Michael McGrath (Cork South Central, Fianna Fail)
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I move:

That Dáil Éireann:notes that:

— the standard variable rate for residential mortgages charged by State-owned Permanent TSB and AIB/EBS, as well as other banks operating in the market, is up to 2% higher than comparable mortgage rates in other eurozone countries;

— for a typical €200,000 mortgage a standard variable rate customer will pay approximately €6,000 a year more in interest than a borrower with a tracker mortgage;

— banks which operate both in the Republic of Ireland and Northern Ireland are on average charging customers in the Republic 2% more for a standard variable rate mortgage;

— normal competitive forces which would allow customers with high mortgage costs to switch to an alternative provider are not currently present in the marketplace, effectively trapping customers with high standard rate mortgages;

— the Economic Management Council has not met with the banks since June 2012;

— the European Central Bank base interest rate is at a historic low of 0.05%, and the cost of funds for the banks has fallen considerably in recent times; and

— recent mortgage interest rate reductions announced by certain banks have targeted new customers only and were not extended to their current standard variable rate customers; and

calls for:

— the Economic Management Council to meet with representatives of the banks at the earliest opportunity and to impress upon them the unfairness of the current pricing regime in respect of standard variable rate mortgages;

— greater product innovation on the part of financial institutions in the mortgage market;

— an investigation to be undertaken into the level of competition in the Irish banking sector;

— legislation to ensure that all residential home loans in the State are subject to the protection of the Code of Conduct on Mortgage Arrears and have access to the Office of the Financial Services Ombudsman;

— residential mortgage holders whose loans are being sold to third parties to be protected from profiteering;

— the Minister for Finance to bring forward a white paper on competition in the banking sector; and

— the Central Bank of Ireland, in its consumer protection role, to engage directly with the banks on the issue of high standard variable interest rates and on the need for fair treatment of existing standard variable rate customers as well as new mortgage customers.

Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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Is that agreed? Agreed.

Michael McGrath (Cork South Central, Fianna Fail)
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I am pleased to propose this motion, which deals with the issue of standard variable mortgage interest rates, on behalf of my colleagues in Fianna Fáil. My party's view is that excessive variable mortgage rates are the primary financial challenge for thousands of families throughout the country. This is an issue of money in people's pockets. What is happening at the moment can only be described as a rip-off. The bottom line is that thousands of families are being exploited by virtue of the standard variable mortgage rates that their banks are charging them.

Finian McGrath (Dublin North Central, Independent)
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Hear, hear.

Michael McGrath (Cork South Central, Fianna Fail)
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It would appear that they are being exploited with the consent and blessing of the Government and the Central Bank. That is simply not acceptable. The purpose of the motion I have proposed is to put the spotlight on this issue with a view to putting pressure on the Government, the Central Bank and the banks themselves to bring an element of fairness to the pricing regime in respect of standard variable mortgages.

In November of last year, four of the banks appeared before the Joint Committee on Finance, Public Expenditure and Reform. We know from information provided to the committee that the circumstances we are discussing affect tens of thousands of families. The rates being charged cannot be justified on the basis of the evidence given by the banks. To put this issue in context, Permanent TSB told the committee that it has 79,100 variable rate customers with an average balance of €88,500. In addition, 60% of AIB residential mortgage customers, or approximately 130,000 customers, are on variable rates. In the case of Bank of Ireland, 33% of customers are in this category, representing another 70,000 cases. While Ulster Bank and Danske Bank have not provided data, we can safely assume there are more than 300,000 variable-rate mortgage customers in Ireland. That shows the scale of this massive issue for households across the country. We believe it firmly needs to be highlighted in the House. If the banks were to be much more transparent and to provide more relevant and timely data, it would be a good starting point. The Central Bank should insist on this and make the information available in an accessible format. It is not acceptable that we do not even have good data about the number of variable rate customers.

The families stuck on variable rate mortgages have benefited least, if indeed at all, from the current low interest rate environment in Europe. In fact, they have watched in absolute frustration as their mortgage rates have steadily risen as rates generally have fallen. The situation in which they are trapped is costing them hundreds of euro a year, but it receives little or no attention from the Government. At the moment, the standard variable rate that a customer with 20 years remaining on a €200,000 mortgage will pay as an existing customer is approximately 4.5%, depending on the bank the mortgage is with. Rates as low as 3.69% are available for new customers with a 20% deposit and the average tracker customer will pay approximately 1.15%. The existing customer is therefore paying €992 a year more than someone who can take up the offers available to new mortgage customers and €3,874 a year more than a family with a tracker rate. This shows the scale of the difference that families stuck on high standard variable mortgage rates are having to endure. In many instances, the annual impact is more than twice or three times the combined impact of the property tax and the water charges. These are huge sums of money to any family and rightly demand our attention in this House.

I anticipate that the response of the banks to this motion will be to state that standard mortgage rates reflect their cost of funds. It is worth noting what they told the Joint Committee on Finance, Public Expenditure and Reform last November in the documents they supplied in advance of the meeting. Permanent TSB said that the blended cost of funds is 1.74%. Bank of Ireland said that "for the 6 month to 30th June 2014 our cost of funds was 1.15%." AIB said that "for the 6 months to 30 June 2014 AlB's cost of funds was 1.64%." Ulster Bank said it was "not required to publish its accounting cost of funds and for reasons of commercial sensitivity [was] not in a position to provide this information." Therefore, rates of up to 4.5% are well in excess of the banks' cost of funds, according to their own data. The banks' arguments are bogus.

People should consider where the banks source their funds from. They can source funds from the ECB. The ECB rate, 0.05%, is at its lowest level ever. They can source their funds from the wholesale interbank markets. Again, record low rates of interest are being charged on the banks there. They can source their funds from the deposits and savings that the ordinary people of Ireland have lodged with their banks. Those people will know that the banks are paying little or nothing by way of interest to people who are saving in Ireland at this time. The cost of funds to the banks is exceptionally low and is in fact coming down. For that reason, there is no justification whatsoever for the massive margins that are being charged to people on standard variable mortgage rates.

According to a report published by the Central Bank in 2012, "it appears that some lenders are charging higher variables rates to compensate for the losses they are making on their tracker loans". The Central Bank suggested that the "risk with such a strategy is that it may be counterproductive and continue to exert upward pressure on arrears." In other words, the actions of the banks are putting a huge financial burden on families and may also prove counterproductive for the banks in the longer term by driving up arrears levels. In his address to the Joint Committee on Finance, Public Expenditure and Reform last year, the Governor of the Central Bank, Professor Honohan, accepted:

A widening of mortgage interest rate spreads over policy rates also occurred in the United Kingdom and in many euro area countries after the crisis but spreads have begun to narrow in the UK and elsewhere. Until recently, bank competition has been too weak in Ireland to result in any substantial inroads on rates.

Mattie McGrath (Tipperary South, Independent)
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Hear, hear

Michael McGrath (Cork South Central, Fianna Fail)
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Action is needed to stop this immediately. The banks' case that they have no choice other than to charge these rates simply does not stack up. I also want to address the notion that bank losses on tracker mortgages are somehow a reason to rip off standard variable rate customers. I recognise that the presence of tracker mortgages on banks' loan books represents a significant drain on their profitability. Permanent TSB has described its losses on tracker mortgages as "eye-watering". The idea that the banks can justify ripping off one group of customers to make up for bad decisions they made elsewhere is outrageous and cannot be tolerated. Those who are paying standard variable rates in this country comprise a forgotten group of mortgage holders. It is about time their plight was properly dealt with, examined and debated in this House.

