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

I move amendment No. 2:

To delete all words after “Dáil Éireann” and substitute the following:notes that:

- the Central Bank of Ireland has a considerable range of supervisory, investigative and enforcement powers which have been enhanced in recent years across a wide range of areas to combat and punish wrongdoing;

- in October 2015, the Central Bank of Ireland embarked on a broader examination of tracker mortgage related issues and since then it has produced regular progress updates on the status of the examination;

- the wrongful removal of tracker mortgage rates from mortgage holders, or a failure to restore mortgage holders to tracker mortgage rates they were entitled to, has affected thousands of families;

- approximately 8,200 impacted accounts have been identified to date by the Central Bank of Ireland but that the total number of impacted accounts is likely to be higher;

- the responsibility for causing the problem, and therefore for rectifying the problem, rests in the first instance with the lenders which wrongly removed the right of their customers to a tracker mortgage rate; and

- the Central Bank of Ireland, utilising its powers, has already issued a reprimand and imposed a fine of €4.5 million on one mortgage lender, and also required the lender to provide redress and compensation to impacted customers, in respect of breaches of its obligations to tracker mortgage customers;

supports the Central Bank of Ireland’s actions to initiate an industry wide examination and calls for the examination to be completed, with appropriate redress and compensation to impacted customers, as soon as possible;

recognising its independence, calls for the Central Bank of Ireland to investigate, and where pertinent, to apply appropriate sanctions to regulated entities and/or individuals for wrongdoing where supported by the evidence;

calls on the Central Bank of Ireland, An Garda Síochána and the Office of the Director of Corporate Enforcement to co-operate and act as necessary on matters arising from the examination of the tracker mortgage issue; and

calls on the Government to keep the legislation on financial regulation and white collar crime under review and to bring forward new proposals if necessary.

I thank Deputy Pearse Doherty for raising this very important issue. I also thank Deputy Michael McGrath for his amendment to the motion tabled by Deputy Pearse Doherty. The fair treatment of consumer borrowers is a key requirement of the financial services regulatory framework and of the Central Bank consumer protection code. This requires all residential mortgage lenders to act honestly and fairly in the best interests of their customers and not to mislead customers, either negligently or deliberately, about the products they provide. It also requires lenders to make a full disclosure of all relevant information to a consumer in a way which seeks to inform the consumer and to enable a consumer to make an informed decision before entering into, or changing, a loan or other financial services agreement.

As all Deputies in this House will be aware, these minimum standards have not been met in the case of a significant number of tracker mortgage customers. This was wrong and it is a very serious matter which now needs to be put right by lenders. The Government, therefore, very much agrees with the sentiment of the motion tabled by Deputy Pearse Doherty and the amended motion tabled by Deputy Michael McGrath. While the Government will move its own amendment to the motion, it does not dissent from the broad thrust and objective of either Sinn Féin’s motion or Fianna Fáil's amended motion. However, the Government's motion wishes to focus more directly on what it considers should be the primary tracker mortgage issues at this point. First, it wishes to state it is the lenders who caused this harm to impacted tracker mortgage borrowers in the first instance by their incorrect actions who have the primary responsibility for rectifying the problem. Second, it wishes to state the Central Bank industry-wide examination should be completed, with appropriate redress and compensation to impacted customers, as soon as possible.

Since 2010 the Central Bank has been dealing with mortgage lenders on tracker mortgage-related issues. The bank had identified and pursued issues in regard to transparency with specific lenders regarding their borrowers who opted to switch from a tracker rate or who had a right to revert to a tracker rate after the end of a period where their mortgage rate was fixed. Individual cases were also presenting to the Financial Services Ombudsman and that office was making a determination on these cases, some of which were also coming before the courts. In addition, due in part to these developments, the matter was coming to greater public attention more generally.

Having regard to such developments, the Central Bank issued a public statement in October 2015 which indicated that it had commenced a systems-wide examination of tracker mortgage-related issues which covered, among other things, transparency of communications with and contractual rights of tracker mortgage borrowers. This examination has turned out to be the largest review ever carried out by the Central Bank on its consumer protection side. It covers 15 mortgage lenders which may at any time have sold a tracker mortgage product to a consumer borrower. It covers banks and other regulated lenders and includes lenders which are no longer providing new mortgage credit. It also covers mortgages which have been redeemed or whose tracker mortgage has been transferred to another creditor.

