Consumer Protection (Regulation of Credit Servicing Firms) Bill 2018: Report and Final Stages [Private Members]

Amendments Nos. 1 and 2 are related and may be discussed together.

I move amendment No. 1:

In page 4, line 8, to delete “determining” and substitute “determination of”.

I will start with some general remarks on the amendments that I hope will accelerate the process. I welcome the opportunity to contribute on Report Stage of this Fianna Fáil Private Members' Bill. The Bill's purpose is to ensure that loan owners who hold legal title to credit, determine the overall strategy for the management and administration of a portfolio of loan agreements or maintain control over key decisions relating to such a portfolio are authorised by the Central Bank and subject to its regulation.

A small number of amendments are to be dealt with, and I will outline them in advance of their individual consideration. Two are concerned with wording changes that have been suggested by the drafter to make the Bill read better. I am happy to propose these. Three are concerned with wording changes to reflect the securitisation regulation. The Central Bank has been consulted to ensure that they do not give rise to any unintended consequence. As far as we can see, the amendments will work to allow completely passive securitisation vehicles to continue operating without authorisation, since all activities will be undertaken by regulated credit servicing firms. It was always the intention to exclude passive securitisation. These amendments will not allow firms that undertake any of the newly regulated activities to structure themselves in such a way as to avoid regulation. If they are undertaking any of the newly regulated activities, they will need authorisation. Generally speaking, the activities will continue to be undertaken by the original lender.

The other amendments are aimed at addressing a concern of the Central Bank that was notified to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach. The issue is that an owner transitionally authorised by making an application to the Central Bank within three months of the commencement of the legislation would be answerable to the Central Bank for the activities of its credit servicing firm. The credit servicing firm in this case would no longer need to be regulated in its own right. Without the amendments proposed, this may be prior to the transitionally authorised owner having a full presence in Ireland that can be pursued by the Central Bank for any breach. The amendments will mean that the transitional authorisation only applies to the newly regulated activities and only for as long as the other activities are undertaken by a regulated credit servicing firm.

Amendments Nos. 1 and 2 are drafting amendments aimed at ensuring consistency in the structure of the list of activities of credit servicing firms.

Before allowing other Members to speak on these amendments, it is important that I put the Bill in context. From our party's point of view, there has been an obvious gap in legislation for a number of years in that we have witnessed banks increasingly selling on loan portfolios to so-called vulture funds that have been unregulated in the Irish market up until now. The credit servicing firm, which is the intermediary or middle man, is fully regulated by the Central Bank. However, it is essentially acting as a conduit, passing messages backwards and forwards, with all of the important decisions concerning the future of the mortgage, changing the interest rate, entering into a restructuring arrangement and taking enforcement proceedings made by the unregulated loan owner or vulture fund. The same applies in respect of a growing number of SME or business loans, and farmers throughout the country are finding that their loans, taken out in good faith from retail banks, are being sold on to these vulture funds.

It is important that the Central Bank, as the regulator, has the statutory power to have direct contact with these vulture funds, inspect them, turn up at their offices, investigate them if necessary and take enforcement action against them if so required. It has been evident to us for some time that these funds are making all of the important decisions. They are sitting at the top of the pyramid, as such. People find it incredibly difficult to deal with them because people are only allowed to deal with the intermediary, that being, the credit servicing agent. They are not allowed to look the person in the vulture fund in the eye. They are not allowed to sit down face to face and have direct engagement to see if there is a way of restructuring the loan, thereby preventing it from going down the adversarial legal enforcement route. Bringing these funds fully within the ambit of the regulatory environment will facilitate direct contact between them and borrowers, which is critical.

I look forward to discussing the amendments and, I hope, dealing with them in an efficient way. We look forward to agreement from across the House on the amendments and the provisions of the Bill.

I welcome the Bill and commend Deputy Michael McGrath. Vulture funds are a nightmare for many people. Those of us who have been representing people in mortgage difficulties have been going to middle men, with the issue then having to go on to the people who bought out the loans. In the past week, a report that the Government had mentioned claimed that the loans' owners had ticked all the boxes. They had. Asset Services, formerly with Capita, would ring or send the mortgage holder a letter and that person would then go back and forth and make proposals. At the end of the day, though, and while all of the boxes were ticked, the people who bought out the loans still called the shots.

Deputy Michael McGrath might clarify something that he mentioned. He stated that people would have direct contact with the person who owned the loan. Does that mean that the likes of Promontory will have to meet face to face the person who owes the debt? There is only one problem with that. There is a medicine, I will call it, whereby people earning under a certain threshold are eligible for the mortgage-to-rent scheme, but people in middle Ireland who are struggling do not qualify for it even though they tick all of the other boxes. Where farmers and SMEs are concerned, their loans' owners are inclined to try to drive in the boot. Someone who earns over €25,000 and owns a house, even if it is a family home, does not qualify for the mortgage-to-rent scheme.

