James Bannon (Longford-Westmeath, Fine Gael) | Oireachtas source

The consultation paper on the regulation of loan portfolio buyers was issued by the Department of Finance in July 2014. The focus of the proposed draft legislation at the time would have required the holders of credit provided to individuals to be authorised under the existing retail credit regime. However, I am pleased to note that under this Bill the focus has shifted greatly. The emphasis is now placed on the regulation of the providers of the credit rather than the holders. This is an important move and one I welcome.

This much-anticipated legislation serves to tackle certain concerns around the loss of regulatory protections for borrowers following the sale of loans to unregulated entities. Before the Bill was published a major concern shared by many Members was the fact that the protections under the Central Bank's code of conduct on mortgage arrears could be lost if the underlying loan book and security was sold by the regulated entity to an unregulated entity. It is true that an unregulated purchaser of loans and security can voluntarily apply the codes. However, as we all know, voluntary compliance is not enforceable. As a result, the Government made a commitment in March 2014 to ensure the same protections would be made available for all consumers whose loans have been sold on. Essentially, we are regulating the practice and ensuring that borrowers retain all their regulatory protections under the relevant codes when a loan is sold by a regulated entity to an unregulated entity.

Under this legislation the customer is protected in four ways. First, the code of conduct on mortgage arrears sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or pre-arrears. More important, perhaps, it requires lenders to engage positively with the objective of helping borrowers to meet their obligations. Second, protection exists for small and medium-sized enterprise customers of regulated financial institutions. These protections revolve around the issue of arrears handling and complaint resolution. Third, the consumer protection code provides protections. These include limits on communications, personal visits and other contacts, error handling, resolution processes and so forth. Finally, we will ensure that protection is provided for credit union customers whose loans are sold to unregulated entities.

I am pleased to note that customers of regulated financial institutions will have access to the Financial Services Ombudsman as well. The role of the Financial Services Ombudsman is to investigate, mediate and adjudicate complaints about the conduct of regulated financial service providers. I warmly welcome all of these points since they offer far greater protection and security to consumers across the board.

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