Mattie McGrath (Tipperary South, Independent)
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Hear, hear.

Michael McGrath (Cork South Central, Fianna Fail)
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The motion is three-pronged. We want the Government to engage directly with the banks, particularly the State-owned banks, to emphasise to them the seriousness of the situation. It is simply not acceptable that the much-vaunted Economic Management Council has not met directly with the banks since June 2012 to discuss this issue, or other serious economic issues such as mortgage arrears. It is really quite incredible. In the past, the Government claimed success in persuading the banks to reduce their variable rates. The Minister, Deputy Noonan, made much of persuading AIB to reduce its standard variable rate by 0.25% in November 2011 following the ECB rate cut. However, little or nothing has been done since then. The Government's early enthusiasm for taking on the banks on issues like this has sadly waned away at the expense of the customers of the banks. If the Minister for Finance was persuasive in 2011, he can try being persuasive again. He should immediately call the banks before the Economic Management Council, or use some other appropriate mechanism, to make clear to them that the current situation cannot be allowed to continue. The amendment that the Government will move later in this debate notes that "the Statement of Government Priorities 2014 to 2016 recognised that promoting and encouraging competition and new entrants in the banking sector was required to put downward pressure on interest rates for variable rate mortgage customers, both new and existing". This is little more than wishful thinking.

What we need is action now to deal with the situation. The Government also needs to play an active role in defining what a competitive banking landscape would look like by publishing a White Paper on the subject. Seven years on from the onset of the crisis, our banks may have stabilised but we are a long way from a normal banking system.

The second aspect of our motion calls on the Central Bank to step up to the plate to take a much more hands-on role in consumer protection. Last year, the Central Bank Governor implicitly accepted mortgage rates for existing variable rate customers were going in the wrong direction in the context of record low European Central Bank, ECB, rates when he stated: "It is reasonable to ask whether, having under-priced lending so badly in the early years of the millennium, they could end up over-pricing it now."That is exactly what has been allowed to happen. We must all accept the Central Bank does a good job in its macroprudential role of protecting the stability of the banking sector. A peer review of the Central Bank published this week indicated the bank needed to do more to protect the interests of consumers. Action in respect of existing variable rate customers would be a good point from which to start.

The third key issue is that the banks must consider the long-term damage they are doing to their own brand. Mortgage interest rate reductions by Permanent TSB and Bank of Ireland for new borrowers announced in January are deeply unfair, as they will do absolutely nothing to address the continuing unfair treatment of their existing variable rate customers. A new pattern is emerging of discrimination against existing standard variable rate customers. The banks got much positive PR when they announced a rate cut. When one looked at it in detail, however, the rate cuts were for new customers but not existing customers who are the among the most hard-pressed. The fact that reductions will only be enjoyed by new customers further highlights the unfair way in which existing customers are treated by the main banks. When AIB reduced its variable rate by 0.25%, it did so for new and existing borrowers. The decision by Bank of Ireland and Permanent TSB to restrict the lower rates to new customers means the benefit felt is actually minimal. In essence, this can be seen as little more than a panicked reaction by these providers to the negative publicity associated with the continuing excessive rates they charge to their existing customers. Bank of Ireland and Permanent TSB should follow the lead of AIB and ensure fair treatment for all customers.

The switcher market is largely a mirage. In the first six months of last year, fewer than 200 switches were completed, as was confirmed in responses given to the Oireachtas Committee on Finance, Public Expenditure and Reform last November. This underlines the weak competitive nature of the mortgage market. Why is it the case that in the rest of the eurozone the average cost of a new mortgage for home purchase is 2.3% versus an average in Ireland of 4%? The banks here are benefiting like their counterparts in Europe from the low ECB base rate and the subsequent low level of interest paid to depositors. However, the banks in Ireland have not been willing to pass on the rate reductions to their customers. This is simply not acceptable.

This cohort of mortgage customers is being exploited and ripped off under the watch of the Government and the Central Bank. We believe the Government needs to step up to the mark. I accept the Government does not set interest rates but it is entitled to have a view on this issue. Again, however, it is afraid to express a view on this issue for the past four years. It, along with the Central Bank, needs to fulfil its role as an advocate for borrowers rather than merely standing over the banks’ best interests.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I compliment my colleague, Deputy Michael McGrath, on bringing this motion forward because high standard variable mortgage interest rates are an important issue that face hundreds of thousands throughout the country. Those with such mortgages feel very aggrieved at the hands-off approach the Government has taken on this issue. We bring forward this motion on foot of our previous Private Members’ motion which highlighted the lack of action on the Government’s part in dealing with mortgage arrears. High standard variable interest rates feed into the issue of mortgage arrears. When one has families here paying a 2% higher interest rate than their European counterparts, this equates to an additional €6,000 per annum or €500 per month in mortgage repayments. This is a serious amount of money for those having difficulties making mortgage repayments.

I recently dealt with a constituency case of a professional lady with a standard variable rate mortgage who received a stay of four months from the courts to tackle her mortgage arrears. Her marriage had broken down and she is trying to hold on to her house. The largest issue for her was the reduction in her monthly take-home pay of €500 over recent years. Her repayments would be made much easier if the banks lived up to their responsibilities and were more reasonable by passing on the benefits of the 3.95% reduction in interest rates that have occurred since June 2007. For example, Permanent TSB, a State-owned bank, has only reduced its standard variable rate by 0.94% in the same period. That bank’s margin over the ECB rate has gone from 1.44% in June 2007 to 4.45% now. It is not good enough that the Government and the Central Bank take a hands-off approach to this. It has a role in the State-owned banks to ensure that reduction is passed on to hard-pressed families. Those families trying their best to meet their monthly mortgage repayments are being screwed. A mortgage of €200,000 is not really large when one considers house prices in the past decade. As the Minister of State knows from his constituency, €200,000 would not have bought a house at all in Greystones or parts of Bray. People on such a mortgage are paying €6,000 more than what they should be paying because of the standard variable rate policy here, however.

We need the Government to bring the banks’ senior executives before its four-man economic committee to ask them why they believe it is okay to compensate for their loss-making tracker mortgages by screwing people on a variable rate. This needs to be addressed. It was very disappointing when the Governor of the Central Bank stated last year: "It is reasonable to ask whether, having under-priced lending so badly in the early years of the millennium, they could end up over-pricing it now." It is not good enough for him to be an observer on the sideline, passing commentary.

He is the Governor of the Central Bank. He should be instructing the financial institutions of this State to pass the interest rate reduction on to the hard-pressed families who need a lifeline. They have endured unbelievable cuts and reductions in their living standards over the past number of years. Here is an opportunity to give those families a lifeline and an extra €500 per month that will not cost the State anything. We talk about our local economies and our retailers and businesses on the main streets of Mullingar, Longford or Athlone. Imagine the difference to the local economy - the local shops and restaurants - if people in these areas got this cut and had hundreds of euro to spend on whatever they chose.