The Minister needs to be aware of some worrying issues that are coming down the line. Even where people are eligible for the mortgage-to-rent scheme, councils in some parts of the country have sent letters to the Housing Agency claiming that their houses are too rural. That is an indictment of those councils. Some cases have been sorted now.

I ask that the Department would send an instruction to local authorities to the effect that if people are eligible for the mortgage-to-rent scheme, they are eligible regardless of whether the property is up a boreen or in the middle of a town or city.

I welcome what Deputy Michael McGrath has done with this legislation and ask him to clarify the position on the issue I raised.

I welcome the Bill and commend Deputy Michael McGrath on bringing it to this stage. We had a very worthwhile debate on Committee Stage about all of the issues pertaining to the regulation of vulture funds. The provisions of the Bill will only take effect from the date of enactment but we must recognise the fact that a considerable number of loans have already been transferred to vulture funds. The vulture funds have refused to meet the individuals and businesses concerned to reach a settlement on their loans and they continue to avoid transparency vis-à-vis the Oireachtas Committee on Finance, Public Expenditure and Reform. The funds will not come before committees of this House. They are barely replying to invitations to come before the finance committee to discuss their intentions in this country and the negative impact they are having on Irish society.

I would like to see as part of the expectation of Government with regard to these vulture funds that they would come here and explain their case and set out their plans for these loans for the coming years. To date, all of the evidence suggests that vulture funds have no interest in settlements. They refuse to talk about settlements or to engage with their customers. They pay scant regard to any protocol that is in place in terms of facilitating customers who are trying to renegotiate or settle. The banks have to be held to account because of the fact that they have encouraged customers with distressed mortgages or loans to restructure them. In most of those cases, one will find a clause in the contract saying that the restructuring will be reviewed in three or six months. Within the three or six month period, the banks then offload those loans to vulture funds, and once they do that, the funds can do what they like with loan. Once the grace period of three or six months expires, the vulture funds can introduce new interest rates, new conditions and so on and they do not seem to care. There is nothing to regulate them. If this Bill regulates the vulture funds to the extent that the banks are regulated, it will represent a very positive step forward. If we can bring the vulture funds before the committees of this House, as we should be able to do, that will also be a step forward, as will be getting them to agree to engage with their customers, current and future.

In reality, we should stop the transfer of distressed loans to vulture funds. We should insist that the banks take each individual case and work out a solution for that business, individual or family. The European Central Bank, Mr. Mario Draghi, and the Central Bank in Ireland have all said that they are not forcing the banks here to sell loans to vulture funds. Indeed, Mr. Draghi said that this is a social policy issue. He said that we should address the consequences of distressed mortgages with some form of social policy. Organisations such as David Hall's iCare should be supported by the Government. The banks have given a sample portfolio of loans to Mr. Hall's organisation and he has proved that those who are caught in the middle, that is, those who are earning too much to qualify for local authority housing, can be put on a sustainable mortgage or a differential rent to allow them to stay in their home. That should be pursued by Government. There should be a social element to the policy of restructuring mortgages and keeping people in their homes. If the Government was to pursue that policy, it would not have to regulate the vulture funds to the extent envisaged in this Bill. The European Union would prefer that vulture funds were not regulated because they are essential in a market that finds itself in the type of distress and collapse that the Irish market experienced.

There is a fundamental contradiction here and I am happy that the Government is supporting Deputy McGrath's Bill and has a timeframe for its implementation. However, I would encourage the Government to go further with this and to introduce its own legislation if necessary. I introduced the Affordable Housing and Fair Mortgage Bill previously, elements of which could be implemented by Government. I encourage the Department to look at that Bill again to see if we can prevent the sale of distressed mortgages to vulture funds. We should provide for the sale of such loans to voluntary housing agencies or housing co-operatives that could restructure them and possibly put people on a differential rent.

The main problem with all of this is the fact that the current crop of young bankers are seeing a very sharp side to banking through these vulture funds. The funds have no desire to comply with the rules and their aim is to make money at all costs. We will have the job of re-educating bankers in the new lending culture that will be necessary in banks in the future. We have already had a report on that.

I encourage the Minister to look at this issue in the round. He should accept this legislation, pass it and then go back to the Department and work out what will be done for the future. AIB is lining up, as is Permanent TSB and no doubt Bank of Ireland and others will follow. There are many thousands of people who are in mortgage distress and we could do so much for them. I have often seen cases in court of families defending themselves, trying to keep a roof over their heads. They are up against a plethora of bankers, solicitors and barristers. We are damaging families and damaging the family unit, with children watching their parents trying to fight for their family home with no support from anyone.

