Central Bank (Variable Rate Mortgages) Bill 2016: Second Stage [Private Members]

I move: "That the Bill be now read a Second Time."

I wish to share time with Deputies Dara Calleary, Bobby Aylward, Thomas Byrne, John Lahart and Marc MacSharry.

I welcome the opportunity to debate once again the vital issue for family finances, that is, the standard variable mortgage interest rate applying to mortgage products in Ireland. This is an issue that Fianna Fáil has been focusing on for well over a year at this stage and, last year, we dedicated two of our Private Members' slots to advancing the interests of individual mortgage holders and families affected by this issue.

I wish to acknowledge the dedication and expertise brought to the issue by campaign groups, such as The Fair Mortgage Rates Campaign led by Brendan Burgess, and the highlighting of the issue by commentators in the media, such as Charlie Weston of the Irish Independent, and others. We also welcome the support of other Opposition parties and Independent Deputies, who also used parliamentary time in the Thirty-first Dáil to advocate for variable rate mortgage holders.

This collective effort led the previous Government to meet the banks in May of last year and some rate reductions have been delivered. There has been a strong degree of consensus that the current situation is far from satisfactory. Ministers in the previous Government and a number of the Independent Deputies who are now part of or supporting the new Government have spoken of the need for action on this issue. While we are, I believe, broadly united in this House in our collective determination to achieve fair treatment for standard variable rate mortgage customers, there has been and remains disagreement on how best this can be achieved. There is nothing to fear from this. It is a sign of a healthy, functioning democracy that all aspects of this issue can be fully ventilated on the floor of Dáil Éireann.

As I noted last July, standard variable mortgage interest rates are a huge issue in many household budgets throughout the country. To put it in context, it is worth remembering there are up to 300,000 residential mortgage customers with variable rate mortgages in this country and, collectively, they owe €40 billion. A 0.5% cut in mortgage rates would give an average boost of over €650 per annum to these families while a 1% reduction would help them to the tune of nearly €1,300, so we can see the importance of this issue in financial terms for the households who are affected.

This debate is a significant chance for the Dáil to assert its greater freedom to act collectively in a spirit of co-operation and in the interests of the public. Fianna Fáil is moving this Bill against the backdrop of the terms of the framework agreement we entered in to with Fine Gael, which committed the parties to: "Take all necessary action to tackle high variable interest rates". I also note the terms of the programme for Government, which states:

It is not ethically acceptable for Irish banks to charge excessive interest rates on standard variable rate customers. We will take all necessary action to tackle high variable interest rates. ... We will request the Competition and Consumer Protection Commission to work with the Central Bank to set out the options for the Government in terms of market structure, legislation and regulation to lower the cost of secured mortgage lending and improve the degree of competition and consumer protection.

Earlier today, the Minister for Finance, Deputy Noonan, raised potential constitutional difficulties with the Bill, citing the comments of an investment bank, Investec. This is most surprising as, when the legislation was originally debated in July of last year, the Minister and his representative on the Tuesday evening of that debate, the Minister of State, Deputy English, did not raise any such concerns. That debate was on the same Bill we are debating here, and I presume it went to the Attorney General for advice, yet no issues whatsoever around its constitutionality were raised at that stage. It is even more surprising when one considers the terms of the programme for Government, which noted the potential for legislation and regulation in the area of mortgage rates. Last May, the Minister himself held up the possibility of introducing this type of legislation or introducing a penal bank levy if the banks did not reduce mortgage costs. Unfortunately, the conclusion may be drawn by some that the question of constitutionality is an excuse that is reached for when a Government has run out of valid reasons not to support an Opposition Bill.

When this issue came to the fore last year, the initial strategy on the part of the banks was to deny to existence of a problem. Some banks have moved to reduce their standard variable rates, which I welcome. AIB has reduced its standard variable rate on four separate occasions in the past 18 months, and it now has a standard variable rate of 3.4%. I believe this should be extended to EBS and Haven customers, who have been excluded from the most recent cut, at least until now. Weekend media speculation pointed to a possible further cut, which would bring the rate closer to 3%. Let us hope this happens.

These reductions are very welcome. On a further positive note, there are now some signs of competition between banks in the mortgage switcher market. This should be supported by a statutory code of conduct on mortgage switching. I believe the Government and the Central Bank are now minded to implement such a code, which I welcome, given we have been calling for it for some time. It is also positive that Permanent TSB has introduced a new managed variable rate product. I am conscious that Permanent TSB has not yet returned to sustained profitability and any regulatory framework that is put in place has to be carefully balanced between the need for consumers to be protected and the requirement for the banks to be profitable, competitive and viable into the future. Indeed, the legislation we are putting forward today allows for a differentiation between different lenders considering a range of factors, including some of those mentioned.

While progress is being and has been made, in the past year in particular, we believe still more needs to be done. Some banks blatantly continue to offer better deals to new customers than to their existing standard variable rate customers. This should not be acceptable to anyone in this House and it should not be acceptable to the Central Bank, which, after all, has a key role in consumer protection. Customers with high loan-to-value mortgages, those in negative equity, those in arrears, those who have restructured their mortgage or those whose financial situation has taken a turn for the worse often find it impossible to switch in order to avail of the new, better rates. Those rates are not extended to them and they are essentially trapped, an issue which needs to be dealt with.

Standard variable rates north of 4% are still far too common in the Irish market. Those banks that have steadfastly refused to reduce their standard variable rate cannot be allowed to hide behind improved fixed rate offers. In particular, Bank of Ireland has stuck rigidly to a completely unjustifiable variable rate of 4.5%. In a presentation accompanying its year-end results for 2015, the bank's cost of funds is quoted at 0.8%, so it is charging its standard variable rate customers over 5.5 times the bank's own cost of funds, which is an indefensible position. If the Central Bank is not going to vindicate the rights of those mortgage holders, then this House should move to do so.

Fixed rate mortgages are an entirely different product to a standard variable rate mortgage, as I have pointed out on numerous occasions. If a customer locks in to a fixed rate, they will lose out again if the variable rate falls below the fixed rate. They will also lose a lot of flexibility because, while a fixed rate is suitable for many mortgage holders, it may not be for others. In addition, if a new competitor enters the market offering a much lower variable rate, the customer will face substantial penalties if they seek to switch their mortgage.

The position of Danske Bank customers is even more precarious as they are paying a standard variable mortgage rate of 4.95%.

In 2013 Danske Bank announced that it was pulling out of the personal banking market in Ireland. While the majority of its mortgage loans are at tracker rates, a significant number of its variable rate customers pay the highest mainstream lender rate in the Irish market of just under 5%. There was a chink of light for its customers earlier in the year as a result of the Miller case. The original ruling by Mr. Justice Hogan who found that Danske Bank had acted incorrectly in raising its standard variable rate at a time when the ECB was actively cutting its lending rates had given hope to mortgage customers, but it was overturned on appeal. Essentially, the courts have found that the law, as it stands, cannot be invoked by a mortgage customer who believes a bank has hiked the standard variable rate payable to an excessive extent. As I stated, at one stage last year the Minister was of the view that legislation and-or a penal bank levy could be used as sticks to force the banks to reduce their rates. Now he seems to believe competition alone will solve the problem.

While customers are to be encouraged to shop around, the truth is that switching a mortgage from one lender to another can be difficult. Today the Minister said one would need a PhD in mortgage switching to switch from one lender from another. Most people do not have a PhD in mortgage switching and find it very difficult. That is why we need a code of conduct on mortgage switching. In particular, it is of no use to customers of Danske Bank who are in negative equity. The option of switching to a lower-cost lender is effectively closed to them and many others. I have been contacted by Danske Bank customers who are at their wits' end in trying to cope with their monthly mortgage repayments. It is of cold comfort to them when they hear the Minister speak about competition reducing rates. There is no realistic prospect of that institution cutting its variable rate, unless it is forced to do so because it is exiting this market. Therefore, moral persuasion will have no influence on it.

