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

I move amendment No. 6:

In page 6, between lines 10 and 11, to insert the following:“(2) Section 33A of the Central Bank Act 1997 is amended by inserting the following subsection after subsection (5):

“(6) The Bank shall also impose, on a debt management firm and or a credit servicing firm, a condition that a customer shall, within 30 days of his or her credit agreement being sold be—

(a) advised of the terms on which his or her credit agreement was sold,

(b) advised on any material change to the terms under which the credit agreement is serviced,

(c) advised whether the loan was sold at a discount, and

(d) provided with details of his or her rights under—

(i) the Code of Conduct on Mortgage Arrears 2013, and

(ii) the Financial Services Ombudsman.”.”.

This amendment arises from Committee Stage debate and concerns the provision of information. We suggest that when a loan is being managed by a credit servicing organisation, the bank shall also impose on the debt management firm or credit servicing firm, a number of conditions to be fulfilled within 30 days of their appointment advising them to advise the customer of the terms on which his or her credit agreement was sold and advising of any material change to the terms under which the credit agreement is serviced.

The Minister will probably say there cannot be changes to the agreement as the original loan had been sold. Therefore, perhaps subsection (b) may not apply - material change to the terms under which the credit agreement is serviced. The customer should be advised whether the loan was sold at a discount and provided with details of his or her rights under the Code of Conduct on Mortgage Arrears 2013 and on the responsibilities of the Financial Services Ombudsman.

The essence of this amendment is that if a person's loan is being sold on, that person is entitled to know whether it was sold at a discount. For example, take the case of somebody who borrowed €1 million from a bank and that loan was sold off, although the customer had been prepared to pay a discounted rate for it but that was rejected. The banks, through laziness - they should not be facilitated for laziness - bundles a group of loans and sells a package of 50 or so loans at a discount of 80%, despite the fact some of those loans will perform better and some worse than that. Rather than work through the agreements individually, the banks sell them off as a bundle so that they do not have to bother working through the details, having earned interest on the loans up to the time of their sale.

If a person's loan is being sold, he or she is entitled to know that. If I had a mortgage of €300,000 on a house and was in financial difficulty and my loan was sold off as part of a bundle, with a 50% discount given on it to the person taking over the new agreement, while I was willing to pay 80%, I should be entitled to know that. People are entitled to know whether their loans are sold at a discount. We must get back to basics on this. While there is some merit in this legislation, it does not go far enough. I believe that when a bundle of loans is being sold off, the borrowers should be notified in advance it is intended to sell the bundle including their loan and they should be entitled to submit an offer to buy their loan at a discount. Ultimately, the Irish taxpayers will benefit if distressed borrowers are willing to remortgage and buy their loans at 80% or 90% and have some of the arrears written off. That option should be available to them, rather than the loan book being sold over their heads.

I know the Minister will say it was always part of the original agreement that loan books could be sold off, but I believe that because of the impact the financial crisis has had on society, people should be informed of the sale value of their loan. If the bank is willing to accept a 50% write-down on a loan by selling it off to a third party, why would it not go at least some way towards dealing with the borrower who lives in the house? That would be the sensible route. I believe everybody would agree with this solution and see nothing wrong with the principle. This might cause some work for the banks. Perhaps they should be forced to do some work and to disaggregate some of these bundles.

They are just taking the lazy approach. One of the problems we have had coming out of the recession is that some of the banks did not do their job when they gave out the loans initially, but they should be forced to do their job when it comes to dealing with the difficult loans they gave out in the first place. Facilitating them by allowing them to bundle 500, 1,000 or 10,000 mortgages in one big lazy bundle is a reward for the banks for laziness. I have a fundamental problem with that.

People are entitled to know if their mortgage has been sold at a discount and they should be given to first option to buy it. That is the essence of the amendment. Even if people are not given the option, they should be told their loan has been sold and what the discount was because it puts them in a strong position. When the company comes back to a person to enforce repayment of a €300,000 mortgage, or whatever is the nominal value of the mortgage, he or she will be in a strong position to say the bank has paid only €150,000 for it and that is an acceptance that it is the fair value of the mortgage, which puts the borrower in a much stronger negotiating position. As we come out of the recession we do not want to further weaken the bargaining position of borrowers who might be able to make a better contribution than the discounted value of the loan, which would ultimately be to the benefit of the taxpayer. Everyone would agree with such a principle. It would be a pity to take such an approach. It is one of the shortcomings of the legislation that it did not take that into account.

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