I commend Deputy Michael McGrath on the Bill and thank the Government for taking it on board and ensuring that it will become law without delay. The current situation is that our banking sector has been repaired to a large extent and the real issue now is dealing with the fallout from previous times in the form of distressed loans. We must bear in mind that when we talk about distressed loans we are also talking about stressed families and individuals. We are talking about people who see no hope. The idea that we would just cut them adrift and leave them to the mercy of unregulated vulture funds beggars belief. I was always very concerned when I saw the large-scale sale of loans to these funds because they were unregulated, meaning that we were unable to guarantee that they would at least comply with the code of conduct on mortgage arrears. That in itself put enormous pressure on individuals.

It is hard to explain to an individual why his or her loan can be sold for a knock-down price to a vulture fund but the same individual cannot engage with the lender directly to restructure the loan and write off a certain amount. What we have effectively done is allowed vulture funds to profiteer on both the individual and the collective. Vulture funds are just a quick fix solution. The banks have impaired balance sheets and do not want to have to retain certain ratios of capital for bad loans. They want to move such loans off their balance sheets as quickly as possible and that is what is going on. The notion that the banks will trawl through the files and assess every individual loan case by case is fanciful. The banks put large swathes of loans into a single book and then sell it off. That is a major issue which must be addressed.

When Mr. Mario Draghi appeared before the finance committee he said quite clearly that we are operating in a quasi-monopoly situation here when it comes to banking.

In other words, if a customer has a problem with one bank, he or she cannot go to another. One cannot put one's file under one's arm and walk down The Mall in Cork, or some other financial street anywhere in Ireland, and go to another bank. Customers are enslaved to the banks they are with. It is difficult for people to access credit if there is any hint of their being in distress. They are slaves to their particular banks. This is a major issue that has to be addressed in order to try and alleviate the burden on individuals.

The Minister and the Government often say that, because there are so many distressed loans on the balance sheets of the pillar banks, mortgage rates are higher here than in the rest of the eurozone. The fact is that interest rates are twice what they are in the remainder of the eurozone and the reason for that is simply because our banks are gouging the Irish economy. That is what they are doing. Day in, day out, they are gouging out of the pockets of mortgage holders and small and medium-sized businesses. Interest rates of 3.3% or 3.4% apply to mortgages in Ireland. In the eurozone, that figure would be 1.7% or 1.72%. That is the reality. The idea that the banks are doing us a favour in how they conduct their affairs simply does not stack up when it is analysed. The President of the European Central Bank, Mario Draghi, said it in the most diplomatic way possible - we are operating a quasi-monopoly in this country when it comes to banking. We saved AIB and we threw a lifeline to Bank of Ireland through the guarantee and the injection of a massive amount of capital. This is what we get in return.

Now that the banks have been stabilised and there is no direct threat to them - and therefore no direct threat to the economy - it is time that they accepted their responsibilities to provide reasonable credit at reasonable rates in respect of mortgages and for small and medium-sized businesses. Any analysis, even by the credit review group that sits in the Department of Business, Enterprise and Innovation, will show that the banks are still pretending that they are lending. They are pretending to the Minister and the rest of us. All they are doing is restructuring loans and pretending that it is new lending. That, simply, is not helping the Irish economy at a time when it needs credit for small and medium-sized businesses to grow and continue to grow.

A lot of work needs to be done. Deputy Michael McGrath's proposals, and the Bill when enacted, will address the issue of compliance and regulation of same. The broader issue of banking in this country must be addressed and our pillar banks owe it to the people and this Parliament to ensure that there are fair lending practices and that they are not operating a monopoly and gouging the Irish economy and borrowers.

I thank Deputies Kelleher, Fitzmaurice and McGuinness for the additional points they raised. I will deal with some of them, as well as the matters that Deputy Michael McGrath raised.

Deputy Fitzmaurice raised a particular point on mortgage to rent and the participation of certain forms of homes within it. I was not aware of the issue he raised and I will follow up to see can I help with it. I would have thought that the location of the home should not be the issue in deciding whether a home can participate in mortgage to rent, so I am surprised by what the Deputy said. I will follow up on the matter.

There was an inference, among the different points that were put to me, that nothing is happening. When Deputy Kelleher was making this point, I accessed the Insolvency Service of Ireland's annual report to get some statistics about what is happening. The latter is the organisation that has been put in place to help our citizens who are coping with bad debt which is putting them and their families under huge strain, something that we, as a society, say is not acceptable. In the context of its most recent annual report, the Insolvency Service of Ireland dealt with bad and distressed debt of €2.18 billion. That was the scale of engagement they had. Interestingly, 87% of the personal insolvency agreements reached related to mortgages and 90% of our citizens who entered into personal insolvency arrangements remained in their homes. There is a route here for citizens who are facing exceptional stress and difficulty reaching resolutions that can allow them to keep their homes. The figures I have just read out provide an indication of what has been achieved. As stated earlier, if one looks at all of the different interventions that have been put in place, over 100,000 mortgages restructured, the amount of mortgage arrears in the country has decreased. The level of difficulty that certain forms of mortgages are facing has decreased as well. To date, a significant amount has been done to deal with this issue.