I plead with the Government to use its offices. It is the Government of the land and it is the one with the say. It has the influence. It should haul the banks before the Economic Management Council and ensure that they live up to their obligations. They benefited from this State, which stepped in and looked after them when they were in their hour of need. They should not now be screwing ordinary, decent, hard-working people. I plead with the Government to ensure the interest rate for variable rate mortgages is reduced without delay.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I thank Deputy Michael McGrath for bringing forward this motion. The issue of mortgages and mortgage arrears is one that Fianna Fáil has raised consistently over the past couple of years. We are now raising the issue of people on the standard variable rate. I must declare my own interest. I am on a standard variable mortgage from Permanent TSB and I feel the pain but I do not think too many people will be interested in the pain suffered by Deputies. Be that as it may, I wanted to put that on the record because many of us may have an interest and in case people think I was just making a case for myself.

I want to look at the motion we have put down and go through some key aspects of it and the response by the Government in its amendment. The motion states that the standard variable rate for residential mortgages charged by State-owned Permanent TSB and AIB-EBS, as well as other banks operating in the market, is up to 2% higher than comparable mortgage rates in other eurozone countries. It has already been outlined by Deputy Troy that a standard variable rate customer with a typical €200,000 mortgage will pay approximately €6,000 a year more in interest than a borrower with a tracker mortgage. This is €500 per month and over €100 per week. That is the difference between surviving and being able to have a life. Banks operating in the Republic of Ireland and Northern Ireland are on average charging customers in the Republic 2% more for a standard variable rate mortgage. These are the same banks with the same access to the same money at European level but they are charging 2% more in the Republic than they are in Northern Ireland. I have already mentioned that the banks here charge more than the average mortgage rate for new mortgages across the eurozone.

Ireland is a small country with only 4.5 million people and one of the difficulties we have relative to other larger countries as a result of the small market here is that normal competitive forces that would allow customers with high mortgage costs to switch to an alternative provider essentially do not operate here. There is no great appetite among the financial institutions to facilitate people who want to switch their mortgages. They will say they have schemes and mechanisms in place, are willing to do it and are in the market for it but when one looks at the number of people who actually succeed in doing it, one can see it is very low. This is because of the lack of competition due to the size of the Irish market. The European Central Bank has a base rate of less than 0.5%. A person would almost have to pay to leave their money with them the way interest rates are going yet we see the excessive rates of 4.5% charged by the Irish financial institutions. We have called on the Economic Management Council to impress on the banks the unfairness of the current pricing regime for standard variable rate mortgages.

In addition, we have said that residential mortgage holders whose mortgages are sold to third parties need to be protected from profiteering. The Minister for Finance deals with that in an unsatisfactory manner in the wording in the amendment substituted for the wording in our motion. We also call on the Central Bank in its consumer protection code to engage directly with the banks on the issue of high standard variable interest rates and the need for fair treatment of existing customers.

In its response, the Government says that the regulation of interest rates remains a policy area under active review and that this has been the subject of previous correspondence between the Department of Finance and the Central Bank. I consider that to be a very important issue because the Government is saying that it is a matter of policy that is currently under review and that there has been correspondence between it and the Central Bank. I would like to see that correspondence to see what the Department is saying to the Central Bank on this issue. The Central Bank has power of persuasion in respect of the banks while the Department has power of persuasion when it comes to dealing with this issue. The Government acknowledges that it is a policy area under its remit. I know the Government cannot get in and micro-manage the banks. Perhaps it should but we will come to that some other day because it is not in the wording of the motion and we are not suggesting that this should happen. The Government is acknowledging that it is a policy area. I do not think it is doing anything about it. How do you call a policy a policy when the Economic Management Council has not met the banks collectively and individually for a number of years? It might be a policy on a shelf or in a book or laptop somewhere but it is not the policy that is being implemented in practice.

The amendment to this motion says that the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 will ensure that all mortgage holders in the State will have the protection of the code of conduct on mortgage arrears and have access to the Office of the Financial Services Ombudsman. It is still a Bill: it has not even been enacted. Does the Government want to wait for ten years after the commencement of the difficulties in the banks, which is seven or eight years ago, before it actually does something about it? It has published a Bill. When will it be enacted and commence? I think the Government is waiting for the problem to pass and thinks that if it procrastinates long enough, the problem will have eased and there might be no need to do that. I spoke on Second Stage of that Bill, which contains serious flaws because it will only be a code of conduct and will apply to the service providers - the people who are managing those mortgages. As we all know, a vulture fund, be it in the US, China, Japan or Canada, will be the owner of the mortgage. The service provider - the company that actually deals with the customer - will be subject to the code of conduct on mortgage arrears and subject to the Office of the Financial Services Ombudsman but the person with the financial and monetary interest in and ownership of the mortgage will not be subject to it, particularly if they are not resident in the State. This is a deliberate loophole on the part of the Government to allow some Irish banks to offload some of their mortgage book to third parties outside the State so there is the charade that the local service provider will be regulated but in fact, it will not really be regulated because the owner of the mortgage will not be covered by these regulations.

We are in the complicated situation whereby some of these companies will have a monetary interest in the mortgage but no legal interest. This is a new concept that is creeping in. Some of these financial institutions have monetary control over the particular loan but do not have legal control. It is a very delicate division that has not been the case heretofore and the financial institutions are expert at working at this.

These high standard variable rates feed into the arrears issue. Some people are seriously in arrears but the first thing other people do every month is pay the mortgage no matter what. Parents want to keep a roof over their families' heads but then have no money to live on. This is an example of the banks in a roundabout way using their veto in respect of the insolvency legislation to exercise unfair muscle in respect of their mortgage account holders by having such a profiteering level of interest on these mortgages.

I support the principle of bankruptcy legislation to provide for an exit from bankruptcy after 12 months, an issue that will be raised in the House by several people in the not too distant future. We need to take a slightly more aggressive approach with the banks now that they are returning to profit. The banks know that the current three-year period in respect of an exit from bankruptcy is off-putting for people and so they continue to exercise their veto. The introduction of bankruptcy legislation would bring the banks to heel because they would know that if they were not fair and reasonable in their dealings with the person in serious arrears that person would have the option of applying to the courts for bankruptcy, leaving them free from their debts in 12 months.

The Government does have influence over the Central Bank. I recall the Governor of the Central Bank saying at the finance committee some time ago that he was not in favour of the introduction of percentage targets in respect of mortgage restructuring by the banks. However, following pressure from the Government and the committee, despite his publicly declared intentions at that time, he is now working to targets. It is important these targets are carefully monitored on behalf of the people.

At a time when banks can borrow at less than 0.5%, it is grossly unfair and obscene that the standard variable rate for existing customers of AIB is 4.15%. The variable interest rate charged by Bank of Ireland is 4.5%; by Permanent TSB is 4.5%; by KBC is 4.5% and by Danske Bank is 5%. This is utterly unfair. It is an abuse of power and position. The Government must use the power of persuasion in this regard. In the past, there was a lack of strong regulation of the banks. We are lapsing into that situation again in that the regulator, because the banks are returning to profit, believes everything is fine again. Everything is not fine. The public interest must also be looked after.