The Central Bank is sitting on or considering an application for a licence by The Frank Mortgage to enter the Irish market and extend cheaper mortgages to customers, I believe, at rates of less than 3%. The Central Bank should embrace new entrants, provided they meet the regulatory requirements and swiftly allow them to compete in the Irish market and apply further downward pressure on interest rates.

The situation facing approximately 46,000 mortgage holders whose mortgages are now owned by non-bank lenders must also be highlighted. Many of these mortgages are owned by so-called vulture funds which bought mortgages from the IBRC special liquidators and foreign-owned banks departing the Irish market. If these funds decide tomorrow morning that the mortgage rate should be increased to 6% or 8%, there is nothing customers can do about it. More worryingly, there is nothing the Central Bank can do about it based on its existing statutory powers. This is not tenable and exposes those mortgage holders, in particular, to an unacceptable risk. I would like to address the question of whether the Central Bank actually wants these powers to intervene in the market, as this is something that I imagine will come up regularly in the course of the debate.

Under the terms of the legislation, the Central Bank would be required to carry out an assessment of the state of the mortgage market, taking into account factors such as the banks' cost of funds, reasonable profit expectations, concentration within the market, the ease with which borrowers can switch mortgages between lenders and the extent to which they are switching. Should the Central Bank conclude that there is a market failure, the legislation would empower it with a range of tools to influence the standard variable rates charged in the market.

It is important to note that, ultimately, it is the Oireachtas that decides what powers are granted to the Central Bank. Having spent a year and a half listening to testimony, the banking inquiry highlighted for me that the Central Bank and the banking institutions in the State had not been challenged robustly enough in the period of the Celtic tiger. We, on this side of the House in Fianna Fáil, are not afraid to robustly challenge the Central Bank and the lenders.

In his statement earlier today the Minister stated provisions such as those in the Bill would mean that the European Central Bank would need to be consulted before legislation could be enacted. This is reflected in the amendment circulated by the Government. I have no difficulty with consultation. However, I remind the Minister that the whole point of the exercise in introducing the Bill is to give effect to the ECB's policy of making credit cheaper, in this instance for households. This is one of the main reasons the ECB is maintaining its base rate at the unprecedented level of 0%. The benefit of base rate reductions has only barely been felt by standard variable rate customers. It is also the case that countries such as France have relative interest rate caps in their national legislation.

Another important part of the legislation is a desire to end discrimination against existing bank customers. The reality underpinning the Bill is that the cost of funds for banks has fallen dramatically, their net interest margin is increasing all the time and the main banks in Ireland are strongly profitable again, which is welcome. Some of the rates which continue to be charged in the Irish market are utterly unjustifiable by any yardstick and need to be addressed. Fair treatment for customers should be a cornerstone of consumer protection provisions. We need a strong legislative framework to ensure this happens. The banks simply cannot be allowed to continue to rip off customers safe in the knowledge that they will not be subject to any sanction or intervention by the House or the Central Bank. By introducing the Bill, Fianna Fáil is setting out a path for how this could be done in a responsible way. It is now time for the Oireachtas to act in the interests of consumers.

This is the first Private Members' business in the new Dáil, but the more things change the more they remain the same. This is the third occasion on which Deputy Michael McGrath has tabled legislation similar to this - twice last year and now. This is the third occasion on which variable rate customers throughout the country who are being ripped off by their banks will be blocked from seeing some progress on how they are being treated. The reasons cited this evening are different from those cited on the two previous occasions. We now have a constitutional issue and the ECB needs to be consulted. Why were these issues not flagged or investigated in March or July 2015 in order that action could have been taken to deal with and get around them?

The lack of urgency in how this issue is being treated is evident in the note given to us by the team at the Oireachtas Library and Research Service which shows that in May 2015, at the time of Deputy Michael McGrath's first motion, the Central Bank published a paper on the influences on standard variable rate mortgage pricing in Ireland. Very little action was taken at the time. The Central Bank then commissioned a consultation paper in November 2015 on increased protection for variable rate mortgage holders. The closing date for the receipt of submissions was 12 February and the bank is currently assessing them. There is a lack of urgency for those who are at the pin of their collar in trying to pay what they are being charged for their mortgages. There is a lack of urgency for people who have a constitutional right to housing, but the same Constitution is being cited as a reason they should be denied proper rates and proper action. We now have a Government amendment which proposes to kick the can down the road for a further six months, while the latest excuses and reasons are examined. That is why, as a House, we cannot stand for this, while people are at the pin of their collar in trying to make repayments.

Deputy Michael McGrath deserves commendation for raising the issue consistently. It has added to public discussion and public discourse and brought media pressure. I join him in praising people such as Charlie Weston. The media have put pressure on some of the banks. Today I heard some commentators state that if the Bill was passed, there was the potential for an increase in the cost of funds to Irish banks. I cite Deputy Michael McGrath's figures from Bank of Ireland's annual report. It pays costs of 0.8% and charges 4.5%. At the same time, it is offering new mortgage customers the chance to get their first payment back to help with the cost of their fees. What about existing customers? Why should they pay for this incentive and offer to new customers? The commentary over the weekend on AIB's recent move was that it was getting ready to get back into the competition market.

When one sees big billboards promising customers their first mortgage payment back or assistance with their legal fees, it brings one back ten years to 100% mortgages and that is not a space to which any of us want to go back in terms of a relaxing of the rules. What we want, however, is fairness. What we want is to give people a chance. What we want is that people who made the choices and purchased their houses ten years ago be given the same sort of treatment as people who do that today.

This Bill is particularly well drafted. It allows for differentiation between different lenders, recognising that each lender in the Irish market has different circumstances facing its particular balance sheet. It gives the power to the Central Bank to do that. The Minister will say the Central Bank does not want that power but consumers need someone to have that power. If the Central Bank does not want it, the Competition and Consumer Protection Commission should surely have it or use it to try to inject fairness and a bit of competition into the system. Another reason given for not accepting this legislation is it might frighten competition away. Anybody considering a market that charges 0.8% cost of funds and can charge 4.5% will think there is a lot of opportunity there. That is a fact and that is the one figure that stands out and it is probably applicable to many of the other banks.

The same applies to SMEs and farms. They are not getting the kinds of reductions in cost of funds that are being given to the banks by the ECB and others. SMEs are being faced with a cut in banking services and massive increases in fees and their loans are being sold off to people with no protection for those loans, with the smallest possible reason being used to call in the loans.

The Minister is right: one needs a PhD to switch. Yet when one sees banks offering customers deals to switch but not making it any easier for them, one would want treatment from a medical doctor and for the price of switching, one would be able to buy a PhD.

By introducing this legislation tonight, Fianna Fáil and our spokesman on finance, Deputy Michael McGrath, are offering the Government an opportunity to halt the scandalous practice of banks charging customers unfair and unjustified standard variable mortgage rates. In March 2015 Fianna Fáil put this issue firmly on the agenda with a motion on the subject of rip-off variable rates being charged. Last July I spoke on this matter during Private Members' time and it is unfortunate that almost a year later we are discussing the same issue and very little has changed.

Further progress is clearly needed to ensure fair treatment of standard variable rate mortgage holders. This is probably the most scandalous situation in recent times. However, we have banks which have been saved from extinction by the taxpayer. These same taxpayers and mortgage holders are now subject to these unjustified variable rates and scaremongering from bankers. We have referred to them as taxpayers and mortgage holders but these are real people with families. There are more than 300,000 householders on standard variable mortgages. At least they have benefitted from the current low interest rate environment in Europe and yet we have seen no meaningful action being taken by the Government or Department of Finance in nearly six years.