As Deputy McGuinness knows, because he has heard me say this before, I do not have the ability to intervene in individual commercial decisions that banks make. I know the frustration that can cause individuals who get caught up in this form of worry because I have dealt with constituents and citizens who are worried about the future. I have experienced the same kind of anxiety that Deputy McGuinness has, when people and citizens come to his clinic with concerns about their homes. No Government and no Minister for Finance, given all that we have gone through, can get themselves into a place where they intervene in individual decisions that banks make. We have, as successive Dáileanna, made the decision that the regulation of banks has to sit with the Central Bank, the regulator and organisations like the Insolvency Service of Ireland to deal with the kind of social issues that can emerge. Not only from a policy point of view is it something that should not happen but, from a legal point of view, because of the stakes that we, as a people, have in these banks - under the relationship agreement and the framework agreement that was made between the Government and the banks in which we have shares, and at the insistence of the European Commission - I am not allowed to be involved in individual commercial decisions that are made.

Deputy McGuinness made the point to me regarding what Mario Draghi said about the European Central Bank not forcing any individual bank to be involved in loan book sales. What the European Central Bank does is set the targets. It does not say much about how those targets are delivered. Of course, I then find myself in this House having to make the case and offer a degree of support for decisions that banks make to pursue objectives that are set by the European Central Bank. While President Draghi and the European Central Bank do not say how objectives are reached, they are pretty clear that these objectives need to be reached. The Deputy will have experienced at least a taste of this when the chief executives of the different banks have been before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, as they are regularly. The committee asks them why they have to meet particular objectives and they are clear, because this is what the regulator wants them to do. It wants these objectives delivered.

Deputy Kelleher made the point that our banks are now stabilised and do not have the kind of difficulty that we all hope never comes back again. If I can emphasise one additional message here this evening, it is that even if they are stabilised, the regulatory pressure they are under to achieve new goals is not lifting, I am afraid. As the reality of what banking union means across Europe becomes clearer to us, two things will happen. First, the level of support that will be available by Irish banks participating in the banking union will become clearer. Second, the requirements that are on our banks to meet the targets of being inside the banking union are also going to become clearer. While it is difficult, it is really in our interests, given all we have gone through, to have Irish banks participating in the heart of a banking union.

Deputy McGuinness is right that it is a social issue in relation to what can happen to citizens who find themselves in this difficulty. I am as aware of that as he is, but that is why we have organisations like the Insolvency Service of Ireland. That is why it is issuing vouchers to help citizens avail of services.

That is why it is running advertising campaigns to help people who are in difficulty. As I mentioned earlier this morning in the Dáil, many hours ago, more than 100,000 mortgages have been restructured and we have seen significant progress on the level of mortgage arrears in our country.

I will conclude on the point Deputy Kelleher raised in respect of the level of competition in our banking sector and the costs in our mortgage sector. I want to see more competition in the existing banks in our economy. I want to see greater encouragement for customers to switch accounts and to move from bank to bank. I want to see the total level of competition in the banking sector in Ireland increase. It will be a slow journey to get to that point but it is in the interests of everybody that the journey be completed.

The Deputy also made a point about the level of credit. He is right in his conclusion, but the factors affecting the level of credit and its pricing are more complicated than may have been suggested so far. It is only recently that we have seen the amount of credit being issued by Irish banks begin to exceed the amount of debt being paid off. That is only happening at this point in our economy and we need to see that change. While our banks are making more credit available, we need to see them being able to increase that credit in a sustainable way in order to meet the needs of Irish small and medium enterprises in particular.

Finally, there are many factors behind mortgage rates being so high in Ireland. I want to ensure the right social balance in supporting citizens who find themselves in difficulty but that, of itself, has consequences. The mortgage tracker scandal has consequences for the performance of banks. The low number of banks, to which the Deputy referred, is also a core factor with regard to the lack of competition. I want to see all of those things change.

I am just responding to the questions the Deputies have put to me.

I agree. I am giving latitude because of the importance of the issue.

I thank the Acting Chairman. As I have said, I have met the commitments I offered to Deputy Michael McGrath earlier in the year. Extending the regulatory reach of the Central Bank to the fundamental owners of the debt can make a difference. I remind the House that the credit servicing firms themselves have always been regulated here in Ireland.

I am sure the Acting Chairman does not want this to develop into a broad discussion but I want to briefly address a few of the points that have been made. First, the Minister referenced the annual report of the Insolvency Service of Ireland. If he looks at the statistics we have so far for the lifetime of the service he will see that there is a problem when it comes to getting proposals approved and over the line.