Éamon Ó Cuív (Galway West, Fianna Fail)
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Tá áthas orm go bhfuil deis agam cúpla focal a rá faoin ábhar seo mar is ábhar an-tábhachtach é agus ar ndóigh goileann sé ar go leor gnáthdhaoine i measc an phobail.

A person who happened to be of the wrong age and needed a house during the last decade when house prices were inflated had no choice but to pay whatever was being asked in order to get a house for his or her family. The reality is that this group of people are now left with serious financial problems. For the person lucky enough to secure a tracker mortgage, the interest rate has reduced dramatically. Those people who have kept their jobs and are on tracker mortgages are probably paying less now than they might have expected to be paying had the economy remained strong. Amazingly, the Government has allowed a situation whereby the low cost of tracker mortgages is being put by the banks on the backs of variable interest rate mortgagees. For those taking out mortgages at that time, it was a gamble as to whether tracker mortgages would remain lower than variable interest mortgages. It was not a certainty. The banks are now making up for their losses on tracker mortgages by loading cost onto the people on variable interest rate mortgages.

I praise Mr. Brendan Burgess of money.com for his continued-----

Michael McGrath (Cork South Central, Fianna Fail)
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It is askaboutmoney.com.

Éamon Ó Cuív (Galway West, Fianna Fail)
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-----highlighting of this issue. Could this Government have done anything about this? The Government's policy, for a reason that I cannot get my head around, is to sell off all the assets it owns as quickly as it can through NAMA to the IBRC, irrespective of the price. For some strange reason it is hell bent on getting rid of the State's valuable AIB shares, which if held onto long enough will become very valuable. I note the Minister of State, Deputy Harris, is shaking his head. I forecast that when NAMA is subject to the freedom of information legislation what we will learn about the policies followed by this Government will be very interesting. Rather than maximising the take for the State, it is allowing the banks to put the burden of tracker mortgages on variable interest rate mortgagees.

The response of the Minister of State will probably be that the Government cannot interfere with the banks and that to do so would be terrible. I accept that the banks are free agents but the Government and the Central Bank cannot stand by and allow people to be charged extra because the banks are losing money on a bad product they sold. If this happened in respect of the ordinary consumer product, the Consumer and Competition Authority would be calling for legislation to prevent the charging of inflated prices by a cartel. We cannot allow the banks to do this just because they sold a bad product, namely, the tracker mortgage which, although great for the customer, was bad for the banks.

Does the Minister of State want to know how to deal with this issue? Fianna Fáil put forward a very sensible suggestion in this regard in its last budget submission. We suggested that tax relief at source, TRS, for those who took out mortgages during the noughties be increased. I will explain how this works. Tax relief is given on the interest payable on the mortgage. I know the Government is currently trying to put an end to that, which I believe is bad policy. The tax relief is deducted at source. In other words, it is deducted from the interest bill. This means that the monthly mortgage amount is decreased by the amount of interest relief. Fianna Fáil proposed that mortgage interest relief be increased, resulting in the monthly repayment per month being reduced by the increased amount of tax relief at source. If, for example, 30% relief was allowed on every €1,000 interest, this would mean a reduction of €300 on every €1,000 interest due. If the TRS was increased to 45%, the result would be a €450 reduction in the interest amount payable, which means instead of having to pay €1,000 in interest the person would only have to pay €550. This would be of major benefit to the banks because it means more people would be able to pay their full mortgage. It would also ease the financial pressures on people, which is good news for the banks. The Government could have ensured that the tax relief at source, on which the banks are depending to get their payments, would only be payable to banks if the variable interest rate was brought below, say, 3%. The banks would immediately be under pressure to bring interest rates down to the competitive international rates about which the Government continually speaks. The banks would be anxious to ensure all of their clients received this tax relief at source because they would be aware that a loss of tax relief at source would result in their not getting their payments, leading to an increase in their arrears. This would not cost the banks anything because with the tax relief at source those currently only paying interest would be able to pay the interest and the capital amount and those not able to meet the full cost of their interest would be able to do so. Those who are paying the interest and the capital but cannot meet the cost of their unsecured loans would then be able to start to repay their unsecured loans. In other words, it would increase people's ability to pay, which would mean that what the banks would lose on the swings they would gain on the roundabouts, and would bring a bit of fair play to the game.

However, the Government never looks to see what can be done. It never looks to see what new possibilities exist. It seems to apply a hands-off principle to everything and believes it cannot touch the system, including not talking to various agencies. In the meantime, the ordinary punter is suffering.

I have worked on this mortgage issue since I was Minister for Social Protection by increasing and improving mortgage interest relief. Does the Minister of State remember mortgage interest relief? People used to get it if they lost their job to help them pay the mortgage. It was in the four-year plan the Government is always quoting back to us and that it claims was so immutable. However, it was able to get rid of mortgage interest relief even though it was specifically mentioned in the four-year plan.

Michael McGrath (Cork South Central, Fianna Fail)
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Mortgage interest supplement.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I mean mortgage interest supplement. It was specifically mentioned in the four-year plan because it put it in there.

I have followed this issue over the years. I have worked with people who are working with people in mortgage difficulties. A large number of them are in difficulties simply because at a time when the banks are getting money at historically low interest rates - they are being given it virtually for free - they are absolutely screwing their own customers who have no consumer choice in the market. If it related to ordinary commercial products, a range of agencies would be in here railing about there being a cartel. However, people are just sitting on their hands and doing nothing. Meanwhile people are going to bed every night not knowing how they will manage financially tomorrow. It is time the Government acted given that it has been four years in office and is in the countdown to the end of its term. During that period it has allowed the banks put the hand in the pockets of those on variable rate mortgages to dig the banks out of a hole they caused by selling products that turned out not to be profitable.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I call the Minister of State, Deputy Harris, who, I understand is sharing time with Deputy Connaughton.

Simon Harris (Wicklow, Fine Gael)
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I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:

“acknowledges that:

— the Statement of Government Priorities 2014 to 2016 recognised that promoting and encouraging competition and new entrants in the banking sector was required to put downward pressure on interest rates for variable rate mortgage customers, both new and existing; and

— the mortgage interest rates that independent financial institutions operating in Ireland charge to customers are determined as a result of a commercial decision by the institutions concerned and the Minister for Finance and the Central Bank of Ireland have no statutory role in relation to the mortgage interest rates charged;

notes that:

— while the European Central Bank base rates are a factor in determining this interest rate, a broad range of other factors including deposit rates, market funding costs, the competitive environment and an institution’s overall funding are key determinants; and

— the improvements in the overall economy, reduction in the costs of funds, increased demand and greater competition between lenders has led to a reduction in the standard variable rate offered by the majority of banks for new customers and for all standard variable rate customers in the case of AIB;

recognises that as part of the Central Bank’s work on mortgage arrears, lenders were asked to consider all avenues to help customers in arrears, including interest rate reductions;

further notes that:

— the issue of regulation of interest rates remains a policy area under active review and that this has been the subject of correspondence between the Department of Finance and the Central Bank of Ireland previously; and

— the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 will ensure that all mortgage holders in the State will have the protection of the Code of Conduct on Mortgage Arrears and have access to the Office of the Financial Services Ombudsman;

acknowledges the actions already taken by this Government to promote competition in the banking sector including the establishment of the Strategic Banking Corporation of Ireland, the Credit Guarantee Scheme and the amendment to section 149 of the Consumer Credit Act 1995 to encourage new entrants to the Irish financial sector; and

calls for:

— the Government to continue to apply downward pressure on standard variable rates charged by the banks by supporting increased competition in the sector in line with the Statement of Government Priorities 2014 to 2016; and

— active monitoring by the Competition and Consumer Protection Commission and the Central Bank of Ireland of the standard variable rate mortgage market to ensure that the rates offered to new and existing customers are competitive and that mortgage holders are aware of, and can switch to, cheaper, lower cost mortgages providers.”