Imagine the sheer frustration and anger of struggling parents who look on as their personal rate is rising while those of others around them have fallen steadily. They are forced to sit back as the single biggest outgoing for their family becomes more and more expensive and difficult to keep up with, which can lead to financial and mental problems. We speak here tonight on the first day of the new Government of the Thirty-second Dáil. We have a golden opportunity to make a real change that will affect real people and significantly improve their standard of living and that of their children.

This legislation requires the Central Bank to assess the state of the mortgage market. This is reason enough to support the legislation. The assessment would consider banks' costs of funds, reasonable profit expectations, concentration within the market, the ease at which borrowers can switch mortgages between lenders and the extent to which they are switching. There is no reason to oppose this aspect of the legislation. This assessment is clearly needed and urgent.

The legislation empowers the Central Bank with a range of tools to influence the standard variable rates being charged should the Central Bank conclude that market failure exists. We are often asked if the Central Bank actually wants these powers. This is nonsense. It is firmly the responsibility of the Oireachtas to decide what powers are granted to the Central Bank. The time for passing the buck is finished. It has gone on for too long. It is time to change.

The banking inquiry has clearly highlighted the need for all institutions, including the Central Bank, to be challenged on the power they have and how it is exercised. The mortgage market in Ireland has failed. Intervention is needed immediately. This Bill provides for meaningful change in a way that separates such intervention from political interference. The banks denied the existence of this problem when it was placed firmly in the public interest last year. Some banks had belatedly reduced their SVRs but we must do more. These banks are point-blank refusing to make even this most modest of concessions on the standard variable rates and they require a rude awakening. They continue to hide behind fixed rate offers as their flashy advertising campaigns portray the false claim of putting the customer first.

This is a measured, moderate Bill aimed at simply bringing some equity to the mortgage market while improving the lives of more than 300,000 families struggling today. We should allow it to go to Committee Stage for a thorough examination that will allow all sides of the House to have their say and influence this legislation. If those on the Government benches are not willing to support our efforts to address this scandal, I implore them to introduce legislation of their own that would help the people trapped in this vicious cycle.

I am delighted to get this opportunity to get my voice on the record on this issue for the second time. I am asking the Minister to take note of what we are saying because many people out there are suffering badly under these extreme interest rates that are being charged by some banks.

I want to commend my colleague, Deputy Michael McGrath, for bringing this forward. He was, as my colleagues have said, associated with bringing exactly the same Bill before the Dáil almost a year ago.

All that this Bill requires is for the Central Bank to carry out an assessment of the variable mortgage rate market. As some of the previous speakers have said, a mortgage is the single biggest financial outgoing for families, couples and individuals and the fact is that tens of thousands of variable mortgage customers are paying exorbitant rates. Those points have been made.

My colleague, Deputy McGrath, also pointed out some of the quick-fix solutions or some of the solutions being proposed by some of the mortgage lenders are not adequate, such as reducing fixed rates. This is simply not adequate as a response to variable rate mortgage customers as it might not be suitable for a large number of customers. The legislation that Deputy McGrath and my party is proposing this evening is comprehensive and would apply to all entities providing, managing or administering mortgages. This is very important as it would include those mortgages which have also been sold to vulture funds, and I know Deputy McGrath made this point. It is needed because more than 300,000 households are on standard variable rate mortgages. As a mortgage holder who benefits from a tracker rate, I can see the huge benefit that those who are on trackers have secured over the last five or six years with the tracker rate matching the ECB rate, and it runs to thousands annually, depending, obviously, on the size of the mortgage.

Deputy McGrath - I support him on this - has outlined how the legislation proposed by Fianna Fáil will deal with this issue comprehensively. The legislation we are proposing is balanced between the obvious needs for banks to be profitable - some of them clearly are, including AIB, which has reduced its variable mortgage rate and is still managing to make profits - and the rights of consumers to be treated fairly. The Central Bank would be given responsibility for monitoring the level of competition in the mortgage market and the fairness of rates charged. What we are proposing would also offer increased protection for mortgage holders whose loans are sold to vulture funds. At the moment those mortgage holders have absolutely no security or protection if their mortgage is sold on to a vulture fund and an increased variable rate is charged.

A Central Bank report in 2012 noted that high variable rates lead to higher arrears, which I am sure is something the Minister does not want to encourage or stand over. I note in the Fine Gael manifesto and in the programme for Government that the Minister is an advocate and supporter of the idea of switching mortgages. However, I want to support what Deputy Calleary said.

Maybe we all in this House can look at some legislation some time. If I wanted to move my bank account from one bank to another, the amount of loopholes, paperwork and bureaucracy that would face me would be overwhelming. The idea of switching a mortgage from one lender to another may seem appealing. No matter how much a government may do in trying to encourage borrowers and setting up a code of conduct to facilitate them, and I applaud the Minister for that, it is not as easy as the Minister makes out or as is made out in the manifesto.

Deputy Michael McGrath has been in the vanguard of this issue for well over a year. This clear commitment regarding variable rate mortgage holders was one of the commitments in my party's manifesto towards a fairer Ireland, in which we referred to tackling mortgage arrears and tackling variable mortgage rates. One way of doing that is doing all we can to reduce variable mortgage interest rates.

There was no mention in the Fine Gael manifesto of the reduction of variable mortgage rates. As I stated, the Minister spoke about establishing a code of conduct for switching mortgages. The programme for Government states, "It is not ethically acceptable for Irish banks to charge excessive interest rates on standard variable rate customers." It goes on to state, "We will take all necessary action to tackle high variable interest rates", and talks about the code of conduct. The line, "We will take all necessary action to tackle high variable interest rates", is the one to which I want to draw the Minister's attention. My colleague, Deputy Michael McGrath, is offering this House an opportunity to do just that and it would be a shame to pass up that opportunity, particularly when the Minister has made that commitment in the programme for Government.

Legislation is not necessary. Deputy Michael McGrath knows my view since the Trinity talks.

The Minister will have six months.

We will come to the Minister in a minute. I thank Deputy Lahart. Deputy MacSharry is the last remaining listed speaker.

I will share time with somebody, if somebody wishes to come in. I am glad to have the opportunity to make a few general points on this issue. Obviously, I support the legislation. The tragedy of the so-called recovery over recent years is the fact that we have not had the people central to our focus in terms of the measures we have sought to implement. Professor Sean Barrett, as a Member of the Seanad, frequently used to speak of the secret back stairs in the Department of Finance to which bankers seemed to have exclusive access, and it certainly seems like that when we see good legislation being put forward that puts first the people who have suffered and who have ultimately sacrificed in beginning that recovery which seems to be taking hold here in Dublin but not elsewhere throughout the country. We have to begin to embrace these issues.

The constitutional argument is nonsense. When I put forward the Family Home Bill in July 2011 in the Seanad to give protections to families against losing their family home, that same argument was put forward. Nobody would share the Attorney General's advice on that occasion and yet for five years we have had many families put to the pin of their collar, and many put out of their homes in that period, while we obsess about the profitability of the banks. As Deputy Michael McGrath has eloquently outlined, the level of profitability that AIB has managed to put together over recent years, looking after its cost of funds and a margin for itself and still reducing rates four times over the period, shows that it can be done. Therefore, it is time we put the people central to this and put the people's representatives in this House in command. If the Central Bank is not anxious to have these powers, frankly, it is not its call. That is a matter for this House to decide. We should face up to our responsibilities and equip the Central Bank with the tools the people demand it should have so as to give them the protections they need.

