Thursday, 23 June 2016
8. To ask the Minister for Finance his plans to ensure that mortgage holders, tenants and small to medium sized business with loans or credit from non-bank lenders or vulture funds are fully protected; if he is considering extending the provisions of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 in this regard; and if he will make a statement on the matter. [17521/16]
Does the Minister have plans to further extend consumer protection and regulation to people whose loans have been acquired, particularly relatively small scale borrowers, mortgage holders, tenants of mortgage holders and small to medium sized businesses, by hedge funds and vulture funds and so on?
As the Deputy will be aware, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 was enacted on 8 July 2015. It was introduced to fill the consumer protection gap where loans were sold by the original lender to an unregulated entity. The 2015 Act introduced a regulatory regime for a new type of entity called a credit servicing firm. Credit servicing firms are now subject to the provisions of Irish financial services law that apply to regulated financial service providers. This ensures that relevant borrowers whose loans are sold to third parties maintain the same regulatory protections they had prior to the sale, including under the various statutory codes, such as the consumer protection code, the code of conduct on mortgage arrears and the code of conduct for business lending to small and medium enterprises.
The Central Bank is now the competent authority for the authorisation and supervision of credit servicing firms. Credit servicing firms must comply with all relevant requirements of financial services legislation, including the various codes mentioned already and fitness and probity standards, including minimum competency requirements. In addition to compliance with Central Bank codes of conduct, credit servicing firms will have to demonstrate to the Central Bank that they have robust governance and adequate resources to ensure compliance, agreements with loan owners that enable the credit servicing firm to fully comply with its obligations under Irish financial services legislation, and adequate and effective control of loan servicing in the State to enable Central Bank oversight.
As the Deputy will be aware, policy in this area is kept under review to ensure that consumers are adequately protected. In this regard, the code of conduct for business lending to small and medium enterprises has recently been updated. The code of conduct on mortgage arrears has also been reviewed and updated over time. The Government will work with the Central Bank to ensure that the code continues to be relevant, fair and balanced in respect of the legitimate interests of debtors and creditors all the while promoting the availability of sustainable solutions to address genuine mortgage difficulty. In that regard, I have recently raised the issue with the Governor of the Central Bank.
Has the Minister met with the purchasers of these loans, the vulture funds and hedge funds? By and large, they bought with the idea of flipping these loans within a relatively short period of three to five years.
We are now at a stage where, as the Minister said, we are reducing the number of distressed mortgages, but those left in distress are probably much worse cases and many have not engaged with the process.
Has the Minister directly met these funds? On various international trips he has occasion to meet some of these organisations or people connected with them, but has he met them in Ireland and talked about our society and how difficult the final work-out is? Many people who have not engaged are in deep difficulty and are likely to go under financially unless a structure is put in place to help them.
I meet various investors from time to time, at home and abroad, at their request. I cannot recall specifically meeting any of the investor companies that would generally be described as vulture funds, but if the Deputy tables a specific question I will have it researched within the records of the Department and give the Deputy a full answer.
I spent perhaps three years trying to persuade the Minister's Department that the Money Advice & Budgeting Service should be able to accompany people to court. We only got the go-ahead for that less than a year ago, and it has already proven to be extremely useful. Many people have not engaged at all and they are terrified of the approaches from these funds. What will be done? Many of these people could have sustainable arrangements with their mortgage holders.
In Tyrrelstown, which is in my constituency, the loan holder was given authority for tenants who were in long-term tenancies, who were working and who could afford the rent but could not afford to buy their properties to be put out on the street. There has to be a response to that.
As I said, we have legislated on a number of occasions because the policy intention is that if a loan is sold the obligations of the new owner are the same as the legal obligations of the original owner. As far as I am concerned, the legislation that was brought through the Houses of the Oireachtas achieves that. As I said to Deputy McGrath, because he had a particular issue, if there is a lacuna in the legislation I am prepared to make an amendment on some appropriate vehicle going through the House. I have no clear insight that there is a lacuna along the lines suggested by the Deputy.