I advise Deputy Michael McGrath and his colleagues who tabled this motion that the Government welcomes this debate. The standard variable rate charged by the various financial institutions in Ireland has a huge impact on many individual households. Understandable concerns about unfairness can develop when people compare the rates they are charged with the rates being charged to other people, either in Ireland or elsewhere in the euro area.

I welcome the opportunity to discuss the issues and I hope the debate tonight and tomorrow night will add clarity to the situation and help people understand its complexities. The issue of the Economic Management Council has already been raised. During Taoiseach's Questions today, the Taoiseach made it clear that the EMC will meet banks to discuss mortgage issues. I am not an apologist for the banks, far from it. Along with Members on all sides of the House, I would have difficulties with some actions the various banks have taken or not taken in the recent past and further back. The debate highlights the issues and I hope we have an honest debate about the options, and the roles and responsibilities of individuals, organisations and Government. It is too important a subject to do anything else. No one in this House has a monopoly on concern or a monopoly on good ideas.

The lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities. The Minister for Finance has no statutory role regarding regulated financial institutions passing on European Central Bank interest rate changes or the mortgage interest rates charged by such institutions. Such decisions are commercial matters for each institution concerned. That is not my opinion; it is just a statement of the fact. Given that position, it is not appropriate for the Minister for Finance to comment on or become involved in the mortgage propositions the individual banks choose to put forward to potential customers or how that relates to existing customers.

Having said that, the issue of regulation of interest rates remains an important policy area under active review and has been the subject of recent correspondence between the Department of Finance and the Central Bank. The Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements, and for ensuring ongoing compliance with applicable statutory obligations. The Central Bank has no statutory role in the setting of interest rates by financial institutions, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act 1997 and the requirement to be notified of penalty or surcharge interest imposed in respect of arrears. A previous deputy governor indicated that, within its existing powers and through the use of persuasion, the Central Bank would continue to engage with specific lenders which appear to have standard variable rates set at disproportionate rates to their cost of funds, and this is the course of action I expect the Central Bank to continue.

The Governor of the Central Bank, who has been well quoted in this debate, stated that it has long been understood that tight administrative control over the rates charged by banks would be counter-productive in ensuring a sufficient flow of properly priced credit on a lasting basis. Such control would strongly discourage new entrants. In this regard, ongoing competition in the banking sector will be crucial in ensuring the economy is provided with efficient and cost-effective banking services. Such control would be detrimental to the economy, given there have been some movements on mortgage interest rates of late by a number of institutions which suggest that the market may well be entering a new and more competitive phase. We have had comments from people on the banking sector. No one is suggesting the banking sector in this country is fully fixed. There is still a significant job of work to be done.

As I said, the mortgage interest rates that financial institutions in Ireland charge are determined as a result of a commercial decision by the institutions. This rate is determined taking into account a broad range of factors, including European Central Bank base rates, deposit rates, market funding costs, the competitive environment and an institution's overall funding.

The Governor of the Central Bank has put forward two reasons that rates charged in Ireland are higher than in the euro area. The first is that the cost of funds for banks operating in Ireland is higher than elsewhere in the eurozone, and the second is a lack of competition.

The House must acknowledge the actions already taken by this Government to promote competition in the banking sector. The Government continues to work to create an environment conducive to new entrants, primarily through the implementation of policies to promote economic recovery and employment creation but also through various initiatives to ensure that there is an adequate pool of credit to underpin the recovery. The Government's actions in this area include the establishment of the Strategic Banking Corporation of Ireland, SBCI, the credit guarantee scheme and the amendment to section 149 of the Consumer Credit Act to encourage new entrants to the Irish financial sector.

The SBCIwas established during September 2014 with the core purpose of enhancing the supply of credit. The Government's aim for the SBCI is to enhance the range and profile of finance providers in Ireland. The SBCI will achieve this by working with existing and new providers to develop specific funding products and by supporting new entrants to the small and medium enterprise, SME, lending market by allocating significant funding to a number of new and non-traditional finance providers. It is also an objective of the SBCI to encourage competition within that funding market through the provision of funding to a broad range of potential lending partners.

The SBCI launched its first product programme on 19 February 2015 and commenced lending on 9 March 2015 through both Bank of Ireland and Allied Irish Banks. An initial sum of €400 million has been allocated for lending throughout the country. It will also offer some loans for the refinancing of credit originally extended by banks. This is another effort by the Government to encourage competition in the sector.

The credit guarantee schemeencourages additional lending by offering a partial Government guarantee to banks against potential losses on certain loans to eligible SMEs. As the original scheme saw a low take-up, the Government moved quickly to improve the existing scheme and is also developing an alternative scheme to ensure best use of the resources available to the scheme. The Departments of Finance and Jobs, Enterprise and Innovation have worked on an amendment to the existing guarantee scheme to provide funding to SMEs whose banks are exiting the Irish market. The Government has agreed that the new credit guarantee scheme will align with the work of the SBCI. Staff from the Department of Finance, the SBCI and Enterprise Ireland have been assisting the Department of Jobs, Enterprise and Innovation with the drafting of the new credit guarantee scheme. Legislation to enable the introduction of the new scheme is a priority for the current legislative term.

The Government has taken steps to ensure that the Irish financial market is accessible to any financial institution considering establishing in Ireland. That really is the core issue - trying to encourage competition to get new entrants into the market and to have a more competitive banking sector in this country. In seeking to reduce the barriers to entry which are specific to the Irish banking market, section 149 of the Consumer Credit Act,as amended, which provides for the regulation of bank fees and charges, has been disapplied for the first three years in the case of new financial service providers setting up in Ireland.

Of course, promoting competition must be balanced with protecting consumers. The Government recognises that as part of the Central Bank's work on mortgage arrears, lenders were asked to consider all avenues to help customers in arrears, including interest rate reductions. However, this is just one avenue to assist customers. In order to assist borrowers in difficulty, the code of conduct on mortgage arrears, CCMA, provides a strong consumer protection framework to ensure that borrowers are treated in a fair and transparent manner by their lender and that long-term resolution is sought by lenders with each of their borrowers. The code stipulates the conditions that must be met before legal proceedings can be initiated.

Borrowers may seek independent financial advice from the money advice and budgeting service, MABS, which will assess their financial position and may intervene with creditors on their behalf. The Insolvency Service of Ireland, ISI, launched its "Back on Track" information campaign last October in an effort to promote greater engagement between personal insolvency practitioners and people in debt. The ISI reported a greatly increased take-up of its services in the last quarter of 2014 on foot of its awareness-raising campaign.