The examination requires all lenders to examine the extent to which they have been meeting their contractual obligations to their tracker mortgage customers or their compliance with their obligations under the Central Bank’s consumer protection code and other consumer protection regulatory requirements. Under the initial phase of the industry-wide examination, the Central Bank required lenders to put in place governance structures and systems to conduct a comprehensive examination. Lenders were required to appoint external third party assurers to oversee the examination in line with the bank’s requirements for the conduct of the examination.

The second phase of the examination is currently ongoing and it involves an extensive internal review of mortgage books to identify borrowers which fall within scope. This involves a potential review of a very large number of mortgage accounts to identify the individual accounts which will warrant more detailed consideration and review. The Central Bank examination requires that when groups of impacted accounts are identified, the lender must, in the first instance, stop charging the incorrect rate of interest on the customer's account and then communicate this to the customer in order that any further customer detriment is stopped as early as possible. Once a full review of the customer's account is complete, following external independent third party assurance, the lender will then issue a letter to the customer explaining the nature of the error, the correct rate to apply to the customer's account and information on the next steps in the tracker examination, including the redress and compensation process. The process also requires that lenders establish an independent appeals process to deal with customers who are dissatisfied with any aspect of the redress package they receive from lenders in respect of these matters.

As Deputies will be aware, last month the Central Bank issued an update statement which indicated that, so far, lenders had identified approximately 8,200 accounts where a right to, or the option of, a tracker rate of interest and-or the correct tracker rate of interest was not provided to customers in accordance with lenders' contractual or regulatory requirements. This is the number of impacted accounts within the scope of the examination which have been verified to date. However, in his subsequent appearance before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on 20 December, the Governor of the Central Bank indicated that the bank expects to see lenders engaging with more impacted customers over the coming months.

There was considerable discussion at the committee meeting on the possible maximum number of likely impacted cases. At that meeting, the Governor did not dissent from an overall figure of 15,000 as being a reasonable estimate but, nevertheless, he did enter a caveat that it may not be that high. As I indicated in my responses to the Deputies' Priority Questions on this subject last week, I do not have any further information at this time on the likely maximum number of impacted cases. While both motions as tabled by the Deputies opposite make reference to the number of confirmed cases as 11,700, the Government’s amendment proposes to refer to the number of impacted cases which so far have been verified in a definitive way by the Central Bank, that is, the 8,200 cases as set out in the Central Bank update statement of 19 December. However, it also recognises that the final number of impacted accounts is likely to be higher, without specifying at this point what that final figure is likely to be.

This is done not to dispute what the final number of accounts will be - that will be determined in due course following the conclusion of the examination - but only to align the record of the Dáil at this point with the number of verified impacted accounts as currently stated by the Central Bank.

It should be noted that progress is already being made. On 29 November last, the Central Bank of Ireland announced that it had issued a reprimand and imposed a fine of €4.5 million on Springboard Mortgages Limited for serious failings in its obligations to its tracker mortgage customers.

The Opposition motion also refer to the possible need for more legislation to hold entities and individuals to account. The existing powers of the Central Bank are strong and should be used to punish wrongdoing where supported by the evidence. Of course, the Government will monitor the progress and outcome of this important investigation carefully, and if there is tangible evidence of gaps in legislation that need to be filled, the Government is prepared to bring forward the necessary legislation to strengthen the consumer protection function of the Central Bank.

What is clear is that some tracker mortgage customers have been treated disgracefully by mortgage lenders and that many borrowers have incurred considerable loss, in particular where they have either directly or indirectly lost their homes due to this harmful action by lenders. I assure the House that the Government is fully aware of the seriousness of this matter and it wishes to have adequate redress and compensation provided to impacted consumers as quickly as possible. At this point the Government wishes to support and encourage the Central Bank to complete its tracker mortgage examination investigation as quickly as possible.

I again thank Deputies Pearse Doherty and Michael McGrath for their very committed and serious contributions to this debate.

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