To take the figures for personal insolvency arrangements, which is the form that involves secured debt, there was a "Yes" vote in respect of 51% of agreements between the fourth quarter of 2014 and the third quarter of 2018. From almost five years of data we see that there is a "Yes" vote in 51% of cases. There is a "No" vote in more than 39% of cases and in the case of approximately 10% protective certificates expired. The "Yes" vote has not been provided in 49% of cases. These decisions follow an exhaustive process whereby the personal insolvency practitioner, PIP, as the independent person who does not act for the borrower or the lender, looks at the case in full and makes a recommendation. In half of those cases there is a failure to deliver a "Yes" vote. That is a point we have been making. There is an issue there about the veto which is in place.

There is a mechanism under section 115A of the Personal Insolvency Act 2012 to appeal to the insolvency court. That is not working. It can take a year or more for cases to come through and in the meantime there is immense pressure on the families concerned who are caught up in that situation. I will talk to the Minister again about how that issue needs to be looked at but in 50% of cases there is a failure to deliver a "Yes" vote on proposals coming from an independent professional who is qualified to deal with them.

On the issue of non-performing loans, NPLs, there is undoubtedly pressure from Europe. It comes from the Single Supervisory Mechanism, SSM, and from its agent here in the form of the Central Bank. When I went to Frankfurt with the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to meet with the chairperson of the SSM, Danièle Nouy, I told her that it was fine for her to say that she is not advising any individual bank to sell loan portfolios, but that she is also telling them that they must reduce their NPL levels to the European average of 4% to 5%. She shot me down straight away. She said that she had not set any target for the banks to reach in reducing their NPL levels. She said that to us openly.

I know what it is going on. I know the pressure is undoubtedly there but she explicitly told members of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach that no target or figure, including the European norm, had been set to which the banks were to reduce their level of NPLs nor had banks been advised to sell loan portfolios. It is important to put that on the record because that is what was said. There were many people in the room who will confirm that.

It is also important to acknowledge that the farm organisations strongly support this legislation. They have come before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach and have explained their frustration at trying to deal with these vulture funds on behalf of farmers to try to get restructuring agreements over the line.

On the issue of whom the contact is going to be with, it is worth pointing out that the benefit to a fund of appointing a credit servicing firm is that it can avoid regulation and maintain the status of being an unregulated loan owner. When this legislation becomes law that will no longer be the case because the loan owners, the people ultimately making the decisions on the strategy and the portfolio, will be required to be regulated. That will involve the imposition of requirements by the Central Bank. Becoming a regulated entity is an onerous process. The Central Bank will set certain standards and require certain things to be done to ensure that regulation is fully put in place and vindicated in that respect.

It is worth acknowledging what Deputy McGuinness has said as Chairman of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. That committee went to great lengths to get these funds before the committee to answer straightforward questions. They would have been given a fair hearing but time and again they have refused point blank to come before the committee to be questioned about their business models, about how they treat customers and about why they wish to remain unregulated. I am thankful that we are at least dealing with that last issue, but it is important to put that on the record as well.

When the banks were in trouble they came to the Minister and Government of the time and were bailed out. They obviously told lies about how they were fixed at that time. There might have been a different complexion on the matter had the Minister known everything, but the banks were saved and now, when people have to be saved, they are telling untruths by saying that this has to be done for Europe. We now know that they do not and that there is a mechanism whereby they can park an awful lot of this debt, work down through it and have their balance sheets right for Europe while at the same time helping the people in Ireland who are affected by these distressed mortgages. There is a lot more that can be done but they just will not do it.

Deputy Kelleher mentioned interest rates. Following the recent report on community banking, why would the Minister not hear of introducing the model? Sparkasse in Germany is offering tracker mortgages at 1.3% or 1.5% but we cannot do it here. The very same banks are making €1.5 billion a year and do not pay tax. Some of these other fellows have charitable status. It just does not make sense. It beggars belief that the Government will not take on the banks. I am not asking the Minister to interfere in their business; I am asking him to set out the demand that they exercise some sort of social conscience around the remaining mortgages currently in the banks to prevent people from being dragged through court, losing their homes and further complicating local authority housing lists.

There is a social consequence and cost here that no one seems to be measuring. I encourage the Minister to take that step, bring the banks in and force them to a position where they acknowledge all of what was done for them and for them to do something for the country in return.

Many businesses that broke down during the bad times were cited on the Credit Bureau and will not get money from banks for seven years, so they cannot get loans to rescue a viable business and keep it going, yet we have credit unions with €7 billion that want to have a role but they are regulated by a Central Bank that is protecting the main banks. That does not make sense. If the Minister were to exercise some form of authority over them and talk to them they might release the money into the economy and we might get houses built and businesses at local level supported by a credit union movement or community banking movement that understands what local economies are all about. We might have more competition and less of the protectionism that is going on between the banks. Is it not amazing that they all entered into the tracker mortgage scandal and adjusted their books around the same time? The Minister says they have to rebuild their balance sheets after that but they are only giving back to the people the money they stole from them. Now they have to be dragged before committees where they started by telling us that there were 4,000 affected customers but that went up to 17,000. They could not even count the numbers they had tricked and conned out of their money. It is only the customers' money that is being given back to them. I would give no quarter to the banks. They are not treating the Minister fairly and they are not being honest with the State, once again.