The balance is wrong between the profitability focus on the banks and looking after the people. As far as I am concerned, throughout the process the banks have engaged only superficially with people. There is all talk of split mortgages, warehousing, restructuring, etc. The reality is very different. If a person is a big boy on the back of the Sunday Independent, he or she will get a couple of hundred million euro wiped out, and those self-same businessmen are flying around in choppers and so on. However, what are we doing for the person in my constituency who texted me this morning telling me of receipt of a notice from Start Mortgages to surrender the house? What is in the State's interest in putting that family out of their home? These are the kinds of measures we have to look at and, I hope, in discussing with colleagues on this side of the House, that we will bring back the Family Home Bill 2011 to give those kinds of protections to families because they deserve it for the pain they have put up with. While those in the banks in their ivory towers once again enjoy the fruits of profitability, bonuses, etc., we owe it to the people, borrowers like that family which got the notice this morning from Start Mortgages to surrender their house, to ensure we are doing something for them.

As I stated, we have had superficial engagement. Why does the Minister not suggest to the banks that it is time we followed the continental example where there are intergenerational mortgages to help people? How many families does the Minister know who have been offered one of those? How many 45 year olds in arrears does the Minister know who were taken aside and told they are a good bet, they will get employment again, they will make money again and the lender will add 15 years to their term, push the loan out and warehouse half of it? That is not happening because the Minister is not interested in doing it. It is because the Minister blindly leaves here and goes to the Department where the advisers tell him what the practice is or the Attorney General says she does not know how this will go down in the Four Courts or whether it will be acceptable.

For once, let the House show the leadership the people want it to have. I very much hope this Bill will be accepted. Deputy Michael McGrath started, along with others of my party in the Seanad, with a package of measures dating back to June and July 2011 and, sadly, the Government of which the Minister was a member, which was in control, put the banks back into profitability but forgot the most important consideration, that is, the people. We all heard on many occasions about the systemic nature and value of the banks to society, but what about the systemic nature of the people?

This is the beginning in terms of the legislative proposals of Fianna Fáil in opposition. I hope that others in the House embrace what we are doing, vote it through and vote down the Government amendment which is nonsense, and that we will follow up with more proposals to try to put the people central to the focus of the work of these Houses.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"the Bill be read a second time this day six months to allow for scrutiny by an appropriate Select Committee to examine and address the following issues:

a) There are major constitutional issues which fall to be considered in relation to interference in vested property rights, the retrospective application of the proposals and the absence of an appeal mechanism.

b) Under the EU Treaties there is an obligation to seek an advisory opinion from the European Central Bank where domestic legislation is proposed which affects the workings of the Central Bank. This has not taken place. A failure to consult the European Central Bank is an infringement of Decision 98/415/EC and could lead to infringement proceedings against Ireland.

c) The Central Bank has not sought the proposed powers to regulate variable rate mortgages. The Central Bank is independent and the Bill provides only that it "may" issue directions in respect of interest rates. The Central Bank cannot be required to exercise the proposed powers. The Bill requires the Central Bank to assess whether market failure exists in the Principal Dwelling House mortgage market but assessment of competition issues comes within the remit of the Competition and Consumer Protection Commission.

d) Competition and the provision of choice for consumers is the best way to achieve a sustainable long term solution to the issue of high mortgage repayments and the proposed Bill is likely to restrict or limit competition in the mortgage market. Following meetings with the banks last year and ongoing pressure, the banks have made a number of reductions to their mortgage offers and some welcome competition is coming into the market.

e) Regulation of interest rates in the manner proposed in the Bill could have unintended consequences on the availability and cost of credit which would lead to consumer detriment in the longer term.

I will share time with Deputy Rock, with the agreement of the House.

I thank everybody who contributed so far for their interest in this important matter. As the House will be aware, I have tabled a proposed amendment to this Bill. The amendment is to delete all words after "That" and substitute that the Bill be read a Second Time this day six months to allow for scrutiny by an appropriate select committee to examine and address the important issues and key points, which are the major constitutional issues raised by the Bill, the obligation to consult the ECB on legislation of this nature, the Central Bank's stated position on this issue, the importance of competition as a sustainable and long-term solution to this issue, and the possibility that this Bill may have unintended consequences.

I fully understand that the intention behind the Bill is to help people with their mortgage repayments. As banks are slowly beginning to return to profitability, customers rightly feel that their mortgage interest rates should be coming down, not least when there remains a low interest environment in Europe, and I wholeheartedly agree. However, I have some significant concerns with the proposed approach in the Bill.

First, it is useful to consider how we have got to this position. This Bill comes against a backdrop where the interest rates charged on standard variable rate, SVR, mortgages in Ireland have diverged from the European Central Bank, ECB, rate in the past eight years. I was acutely aware of the difficulties this must be causing families and so discussed the issue at a meeting with the then Governor of the Central Bank, Professor Patrick Honohan, in early April of last year. At that meeting, I requested that the Central Bank conduct research into the factors impacting standard variable mortgage rates in Ireland, and this report was published shortly afterwards.

It is worth pointing out that this report found that interest rates on overall outstanding mortgages in Ireland are actually close to the European median, the Irish figure being influenced by the large number of low interest rate tracker loans, which represent over 50% of all loans outstanding. This should not be forgotten in a proper analysis of this issue.

The Central Bank's report stated more specifically that the spread between the official ECB interest rates and the standard variable mortgage rates is relatively high in Ireland both by historical standards and compared to European peers. However, three factors are important determinants of this margin, namely, increased credit risk resulting from high levels of non-performing loans and lengthy and uncertain processes of collateral recovery; weak competition; and the constraints on bank profitability arising from legacy issues of the financial crisis, such as the increased regulatory requirements for capital.

The report also noted that policy steps to interfere with interest rates risked creating damaging side effects and stated that by discouraging entry, innovation and competition, such measures could result in higher spreads and higher Exchequer costs over the longer term. Owing to the difficulties faced by borrowers, I decided at that time to act in a concrete and effective way to try to resolve the issue. Last May, I met with the main banks and asked them to review their rates and products to provide options for borrowers to reduce their monthly mortgage repayments. Since then, lenders have announced a number of new initiatives which have resulted in reductions in mortgage interest rates for customers.

I am pleased to see reductions and competitive offerings continue to be announced. This is igniting the competition market between banks and will benefit customers in an immediate way. For example, last week AIB announced another reduction of 0.25% in its standard variable rate, SVR, and loan to value, LTV, rates for new and existing customers. It stated that this reduction on a €200,000 SVR mortgage could save a borrower up to €320 per annum, based on a 25 year term. This is an immediate and real saving for customers. KBC also announced rate reductions last week while on Friday the Central Bank published figures that showed principal dwelling house mortgages across all categories have declined over the 12-month period ending in the first quarter of 2016. The sharpest decline was observed for SVR or LTV variable rate mortgages, which fell by 49 basis points to 3.64% over the year ending in the first quarter of 2016. Permanent TSB and Bank of Ireland offer lower rates through managed variable rates and fixed-rate products, respectively. The banks are offering different products which contain lower interest rates. As I have often stated, I recommend customers shop around in order to avail of the best products in the market which suit their circumstances.

These changes show the actions I have taken continue to have an effect. In the programme for Government, we have committed to take action on the issue. We can all agree that we want to take action on the issue that is targeted, thought through and which can deliver the best possible results for borrowers now and in the long term. Legislation is a very significant step for anyone, in government or in opposition, to take. It is, therefore, not something we should undertake lightly or without full consideration of its effects, intended or unintended. I will highlight some of the concerns I have with the proposed Bill.

