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

One is dealing with an intermediary, namely, a credit servicing firm as a legacy of the regime that was there all along. It is simply a conduit. It is the messenger and it is passing the information back to the vulture fund and then the loan is one of a long list of loans that goes through its credit committee. There is no real engagement. One never gets to talk to a decision-maker. That is my experience. The same argument can be made for banks and their systems need to continue to be improved, but as I say, in many cases deals are being done in that scenario.

The other point, which we have discussed previously, is that at least the banks will come before these Houses in the form of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, and they will allow themselves to be held to account. They fill up very detailed questionnaires that we, as members of the committee, send to them in advance of their appearance before the committee. They are very detailed questions and, by and large, those questions are answered in the questionnaires. Then they come in and they have maybe a four, five or six-hour engagement with members of the committee, and the Minister of State, Deputy D'Arcy, will be well aware of this from when he was a member of that committee. They will answer those questions to a greater or lesser extent.

We get no such opportunity when it comes to these funds. We have tried time and again to get them in before the committee to talk about how they deal with these loans, their business plan, what type of restructuring options they are offering, and the approach that they adopt, and they simply refuse time and again to come in and have any discussion. If they come in, they will be given a fair hearing and they will be given an opportunity to answer questions and to set out from their perspective their approach to managing these loans. I always get suspicious when businesses such as that are afraid to be held accountable and will not allow themselves to come into a public forum and be questioned by publicly elected representatives. That is not on.

The people whom we represent are those who are making a genuine effort, people who are paying what they can for mortgages, people who are prioritising the retention of their home and who are doing their best to meet their commitments and face up to their responsibilities. The vast majority are. I have not seen any data backing up the suggestion that there are a huge number of so called strategic defaulters. I have no doubt there are some but they are a small minority. The vast majority of people want to keep their homes and they are paying what they can.

I have acknowledged the Government's support for the Fianna Fáil legislation, which the Minister referenced and which means these funds are regulated. That is an important step in the right direction. What we had up to that point was a halfway house, to my mind, whereby the agent, with whom all the borrower's contact was, was regulated but the fund making all of the key decisions on the future of that loan was not regulated by the Central Bank. The fact that they are now regulated is progress. I want that to be active regulation and I want to see the Central Bank going into the offices of these funds carrying out its inspections, doing its thematic work and assessing the compliance by these loan owners themselves directly, not their middlemen or agents, but these funds directly, with the various codes and with the legislation that they are obliged to honour.

On 18 April, representatives from FLAC and Mr. David Hall from the Irish Mortgage Holders Organisation appeared before our committee to discuss Deputy Pearse Doherty's Private Members' Bill, which has been discussed in the House. In the context of the sale of loans to so-called vulture funds and the impact of that on borrowers, they raised some important issues the Minister needs to address. We followed up on a number of the issues with parliamentary questions. One issue raised by both bodies was that, in their view, the code of conduct on mortgage arrears is not a statutory code. The Minister, however, denies that. He has stated it is issued under the Central Bank Acts and that it is, therefore, a statutory code and that the Central Bank has enforcement powers for non-compliance with that code. Mr. Paul Joyce from FLAC, who is highly respected, made the point to the committee that while the code is issued under section 117 of the Central Bank Act 1999, it is neither primary nor secondary legislation and it has neither been passed by the Houses of the Oireachtas nor signed into law by the relevant Minister, who in this case would be the Minister for Finance.

He went on to refer to the decision of the Supreme Court in Irish Life and Permanent plc v. Dunne and Irish Life and Permanent plc v. Dunphy. He described them as seminal cases to test the enforceability of the arrangements entered into by lenders under the terms of the code. He said the Supreme Court stated the only measure in the code of conduct on mortgage arrears that was legally enforceable was the three-month moratorium on the bringing of proceedings against the borrower when the borrower had been exited from the mortgage arrears resolution process. He stated there was nothing else in the code the court could discover that was sufficiently precise and tangible to provide legally enforceable rights for borrowers. I have yet to see a full response to that from the Department of Finance but it should be forthcoming because FLAC has questioned the enforceability of the code of conduct on mortgage arrears in reference to the Supreme Court's judgment. We cannot allow any ambiguity or question mark over the enforceability and applicability of the code of conduct on mortgage arrears.

Another issue raised at the committee and which continues to arise relates to section 39 of the code of conduct on mortgage arrears. Under that section, lenders are required to explore all the options for alternative repayment arrangements offered by that lender and all the usual forbearance arrangements are listed from A to L. Lenders are required to explore all the options for an alternative repayment arrangement offered by that lender but they are not obliged to consider all the options. They can say they offer only A, B and C, or only F, G and H. I have seen many letters received from the funds in which it is stated a conclusion has been reached that the loan is not sustainable and that, therefore, the only solutions offered are voluntary sale, voluntary surrender or court proceedings. They should be required at least to consider all the options set out in the code of conduct on mortgage arrears but that is not the case. It is a deficit that should be addressed.

Other issues raised that need to be dealt with include the fact that thus far, despite all the Central Bank inspections of lenders in respect of the code of conduct on mortgage arrears, not a single sanction has been imposed by the Central Bank, even though it found a litany of issues and of breaches of the code by lenders. In a reply to a parliamentary question I tabled, the Minister stated no firm had been sanctioned for a breach of the code of conduct on mortgage arrears to date. I was suspicious when I heard from organisations such as FLAC that there was a question mark over the enforceability of the code. Despite the Central Bank finding issues with the approach of the lenders to the code during its inspections, not a single sanction has been imposed. That is a significant concern and it should be addressed.

We have heard time and again from the Minister and others that when a loan is sold, all the protections travel with the loan and the borrower is not disadvantaged in any way. They claim that if the borrower has entered into a restructuring arrangement with the seller of the loan, namely, the bank, that arrangement must be honoured by the new loan owner. FLAC made the point, however, that such a requirement is not written anywhere. It is not part of the code of conduct on mortgage arrears or part of any legislation. While it appears to be the case that restructuring arrangements continue to be honoured, that will be tested fully as time passes. Currently, there is no requirement in the code for new loan owners to honour an alternative arrangement. In a reply to a parliamentary question I tabled, the Minister stated: "The Central Bank expects that where a co-operating borrower is complying with the terms of an alternative repayment arrangement (ARA) and where the borrower’s circumstances have not changed, the terms of the ARA will continue to be honoured." The Central Bank expects but it cannot enforce. There is nothing the Central Bank can do if a fund purchases a loan and says it does not like that arrangement and that it will tear it up. That is a concern and it needs to be addressed.

Another important issue which arose at the committee was that representatives had found over time that the file relating to the loan, its origin and its full documentation was not being transferred to the purchaser. We queried the issue with the Minister, who replied, "I am advised by the Central Bank that while there is no specific provision in the Central Bank’s codes which requires that a full file be received by the loan purchaser from the original lender, the General Principles of the Central Bank’s Consumer Protection Code 2012 provide that 'a regulated entity must ensure that in all its dealings with customers and within the context of its authorisation it acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market'". There is nothing written to provide that the full file must be transferred, but I would expect that to be a basic requirement that should be honoured.

I have used my speaking time to convey to the Minister that it is not as simple as saying that if a loan is sold, it will have no impact on the borrower. I have made three or four specific points which show that at a minimum, there is a question mark and ambiguity. The points need to be addressed because by not doing so, the Minister is potentially exposing borrowers to the types of risks my colleagues have highlighted.

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