Dáil debates
Wednesday, 21 June 2023
Saincheisteanna Tráthúla - Topical Issue Debate
Fiscal Policy
9:32 am
Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I seek to bring to the attention of the House the activities in recent times of some lending institutions, fund managers and their successors. This mainly relates to funds that were sold over from the pillar banks in a package to the investment fund managers. Some of them are being sold on again to third parties. I am not too certain whether they are fully regulated, but I am sure they are. I am concerned at the tendency - I observe a new urgency now - on the part of asset managers who, with a renewed vigour, seem to have the attitude of pursuing the borrowers in a way that was not evident in the past.
This also relates to cases where the lending institutions concerned, or their forebears, had ample opportunity to enter into an arrangement with the borrowers but they always rejected whatever offer was put forward on the basis that it was unsustainable. It was unsustainable from their point of view but readily sustainable from the point of view of the borrower in reducing the debt. In many cases that offer was refused and as a result the debt remains and has increased. Obviously it has increased with interest rates and so on. Notwithstanding all of the help that has been made available by various ways and means, I also observe a tendency to cut corners, for instance by getting an updated repossession order for a property after the property was repossessed and sold. I do not mind people pretending that they can do these things and get away with it but I do not believe we should allow any institution get away with that kind of nonsense because it is establishing a precedent that gives them huge power over the borrower. Do not let us forget that the borrowers in many of these cases are people who over the last ten years or so were subjected to continuous harassment from the lender. In one case that I am aware of, the lending institution representative appeared on the doorstep of a widow on a nightly basis or until such time as he forced her out of the house and forced the sale of the house in order to keep his books balanced.
All of this occurred as a result of the lending institutions of this country lending unwisely. They will say that the borrower had a hand in this as well. Yes, we know that but the lending institutions were primarily responsible for lending to the extent way beyond the collateral available, and which they knew was not there. They had always in their minds the intention of ensuring they did not lose. I suggest that we examine what is going on at present to look at the tendency to put people into receivership in much quicker order than previously, and the forcing of the issue to a conclusion in a way that is not to the advantage of the borrower. These unfortunate people have suffered a great deal over the past number of years not as a result of what they did themselves but because of what the banks did to the country in general when they put the country in hock to themselves. It was nobody else. They held all of the cards. I ask the Minister of State this morning to ensure we look at them very carefully, and examine their activities with a view to finding out if they are cutting corners and, if so, where they are doing so and to what extent.
Joe O'Brien (Dublin Fingal, Green Party)
Link to this: Individually | In context | Oireachtas source
I thank Deputy Durkan for raising this issue. The Central Bank has put in place a range of measures to protect customers who take out a mortgage or have another loan.
This consumer protection framework seeks to ensure that all Central Bank regulated entities are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle. This includes, for example, through protections at the initial marketing and advertising stage and assessing the affordability and suitability of the mortgage at a time when borrowers might find themselves in financial difficulties.
This consumer protection framework applies to all Central Bank regulated entities that provide credit to consumers. Also, following the enactment of the Consumer Protection (Regulation of Credit Servicing Firms) Acts of 2015 and 2018, the Central Bank consumer protection framework equally applies to any entity that services or holds the legal title to the rights of a creditor under a mortgage or other credit agreement. Therefore, any entity which purchases a loan or acquires the legal rights of a creditor under a consumer credit agreement will, unless it already has an appropriate authorisation from the Central Bank, be required to be authorised by the Central Bank as a credit servicing firm or retail credit firm. These regulated entities must act in accordance with Irish financial services law and the consumer protection regulatory framework that applies to all Central Bank regulated firms. This means that where a creditor sells or assigns its legal rights under a credit agreement to another creditor, the consumer protections that were available to borrowers prior to such a transaction remain in place. Therefore, the new creditor that acquires the contractual rights and benefits of the creditor will do so based on the terms of the existing loan agreement and the regulatory protections available to consumers. Accordingly, any new creditor will only be able to enforce a credit agreement in accordance with the relevant terms of the particular agreement and the relevant consumer protection framework.