The Citizens' Information Board, CIB, hosts a free mortgage advice and information helpline, which borrowers can avail of to get details of all options available to them in dealing with their debt situation. The Citizens' Information Board also hosts a panel of financial advisers from whom borrowers can seek independent advice regarding restructuring arrangements offered to them by their lenders. The Government has already committed to examining this area further and to bringing forward more measures in respect of mortgages and mortgage arrears next month.

A further measure to protect consumers is the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015,which is priority legislation for the Government. It was published in January 2015, and Second Stage of the Bill was taken on 3 and 4 February 2015. Officials in the Department of Finance are working intensively with the Office of the Attorney General and the Central Bank to ensure we can bring the Bill to Committee Stage as soon as possible. The Bill addresses concerns surrounding the continued applicability of the Central Bank's codes and access for borrowers to the Financial Services Ombudsman after loan books are sold to unregulated entities. The proposed legislation provides that borrowers will have the same protections under the Central Bank codes, such as the code of conduct on mortgage arrears, that they had before their loan was sold to an unregulated entity.

It is generally accepted that consumers need protection when they are taking out credit, during the course of holding the credit and when they are repaying the credit. It is not equitable that some of these protections can be avoided due to the regulatory position of the entity which owns the credit; therefore, consumers should retain the protections they had before their loans were sold. That is what the proposed legislation achieves.

The Government recognises that while the country is moving in the right direction, too many people continue to struggle in their daily lives. That is why it is prioritising the decisions needed to best serve our economic recovery and improve the lives of people in Ireland. Building on the commitments in the programme for Government, in July 2014 the Government announced its Statement of Government Priorities 2014-2016. In setting out its priorities the Government acknowledged that promoting and encouraging competition and new entrants in the banking sector was required to put downward pressure on interest rates for variable rate mortgage customers, both new and existing. The Government will continue to apply downward pressure on standard variable rates charged by the banks by supporting increased competition in the sector in line with the statement of priorities. It will do this by working with national and European competition authorities to encourage and support new mortgage lenders in the market.

Departments play a very significant role in representing Ireland at European and international institutions and we intend to use all of our interactions to ensure these institutions are focused on increasing global economic growth, which is crucial to our own economic prosperity. A great deal has been achieved over the past four years, but we must not, and will not, become complacent. We must sustain a competitive economy that can pay its way and serve society and that can survive and thrive in a reformed eurozone and an increasingly globalised international economy. To assist in the achievement of our objectives, the Government calls for active monitoring by the Competition and Consumer Protection Commission and the Central Bank of Ireland of the standard variable rate mortgage market to ensure that the rates offered to new and existing customers are competitive. These issues will receive ongoing attention from the Government. We look forward to working with Members on all sides of the House and to pursuing these issues in line with the objectives outlined in our amendment. I commend the amendment.

Paul Connaughton (Galway East, Fine Gael)
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I welcome the opportunity to discuss this extremely serious situation. When one considers the last four years and where we have come from, one can see that a great deal has happened in the banking sector, but there is a long way to go. As the Minister acknowledged, it is far from fixed and certainly far from where it must be to treat everybody fairly.

Probably every Member of the House has been contacted by people at some stage about mortgage arrears and certainly about issues regarding the variable interest rate. I am no different. Outside of the technical response the Minister gave, the sense of unfairness is what grips people most when they discuss this. More than likely they know their neighbour has a tracker mortgage while they have a variable rate mortgage. It is very easy to calculate the difference between what they are expected to pay back on their mortgage and what their neighbour is expected to pay. It is very hard for people to stomach that, given that they are going through the same trials as their neighbour. It might be unemployment or a reduction in income since the recession began. However, as the country starts to pick up they appear to be two steps behind their neighbour all the time. This is not about bitterness or wishing worse for their neighbour, but about them wanting to be given the same opportunity everybody else is given.

I understand everything the Minister said about opening the market to more competition to allow more people in. That will probably make matters better for those who are joining now, but more stern action is required to help those who are already experiencing this problem. That there is an issue with mortgage arrears is acknowledged and recognised, and work is being undertaken to deal with that. However, many of these people are not yet in mortgage arrears, but they might fall into that trap. For that reason more immediate action is required to help them.

There is always a counterbalance. We want an effective banking system and there is nothing wrong with that. The banks are beginning to return to profitability. However, that must not be on the backs of people who made a decision to go with a variable rate over a tracker mortgage.

I wish to highlight the sense of unfairness they feel in that regard. Let us be honest. The easiest thing to do in politics in the past four or five years was to give the banks a good kicking. The economy needs an active banking sector. When they needed help we were there for them. I am not 100% certain how many people were caught in the trap but they deserve to get some help as well for several reasons. As someone said here, if they can get a fair chance, they will pay down their mortgage. We are also concerned about increasing spending in the domestic economy. They simply do not have that domestic spending power at the moment because of what they are paying on variable rates.

We need to focus on this matter. Bringing the banks in front of the Economic Management Council would be a step forward. However, they have to follow through. It was well acknowledged even before this Government came into office that the banks were not always giving us the true picture of what was going on. They got away with a great deal. Whether that was down to lack of regulation or oversight does not matter; we are not going back to that issue. The banking inquiry under way at the moment is doing all of that. However, the concern is that they are doing it again. It is possible to fob off a decision for a couple of months but a person cannot fob off paying back his mortgage for a few months. He runs into trouble straight away. We need to see action quickly, something that will make these mortgages more sustainable and something with a hint of fairness. As the banks return to profitability, they should be rewarding the people who bailed them out. Let us be blunt and honest about this that it does not seem to the people on variable mortgage rates as if this is happening at the moment.

Multiple measures have been taken. The Minister of State has announced what will happen in future and all of that is welcome. However, we really need to get across the idea that these people are in trouble now. Something that is due six months down the line or three months down the line or a meeting that will happen at some stage is cold comfort for someone who is paying a high variable rate at the moment and who simply cannot afford to keep doing so. We need to take whatever actions we can take now.

We have to be realistic as well. Many people are throwing out options. Sometimes it is a little hard to understand Deputy Ó Cuív. He sounds like one of the new Fianna Fáil Deputies elected at the last election, someone who never spent time in government, because he seems to have all the answers. He spent time in Cabinet when the banks were causing trouble for the last Government.

We are now reaching a situation where the banking sector is moving in a way that we want. We need the sector to lend much more to small and medium-sized enterprises to produce growth in the domestic economy. However, they must also help the people who are on variable rates. That is why the motion is welcome. We also have to think of those in extensive mortgage arrears and those who could potentially fall into the trap of mortgage arrears.

Whatever action the Government takes, it should take it quickly. I understand the banks are independent institutions, but pressure should be brought to bear on them as to why they are still around. Whatever we need to do to bring in more lending institutions should be done. I am unsure whether that would allow the credit union movement to get into the mortgage market. I am not suggesting I have all the answers but let us open up the market and protect those who are coming into it now.

Above all, let us not forget that group of people who are hurting seriously at the moment. We get this thrown at us every day. The banking crisis happened but who went to prison? Who was jailed for the banking crash? It all leads to this argument. This is all we get in clinics day in, day out. We hear that no one paid the price except these people and they are being fleeced again. Many people take the view that this lack of fairness needs to be solved quickly. While I welcome the announcements of what is to come, much more needs to be done now. We need help to get these people out of the mess they are in. When we do that, they will certainly help us in future when they increase spending.