Commentators have raised concerns about constitutional issues. Deputy Michael McGrath referenced Investec, which issued a note to clients approximately two weeks ago. These concerns must be addressed regarding compulsory interference with vested property rights. There are concerns around the retrospective application of the proposed legislation to private contractual arrangements entered into under the existing legal and regulatory structure in the absence of an appeal mechanism for the lenders and regulated financial service providers targeted in the legislation. Any such legislation would need to provide for fair procedures and be a proportionate response to the issue in the interest of the common good. It would also need to come within the permitted constitutional exceptions for interference with property rights.

Second, and more immediate, under EU treaties there is an obligation to seek an advisory opinion from the European Central Bank, ECB, where domestic legislation is proposed which affects the workings of the Central Bank. EU rules require member states to consult the ECB on draft legislative provisions falling within the ECB fields of competence and the member state must ensure the ECB is consulted at an appropriate stage, enabling the authority initiating the draft legislative provisions to take into consideration the ECB's opinion before taking its decision on substance. Consultation has not taken place regarding the Bill and a failure to consult with the ECB in this regard can result in infringement proceedings before the European Court of Justice taken by the European Commission against the member state. I do not know whether it is within the Ceann Comhairle's competence or it is a matter for the Government, if the Bill passes Second Stage, to inform the ECB, and I have asked the Attorney General to advise me on where the responsibility lies.

Third, the Bill gives powers to the Central Bank to regulate variable rate mortgages, although the Central Bank has never sought these powers. The Governor of the Central Bank, as well as the previous Governor, has made it clear that he does not consider the Central Bank should be given the power to regulate interest rates. The Central Bank is independent and the Bill provides only that it may issue directions in respect of interest rates. There must be some doubt about the efficacy of giving a power that it does not want to an institution which cannot be required to exercise it. This is the nub of the problem with the legislation.

We can make it stronger if the Minister wants.

The Bill requires the Central Bank to assess whether market failure exists in the principal dwelling house mortgage market. However, assessment of competition issues comes within the remit of the Competition and Consumer Protection Commission, CCPC, not the Central Bank. It would not be appropriate for the Central Bank to make this assessment. Previously, the Central Bank had a mandate in this area, but the Honohan report in 2010 found that this responsibility caused conflict with the other goals of the Central Bank. Competition represents the most favourable method of driving down interest rates, both competition between existing lenders and that introduced by new entrants. New entrants are looking to enter the Irish market. We must be careful that we do not deter new entrants from coming in, meaning that, ultimately, consumers have less choice and will end up paying a higher price or, worse, having no access to credit at any price. The introduction of the legislation may result in potential entrants deciding not to enter the Irish market.

Competition is a better solution to the issue, given that it benefits all banking customers. If banks must respond to increased competition, it will benefit not just mortgage interest rates charged, but the costs and fees of other banking products and the types of products they offer to all customers. Over recent months, the main lenders have announced a number of new products and initiatives that have reduced the cost of borrowing. These rate reductions by lenders should narrow the margin between lending rates in Ireland compared to the European average, and the longer this competition is allowed to flourish, the better the rates being offered to consumers will be. These are all significant factors that should be considered before this Bill is read. That is why I suggest the Bill be reviewed before it advances further.

The programme for Government commits that all Bills will be subject to pre-legislative scrutiny. Given that the Bill has not been through this process, I strongly suggest that the scrutiny and analysis of an appropriate committee is needed here to ensure the significant concerns which the Bill raises are properly investigated. The committee could also examine the potential unintended consequences of the proposed legislation, which have not yet been discovered or considered. For example, a possible response of a lender faced with restricted flexibility on interest rate setting could be to seek to recover lost revenue through other means, such as up-front charges for other mortgage related services or higher prices for other products.

The regulation could also have unintended consequences on the availability and cost of credit, which could lead to consumer detriment in the longer term. Given that lenders would not be able to price for risk, rationing of credit to those presenting the lowest risk would be the likely outcome. High-risk borrowers would not get money from any bank due to the legislation. If a bank can charge only up to a particular regulated rate, the bank may be more likely to refuse credit to the higher-risk borrower, thus locking a cohort of potential borrowers out of the housing market, when we all want to make buying a home accessible and affordable to all.

I understood everybody in this House agreed several weeks ago, in the great rush to reform the Dáil and have new politics, that all legislation would be referred for pre-legislative scrutiny. I thought that was a common position, but Deputy Michael McGrath has decided, two weeks before the introduction of pre-legislative scrutiny, to reintroduce a Bill that was debated here previously. It looks like he is trying to beat the deadline for pre-legislative scrutiny. This flawed Bill badly needs pre-legislative scrutiny.

The Government has publicly stated its intentions when it comes to excessive or high variable rates. Deputy Michael McGrath has already quoted from the relevant section of the programme for Government:

It is not ethically acceptable for Irish banks to charge excessive interest rates on standard variable rate customers. We will take all necessary action to tackle high variable interest rates; including through establishing a new code of conduct for switching mortgage provider, administered by the Central Bank and the development of a new, easy-to-use standardised and dedicated switching form. We will also request the Competition and Consumer Protection Commission to work with the Central Bank to set out the options for the Government in terms of market structure, legislation and regulation to lower the cost of secured mortgage lending and improve the degree of competition and consumer protection.

This is a "Year 1 Action" to which we have committed. We intend to see it through. The Government is very conscious of the difficulties faced by borrowers. It supports the principle of reducing interest rates. However, it does not consider that regulating interest rates is in the long-term interest of the Irish economy. It is widely accepted that appropriate competition is likely to be more effective and to provide consumers with a better outcome over the medium term and the long term. Furthermore, encouraging an environment in which borrowers switch between mortgage providers will force the banks to reduce rates and to become more competitive in attracting switching customers and retaining their own customer base. A Central Bank economic letter that was published last July suggested that 21% of existing private dwelling home variable-rate mortgage customers could save money by switching providers. In the present environment, in which we are seeing lenders reduce rates and introduce offers specifically targeted at the switcher market, I have encouraged borrowers to contact their banks to see what is available to them in their circumstances.

Will the Minister give way to his colleague, Deputy Rock, who is due to speak for five minutes?

Yes, but I will make a further point before I conclude. This is a minority Government. As everybody knows, the Opposition collectively has more votes than the Government. That creates difficulties for the Government and puts an onus on the Opposition as well. Previously, when the Government was protected by the whipping system, the Opposition could have a go. Now there is a risk involved if the Opposition has a go. The day Deputy Michael McGrath republished his Bill, Irish bank shares went down by 10% across the line. The publication of the Bill dropped the total value of Irish taxpayers' holdings in the bank by 10%.

The Minister is making a direct correlation between two issues that are not related.

I am not saying it will not-----

The Minister knows well they are not related.

I am not saying-----

That is scaremongering. The Minister is scaremongering.

The Minister is siding with the banks, as usual.

That is what he is doing.

The Deputy does not like to hear this.

The Minister is talking rubbish.

If the Deputy goes back and checks the date of his-----

He needs to accept the new reality as well.

It is a valid-----

The Minister has to listen to others.

I ask Deputy McGrath to resume his seat.

The Minister no longer dictates everything.

I ask the Minister to conclude and to give way to his party colleague.

That is the reality.

It is a valid point.

It is scaremongering.

If the Deputy checks the dates, he will see what happened.

I ask the Minister to conclude.

I hope they will recover.

This scaremongering ill behoves the Minister.

I hope they will recover.

I am afraid Deputy Rock has a little over three minutes.

The Minister has made a ridiculous contribution.

I thank the Minister, Deputy Noonan, for agreeing to share his time with me. While I appreciate the position from which Deputy Michael McGrath approached this issue when he drew up this legislation, which seeks to confer powers on the Central Bank, we should ask whether those powers will be used. In this case, the answer has arrived long before the question has even been asked. These powers will not be used. The Bill before the House provides only that the Central Bank "may" issue directions in respect of interest rates. It does provide that it "will" do so. The Minister, Deputy Noonan, has outlined the measures he has taken in regard to interest rates. I believe that is the approach that should be followed.

