Dáil debates

Tuesday, 15 May 2012

Topical Issue Debate

Financial Services Regulation

5:00 pm

Photo of Martin FerrisMartin Ferris (Kerry North-West Limerick, Sinn Fein)
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I have raised this issue on foot of the problems people are encountering in the context of so-called sub-prime mortgages. We are all aware of the general difficulties experienced by people whose mortgages are in arrears as a result of unemployment and reductions in income. These difficulties are greatly exacerbated in the case of certain lenders who charge huge interest rates, impose massive penalties on people who are in arrears and resort to legal proceedings to obtain possession of properties even in circumstances where they have been presented with reasonable offers of repayment.

The lenders to whom I refer should not be allowed to continue to lend money. One such lender is a certain Mr. Weisz, who has been already convicted of a breach of section 27 of the Central Bank Act 1971. His offence related to the illegal solicitation of deposits and was a breach not only of the Central Bank Act but also of the terms of the only licence held by the company, which was issued in the UK. This fact alone should warrant an investigation on the part of Revenue. We also have information relating to the fact that numerous deposits were made to the personal bank account of Mr. Weisz and his wife, Fiona, and not to that of the Wise Finance Company.

Concerns in respect of this matter were raised in the House in 1999. The then Minister, Mary Harney, attempted to tighten up the legislation relating to lenders of this kind. Unfortunately, a number of loopholes still remain.

Mr. Weisz signed an affidavit in the High Court on 28 September 2004 in which he stated that the plaintiff company was a mortgage lender within the meaning of the Consumer Credit Act 1995, when the only licence the company ever held was one issued by the Office of Fair Trading in England. This licence allowed for the granting of credit by non-deposit taking finance houses and other specialist consumer credit guarantors. Said licence lapsed on 25 May 2004, over four months earlier. I am sure Mr. Weisz was well aware of that fact at the time.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I apologise for interrupting but I would like the conversations taking place in the lobbies to cease. I want to be able to hear what Deputy Martin Ferris has to say and I am sure the Minister of State does as well. Perhaps the Deputies who are talking to one another in the lobbies might continue their conversations outside the Chamber.

Photo of Martin FerrisMartin Ferris (Kerry North-West Limerick, Sinn Fein)
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Given that the company to which I refer is currently in the process of attempting to repossess properties, particularly a number of farms throughout the country, I request that the Department of Finance and the Central Bank investigate the legal position and status of this company as a matter of urgency. I hope the Minister of State will relay my request to the relevant entities.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
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I have taken on board everything the Deputy stated and I promise to forward the details to the relevant authorities. Approximately two years ago, I was gob-smacked when discovered the number of people and entities that were in a position to give out mortgages and the number of individuals who simply did not know what type of mortgage they had taken out.

The Central Bank of Ireland has overall responsibility for authorising, regulating and supervising regulated financial service providers. In terms of the provision of mortgages, this includes the regulation of credit institutions - such as banks - retail credit firms and home reversions schemes. A retail credit firm is one which provides credit in the form of cash loans directly to individuals under the Consumer Credit Act 1995. A home reversion scheme is where a consumer agrees to sell a share of his or her home in return for a set price. The Central Bank provides a register of regulated financial service providers on its website www.centralbank.ie. In addition to the requirement to be authorised, mortgage providers are subject to a range of supervision and enforcement provisions set out in statute, including the Central Bank Acts 1942 to 2011. There are a number of other requirements to which mortgage providers are subject, including the code of conduct on mortgage arrears; the consumer protection code; and the Central Bank fitness and probity regime.

A number of measures have been already put in place to protect mortgage holders who are experiencing difficulty with their mortgage repayments. These include the Central Bank code of conduct on mortgage arrears which, among other things, requires each lender to put in place a mortgage arrears resolution process. It also provides that a lender must make every reasonable effort to agree an alternative payment arrangement with a co-operating borrower who is experiencing mortgage difficulties and places a moratorium on legal action by banks against co-operating borrowers.