I thank the Minister for the clarification. I will forward him an email on what some local authorities are doing. The one thing that we have not addressed is the situation I referred to in middle Ireland. There is nothing available if one is above the threshold. The banks try to tick boxes but after that there is no solution for many of those people. Ironically, I got a text while we were talking about a 70 year old who owes €16,000 and the bank has said the person must get out of the house as there is no provision for people when they are over 70.

People could owe €200,000 and a vulture fund might have bought the property for €110,000 or even as little as €80,000. Those people would fully function in Ireland at €150,000 but the problem is that one cannot get one's hands on money, as Deputy McGuinness pointed out. It is like someone who has a disease; the other banks do not want to touch such a person no matter how much one tries. We must ensure we introduce measures to help people. If someone makes a settlement with a bank or vulture fund that is recorded. If one looks for money one hears everything back and that puts a wobble on things when it should not because if one gets loan clearance then one has a chance of making money.

I welcome the Bill and the input of Deputy Michael McGrath and the Minister, but we have other parts of the jigsaw to try to put together if we are to bring people back to live without fear. Day in and day out we see the fear and trauma, the break-up of families and hardship. Unfortunately, sometimes we see worse than that.

I have allowed latitude so as to ensure as much information as possible is made available to both sides. The Minister is well aware from previous performances that I went into this issue myself. I ask Members to bear in mind that we are to bring matters to a conclusion by 8 p.m. I say that on the basis that interaction is promised by the Minister with the Opposition. I would like to be involved in that myself.

I will make two final points because the amendments are technical in nature and I hope we will be able to pass them quickly. I do not want my comments to be misinterpreted. What Deputy McGuinness just said about the tracker mortgage issue is correct; the money that was being returned to people was their money, full stop, end of story. The fact is that more than €500 million has been returned to people, but it was their money in the first place and whatever the consequences are for the return of that money on the balance sheet of banks pales into insignificance beside the fact that those people should not have lost their money in the first place. I am really clear on that.

I will conclude on this second point which I wish to emphasise. In some of our banks we have one of the highest levels of non-performing loans within the eurozone. That is despite the fact that we have an economy that has been growing very quickly in recent years. One bank in particular has a level of non-performing loans that is way higher than the European average, and even though, on average, we have made significant progress in reducing the level of non-performing loans in this country, it is still high in comparison with other countries despite the fact that we have a recovering jobs market, income is recovering and the economy, as we all know, in recent years has performed really well. That has consequences for our banks in terms of them being able to do all the other things Deputies have raised this evening. Ultimately, we do need to find a way that is socially acceptable in which that level of risk can be reduced because if the country ever finds itself in further difficulty, that level of risk will be a fault line. I will leave it at that.

Amendment agreed to.

I move amendment No. 2:

In page 4, line 10, to delete “maintaining” and substitute “maintenance of”.

Amendment agreed to.

Amendment No. 3 forms a composite proposal with amendment No. 7 and they will be discussed together. Is that agreed? Agreed.

I move amendment No. 3:

In page 4, lines 24 to 26, to delete all words from and including “or” in line 24 down to and including line 26 and substitute the following:

“(c) a credit servicing firm taken to be authorised to carry on the business of a credit servicing firm by virtue of subsection (4), or

(d) a credit servicing firm referred to in paragraph (b) of section 34FA(1) that undertakes, on behalf of a person referred to in the said section 34FA, credit servicing within the meaning of subparagraphs (i), (ii) and (iii)(I) to (VIII) of paragraph (b) and paragraph (c) of the definition of ‘credit servicing’ in section 28(1);”,”.

As I mentioned earlier, these amendments are aimed at addressing a concern of the Central Bank which was notified to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach. The amendments ensure that an owner who is taken to be authorised on a transitional basis will still have to continue to employ an authorised credit servicing firm to undertake the existing regulated activities. The owner will be transitionally authorised to undertake the newly regulated activities provided for in the Bill: in paragraph (a) holding the legal title to credit granted under the credit agreement; in paragraph (b)(iii)(IX) determination of the overall strategy for the management and administration of a portfolio of credit agreements; and under paragraph (b)(iii)(X) maintenance of control over key decisions relating to such portfolio.

The existing authorised credit servicing firm will continue to undertake the other activities, that is, under subparagraphs (i), (ii) and (iii)(I) to (VIII) of paragraph (b) and paragraph (c) of the definition of "credit servicing". I do not propose to list all of those out but they are the activities that are currently regulated by the Central Bank.