While I agree with some of what Deputy McGrath has said, I would favour more consultation, collaboration and fruitful engagement between the Central Bank and legislators. Such an approach, as advocated in my Central Bank (Supervision and Enforcement) (Amendment) Bill 2016, would produce better outcomes and would actually be used. I suggest it would produce a stronger legislative framework in collaboration with the Central Bank, rather than a legislative solo run which seeks to confer powers of dubious constitutionality on the Central Bank. The bank itself has said that it will not use such powers. As the Minister, Deputy Noonan, has rightly pointed out, the prospect of such powers being legislated for has already had an effect on the markets.

A cap relative to the market average, as seemingly inferred in the Bill before the House, would be useless if all variable rates were equally high. If the average is uniformly high, a cap relative to the average is useless. The quarterly monitoring of competition by the Central Bank, as proposed in the Bill, could override the remit of the Competition and Consumer Protection Commission. I suggest it would be preferable if the Central Bank were to maintain its focus on the kind of regulatory oversight and market supervision that was badly needed in the aftermath of 2010. The Central Bank has become much better at such supervision following bitter experience. This measure seems to dull that focus. It would pass powers from the Competition and Consumer Protection Commission to the Central Bank. I would not agree with that.

Reference has been made to the risk that the measure being proposed in this Bill will politicise the Central Bank to some extent. We will set a dangerous precedent if we invite politicians to routinely and regularly call on the Central Bank to move prices unilaterally. While I understand the pressures being experienced by families and borrowers with variable rate mortgages, I believe a better mechanism can be found to discuss how to approach their difficulties. If an independent Central Bank is to work, the Dáil, regardless of the shape it is in - we can see what shape it is in now that we are in a minority position - cannot be leveraging a public body with tasks that will not solve the problems that people on all sides and in all parties are equally keen to see solved. I would like to ask a question on that basis. When Deputy McGrath and his Fianna Fáil colleagues proposed this Bill, had they engaged properly with the Central Bank on it? Was it consulted properly? I suspect it was not. If new politics is going to work, we need a responsible Government and an equally responsible Opposition.

The usefulness of a Bill like this and regulations like these depends entirely on the willingness of the Governor of the Central Bank to use such regulations. It seems crystal clear that the level of willingness in this instance would be zero. Naturally, I support the amendment that has been proposed by the Minister, which would provide ample time for scrutiny and fruitful engagement in this case.

I would like to share five minutes of my time with Deputy Tóibín.

Is that agreed? Agreed.

I listened with interest to what the previous speakers had to say. I would like to focus particularly on what the Minister, Deputy Noonan, said. He was completely off the mark when he blamed the drop in the shares of Irish banks on the publication of this Bill or indeed, given that I do not think the Bill had been published when that decrease took place, on the media commentary on the likelihood that this Bill would be passed on Second Stage. The Minister will be aware that such a charge could equally be levelled against some of his own commitments in the programme for Government. The reality is that we need to stop the Irish banks fattening themselves off the backs of Irish customers. I refer particularly to standard variable rate customers, who have been ripped off over recent years. That is why I welcome Deputy Michael McGrath's Bill and pledge my party's support for it.

We live in an era of unprecedented low interest rates for states, banks and speculators. It seems that such rates apply to everybody except Irish home owners who have standard variable rate mortgages. The banks can try to confuse the issue by talking about their various sources of funding, but the truth is that standard variable rate mortgage holders can be gouged. Therefore, that is what is happening. The European Central Bank's current marginal lending rate is 0.25%, which marks a decrease from over 5% less than ten years ago. AIB's rate of 3.4% remains the lowest option for mortgage holders among the main lenders, with most of the options being well above that level, as we have heard. The previous Government failed spectacularly to address this issue, which is of huge importance for over 300,000 families. As it did with all issues involving the banks, in this case it chose to slink away from the fight and hid behind weasel words. The result is a huge and ongoing rip-off of Irish families and home owners, in many cases by the banks that were bailed out by the same home owners.

The Government and the banks can spin this all they like, but the truth is that we are looking at market failure. The banks operating here are failing to provide a functioning market in which normal market rules apply. My party supports a role for the State in banking, but that is not even the issue here.

The issue is that when the market so clearly fails, the State has a duty and a responsibility, in the interests of the people and the economy, to step in. We heard those arguments from a Fianna Fáil Government many years ago when there was a market failure, a banking failure, and it demanded that the State step in. However, this time it is in response to the needs of the people and not those of the bankers, the developers and the speculators. Let us do this and stop whistling in the wind. Let us put the Irish people first and foremost. This is an issue which symbolises the unfairness of people's interests playing second fiddle to the banks for years and years and of a Government that is happy with that situation. This is the legacy of the reign of Fine Gael and the Labour Party. Bankers are protected, banks are protected at all costs and struggling families are being ripped off.

Last May when I introduced my legislation, the first such legislation to be debated and voted on in this House and which empowered the Central Bank with more or less the powers contained in Deputy Michael McGrath's Bill, the Minister gave us every reason under the sun as to why it could not be enacted. The Minister said he was not ruling out bringing forward his own legislation and he echoed some of the words uttered by the Taoiseach, Deputy Enda Kenny, many years previously regarding bringing forward this type of legislation but he said that he wanted to talk to the banks first. Let us see where that got us and let us imagine how things could have been different if the previous Government had grasped the nettle and adopted the Bill I proposed last May, the Bill Deputy Michael McGrath proposed in July or the Bill Senator Feargal Quinn brought forward in May 2015, all with the same objective and all using different ways and different language but all empowering the Central Bank to deal with the issue of the huge standard variable rates that were being applied to the banks' customers.

There is no doubt that pressure has been brought on some of those banks by those Bills, by campaigns by the general public and by a number of media commentators who have taken up this issue and done sterling work on it. However, the changes made and pressure applied have been few and many of the banks have not moved. It is interesting to hear the former Tánaiste's party will support this legislation, which I welcome, but I remember in 2011 when I first raised this issue with the then Tánaiste, Eamon Gilmore, he told me the same story that this Government is telling me now. He said "Deputy Doherty need be in no doubt that this Government will act decisively, forcibly and effectively with the banks." Basically that is what the Minister is saying today, that there is no need for legislation, we have got the commitment in the programme for Government, it is unethical and we will do whatever needs to be done to deal with this issue but yet there is no meat on the bones. The Minister has been telling us that for a number of years and we have not seen any real changes for many customers.

How many Bills need to be presented in this House or in the Seanad before reality starts to sink in for Fine Gael? What has been achieved by waiting? Of the main banks, only AIB has budged at all on standard variable rates. Others have tinkered around the edges but with so many conditions and catches that few people have benefitted. The Minister spoke of one bank but the rate only reduces if one's loan to value rate is less than 80%. That rules out the vast majority of people. He spoke about switching providers, which is impossible for many people, and it is not only a case of the banks frustrating the process, we have problems legislatively as well regarding securing assets, land registry delays and so on, which are issues for another day.

Earlier today the Government spin spoke about kicking this Bill into touch, back to pre-legislative scrutiny. Let me be clear - for my party that is not acceptable. If this Bill passes Second Stage, it must be brought to committee as soon as possible. We were told last year, when Sinn Féin introduced its Bill in May 2015, that we were premature. We were told we had to be patient and that the Minister was going into negotiations with the banks. I wonder if any group was more relieved when Deputy Noonan was reappointed as Minister for Finance than the bankers.

