valuable because one of the conditions of sale is that purchasers must adhere to the code of conduct on mortgage arrears, that means the people who are adding to the value of the loan book are the mortgage holders themselves who are being asked, in effect, to stump up, in the form of risk, the difference between the value of the book with the code in place and without the code in place. That is totally unfair. Why should they bear the burden and the risk? If there is a difference in the price, that must mean that the promise that is given is not worth the same, in financial terms, as one underlined by a statutory obligation to adhere to the code. That shows the lack of cash worth of the promise that has been given to the Government.

This is a totally new situation which follows from the Government's decision to liquidate IBRC. It also relates to what is happening in the market generally, where loan books are being sold on. People are buying them at a discount and hoping, by working them out, to make a profit. There is nothing wrong with that in and of itself as long as the borrower is given protection. In making the decision to liquidate IBRC, the Government has exposed ordinary citizens who have acted in good faith at all times and who expected that their mortgages would get the same protection as all others. When one looks at all of the provisions in the mortgage arrears resolution process, MARP, all of the conditions attached and the processes to be followed, one realises how deficient the previous processes were. Without MARP and the code of conduct on mortgage arrears, banks were not adhering to good practice and were not giving customers a fair chance. They were not working through difficulties in collaboration with their customers in order to avoid the repossession of family homes, if at all possible.

The Minister has taken a small step in the right direction in that he has admitted the principle of the Bill; that is what not opposing Second Stage means in parliamentary parlance. It is quite an achievement for Deputy McGrath to have forced the Government to accept the principle of the Bill. However, it is vital that we now go a step further, having admitted that the Bill is correct in principle and is necessary. Before the loan book is sold and the loans are transferred out of a State entity and into the private sector, the Government should immediately enact this legislation and give protection to borrowers. To be quite blunt, this legislation is as urgent as the legislation to liquidate IBRC, which we sat up all night to pass. I suggest that the Government puts the same effort into protecting the consumer, the ordinary citizen. It must not only accept the principle but must also put the legislative blocks in place to protect our citizens from anything that might go wrong in the future.

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