This consumer protection framework is strong and it includes the various Central Bank statutory codes of conduct, such as the consumer protection code and the code of conduct on mortgage arrears, CCMA. In particular, the CCMA provides specific protections to borrowers in arrears or facing a prospect of arrears on a loan secured on a primary residence. Under the CCMA, all relevant regulated entities, such as a bank, retail credit firm or credit servicing firm, must proactively encourage borrowers to engage with it about financial difficulties that may prevent the borrower from meeting his or her mortgage repayments. Also, where a borrower is experiencing repayment difficulty, a regulated entity must explore all of the options for an alternative repayment arrangement, ARA, offered by the entity to determine if a more suitable and sustainable repayment option is available based on the borrower’s individual circumstances. If a borrower is not satisfied with the options proposed, or if the regulated entity declines to offer an ARA, an appeals mechanism is provided for in the CCMA. In addition, a regulated entity must review an ARA at intervals that are appropriate to the type and duration of the arrangement, including at least 30 calendar days in advance of an ARA coming to an end.
The Central Bank has advised that it expects that all regulated entities, including retail credit and credit servicing firms, to take a consumer-focused approach in respect of any decision that affects their customers, both existing and new, and to communicate clearly, effectively and in a timely manner with all customers. In particular, it indicates that the protection of mortgage loan borrowers, including those in arrears, is a key priority and that it will continue to supervise compliance by all regulated entities with the CCMA and consumer protection code and other relevant financial services legislation.
While there has recently been an increase in short-term arrears, it should also be noted that progress is still being made on reducing long-term arrears. As the Deputy will be aware, last week the Central Bank produced its mortgage arrears statistics for the first quarter of 2023. They showed that non-banks hold 76% of all primary dwelling home mortgage accounts in arrears over one year. They also showed that the number of accounts in long-term arrears continues to decline and now stands at a little over 22,000, having been 26,000 in March 2022. This is the lowest level of long-term arrears since the Central Bank started to collect its data on mortgage arrears.
9:42 am
Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I thank the Minister of State for his comprehensive reply. What he says is accurate. That is the way this is supposed to work but it is not the way it is working. To what extent can this House ensure that what the Minister of State has just intoned to the House actually happens and that every borrower gets the same chance to recover, regardless of whether he or she is in arrears? There is no sense in saying we will continue as we were and pay back as we should have at the beginning. That option has been gone for a long time. We have a different regime and we have to accommodate the needs of the customer to a far greater extent. I suggest that something be done, as a matter of urgency through the Central Bank or the regulator, to ensure that exactly that which the Minister of State indicated happens. We must ensure consumers get a fair chance to do a variety of things and do not find themselves painted into a corner whereby the response is the same whenever an offer is put forward. Incidentally, like everybody else in this House, I have put forward scores of these offers and invariably the answer has been that these are not sustainable and cannot be accepted. The lending institutions are the arbiters of what is right and wrong, which is not what is supposed to happen.
I thank the Minister of State for his reply. It would be helpful if a review were conducted by one of the bodies I have suggested to identify where there are deviations from the regulations in favour of the lending institutions.
Joe O'Brien (Dublin Fingal, Green Party)
Link to this: Individually | In context | Oireachtas source
I thank Deputy Durkan for the opportunity to speak to the House on this issue. All regulated entities, including banks, other regulated mortgage lenders, loan owners and services are required, as a matter of law, to follow the statutory Central Bank codes of conduct, including the code of conduct on mortgage arrears and the consumer protection codes. These codes are not voluntary and there can be no question of the regulated owners not following them. Failure to do so can result in the Central Bank using its range of powers to ensure adherence to the codes, including employing its administrative sanctions procedures or legal action, where appropriate. If the Deputy has information to indicate that a regulated firm is not complying with the Central Bank’s consumer protection framework, I ask that he submit it to the Central Bank, which is the independent regulator of these financial institutions.
In addition to the protections available to consumers under financial legislation and regulatory framework, a consumer also has recourse to the Financial Services and Pensions Ombudsman, FSPO. If a consumer is not satisfied with how a regulated firm is dealing with him or her in the handling of his or her mortgage or believes the regulated firm is not following the requirements of the Central Bank’s codes and regulations or other financial services law, he or she should make a complaint directly to the regulated firm. If the consumer is still not satisfied with the response from the regulated firm, he or she can refer the complaint to the FSPO, which is the independent statutory office provided for in law to adjudicate on complaints a consumer has with a regulated financial services provider.
I also encourage any person who is experiencing a repayment difficulty, or who has any other genuine concern regarding a mortgage, to contact, in the first instance, his or her mortgage creditor to discuss the matter. It is also essential that, in turn, these Central Bank regulated entities, irrespective of whether it is a bank, retail credit or credit servicing firm, constructively engage with their borrowers to address any legitimate concern raised and to act fairly in the interest of their customers. That is what they are required to do under the Central Bank consumer protection framework and it is the minimum standard Central Bank-regulated firms are expected to comply with.