Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I move amendment No. 1:

To delete all words after "and the Department over those years; and” and substitute the following:"— calls on the Government to implement the recommendation contained in paragraph 18 of the Report to introduce legislation for the regulation of all unregulated entities operating in the Irish mortgage market in order to protect Irish consumers; and

— calls on investment funds to engage with the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach as a matter of urgency and to attend the Joint Committee when invited."

I repeat that the madness took place ten years ago on 29 September 2008 when every liability was guaranteed by the Deputy's party in government.

The Deputy should not forget that. That is what his party did. That was the madness. That was the insanity which cost €64 billion gross and which eventually cost €32 billion or €33 billion. Deputy John McGuinness should not forget that. His party did that.

I welcome the opportunity to speak on the motion. There is public concern about the sales of loans and it is important that considered discussion on the topic takes place. I am glad the report specifically acknowledges that relevant borrowers whose loans are sold to unregulated third parties maintain the regulatory protections they had prior to the sale, including the protections provided by the Central Bank’s code of conduct.

It is regrettable that these funds and particularly regulated credit servicing firms have not agreed to appear before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. These funds and firms are an important part of the financial services landscape. They should show due respect to the democratic institutions of the State in which they are operating.

I am surprised by the format of the debate this evening. Although we are considering the report of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on engagement with investment funds, the format is a motion that calls on the Government to take particular actions following the recommendations in the report. This is different from the normal consideration of a committee report.

Subject to amendment on one issue, the Government can support this motion and the recommendations in the report of the joint committee on engagement with investment funds. The one issue with which we cannot agree is the recommendation to cease all engagement with unregulated private investment funds and regulated credit service firms. Aside from the potential harm flowing from this element of the motion in terms of promoting Ireland as a good place to do business and to make investments, I have a concern about penalising companies for failing to do something they do not have a legal obligation to do. If, on the other hand, the intention behind the motion is that these firms should be compelled to be accountable to Parliament, then we are entering a whole other debate that has a long history in the House. Compellability powers are available to Oireachtas committees in certain circumstances under the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013. I suggest we avoid that debate today given the legal complexities and complications that accompany the issue.

The motion calls on Government to cease all engagement with unregulated private investment funds and regulated service firms. The report refers to the statement of the Governor of the Central Bank regarding the social responsibility of firms operating in the Irish economy to be accountable to Parliament. However, while members of the House have alluded to evidence that has been provided to them on misbehaviour, the report itself does not produce any such evidence. The report states anecdotal evidence suggests that a disproportionate number of complaints made to public representatives by mortgage-holders are mortgage-holders whose loans are now owned by vulture funds. However, if the anecdotal evidence is like the representations that have been received in my Department on these funds, many of the complaints are about the fact that the loan was sold to a fund rather than specific complaints about the behaviour of the fund.

I am not an apologist for these funds or for the regulated credit servicing firms that service the loans on their behalf. However, if there are examples of misbehaviour which have been brought to the attention of Deputies, it is appropriate that they be raised with the Central Bank of Ireland to ensure this misbehaviour is eradicated. Individual borrowers also have a means of complaint through the Financial Services and Pensions Ombudsman when they have exhausted the internal complaints mechanism in the credit servicing firm. The Ombudsman has the power to refer complaints to the Central Bank if he detects a pattern which shows evidence of a systemic issue.

The Central Bank has written to the regulated credit servicing firms and outlined its expectation that these firms would attend before the committee and co-operate fully with the committee when requested to do so. I also appreciate that the Central Bank does not have the power to compel these firms to do so. I would strongly support the Central Bank's expectation that they show up.

However, as I have said, the motion calls on the Government to cease all engagement with unregulated private investment funds and regulated credit service firms until these entities are accountable to Parliament but neither the motion nor the Oireachtas joint committee report on which it is based goes on to clarify exactly what this means, both on the extent of Government and the meaning of "accountable". Is the intention that Ministers or Departments cease to meet with such entities or is the intention that no arm of the Government or the State should have any engagement? With regard to the former, the motion notes that the Department of Finance has had multiple engagements with private equity funds over the years. The principal rationale for the Department’s routine engagement with such funds is that it allows the Department to obtain market intelligence from firms that have invested in or will invest in the Irish economy in order to understand how they perceive Ireland versus other countries in which they invest. Such information enables the Department to provide me and the Minister with better insights which are cross-checked against other information channels when we are considering policy matters.

It should also be noted that the Department has on many occasions taken the opportunity afforded by such meetings to urge such funds to agree to appear before Oireachtas committees if invited.