Another point mentioned previously is the issue of bankruptcy. Although somewhat off topic, we need to give serious consideration to reducing the bankruptcy term to one year. That is my personal belief. Some people who have contacted me got into trouble and want to get out of it as quickly as they can. They may have a great idea but they are being held up by the three year limit. It may be a stick to beat the banks with. The Minister of State said that he is no apologist for the banking sector and neither am I. We can be partisan about this but we all want to move in the one direction. This involves the banks stepping up to the mark and doing something. However, they cannot say they are going to do something; they actually have to do something and move on this issue. If they were able to do something about variable rates, we would see a greater increase in domestic spending and public trust in the bank. I am unsure who is lower in the popularity stakes at the moment, politicians or bankers, but they could do themselves a favour if they worked on this. They would probably help people for much longer. We could do ourselves a major favour if we put enough pressure on them to do something. I welcome what has happened in the past four years to move this economy on but we cannot forget the people who are in this situation.

Pearse Doherty (Donegal South West, Sinn Fein)
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Cuirim fáilte roimh an rún seo atá curtha síos ag an Teachta Dála McGrath. Is ceist í seo atá á phlé againn le cúpla bliain anuas. Tá sí á phlé againn arís agus arís eile le tamall maith anois ach gan aon réiteach ar an gceist ag teacht ón Rialtas nó ón Aire Airgeadais ach go háirithe. Baineann an cheist seo leis na mílte daoine atá i gcruachás maidir lena gcuid morgáistí agus leo siúd atá ag feidhmiú i ngnóthaí, go háirithe gnóthaí bheaga. Baineann an cheist seo le daoine nach bhfuil i gcruachás chomh maith ach a bhfuil faoi bhrú millteanach ó thaobh an méid caiteachais atá acu gach lá agus gach seachtain mar gheall ar na rátaí úis bainc atá á íoc acu. Tá na rátaí seo ag ardú le cúpla bliain anuas ach níl an Banc Ceannais nó an Rialtas ag déanamh aon rud faoi. D'éist mé leis an méid a bhí le rá ag an Aire Stáit. Tá urlár an Tí fágtha ag an Aire Stáit arís. Tá sé imithe. Níl mórán faoisimh sa leasú atá curtha síos ag an Rialtas do dhaoine. Labhair mise faoi na daoine sin. Labhair Teachtaí eile fúthu chomh maith agus ní hamháin Teachtaí ón bhFreasúra iad san ach Teachtaí ón Rialtas fosta. Níl an Rialtas ag déanamh ach an beagán. Níl an Rialtas ag déanamh ach an méid is lú gur féidir leis.

I welcome the motion before the House tonight. I have raised this issue in the past and it has been raised with me by people throughout the State, sometimes on a daily, weekly or monthly basis. As the previous speaker said, I imagine there is not a Deputy in the House who would not have had concerns raised with him or her on this matter.

Sinn Féin will be supporting the motion and rejecting the Government amendment, which is weak. Basically, it does what the Government has done all the way through, that is, it places its entire trust in the banking system. We know that is an incorrect position to hold and that the Government would not take this position if it was really looking out for the interests of Irish citizens. We know this because of the way the banks are abusing the mortgage arrears resolution targets. We know this because when it comes to personal insolvency arrangements the banks hold a veto and are not afraid to use that veto. We know this because the Government will not stand up to these same mighty banks. We know this only too well and it has been confirmed tonight in the Government's pathetic amendment. The Government has no intention of interfering in any way with the banks in respect of the excessive interest rates they are charging customers. The Fine Gael-Labour Party Government will not stand up to the banks. That is a well-established policy and they are not for changing, as we have heard from the Minister of State tonight.

The Minister for Finance, Deputy Michael Noonan, seems simply not to care. He is no longer bothered even pretending to care about this issue. There has been a remarkable evolution in the thinking of the Minister, Deputy Michael Noonan, on interest rates. In 2010, when the Minister was the Opposition finance spokesperson, he said: "The least that taxpayers should now expect is for Bank of Ireland and AIB to set an example by cancelling planned increases in variable mortgage rates." Let us move forward to 2011. The newly-appointed Minister told the House in December 2011 in a written reply that at a meeting with AIB he "requested of him that the bank reconsider its position in light of the current circumstances faced by mortgage holders across the country".

At the time, the Labour Party leader was more vociferous, saying it was "the intention of the Government that the interest rate reduction should be passed on," and adding that the Government might take action against AIB if it refused to comply. Fighting talk. However, by 2013, the Minister had changed his tune quite a lot. By then, the Government had decided to hide behind the relationship framework with the banks, the same relationship framework the Minister and Government Deputies are hiding behind tonight. Now, in 2015, the last pretence of pretending to care has been done away with. Now the line is, "[T]he mortgage interest rates that independent financial institutions operating in Ireland charge to customers are determined as a result of a commercial decision by the institutions concerned and the Minister for Finance and the Central Bank of Ireland have no statutory role in relation to the mortgage interest rates charged." The evolution in a few years from a Minister and a Government who pretended to care to a Minister and a Government who could not even be bothered pretending to care is clear for all to see.

There are things the Government can do; it just does not want to do them. Some days it seems that the Minister, Deputy Noonan, forgets completely he owns the banks. Why does he forget this? The Government must use its resources for the betterment of society and to create fairness, but that is not what it is doing. AIB, Permanent TSB and a chunk of Bank of Ireland belong to the Irish people. That is why I have drafted legislation that would give far greater powers to the Financial Regulator to veto applications for an interest rate hike by banks in which the people have a stake. That is the democratic and socially responsible way for banks to be regulated in times such as these. These are not normal times. These are times when we have 100,000 families in mortgage arrears, the same families who are suffering under the burden of austerity imposed by this Government and the previous Government as a result of bailing out these very same banks. Will this type of regulation I have drafted come into force under this Government? Of course it will not happen, because the Government has made it clear that the banks will have the final say.

I wonder, when we look at the disastrous number of people in mortgage arrears, how many are there because the Government has decided that the policies of the banks it owns on behalf of the people are none of its business. How many of the thousands living in fear of repossession were tipped over into arrears by one increase too many while the Government and the Central Bank washed their hands of any responsibility? The Government has adopted a clear banking strategy, we are told time and again. It is very clear what it is. It will let the banks do what they want, including kicking people out of their homes, it will let the banks rip off Irish mortgage holders and it will do nothing to annoy the Irish banking sector.

We are supposed to be in a new enlightened era of regulation in the public good. We are told that the bad old days are well behind us. When it comes to the banks and the wider financial services, however, I fear we are actually slipping in the opposite direction. In Ireland, in 2015, a wealth trust fund located not far from this House can proudly boast to its global clients in its advertising slogan: "We are able to offer our corporate clients a highly professional service in a lightly regulated environment without the costs or inconveniences associated with an offshore jurisdiction." In Ireland, in 2015, a credit card company can hike interest rates by 4% on customers already in arrears and the best the Government can do when I raise this is to direct the families affected to a website to compare prices. That is the best the Government can do - to send a link to a Deputy who is raising the concerns of people who are in arrears with a company that has just given its customers notice that it is raising rates by 4%, and tell them to check www.gocompare.com. It is a pathetic response.

