Pearse Doherty (Donegal, Sinn Fein)
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240. To ask the Minister for Finance in situation where a legal title is owned by a credit servicing firm and the loan related to the same mortgage is owned by a special purpose vehicle, as is the case form many residential mortgages in the State, which legal entity determines the rate of interest to be applied to the mortgage; and if he will make a statement on the matter. [33347/25]

Pearse Doherty (Donegal, Sinn Fein)
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242. To ask the Minister for Finance if credit services firms as only the legal title holder under current legislation are allowed to enforce a credit agreement including repossessions, to outline the legislation that provide credit servicing firms with this authority in situations where they are only the legal title holder but not the beneficial owner of the underlying loan of the mortgage; and if he will make a statement on the matter. [33349/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 240 and 242 together.

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (the 2015 Act) and the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 (the 2018 Act) applies to the activity of credit servicing in relation to relevant credit agreements. The Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 and EU Directive 2021/2167, which was transposed by the European Union (Credit Servicers and Credit Purchasers) Regulations 2023, applies to the servicing of agreements within the scope of those enactments.

The 2015 Act made the activity of credit servicing a regulated activity. This legislation ensured that where an unregulated entity acquired the legal title to the rights of the creditor under a relevant credit agreement (legal title loan 'owner'), that entity had to become a regulated entity unless the agreement was serviced by a regulated credit servicing firm or by an alternative type of regulated entity such as a bank or retail credit firm.

Subsequently, the 2018 Act expanded the scope of credit servicing to include, in and of itself, holding the legal title to the rights of creditor and associated ownership activities.

Any entity with such a legal interest in a relevant loan, if not already subject to Central Bank regulation, has to be authorised as a credit servicing firm even where the entity had already appointed a person authorised to carry out credit servicing activities.

Under the 2018 Act, the determination of the overall strategy for the management and administration of a portfolio of credit agreements and the maintenance of control over key decisions relating to such a portfolio also became a credit servicing activity, subject to regulation by the Central Bank of Ireland.

It is worth highlighting that the Central Bank has put in place a range of measures in order to protect consumers who are mortgage holders. The consumer protection framework in place seeks to ensure that lenders 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 framework provides the same protections for borrowers regardless of the regulated entity with whom they are dealing, be that a bank, retail credit firm or credit servicing firm. Credit servicing firms must be authorised and supervised by the Central Bank, and are subject to the full suite of relevant regulatory requirements and financial services legislation, including the Code of Conduct on Mortgage Arrears (CCMA).

Neither the Central Bank nor I as Minister for Finance have a statutory role in approving interest rates or in determining the products that lenders provide to their customers as these are commercial decisions for firms themselves. In each case, firms will have made their own commercial decision on the lending interest rates that they charge and the specific changes (if any) to make to their lending rates based on the terms and conditions of their products and their commercial pricing strategy and funding costs.

In general, recent Central Bank data indicates that the average interest rate on outstanding mortgages held by bank and ‘non-bank’ regulated entities has declined over the past year. As the ECB has continued reducing official interest rates, the Government expects all mortgage creditors to keep their lending rates under review and where mortgage rates had in the past increased in line with ECB increases they should now appropriately adjust downwards. I have been informed that the Central Bank will continue to liaise with regulated entities on this matter.

The CCMA provides for the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner. Due regard must be given to the fact that each case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.

Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm. The CCMA framework requires lenders to exhaust the options available from the suite of alternative repayment arrangements offered by them before taking action which may result in the borrower losing his/her home (whether by voluntary sale or repossession).

The CCMA also requires regulated entities to have an appeals process in place and must inform the borrower of his/her right to refer the matter to the Financial Services and Pensions Ombudsman.

In relation to repossessions, Provision 56 of the CCMA provides that a regulated entity may only commence legal proceedings for repossession of a borrower’s primary residence where the regulated entity has made every reasonable effort under the CCMA to agree an alternative repayment arrangement with the borrower or his/her nominated representative. Further the specific timeframes set out in the CCMA must have been adhered to or the borrower has been classified as not co-operating and notified in accordance with the CCMA.