If the intention is that no arm of the Government or State should engage with such entities, there are numerous unintended consequences. These investment funds operate in many parts of the economy providing much needed capital investment to sectors as diverse as hotels, retail business and nursing homes. As the Central Bank is independent of Government, we can assume this motion is not telling the Central Bank to cease engaging with credit servicing firms it regulates. However, both credit servicing firms and investment funds are resident in the State with employees. Are Departments or the IDA not to engage with any funds operating in or considering opening up new operations in Ireland? I presume we would still like the Revenue Commissioners to engage with all such entities to collect the relevant payroll taxes and pay related social insurance. Several of the investment funds are moving operations into the State in response to Brexit. Where they purchase offices, I presume the Revenue Commissioners should collect stamp duty. What about public-private partnerships which include investment funds? Should all Departments refuse to meet such firms, even when they are providing much needed capital to the economy to develop much needed infrastructural and other projects? What about the discretion that is available to Ireland as a member state of the EU in transposing EU directives into Irish law? Many directives are highly technical in nature and there is a need to consult with industry to ascertain its views as an input into the decision-making process. That is not to say that industry is a decision-maker but its views are important in ensuring we have the fullest amount of information available to inform the decision-making process. What about venture capital funds which make much needed investments in ambitious, fast-growing companies with the potential to develop into significant businesses? These funds work with management of high potential companies and usually provide expertise and mentoring in addition to actual capital. They are common in high-growth sectors such as healthcare, life sciences, medical devices, ICT and fintech and pose absolutely no threat to consumers. However, the recommendation in the motion is worded so loosely as to capture engagement with these funds.

With regard to being accountable to Parliament, neither the motion nor the report is clear. Will the joint committee be satisfied if such firms appear before it or is there to be a defined standard of accountability against which firms can be measured? What if the committee does not like the answers it receives from a fund or credit servicing firm? Should the committee require information on the performance of the regulated credit servicing firms on adherence to the code of conduct on mortgage arrears, it is already in a position to get this information from the body which regulates credit servicing firms, the Central Bank of Ireland.

The bank appears before the committee regularly and could be asked to comment on these matters. The bank wrote to the committee on 18 September and made it clear that the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 ensures that relevant borrowers maintain the same regulatory protections that they had prior to the sale of a loan book.

For these reasons, the Government is of the view that we need to delete part of the motion and replace it with a call for the funds to appear before the committee when invited. Our amendment proposes that the words, "to cease all engagement with unregulated private investment funds and regulated credit service firms until these entities are accountable to Parliament" should be deleted and should be replaced with "calls on investment funds to engage with the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach as a matter of urgency and to attend the Joint Committee when invited".

As for legislation on the regulation of unregulated entities operating in the mortgage market, Deputy Michael McGrath initiated a Bill to provide for the regulation of loan owners, which the Government has committed to supporting. Amendments were prepared by the Office of the Attorney General in conjunction with departmental officials. The Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018 passed Committee Stage on 12 July. As currently amended, it would require loan owners to be authorised and regulated as credit servicing firms. Departmental officials have been in contact with the Central Bank and with Deputy McGrath following Committee Stage and we hope to progress to Report Stage shortly. We must be careful that any actions we take to further protect borrowers whose loans are sold do not have unintended consequences for the banks, their relationship with the regulator and all our citizens who depend on a functioning banking system in their day-to-day lives.

Therefore, it is not incumbent on the Government to introduce this legislation since it has already been introduced and discussed at the committee chaired by Deputy McGuinness. I am glad that we have had the opportunity to discuss this important topic and we can agree to the motion, subject to the amendment proposed in respect of ceasing all engagement with unregulated funds. Deputy McGuinness is absolutely within his authority to continue with Deputy McGrath's Bill. The Central Bank of Ireland is independent of us and we are independent of it. It is a matter for the committee to progress if the Chairman sees fit, prior to receiving an opinion from the ECB.

I have said here previously that the Minister for Finance, Deputy Donohoe, has not met representatives of any of the private equity funds and neither have I. The banks are in profit and will not be paying taxes because of the deferred tax assets but they pay a levy of €100 million every year and that is a matter for the Government and the Oireachtas to increase or decrease as they see fit. I want to nail one incorrect statement that is made all the time and it is important that this Oireachtas does not perpetuate it. It is said we have not done enough, "we" being both of these Houses. There have been 17 actions, by which I mean legislation and guidelines, starting with the code of conduct for mortgage arrears and moving to the mortgage arrears resolution process, MARP, since 2011. That is one action every six months. We have protected and are protecting the borrowers of this State more than anybody else in any jurisdiction, certainly in Europe, that I know of.

We have the lowest levels of repossessions in Europe. There have been approximately 8,000 repossessions, many of which were voluntary, through the courts or not, over the past decade. That is too many and nobody in this or the other Chamber or any public representative who I know wants to see a repossession in this State but some loans are unsustainable. We have to accept that is the case. Some people will not come out from under those loans. That is why we moved the insolvency legislation in this House from 12 years to one year. That was the right thing to do. There is an opportunity for people in a financial situation that is not sustainable to use that legislation to their benefit in order that they can re-start in business from zero.

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