Seán Sherlock (Cork East, Labour) | Oireachtas source

We believe that the Oireachtas, through its committees, has the requisite capacity to interrogate the three flaws, as articulated by the Minister, Deputy Noonan, namely the constitutionality of the Bill, the need to consult with the ECB before the intended Bill could be enacted and the statements by the Governor of the Central Bank that it does not wish to regulate interest rates. If it is the will of the House that this Bill be considered under pre-legislative scrutiny, then so be it. However, we see no reason that is necessary. Notwithstanding the consumer protection regulation Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, which ensures access to the Office of the Financial Services Ombudsman and ensures the protection of the code of conduct on mortgage arrears, there is still a number of borrowers who signed up for variable interest rates at the top of the market who feel a legitimate grievance and feel left behind. Section 5 of the Bill, which deals with the issuance of a direction by the Central Bank to a specific lender or lenders, deserves further scrutiny. The issue of contract law looms large over the section but we believe that this is something that can be examined further at the next Stage of the Bill.

We recognise that banks have to make a profit but there is a fine line between making a profit and profiteering. A person in my constituency of Cork East took out a mortgage in 2009 with Permanent TSB. Since 2009, that person has been paid interest, in one specific period, at rates of up to 6.5%. The borrower estimates that over the lifetime of the mortgage he could end up paying an additional €100,000 in interest payments alone and what grieves that person is the fact that mortgage products that are offered now on a similar property of similar value are significantly cheaper. He recognises that he signed a contract, he recognises that banks must make a profit but with some justification he feels that having to pay up to €100,000 more than his neighbour for the same amount of money borrowed, albeit from a different bank, is unfair.

On Committee Stage my party intends to examine more closely the issue of marginal interest. The question of profitability versus profiteering could be addressed, for instance, through the capping of variable interest rates such that, for instance, if the ECB sets a rate at 2.5%, a margin could be determined, for instance, two percentage points in excess of that, which would allow for a degree of profitability and competition without profiteering in that banks could compete within the two percentage points margin. We want to explore that at a further Stage or at least have a proper discussion in a collegiate way around that. I accept it is interventionist within the market but my party considers it is worthy of further examination.

We have some questions on section 2, on the assessments. It is difficult to understand how the Central Bank, subject to the 11 "factors" outlined in the assessment in the Bill, could reasonably conclude that a market failure exists. Section 4(2) states that ""market failure" shall mean a situation in which market conditions are such that a lender is, or lenders are, charging a variable interest rate or variable interest rates for principal dwelling house mortgage loans which are higher than the Central Bank considers can be reasonably and objectively justified by reference to the factors set out in section 3." The question is, how can the Central Bank, even when the 11 factors are taken into account in section 3, reasonably intervene to make a direction in an individual or collective case if those individuals have, in the first instance, signed a contract with a mortgage provider, and the question then arises, does the law of contract supersede the enactment of this Bill or does this Bill give powers to the Central Bank that may be subservient to the law of contract. My party has an open mind in terms of exploring those questions at the next Stage and while we may differ from Deputy Paul Murphy in regard to the recognition that banks must make a profit, we have to distinguish between making a profit and profiteering.

In the spirit of the new paradigm, in this current enlightenment period, which I hope will last, we will explore the Bill further. We believe that there is not necessarily a need for pre-legislative scrutiny because we all have the wherewithal within this House to be able to interrogate the Bill further and if we need to bring in experts to address any of the issues or the questions that may be outstanding then in the spirit of the new dispensation in which we find ourselves we should take a pragmatic view on this Bill and allow it to proceed to the next Stage and discuss these matters further.

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