The change in amendment No. 3 adds to the definition of "credit servicing firm" to include a firm that is undertaking the current activities on behalf of a transitionally authorised firm. That is needed because the definition of a "credit servicing firm" means a person who undertakes credit servicing other than on behalf of a regulated financial service provider. The new owner will be a transitionally authorised financial services provider, so we need to make sure that the credit servicing firm operating on their behalf still needs authorisation.

Under the new paragraph (b) of section 34FA inserted by amendment No. 7, the owner can only get the transitional authorisation provided these activities are being undertaken by an authorised credit servicing firm. The owner will be subject to the supervision of the Central Bank in respect of the new activities and the bank will be able to impose administrative sanctions on the owner, as it can on any regulated entity.

In essence, these two amendment are to ensure that during the transitional provisions there are no gaps in the regulation.

That is the key measure. The idea is that during the transition period a fund will be regulated for the new functions that are covered. These include holding the legal title for determining the overall strategy for the management and administration of the portfolio and maintaining control over key decisions relating to the portfolio. During the transition, the fund will be regulated for those functions. However, until the transition is over and the fund becomes fully regulated in accordance with the full set of provisions under the credit servicing legislation, the existing agent has to continue to be regulated and authorised in full. The idea is to ensure there is no gap.

I wish to be clear with people whose loans have already been sold by banks to vulture funds: these provisions will apply. They will be regulated. In that respect it is retrospective, because it deals with loans already transferred. The loan owners will now be required to become transitionally authorised and then, ultimately, fully authorised.

Amendment agreed to.

Amendments Nos. 4 to 6, inclusive, are related and may be discussed together by agreement.

I move amendment No. 4:

In page 4, line 36, after “interest” to insert “in the securitisation”.

As I mentioned earlier, these are technical amendments concerned with wording changes to reflect the securitisation regulation. The Central Bank has been consulted to ensure that they do not give rise to unintended consequences.

Amendment No. 4 will add the words "in the securitisation" to the term "retain on an ongoing basis a material net economic interest of not less than 5 per cent", so that it will now read "retain on an ongoing basis a material net economic interest in the securitisation of not less than 5 per cent". This is so that the term will reflect the securitisation regulation.

Amendment No. 5 will add the term "original lender" as another term that will have the same meaning as in the securitisation regulation.

Amendment No. 6 specifies that the owner, sponsor or original lender of the securitisation is required to retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%. The previous wording only referred to "owner" while the revised wording reflects the regulation. These amendments are to give effect to our intention from the beginning, which has been to ensure that passive securitisation was not captured in any way by the new regulatory regime. As the Minister of State at the Department of Finance, Deputy D'Arcy, will know well given his responsibility for financial services, securitisation is a bona fide activity and an important part of the financial services sector in Ireland. It was never intended to capture this activity. Where it happens and involves a bank, for example, then the customer relationship would remain with the bank or financial institution. The provision is giving effect to that intention.

I will thank those who need to be thanked later on but I wish to highlight that this has been done in consultation with the Department of Finance and the Central Bank.

Amendment agreed to.

I move amendment No. 5:

In page 5, line 9, to delete “and ‘sponsor’ ” and substitute “ ‘sponsor’ and ‘original lender’ ”.

Amendment agreed to.

I move amendment No. 6:

In page 5, to delete lines 32 to 34 and substitute the following:

“(c) the originator, sponsor or original lender of the securitisation is required to retain on an ongoing basis a material net economic interest in the securitisation of not less than 5 per cent;”,”.

Amendment agreed to.

I move amendment No. 7:

In page 6, lines 10 to 16, to delete all words from and including “firm” in line 10 down to and including line 16 and substitute the following:

“firm, in so far as that business relates to credit servicing within the meaning of paragraph (a), (b)(iii)(IX) or (b)(iii)(X), as the case may be, of the definition of ‘credit servicing’ in section 28(1) (in this subsection referred to as ‘the specified matters’), immediately before the coming into operation of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, is taken to be authorised to carry on the business of a credit servicing firm, in so far as that business relates to the specified matters, after such coming into operation until the Bank has granted or refused authorisation to the person, provided that—

(a) the person applies to the Bank under section 30 for authorisation no later than 3 months after that coming into operation, and

(b) a credit servicing firm undertakes, on behalf of that person, credit servicing within the meaning of subparagraphs (i), (ii) and (iii)(I) to (VIII) of paragraph (b) and paragraph (c) of the definition of ‘credit servicing’ in section 28(1).”.

Amendment agreed to.
Bill, as amended, received for final consideration.
Question proposed: "That the Bill do now pass."

