Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank Deputies for their contribution to this debate. As I outlined this morning, this is a priority issue for the Government. The purpose of the legislation is to protect consumers whose loans are sold by regulated financial service providers to unregulated firms and I welcome the broad support given by Members to this overall objective. We are all agreed our aim is to protect the consumer.

As was indicated earlier, while many purchasers of loan books have already agreed to voluntarily apply the Central Bank codes when managing loan books, voluntary compliance is not enforceable. As a result, the Government committed to bringing forward this legislation to protect consumers. The legislation provides that borrowers retain protections after their loan is sold. It addresses concerns surrounding the continued applicability of the Central Bank's codes and access for borrowers to the Financial Services Ombudsman. For example, borrowers will retain the protections provided by the Central Bank codes, such as the code of conduct on mortgage arrears, known as the CCMA.

The points raised by the Deputies have been noted during the course of the debate and will be carefully considered. We will also have more time on Committee Stage to explore the issues that have been raised. It is opportune to flag that, as usual, the Government is likely to have some amendments of its own on Committee Stage.

As many Deputies raised the issue of who should be regulated, I would like to explain further the evolution of thinking on the Bill. As a number of Members pointed out, the initial thinking was that the best approach would be to regulate the new owners of credit. However, over the course of preparing the legislation, the views on this evolved. The Department of Finance ran a public consultation last July and August, seeking views on this proposed legislation. This was followed by further clarification meetings and examination of options, including intensive work with the Central Bank and Office of the Attorney General to progress the legislation. The public consultation process highlighted an issue with this approach, as it was possible to envisage cases where owners would effectively be a passive special purpose vehicle, SPV, and would outsource servicing of the loans to a firm that would not be regulated.

In this context, Deputies also referred earlier to complexities around foreign based owners. This was one of the factors we considered and we saw there was potential for a lacuna to arise if a foreign based unregulated owner was to use a local credit servicing firm which was not regulated. It therefore became clear from the consultation process that if we were to effectively protect consumers, it was better to regulate the process of credit servicing, as that is the customer facing activity. However, if an owner does not outsource credit servicing and instead undertakes the activity themselves, they will be required to be regulated. In other words, some regulated entity will be responsible for all credit agreements.

Deputy McGrath raised the issue of a loan book being sold more than once. I am satisfied that the legislation will be effective, no matter how many times a loan book is sold. This is because the customer facing entity, the credit servicer, will have to be regulated. If a new owner decides to continue with the existing servicer, then the borrower may not even be aware of the change but, in any event, will still be able to make a complaint about the servicer. The new owner could decide to go with a different regulated credit servicer, in which case the borrower can make a complaint about the new servicer. If new owners decide to service the book themselves, then they will need to be regulated and a complaint can be made about them to the Financial Services Ombudsman.

Deputy Fleming raised the question of whether the legislation is retrospective. The position is that it will apply to all loans, once the legislation is passed, regardless of when the loan was taken out, including loans that were bought out in the past. This applies not just for loan books and loans in loan books that are acquired from the passing of the legislation onward, but to loans that were bought out in the past.

Deputy Naughten raised an interesting point in the context of tragedies arising from sudden deaths in circumstances where people die intestate. I will reflect on this point. I cannot be exact on the figures, but from memory I believe there are approximately 1.8 million houses and homes in the country, but that only approximately 750,000 of them have mortgages on them. Therefore, if we made a provision on the mortgage side, I doubt it would reach the full target the Deputy has in mind.

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