Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank the Senators for their amendments. We are all here to do the same thing, which is to try to ensure that mortgage holders are protected regardless of who owns their mortgage book. That is the very reason the Government is bringing forward this legislation, and it is eager to work with the Houses of the Oireachtas to ensure that it can be enacted as quickly as possible.

I will discuss the Sinn Féin amendments, Nos. 1 and 3, together as they are broadly aimed at the regulation of owners of credit. The purpose of this legislation is to protect consumers whose loans are sold by regulated financial service providers to unregulated firms. I welcome the broad support given by Senators to this overall objective. We are all agreed that our aim is to protect the consumer and to ensure these protections are put in place as soon as possible.

Over the course of discussions on this Bill, the question of who should be regulated has arisen. I would like to take this opportunity to further explain the evolution of thinking on the Bill. As has been pointed out previously, the initial thinking was that the best approach would be to regulate the new owners of the credit. However, this thinking evolved over the course of preparing the legislation. Often, governments are accused of not listening. The Department of Finance ran a comprehensive public consultation last July and August, seeking views on the proposed legislation. This was followed by further engagement with the Central Bank and Office of the Attorney General. The public consultation process highlighted an issue with this approach, as it was possible to envisage cases where owners would effectively be passive special purpose vehicles, SPVs, and where they would outsource servicing of the loans to a firm that would not be regulated. Indeed, this was one of the factors we considered and we saw that there was the potential for a lacuna to arise if a foreign-based unregulated owner were to use a local credit servicing firm which was not regulated.It therefore became clear from the consultation process that if we were to effectively protect the consumer it was better to regulate the process of credit servicing as that is the customer facing activity. It is the part of the operation with which our constituents and citizens interact and it is very important that it is regulated.

However, if an owner does not outsource credit servicing and instead undertakes the activity himself or herself he or she will be required to be regulated. In other words, at all times some regulated entity will be responsible for all credit agreements. The purpose of the Bill is to ensure that consumers retain the protections they had prior to the sale of their loans. This Bill will require entities dealing with consumers to be authorised by the Central Bank and subject to its code of conduct. Dealing with consumer credit servicing and the definition of credit servicing is broad.

In order to further strengthen borrowers' protections in this area a new section, section 5, was added to the Bill on Committee Stage. This is a statutory obligation that states that a credit servicing firm cannot do something or fail to do something which would be a prescribed contravention if performed or if not performed by a retail credit firm. It also prevents the owner of a credit from instructing a regulated credit form to perform such an action. This is a belt-and-braces approach and its purpose is to try to address some concerns and further enhance the consumer protection element of the Bill.

As such, I am not accepting these amendments as the decision to regulate the credit servicing firm as a customer-facing activity has been carefully considered and put out to public consultation. There has been extensive engagement on this and it is the best way to go about this. The decision was not arrived at lightly and many scenarios have been discussed at length. In consultation with the public, the Central Bank and the Attorney General, the Minister, Deputy Noonan, and the Government have reached a decision that this is considered to be the best way to protect borrowers.

Regarding amendments Nos. 2 and 4, I thank the Senator. The Minister, Deputy Noonan, discussed them on Report Stage in the Dáil, but I am glad to have an opportunity to clarify the reasons they are not being accepted. I understand and welcome the intention behind the amendments, that is, to impose regulation on firms that take an active role in managing the relationship with borrowers even when the borrower is not in financial difficulty. However, I am glad to be able to inform the Senator and the House that the amendment is unnecessary because the definition of credit servicing is broad enough to capture this already. Currently, borrowers whose loans are sold to unregulated entities are not protected. It is, therefore, imperative that we enact protections as soon as possible.

We all want to strengthen the protections for consumers whose loans are currently with unregulated entities by restoring them to the position they were in before the loan was sold. The Bill is about ensuring that people have the same level of protection under the various codes and Central Bank after their loans were sold as they had beforehand. That is not the case today for many of our constituents and that is why we need to pass the Bill.