Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I welcome the opportunity to speak on this Bill, which aims to regulate agents. The principal financial institution which engages a credit servicing firm to act as agent will not be covered by the legislation. We were discussing the rental market earlier. Tenants who rent from a landlord enjoy certain protections. This Bill is akin to saying that if a landlord appoints a letting agent to manage the property, the landlord is off the hook in terms of obligations to the tenant. That is the principle this Bill will apply in respect of private homes. It will regulate the person who knocks on the householder's front door but the institution who sent the agent will not be regulated. This is bad legislation. There are a few scraps of goodness in the Bill but I cannot say much else for it. If it is passed, it will cause greater problems that have arisen heretofore. This morning we debated legislation on insolvency because the earlier legislation on insolvency has not worked. This morning's legislation was introduced to put a patch on legislation that does not work. While we were debating that legislation, the Taoiseach was meeting the Central Bank and the Insolvency Service to discuss the need for new systems to deal with insolvency. By his actions and his comments on Morning Ireland, he is implying that the insolvency legislation is not working. The same will happen with this Bill. It is farcical that the Taoiseach could claim that legislation we had not even finished debating is not working. The decent response would be to withdraw the legislation in order to get it right before reintroducing it.

The people who work in this business think logically rather than emotionally. They are in it to make a profit. When the Bill is passed, banks will sell their loan books to another institution. They will call it a special purpose vehicle or make up some other fancy title. This new institution will engage an agent to manage the loans. Banks will be able to avoid regulation by selling off their loans and ensuring the organisation or financial institution established to purchase the loans engages an agent.

The legislation provides the banks who do not want to deal with difficult customers with an incentive to sell off their mortgages. That is the logical outcome. We are putting an exemption in place for banks that says if they sell the loan and the buyer engages an agent, the new owner is not covered. Why would the pillar banks in Ireland - AIB and Bank of Ireland - want to continue in the Irish mortgage market where they are rightly heavily regulated if all they have to do is take a write-down, sell off the loan books in whatever packages suit them and get their money? An unregulated owner who will not be covered by this legislation will then be free to send in his agent to do what he likes. Ireland has a long history of landlords from outside the country sending in their agents to carry out repossessions. That is what will happen. Banks will look at this logically and consider that given the legislation they would be foolish not to go down this road.

The Governor of the Central Bank announced a few days ago new rules on people taking out mortgages. I did not hear him telling the public, as he has a duty to do, that new borrowers should beware that if they get a mortgage from one of the main institutions in Ireland it may be sold off at the end of the year to an entity that will not be regulated where it gets someone to come and do the dirty work as an agent acting on its behalf. The banks exist to make a profit and they will do it as easily as possible. They will go down this road. The legislation is also bad for small businesses. There are many small businesses which are viable but for the large property debts on foot of investments they made. These operators will want to realise that, even if it involves putting a small company out of business and causing job losses.

The legislation will cause more problems than it solves. First in the firing line will be those people who are well into their mortgages and not now in negative equity. If the value of their loans are way less than the value of their houses, these unregulated entities will cash in their chips straight away. They will not be as quick to go into houses where there is huge negative equity as they know they will not recover half their loan book if they sell. This is designed to attack the people who are well into their mortgages and have paid down a good bit of their debt without being in negative equity. That is where the cherry-picking will take place to get money back quickly. In those cases, it will be possible to get the full loan amount. It should be remembered that the people the legislation will facilitate will have bought loan books at a significant discount to start with. They do not even need to recover the full outstanding amount of the original loan to make a substantial profit as the loan was heavily discounted in the sale price.

The code of conduct on mortgage arrears is not working satisfactorily and some of these organisations do not want to know about rent to buy schemes. Other Members and I have encountered cases where people in serious mortgage arrears were told by one of the voluntary housing agencies that it would buy their house at a market rate written down from the original price and rent it back to the people living there. These companies do not want to do that in the cases I have dealt with because they want vacant possession. They do not want women and children in a house if they feel they can get more by vacant possession. Thankfully, Ireland is a great little country on the ground and there are many auctioneers who will not sell repossessed family homes. They will not take them, which is the right approach as we do not want to encourage the foreign vulture funds to come here and force people out of their houses unnecessarily and where there are other options they choose not to explore. That is a further flaw in the legislation.

Why is the Government doing this? It has backed away from tackling the financial institutions. One might say that the Bill contains some level of cover, which is better than none, but by giving cover to these agents, the Government is encouraging people not to get caught under the new legislation. They will take the simple way around it. Last year, we had 10,000 new repossession cases and that will increase the more we have of these kinds of activities. Before we conclude Second Stage, I ask the Minister to clarify if the legislation will apply to those customers whose loans have already been sold off. I am not sure of the answer and would like the matter clarified either way. We want to ensure that those people are covered by the Bill.

FLAC has made a submission on the legislation and said it is not clear whether legislation it provides that newly regulated credit servicing firms must apply the relevant Central Bank codes immediately. It says there may also be some doubt as to whether the definition of "credit servicing" is robust enough to ensure that all decisions made under the code of conduct on mortgage arrears are servicing matters. There is a difference between dealing with mortgage arrears and servicing an account on behalf of someone else. The definition of "credit servicing" in the Bill covers notifying people, which is sending them letters, but it also refers to managing and administering any charges imposed on the relevant borrower. Who is the invisible person who will impose new charges on the relevant borrower? They are not to be seen and may not even be in this hemisphere. This is a charter for banks to outsource their difficult loans to foreign companies who do not require to be regulated. The Government has done a disservice in this regard which will come back to haunt it.

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