Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Ceann Comhairle for selecting this issue for debate and thank the Minister of State, Deputy Hayes, for attending the House to respond to it.

I was prompted to raise this issue as a result of a desperately sad case in which I became involved last week - which has received some coverage in The Irish Examiner - having visited a family who have been touched by the unbelievable tragedy of losing a family member through suicide. The financial circumstances of the family at the time of this sad event are likely to have contributed to what happened. At the very least, they created an environment where pressure became acute and unbearable for someone. I have looked at the chain of events leading up to this sad event and at the financial transactions which led to the creation of that environment. There is no doubt but that mistakes were made by many parties along the way, including, tragically, the family involved.

I want to focus on a particular part of that chain, namely, the general role played by mortgage brokers and financial intermediaries. Much of what I learned in terms of regulation, if any exists, in this sector caused me concern. The family concerned received a mortgage, the application form for which contained no evidence of a bank account. Also, the person granted the mortgage did not have life assurance, was not able to produce evidence of income and had already built up mortgage arrears from a previous mortgage. Despite this, a mortgage many times the amount of the original mortgage was granted.

A particular link in this transaction is the role of the mortgage broker-intermediary who received information from the family and used that information to apply for a mortgage which the family had no ability to repay. As I stated earlier, responsibility rests everywhere. However, money was loaned to people who had no ability to repay it. The money should never have been given to them.

From my review of this sector since then, a number of things have become clear. We need to move quickly from a system of registration to regulation. That is essential. Whatever regulation exists needs to be strengthened and a number of new features need to be added. First, we need to have at the core of this sector protection of the borrower, in particular a borrower who could become vulnerable in the future. Second, we must have in place a system of cross-referencing. As I understand it, a person in this sector against whom there is a ruling from the financial ombudsman can continue to practise, including under a different name or different company. I would appreciate clarification on that point from the Minister.

Money is being transferred from clients to brokers to banks. There must be in place a system that ensures there is a verifiable paper trail of money transferred and that this is done by people who should be doing so. My final point relates to insurance, in particular run-off insurance. For example, where a solicitor who is no longer in operation is sued because of something he or she did when in operation and the person taking the action is successful he or she will be paid from the solicitor's insurance. As I understand it, no such policy exists in respect of mortgage brokers who are now becoming debt intermediaries.

The Central Bank is currently investigating the case in which I am involved. I believe these matters need to be urgently brought to public attention. I would appreciate if the Minister of State could clarify in his response what regulation currently exists in this sector and if the general thrust of what I have outlined in terms of the need for a strengthened regime can be acted upon. It needs to be.

Brian Hayes (Dublin South West, Fine Gael)
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I apologise for my delay in coming to the House. I thank Deputy Donohoe for raising this important case, the particulars of which I am aware. It has a much wider application because of the number of people who used this option to obtain financing and mortgage deals when there was a flood of opportunities to do so in the past.

Mortgage intermediaries that intend to provide services to consumers must be authorised by the Central Bank in accordance with section 116 of the Consumer Credit Act 1995. A mortgage intermediary is defined as a person, other than a mortgage lender or a credit institution, who, in return for commission or some other form of consideration, arranges or offers to arrange for a mortgage lender to provide a consumer with a housing loan, or introduces a consumer to an intermediary who arranges or offers to arrange for a mortgage lender to provide the consumer with such a loan. It is an offence for a person to engage in being a mortgage intermediary unless he or she is the holder of an authorisation granted for that purpose by the Central Bank and holds a letter of appointment in writing from each undertaking for which he or she is an intermediary.

The Central Bank is responsible for the authorisation and supervision of over 2,000 mortgage intermediaries. I have no indication from the Central Bank of a lacuna in the law in this regard.

The points raised by Deputy Donohoe about a particular case have a wide application. It would be important, therefore, that his statement in the House would be transmitted immediately to the Central Bank. He has informed the House that a complaint is now before the Central Bank concerning the case. It is not the Minister for Finance's position to comment on this complaint and it is better to await the deliberations of the Central Bank.

Deputy Donohoe has also raised the fundamental issue of the supervision of the granting of authorisation to mortgage intermediaries. Is there a proper supervision regime in place? Is the complaints system adequate to allow for the removal of a negligent mortgage intermediary? If the Central Bank believes the law needs to be changed to provide additional consumer protection, as outlined by Deputy Donohoe, the Government would be open to suggestions. However, the authority in the first instance rests with the Central Bank to determine if such a change is necessary and what further policy changes may need to be considered by the Government. It is important the Central Bank makes its determination on the particular case raised by the Deputy known soon as it has wider implications across financial services supervision.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Minister of State for his detailed response. I am not suggesting the entire industry is performing in the way I described in the case that came to my attention. However, other individuals in this sector have also come across such difficulties but, thankfully, have not resulted in the tragedy I encountered.

I suspect there is an effective process in place for registration but not for regulation. A change is occurring where parts of the sector in question are morphing into debt intermediaries, a business which takes on people's debt, restructures it and then charges them for doing so. The point I am making would then have greater applicability because one would be dealing with people who would be far more vulnerable than people who are applying to take on a mortgage or debt in the first place.

I will return to this matter in the future. I appreciate the Minister of State's reply.

Brian Hayes (Dublin South West, Fine Gael)
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I agree with Deputy Donohoe that the issue is one of regulation and supervision. There is little point in handing out authorisations unless the actual work is properly supervised and regulated. The Government is minded across a pan-European level to see how we can strengthen the law in this regard. This is also a key issue of the Polish EU Presidency and one which could get further direction from the European Union.

People who believe the advice they received from a mortgage intermediary is defective, or even bordering on criminal, can take the matter up with the Money Advice and Budgeting Service. People must not feel they have nowhere to go, as there is much advice on such matters.

The important issues raised by Deputy Donohoe need to be teased out further with the Central Bank. Much more work needs to be done in the area of financial services regulation and supervision.