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

I move amendment No. 2:

In page 4, line 18, after “restructuring” to insert “where the credit agreement is in financial difficulty”.

We had a discussion on this and several other amendments tabled by Fianna Fáil on Committee Stage. There is merit in the Bill in so far as it goes and nobody disagrees with the contents of the Bill. The main thrust of our amendments was to extend its provisions further and to include some items that should have been included. We discussed our various amendments at length on Committee Stage so I will not repeat what is already on the Dáil record. When the Minister of State at the Department of Finance, Deputy Harris, was summing up on Committee Stage he argued that this Bill was a first step and that if some of the issues I had raised needed to be dealt with, that would be done on another day. He agreed that those issues could be looked at down the road but said that it was important to get this legislation through the Houses as quickly as possible, notwithstanding the shortcomings I highlighted on Committee Stage.

We have not tabled all of the amendments that we discussed on Committee Stage again, even though some of the discussion on them was not concluded to our satisfaction. We have submitted just a couple of amendments on Report Stage, one of which is amendment No. 2. This follows on from the Committee Stage debate and seeks to insert "where the credit agreement is in financial difficulty". Amendment No. 4, in the name of Deputy Naughten, is related, as is amendment No. 5 in the name of my party colleague, Deputy Michael McGrath. The essence of this Bill is to protect mortgage holders and that point cannot be over-stressed. However, an issue arises where loan books are being sold off which include loans to the small and medium business sector. The Minister knows that this is an issue which needs to be addressed although he may argue that he cannot do so with this legislation. I believe it is the perfect vehicle for so doing but if the Minister is not agreeable to doing it here today, he might agree to addressing it separately at a future date.

An issue arises where an investment organisation similar to Goldman Sachs buys a loan book from one of the banks to which we have been referring. We have discussed the issue of mortgage books in some depth but I am referring now to loan books with performing loans belonging to the small and medium business sector. Some vulture funds can come into the market and actually trigger a default. We have seen high profile court cases dealing with this issue and some of the biggest clients in NAMA have taken the agency to court in this regard. There have been various discussions and court rulings on the matter. The essential issue is that under the terms of many loan agreements the loan provider can call in the loan within 14, seven or even one days' notice. I have criticised anyone who ever signed up to such a loan but people were told that such terms were standard and would never be invoked. However, that power is being invoked.

There are many cases of vulture funds coming into the market, examining the underlying asset value of loans and calling in the loan in order to seize the assets. They are not here to finance the business that is trading and using those assets. Vulture funds do this even where loans are performing. They have the ability, under the loan agreements, to trigger a mechanism demanding that the loan be paid in full in 24 hours or seven days. Obviously companies which may be performing in terms of paying their loans and trading profitably do not have the ability to clear the loan at such short notice. That puts small and medium businesses in Ireland at an enormous disadvantage. The bigger companies can fight their corner and might have the resources to mount a challenge in court. Indeed, some cases have been taken to court, especially in the NAMA context.

Will the Minister accept the principle of this amendment? It covers mortgages, where such mortgages are performing and the credit agreement is not in financial difficulty. The issue is that a default can be manufactured when investors take an aggressive approach to the loan in an effort to seize the underlying assets, regardless of the consequences. Many of these investment companies are not based in this State. While they are operating here, they are not regulated to the extent that they should be and that can have a detrimental effect on many businesses and mortgage holders. I ask the Minister to take that into account and I look forward to his response.

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