I am shocked at the cheek of the Government in patting itself on the back tonight, because it has referenced the Consumer Protection (Regulation of Credit Servicing Firms) Bill in its amendment to the motion. It is pretty hard to stomach a Government that has very consciously allowed the banks to sell to vulture funds claiming credit for tabling a Bill to deal with the activities of vulture funds four years into that Government's term. For many, the horse has well and truly bolted, as these funds have behaved the way vultures do and picked the meat off the carcass.

Extending the code of conduct and the protection of the Financial Services Ombudsman is all well and good, but will it help mortgage holders thrown to the vultures by banks owned by the Government? How will access to the watered-down code of conduct help families who have had their interest rates increased by vulture funds or had their homes taken? The decision by the Minister, Deputy Noonan, to sign off on the Central Bank’s dilution of the code of conduct on mortgage arrears was a cold, calculated move done to please the banks.

In my view, the Central Bank is not fulfilling its role in regulating the financial sector. As far back as 2012, the Central Bank knew that Permanent TSB was in breach of the rules by shifting customers from tracker mortgages to more expensive variable rate mortgages, yet where was the action? It was only after a court case had adjudicated on the issue that the Central Bank stepped in. Where is the Central Bank's role in regard to consumer protection? It seems that when the banks are involved, the wheels of justice for the family in the street move very slowly. Yet many of those same families who have been moved from a tracker rate to a variable rate by a State-owned bank have yet to get a letter from that bank telling them how this issue will be dealt with, despite the courts having adjudicated on a test case in this regard.

We have a Financial Services Ombudsman that has been reluctant to embrace the full range of powers open to it. I believe there is potential for the Ombudsman to be empowered to rule that interest rate increases by banks and others are not justifiable. Unfortunately, there is a perception among the people who have used this service that the game is rigged in favour of the banks. Even more unfortunate is the fact that this view is accurate. There is a need for a major rebalancing of powers towards the consumer when it comes to disputes with financial services providers.

There is a need for the Government to get real about the banks. Despite everything that has happened, this Government actually trusts the banks. Why? What has it seen that has caused it to trust that these financial institutions will behave responsibly and appropriately in regard to Irish consumers and citizens? On what possible grounds would anybody trust the banks, given the litany of mistakes? In some cases, it could go beyond mistakes, and I have given examples of people who have been pushed from tracker mortgage rates to variable rates. The answer is that the Government trusts the banks because it has decided that the banks come first and citizens come second. At all times and regardless of the situation, the Government's view is that the banks will have the final say. That is the Ireland of 2015. Families struggling with a mortgage will pay what the banks want and a weak Government will let them away with it.

Shame on the Minister and shame on the backbencher Deputies who rightly speak up and say that more has to be done but, tomorrow night, when the bells ring at 9 p.m., will march in here and vote against a motion that demands that more be done. They will instead line up to pat the Minister on the back for doing nothing but appeasing the banks and sending Irish consumers to these vultures, as we have seen in the last number of years.

Thomas Pringle (Donegal South West, Independent)
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I wish to share time with Deputy Finian McGrath.

I welcome the opportunity to contribute to this important debate, which once again highlights how the Government defers to the banks continuously. One of the hallmarks of this Government in its lifetime has been how it has kowtowed to the banks and let them call the shots in regard to economic and banking policy and what the banks are doing to our society. The one thing that should be clear to everybody in this society at this stage is that the banks do not work for the people.

The banks do not work for the good of their customers or citizens, rather they work to look after the banks and that is their only reason for being. We saw all through the build-up to the financial crash and the introduction of the bailout in 2010 that the banks continued to fuel the market and bubble, keep them going and drive them ever faster by pumping money into the system, thereby fuelling the increase in house prices and the debt burden on everyone across society.

Since the crash we have seen that the Government plays to the banks' tune. It is very wary of calling in the banks. I remember the Government had to be cajoled and pushed into meeting the banks to discuss issues around the increases in interest rates the banks had been forcing on customers throughout the country. This has led to a situation, as pointed out in the motion, where more than 300,000 families are on variable rate mortgages with interest rates of up to 4.5% while the banks are borrowing money at between 1.1% and 1.5%. Significant profiteering is taking place on the backs of very vulnerable people who are struggling to meet their mortgage payments and struggling through the recession. They are fuelling the recovery the banks are enjoying.

Much has been made over recent months of the banks returning to profitability, but the debate has exposed how that has happened, namely, by screwing people on variable rate mortgages. If all the 300,000 involved were paying up to €6,000 extra compared with what they would be paying if they had reasonable rates on their mortgages, it would contribute more than €1.8 billion in profits to the banks. We see the facade that is the banks having returned to profitability, which has happened on the backs of very vulnerable people who are struggling to keep roofs over their heads. This Government, to its eternal shame, has allowed that to happen and has lain down before the banks at every opportunity to allow them to continue to ride roughshod over the citizens of this society. It needs to act.

Finian McGrath (Dublin North Central, Independent)
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I thank the Acting Chairman for the opportunity to speak to this important and urgent debate on variable rate mortgage holders in Ireland. I commend Deputy Michael McGrath for tabling this motion which deals with the issue head-on. We have to focus on the issue for the 320,000 variable rate mortgage holders as they are the forgotten customers and need and deserve fairness. They also deserve assistance at this very difficult time.

Not only does the motion highlight the issue, it also puts forward sensible solutions to the crisis. We often hear speakers in the House ask about solutions. This motion puts forward solutions. We have a duty to support them strongly. The current situation is that the standard variable rate for residential mortgages charged by State-owned Permanent TSB, AIB and EBS, as well as other banks operating in the market, is up to 2% higher than the comparable mortgage rates in other eurozone counties. For a typical €200,000 mortgage, a standard variable rate customer will pay approximately €6,000 a year more in interest than a borrower with a tracker mortgage. Banks which operate in the Republic and the North are, on average, charging customers in the Republic 2% more for standard variable rate mortgages. Normal competitive forces which would allow customers with high mortgage costs to switch to an alternative provider are not present in the marketplace, effectively trapping customers with high standard rate mortgages.

The Economic Management Council has not met the banks since 2012 and it is now 2015. The European Central Bank base interest rate is at an historic low of 0.05% and the cost of funds for the banks has fallen considerably in recent times. Recent mortgage interest rate reductions announced by certain banks have targeted new customers only and were not extended to the current standard variable rate customers. The EMC needs to meet representatives of the banks at the earliest opportunity and impress upon them the unfairness of the current pricing regime in respect of standard variable rate mortgages. We also need greater product innovation on the part of financial institutions in the mortgage market. An investigation should be undertaken into the level of competition in the Irish banking sector. I call on the Minister of State to ensure legislation in introduced to ensure all residential home loans in the State are subject to the protection of the code of conduct on mortgage arrears and have access to the Office of the Financial Services Ombudsman.

Residential mortgage holders whose loans have been sold to third parties should be protected from profiteering. The Minister for Finance should bring forward a White Paper on competition in the banking sector. The Central Bank, in its consumer protection role, should engage directly with the banks on the issue of high standard variable interest rates and the need for the fair treatment of existing standard variable customers as well as new mortgage customers. I urge all Deputies to support this motion and the 320,000 variable rate mortgage holders in Ireland.