In its report published last autumn, the interdepartmental group on mortgage arrears concluded that the mortgage problem is complex and that in some cases a response other than a forbearance approach will be required. In particular, it stated that a range of practical solutions tailored to individual circumstances will need to be developed and deployed for people in most need. The Government has accepted the recommendations in the Keane report which relate to this area and has put in place a special committee to ensure a high priority is assigned to their implementation across relevant Departments and agencies. Under the consumer protection code, a regulated entity must ensure that in all its dealings with customers and in the context of its authorisation it acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market; acts with due skill, care and diligence in the best interests of its customers; does not recklessly, negligently or deliberately mislead a customer as to the real or perceived advantages or disadvantages of any product or service; does not exert undue pressure or influence on a customer; ensures any outsourced activity complies with the requirements of the code which also sets out a range of more detailed provisions relating to mortgages.

The Central Bank Reform Act 2010 gave effect to the new fitness and probity regime being introduced on a phased basis by the Central Bank. Under the new regime, the Central Bank may refuse to approve a proposed appointment to a pre-approval controlled function where it is of the opinion that the proposed appointee is not of such fitness and probity as are appropriate to perform the relevant function. The Central Bank, as part of its role in the ongoing supervision of the financial services sector, may from time to time consider there is reason to suspect the fitness and probity of a person performing a controlled function and may commence an investigation into that person. Under the fitness and probity regime, a person must be able to demonstrate, among other things, that his or her ability to perform the relevant function is not adversely affected to a material degree where he or she has, in any jurisdiction, been convicted of an offence either of money laundering or terrorist financing, or has had a finding, judgment or order made against him or her involving fraud, misrepresentation, dishonesty or breach of trust.

Following on from the Central Bank Reform Act 2010, the Central Bank (Supervision and Enforcement) Bill 2011 was published in July 2011. That Bill draws on the lessons of the recent past in Ireland and abroad and further enhances and strengthens the Central Bank's regulatory powers to impose and supervise compliance with regulatory requirements and undertake timely prudential interventions. The Bill contains a range of provisions that will enhance the protection of consumers. Further provisions have been proposed for Committee Stage which are the subject of a public consultation process.

The Government has brought forward several reforms to improve the regulatory system. The provision of mortgages and the protection of consumers remain a core focus of the Government's attention. The Central Bank continues to work with the Department of Finance and other stakeholders to deal with difficulties that arise on the ground and bring forward meaningful proposals to ensure mortgage holders are dealt with in a fair, honest and professional manner.

Photo of Martin FerrisMartin Ferris (Kerry North-West Limerick, Sinn Fein)
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I thank the Minister of State for his reply. Obviously, he does not have the details I have regarding the Wise Mortgage Company and Mr. Weisz's finance company. I have been aware of his operation for several years when he attempted to repossess a farm in my constituency. Vulnerable people borrowed money at a rate of 9%, but once they had missed one repayment, it doubled to 18%. It would tend to accumulate over time, making it impossible for the individuals concerned, small farmers in many cases, to pay it back.

When I first named Mr. Weisz in the House, I was assured the loopholes in the legislation would be closed for this sub-prime mortgage lender. In two weeks time, however, he has a case before the Supreme Court. Again, it involves an individual who borrowed a modest amount of money that has accumulated with penalties to an exorbitant sum which the person concerned is unable to pay back. Unless the Supreme Court states the lender, Mr. Weisz's finance company, was acting illegally, the farm of the individual in question will be repossessed. I am aware of two other farmers whose farms are being repossessed by Mr. Weisz.

Because of a loophole people like Mr. Weisz are not regulated by the Central Bank. Until such time as this is done, vultures like him will continue to exploit the vulnerability of individuals who find themselves in desperate situations and who are doing their utmost to maintain whatever property they have.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
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I will bring this matter, particularly the specific lender mentioned, to the attention of the Minister for Finance. In my constituency we have had similar cases of people who did not look at where they were getting their mortgage from and now find themselves in serious trouble like that described by the Deputy.