There are many new Deputies but I doubt any are naive enough to think that this Bill will automatically mean relief for home owners or an end to the rip off. We are all grown-ups; we all know the potential pitfalls with this type of legislation. This Bill passes the buck to the Central Bank but, ultimately, it will have the final say on whether to act or not. All indications to date suggest it is not inclined to do so. This is where we need to strengthen Deputy Michael McGrath's Bill in making that aspect a little stronger. There also needs to be stronger public scrutiny of the Central Bank's role and decision-making on this issue. This means, as my Bill suggested and which I have committed to reintroduce, that it would allow for a greater prompting role for the Minister and a greater responsibility on the Central Bank to explain why it has not acted if it has not used the powers in the legislation. I hope it will be possible to deal with these types of amendments on Committee Stage, if and when that is reached.

I had to laugh at the Minister's comments that this legislation could discourage new entrants into the market. He has overseen entrants leaving the market. His record of attracting new entrants is a complete failure. The idea that the reason new entrants are not entering the market is because of potentially this type of legislation is not on. He also threw out scaremongering comments about the share price and so on and about our facing Armageddon in terms of our shares in the banks. He mentioned the ECB and the potential that we could be fined millions of euro if this passes Second Stage and the dramatics about informing the Ceann Comhairle and that perhaps it is his responsibility. Let me inform the Minister about this. I am sure he knows the number of Stages in legislation. It starts with First Stage, which is the Stage this House passed my Bill in May 2015 and Deputy Michael McGrath's Bill in July 2015. Those Bills have already passed First Stage in the legislative process. There was no mention at that time - this House did not oppose the First Stage - that we could be fined by the ECB. That is bluster from the Minister and his colleagues.

I acknowledge that AIB has reduced its rate. I hope, as some commentators suggested, that it will reduce its rates further and thereby put pressure on other financial institutions to do likewise. We in this House should not have to discuss in 2016 the idea that we would give these powers to the Central Bank and urge it to use them. The financial institutions which are gouging their standard variable rate customers should reduce their rates appropriately. That is what should happen but, unfortunately, that has not happened. The time comes when the Minister has to stop talking, take up the mantle and take action.

The Minister keeps making the same mistakes; he never learns. He thinks that the banks can be trusted, that they can be cajoled into doing the right thing and that they have somehow accepted responsibility for past mistakes but he is wrong every time in his dealing with the banks. That is why we are here almost a year to the day since Fine Gael and the Labour Party rejected my Bill, four and half years since the then Labour Party leader told me that they would deal with the banks.

Sinn Féin will support Deputy Michael McGrath's Bill and we hope all Deputies in this House will do so. I have some concerns about the Bill but those are issues that can be dealt with on Committee Stage. The Minister mentioned one of those issues, namely, that of fair procedures in terms of an appeal. A provision on that was included in my Bill but that could be easily dealt with on Committee Stage. It is not a reason to kick this legislation into touch or to put it back to pre-legislative scrutiny stage.

The issue of this being unconstitutional is a new one the Minister has raised. No Member of this House wants to waste our time or that of the customers, who are under pressure as a result of the rates being applied, by debating and passing legislation that will ultimately be deemed unconstitutional at a later stage or by the President when the legislation goes forward for his signature.

I appeal to the Minister to accept that there is a new reality, that he is part of a minority Government and that the Irish people have spoken and have elected Deputies who made a commitment in the run up to the general election to bring forward this type of legislation. They have supported the Fianna Fáil party and this legislation was part of its pledge. Sinn Féin committed to this legislation in its manifesto and other parties and Independents are supportive of it.

The Minister needs to get with it. He needs to start to strengthen the Bill where he believes it needs to be strengthened. He needs to accept that there is a new reality and that this Dáil is going to move this legislation from Second Stage to Committee Stage. His responsibility, as someone who no longer calls all the shots, is to work with the Opposition and impart to it the legal advice he has received from the Attorney General on the potential pitfalls of the Bill, as well as the advice he has received from the Central Bank on this legislation. He should do this in order that we, as legislators, in dealing with the Bill on the next Stage can make sure these issues are dealt with effectively in order that we will have the best legislation. We need legislation that will stand the test of time and deal with all of the issues it is intended to deal with without risking the consequences, to some of which the Minister has referred, of putting off those who want to enter the new market.

I hope the Minister will engage fully with this new process. I believe the Bill is going to move to Committee Stage. I welcome this. It is always good to have pre-legislative scrutiny, but that issue has not been decided by the Dáil and I do not know how it can deal with it in terms of a Private Members' Bill. If we are flexible enough on Committee Stage and if the Government does not stall it for the maximum period of ten weeks that it can, we will have enough time to deal with all of the issues. If the information the Minister has in his office is imparted to other Members of the House, we can all work together to make sure we have the best possible legislation.

I remind the Minister that he suggested time and again in this House that he would introduce such legislation himself to empower the Central Bank to deal with standard variable interest rates. Surely to God, between the first time the Taoiseach raised the issue - I believe in 2011 - and the last time the Minister raised it in 2015 the Attorney General told him that it was constitutional somewhere along the line. There is a lot of scaremongering. I understand this is probably the first Bill the Government does not want to have introduced that will move to Committee Stage. I appeal to the Minister to work with the rest of us who want this type of legislation on the Statute Book to try to strengthen and improve it where that needs to be done.

I wish to focus on those who are in mortgage distress, as this particular group are at the sharp end of the variable rate rip-off in the State. Mortgage distress is wreaking havoc on families. It has only been dwarfed by the humanitarian crisis of homelessness in the past few years, but, in reality, it is part of the same chaotic Government approach to housing throughout the State. What we have seen is a glacial private sector building industry, a social housing sector in reverse and a hyper-inflated rental market that is increasingly in the hands of vulture markets.

In my county and many others there are people who are migrating westward to try to find houses in their price bracket. They are being excluded from their own communities as a result of what is happening. About 30,000 families in mortgage distress will have spent the whole day struggling to keep their heads above water. Tonight these 30,000 families will go to bed and in the silence of their houses their minds will be wracked until dawn to see how they can stop the train hurtling down the tracks towards them, with the prospect of losing the roof over their heads. They are dealing day in, day out with super-profitable banks that have been pumped full of our tax money and paying rates that are way out of kilter with European comparisons. For many of them, the interest rates for this group of people are the difference between survival and being thrown into the chaos of homelessness.

The Minister talks about the role competition will play to solve this problem. Is he for real when he says this? He created two pillar banks, which now have 85% of the market. Anybody with a rudimentary understanding of economics will know that this is not competition; it is an oligopoly and the opposite to competition. These banks have the supplier power and call the shots every time when it comes to the customer. Stunningly, in the past five years the Government has made no efforts to introduce competition into the sector. It has not looked at the public banking system that we see in Germany. It has disempowered the credit union sector from properly entering the market. The ecosystem of credit the Government has created is being funnelled through these two pillar banks. What we have seen is an over-concentration of supplier power in these two banks. The Minister let the cat out of the bag at the end of his statement. What he is seeking to do is fatten the State banks in order that they can be sold. He is putting the rates and prices of the stocks of the banks above the needs of hundreds of thousands of families who are struggling.

I wish to highlight one sector of the mortgage distress class that the Government has created. It is pretty invisible, unfortunately, in most of the discourse we have had, but its suffering is real. Many separated mothers and some separated fathers are raising families in homes that they are teetering on the edge of losing owing to mortgage distress. Many of these parents have been doing their best to meet their mortgage repayments and keep their children in a home. Their former partners have reneged on all of their responsibilities in the repayment of mortgages. Some of these parents have been valiantly trying to keep the show on the road and actually brokered deals with the banks. However, in spite of this, owing the fact that their former partners are remaining unco-operative, it is likely that they will be thrown out onto the street. In other words, they are being held to ransom by parties to the contract they signed for the mortgage on their house and not being allowed to proceed with paying off the mortgage at a feasible rate. As a result, their families are going to lose out. It is all perfectly legal, but it is absolutely wrong that it should happen and it needs to change. I am not saying it can change in this Bill, but the Minister needs to focus on the issue.