I will be brief. I want to put on record our thanks to the Minister for facilitating and supporting the legislation and for making the process as straightforward and efficient as possible. I thank in particular the officials within the Department of Finance. They did a great deal of work on this Bill. They had significant contact with the Central Bank. I know many work-hours went into the Bill. I deeply appreciate the efforts that have been put in. I also wish to acknowledge the anticipated support from the other strands of the political spectrum.

We are not presenting this Bill for more than what it is. It is not a silver bullet. It will not solve every issue of mortgage arrears or the issues of small and medium-sized enterprises that are struggling with excessive debt. However, it will for the first time ensure that the ultimate owners of these loans can be and will be directly regulated by the statutory regulator in our country, the Central Bank of Ireland. That is an important step.

It is important to put on record as well that if there are attempts to circumvent this legislation – we are not naive – we maintain it has been crafted a way that will address that. Let us suppose there is a pyramid of a certain structure with a fund at the top of the structure. Organisations can set up whatever entities they want as part of that structure. However, if the ultimate decisions are being made and the overall strategy for the future of a given loan portfolio is being determined at the top of that pyramid – it will be because of the business model that these companies operate – then all the elements will be captured by this legislation and the new regulatory regime. That is an important point to put on the record.

Many other issues need to be dealt with, including those raised at the beginning of Report Stage around interest rates. The Minister knows my thoughts and ideas on these matters and we will be discussing them further along with the issues around the Insolvency Service of Ireland. We are not blind to the ingredients that feed in to the cost of credit in Ireland, but there are ways of tackling the matter in a responsible way and in a way that will seek to bring about better value for customers. We saw only yesterday the latest report from the Central Bank. It shows the direction of profitability of banks in Ireland, and the direction is clear. We see the direction of the net interest margin, which has been growing considerably in recent years as we have emerged from the crisis. Further interventions are necessary. We want to see more competition in the market. That would be welcome. There are some emerging signs that competition will come.

We welcome the anticipated passage of this legislation. We appeal to the Government to generously provide Government time in the Seanad to ensure the Bill can complete its journey in the Seanad efficiently. We would like to see this Bill signed into law before Christmas so that for the first time, these loan owners and vulture funds will now be directly regulated and within the reach of the Central Bank. The Central Bank will be able to knock on their door, ask questions, demand answers, hold them to account and insist on transparency in how they do their business. That is an important step and a good day's work.

I wish to thank my officials, who have put considerable work into co-operating with Deputy Michael McGrath on this Bill.

I am keen to emphasise one objective we have not touched on tonight. We have all talked about the different objectives that Deputies have relating to Irish banks. I have another objective that has not been mentioned this evening. I want the Irish taxpayers' money back. I am struck by the degree to which the fact that we have a high share of ownership in the Irish banking system has become normalised. Over time, the Irish taxpayer will need that money back. A considerable amount of money has been invested. We need to look at the different policy objectives that people have and the balance between doing the right thing by our society and ensuring that we have banks that are able to meet the investment and credit needs of SMEs and families. At the back of all of this is the fact that we are still majority shareholders in two of our banks and a minority shareholder in another bank. It is not in the long-term interests of our State, I believe, that we continue to be such a significant owner of each of these three banks. Over time, and at the right point, I believe it is in the interest of citizens that this interest be reduced and that we get our money back.

I wish to comment briefly. On behalf of Fianna Fáil, I thank Deputy Michael McGrath for persisting with this Bill.

I acknowledge that the Government is supporting the Bill, which is very important. While Fianna Fáíl has taken a lot of stick for signing up to a confidence and supply agreement, what is happening here tonight shows that it can and should work both ways.

There should be more than just this example. We should get a little bit more respect from the other side of the House.

(Interruptions).

That is a very important issue, and I want to recognise it. Many things have been said here tonight. Deputy McGuinness spoke about distressed mortgages, as did other Members. There are many distressed people out there, many of whom are on the verge of suicide. I thank Deputy Michael McGrath on behalf of the many hundreds of people whose mortgages will, hopefully, be resolved as a result of our actions here tonight. There are decent, honest people out there. Some 99% of Irish people are decent, honest people. Some of them got in over their heads, unfortunately, because of the price of property. That was not their fault, but they are trying to cope. I am aware of people who do not even know who owns their mortgages at this point in time. Some people are trying to deal with vulture funds with personal insolvency practitioners and solicitors. The vulture funds are not responding to the representatives of these people, and we all know that the people themselves cannot correspond with them because the funds will not speak to them either. In the meantime these funds are charging 7% interest on overdrawn mortgages. People defaulted somewhere along the line and the funds are charging them whatever they like. In the meantime property prices are going up as well. People are being attacked from all sides, and the banks do not care. There is no respect whatsoever for the people who have suffered so much, despite the fact that the banks were all bailed out, as the Minister pointed out. We will be paying the price for a long time to come. I hope we get the money back from the banks because we deserve to get it back.

Question put and agreed to.

Does that just cover the Bill or does it cover the confidence and supply agreement as well?