Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 1:

In page 4, line 8, to delete “determining” and substitute “determination of”.

I will start with some general remarks on the amendments that I hope will accelerate the process. I welcome the opportunity to contribute on Report Stage of this Fianna Fáil Private Members' Bill. The Bill's purpose is to ensure that loan owners who hold legal title to credit, determine the overall strategy for the management and administration of a portfolio of loan agreements or maintain control over key decisions relating to such a portfolio are authorised by the Central Bank and subject to its regulation.

A small number of amendments are to be dealt with, and I will outline them in advance of their individual consideration. Two are concerned with wording changes that have been suggested by the drafter to make the Bill read better. I am happy to propose these. Three are concerned with wording changes to reflect the securitisation regulation. The Central Bank has been consulted to ensure that they do not give rise to any unintended consequence. As far as we can see, the amendments will work to allow completely passive securitisation vehicles to continue operating without authorisation, since all activities will be undertaken by regulated credit servicing firms. It was always the intention to exclude passive securitisation. These amendments will not allow firms that undertake any of the newly regulated activities to structure themselves in such a way as to avoid regulation. If they are undertaking any of the newly regulated activities, they will need authorisation. Generally speaking, the activities will continue to be undertaken by the original lender.

The other amendments are aimed at addressing a concern of the Central Bank that was notified to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach. The issue is that an owner transitionally authorised by making an application to the Central Bank within three months of the commencement of the legislation would be answerable to the Central Bank for the activities of its credit servicing firm. The credit servicing firm in this case would no longer need to be regulated in its own right. Without the amendments proposed, this may be prior to the transitionally authorised owner having a full presence in Ireland that can be pursued by the Central Bank for any breach. The amendments will mean that the transitional authorisation only applies to the newly regulated activities and only for as long as the other activities are undertaken by a regulated credit servicing firm.

Amendments Nos. 1 and 2 are drafting amendments aimed at ensuring consistency in the structure of the list of activities of credit servicing firms.

Before allowing other Members to speak on these amendments, it is important that I put the Bill in context. From our party's point of view, there has been an obvious gap in legislation for a number of years in that we have witnessed banks increasingly selling on loan portfolios to so-called vulture funds that have been unregulated in the Irish market up until now. The credit servicing firm, which is the intermediary or middle man, is fully regulated by the Central Bank. However, it is essentially acting as a conduit, passing messages backwards and forwards, with all of the important decisions concerning the future of the mortgage, changing the interest rate, entering into a restructuring arrangement and taking enforcement proceedings made by the unregulated loan owner or vulture fund. The same applies in respect of a growing number of SME or business loans, and farmers throughout the country are finding that their loans, taken out in good faith from retail banks, are being sold on to these vulture funds.

It is important that the Central Bank, as the regulator, has the statutory power to have direct contact with these vulture funds, inspect them, turn up at their offices, investigate them if necessary and take enforcement action against them if so required. It has been evident to us for some time that these funds are making all of the important decisions. They are sitting at the top of the pyramid, as such. People find it incredibly difficult to deal with them because people are only allowed to deal with the intermediary, that being, the credit servicing agent. They are not allowed to look the person in the vulture fund in the eye. They are not allowed to sit down face to face and have direct engagement to see if there is a way of restructuring the loan, thereby preventing it from going down the adversarial legal enforcement route. Bringing these funds fully within the ambit of the regulatory environment will facilitate direct contact between them and borrowers, which is critical.

I look forward to discussing the amendments and, I hope, dealing with them in an efficient way. We look forward to agreement from across the House on the amendments and the provisions of the Bill.

See this speech in context