I commend my colleague, Deputy Pearse Doherty, who has done much of the heavy lifting on this issue in the development of his own Bill, although I recognise the similar work done by Deputy Micheal McGrath.

Deputy Mick Barry is sharing his time with Deputy Catherine Martin.

Variable mortgage interest rates in the State are 2% above the European average. In other words, there are states in Europe in which variable mortgage interest rates are more than 2% below the rates charged here. This equates to an extra €167 per month for a household per €100,000 owed on a mortgage. For someone with a €200,000 mortgage, we are talking about a difference of €330 per month. This means real hardship for working-class and middle-class people and a serious deflation of the economy. The Anti-Austerity Alliance-People Before Profit will broadly support the Bill. We will be offering our support for it on the grounds that it will put a certain amount of pressure on the banks to lower their rates. It will give certain increased powers to intervene against some of the actions of the banks. However, in reality, our support for it will be very critical as we believe it falls far short of the measures that need to be taken.

AIB is nearly 100% in State ownership. The stake of the State in Permanent TSB amounts to a clear majority. These banks, as well as others, should be run on the basis of a public service to meet the needs of the people rather than on a for-profit basis.

There is a privatisation agenda, driven by the Government, at work in regard to the banks. The banks are being fattened for the private operators to gain majority control and that is the root cause of a lot of the problems we have. The profit motive in banking is the root cause of many of the problems that are faced here but the Bill refuses to recognise that. Indeed it makes major concessions to that approach by conceding at its heart the idea that a reasonable profit for lenders should be part of the guidelines the Central Bank operates under. It refuses to recognise that the needs of ordinary people are in conflict with the profit motive behind the banks. That is the key weakness of the legislation.

While we will support the Bill, it will be a very critical support. What is needed now are interest rates that can be payable by ordinary people. What is needed are mortgages which are written down where debt is unpayable. What is not needed are court proceedings against huge numbers of mortgage holders. What is absolutely not needed are the repossessions and evictions we have seen across the State in recent times. In order to do that, there must be no privatisation of the banks and a rejection of the profit motive in the running of the banks, which should constitute a public service for the needs of people. That means the banks must be maintained in public ownership and if they are not in public ownership they should be taken back into it.

The boards of the banks must adopt a totally different agenda than the one at play. They must be democratically controlled. They must have democratic public ownership with an agenda of attempting to meet the needs of the people rather than to make the banks ever more profitable. That is what is needed. While we will vote in support of the Bill, it is a critical support and we reserve the right to put down amendments.

The banks are deliberately overcharging homeowners unlucky enough to be stuck with variable rate mortgages. The banks do this because they can. A family with an average mortgage in the State can now lose up to €400 per month or up to €100,000 over the lifetime of a mortgage. This is money unjustifiably taken from ordinary families and stolen from the real economy. The irony is that the real economy and its health are where our economic salvation lies. Those who rob from the real economy rob us all of our futures. This is not backing brave, it is attacking brave. It is hard to credit that the banks which were saved by the taxpayer can now, in the teeth of that rescue, gouge homeowners in such a shocking way. It is shocking and it is immoral but, perhaps most awfully, it is treacherous. How can we explain this to those hundreds of thousands of families who daily strive to pay their home loans in the face of financial challenges? How can we explain to them tonight? They have suffered the extra taxes, reduced incomes and all the hardship required to bail out the banks and now those same banks steal from them. Something must be done and it is our duty in the House to act.

I commend the efforts of Deputy Michael McGrath who has been a constant voice in this area and I agree with him that banks will not act voluntarily and must be forced. Where I take issue, however, is with the Bill before the House. It is drafted with such infirmities that it could never in its current form hope to see the light of day. It would not pass the test of constitutionality and would inevitably be struck down. The banks know this, the civil servants know this and the Government knows this. Let us not give them all a told-you-so moment in the sun. While there is a process on Committee Stage whereby Bills can be amended, this Bill cannot be amended as it is inherently and fundamentally flawed. It would be much better and safer from the perspective of hard-pressed borrowers to start again. What is required is thorough consultation and endeavours to bring the Members of the Thirty-second Dáil together in an unprecedented collaborative approach, coming together as legislators from the get-go. This approach would safeguard against losing valuable time and avoid an imminent and most serious setback when this flawed legislation is inevitably deemed unconstitutional.

In fairness, it is not hard to get a sense of what the Bill seeks to achieve. It seeks to create some objective standard by which a regulator can measure whether banks are overcharging. This is a difficult process when private parties have signed up to private contracts allowing one party later to retrospectively change the rate charged. The genuine effort and the laudable purpose is not achieved by the Bill in the form presented. The Bill as drafted requires the Central Bank to form a conclusion on an assessment which is so broad and vague in its terms on the state of competition in the market that in its current form it makes very little sense. The conclusion the Central Bank must reach is whether a market failure exists. Market failure is defined as a situation in which a lender is charging a variable interest rate which is higher than the Central Bank considers to be reasonably justified. Where the Central Bank came to such a conclusion, it could direct a lender not to charge a variable rate exceeding a rate specified by the Central Bank. The direction could be in regard to loans generally or to categories of loans or even to a particular loan. For example, theoretically the regulator who made the direction could himself direct that his own lender reduce his own personal mortgage rate and the bank would be powerless to challenge such biased direction. He could direct that those who took out loans after 2005 be given a massive reduction while others could be forgotten. In short, he could do whatever he wanted unchecked by any supervisory or other power.

A direction under the Bill could be for an indefinite duration of time and could not be appealed by the lender to the High Court or to any other tribunal. As such, the Bill at its core gives the Central Bank the power to set variable interest rates for the banks. This is a huge power to vest in an organ of the State and would render the banks entirely dependent on the whim of the regulator. It would be unprecedented internationally as it could apply to a single loan and, therefore, to a single borrower just as much as to every loan. It is whatever the Central Bank wants. There is no appeal to the courts. The role of the courts is usurped or ousted and there is no chance to challenge a decision which might be crucial to the survival of an institution. I have further concerns that no mechanism is envisaged by which either side could be heard during an assessment. There is no right to be heard which appears to breach a fundamental principle of natural justice, especially when there is no right of appeal from a decision taken against one. This decision may be one that is crucial to a party.

As much as anyone, I am appalled at what the banks have done to this country and what they continue to do. However, this Bill will not help our cause. There is a duty on all of us in opposition and in government, especially in this era of new politics, to bring forward Bills in a manner which is not populist, rushed or sensationalist. This is particularly the case when considering the precarious voting arithmetic of the new Dáil and, especially, when dealing with emotive and hugely important issues. We have a duty to consider carefully the legislation so that if it were enacted it would not create more delay and mischief than it seeks to redress. The Bill for all its good intentions would if enacted set aside decades of carefully established rights to fair procedures.

To the crowd and those suffering under the burden of excess rates, this may be an immediate issue, but as legislators, we must look further down the road and be cognisant of the unseen consequences.

I ask the Deputy to move the adjournment of the debate.

It is crucial that we get this right from the start. We propose that the Bill in its current form be withdrawn and presented again as soon as possible. Not in six months' time as in the Minister's proposed amendment, as six months is too long and does not acknowledge the urgency of this matter, but as soon as possible once the Bill is capable of passing the basic tests of constitutionality.

Debate adjourned.