“That Dáil Éireann:
— the Programme for a Partnership Government commits to providing greater protection for mortgage holders, tenants and small and medium-sized enterprises whose loans have been transferred to non-regulated entities (‘vulture funds’);
— chapter 8 of the Central Bank of Ireland’s Consumer Protection Code 2012 includes a requirement that ‘where an account is in arrears a regulated entity must seek to agree an approach (whether with a personal consumer or through a third party nominated by the personal consumer) that will assist the personal consumer in resolving the arrears’;
— Article 3 of the European Union’s directive on unfair terms in consumer contracts provides that: ‘A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer’;
— the decision by Allied Irish Bank (AIB) to sell a significant volume of non-performing buy-to-let loans to Cerberus, involving buy-to-let loans with an approximate value of €1 billion involving at least 2,200 customers;
— the decision by AIB was preceded by the sale of 6,139 loans linked to family homes by Permanent TSB, despite such accounts meeting the terms of their agreed arrangements;
— research conducted by Free Legal Advice Centres (FLAC) indicates that there are currently 111,504 restructures of principal dwelling house mortgages in place, of which more than 27,000 are split mortgages, more than 36,000 are capitalisation of arrears arrangements, and more than 13,000 are term-extensions; and
— the most recent statistical mortgage arrears report from the Central Bank of Ireland, to the end of the last quarter of 2018, concerning principal dwelling houses shows that the significant majority of approximately 14,000 loans acquired by unregulated loan owners in the course of the last quarter are performing restructures; and
calls on the Government to:
— accept the conclusions reached by FLAC that there is a ‘significant inequality of arms between the lender and borrower’ where the borrower ‘may have no meaningful influence on the content of the terms of the loan and may be wholly unaware that the lender is reserving the right to sell the loan on to an entity of its choice’;
— ensure that the Central Bank of Ireland’s Report on the Effectiveness of the Code of Conduct on Mortgage Arrears in the context of the Sale of Loans by Regulated Lenders, which was furnished to the Minister for Finance in 2018, be given legislative force to ensure that all parts of the code are expressly admissible in repossession hearings;
— recognise that so-called ‘vulture funds’ pose an immediate and overwhelming threat to borrowers in rural and urban Ireland;
— accept that unregulated entities have demonstrated a clear unwillingness to abide by voluntary codes of conduct; and
— revise the Code of Conduct on Mortgage Arrears in order to ensure that provisions 38 and 39 mandatorily require lenders to provide solutions.”
I am very happy to introduce the motion on behalf of the Rural Independent Group and thank the Minister for taking the debate. The Programme for a Partnership Government commits to providing protection for distressed mortgage holders and borrowers, tenants and small to medium-sized enterprises whose loans have been sold or transferred to non-regulated entities, which effectively are vulture funds. The Fine Gael Government has not lived up to this commitment.
Vulture funds are private equity companies such as pension or investment funds, which seek to make a quick profit from distressed mortgage holders by buying cheap and selling on at a quick profit without any compassion or social conscience. Effectively, they are buying debt and turning it into a quick profit. That surely goes against the principles of this Government. Vulture funds are buying distressed loans in large batches from our pillar banks, which are almost exclusively owned by the taxpayer, such as AIB and Bank of Ireland. During the last economic boom, banks acted irresponsibly by lending money by way of mortgages to people who did not have the capacity to repay those mortgages, particularly in an economic downturn. However, those very banks take no responsibility for that reckless lending. The same banks were bailed out by the taxpayer to ensure their survival. In return for that support, banks are allowed to sell these distressed mortgages at a substantial write-down to vulture funds that demand rapid repayment, compulsory sale or repossession with no regard to the circumstances of the mortgage holder or their tenants, many of whom effectively become homeless, thus becoming the responsibility of the State, which has to house them in whatever accommodation is available or place them in emergency temporary accommodation to the detriment of the family and at great loss to the State. This makes no sense.
I am not an economist or an expert on these matters but I do understand the difference between a State supporting its citizens and a State which turns its back on its citizens either directly or indirectly. Mr. David Hall of the Irish Mortgage Holders Organisation, which has assisted over 10,000 families restructure their mortgages, states “it is not just loans that are being sold, but real families, real people and real lives that are being fed to [vulture funds], and this is a real social issue.” Banks have resisted personal insolvency legislation and taken legal challenges to various aspects of legislation to prevent its impact on writing down debt. It is not acceptable to allow vulture funds to come into our country, act in the manner in which they conduct their business and not interfere meaningfully to protect our citizens. What the Minister permits, he condones.
This is not just a financial disaster but also a social and cultural disaster for many families who have suffered family break-up, mental distress and suicide. The activities of banks and vulture funds have far-reaching destructive effects which go far beyond the financial loss. The financial recovery of the past few years has not been even or uniform and there have been many casualties along the way. It is incumbent on this Fine Gael Government to protect its citizens from the effects of the financial crash, and defend them from those who seek to profit from their misfortune. There is an absolute expectation that this Government would protect its citizens from banks selling performing and so-called non-performing loans, restructured loans, and bad debts to entities about which we know little and which are poorly or weakly regulated, faceless global conglomerates of which people are afraid.
A substantial proportion of the 10,000 people in emergency accommodation, including 4,000 children, are there directly or indirectly as a result of vulture fund activity Do these vulture funds pay tax to the Irish economy and if so, how much? This is not just an abstract debate about fiscal housekeeping. What value is placed in maintaining the structure and social health of a family and a household when compared to the quick profit of a vulture fund? Is what is happening today in keeping with the principles articulated by the First Dáil in 1919, which we commemorated last January? Is it consistent with the Democratic Programme which was delivered on that day, the Proclamation of 1916 or the Constitution of 1937? Are vulture funds in keeping with the moral and social responsibility of this Government? Do vulture funds operate to the same level of regulation as is expected from our pillar banks?
Housing, homelessness and, by extension, the activities of vulture funds were among the main issues raised on the doorsteps during the local and European elections. The Government says it is going to become greener following the local elections. I would suggest that it should also become more compassionate and caring, listening to its citizens and being more responsive to their needs rather than to financial vulture funds that hold profit as their only goal.
Rather than facilitating vulture funds to operate in Ireland, we need to highly regulate them but also to reform our banking system by introducing competition into the market by promoting a community banking system along the lines of the Sparkasse banks in Germany or the Kiwibank in New Zealand. Providing banking services via our post office network would provide loans and mortgages at far lower and affordable interest rates, would plough the profits back into the local community and would give a lifeline to our struggling post office network. Instead, Fine Gael seems to be intent on protecting the pillar banks from such competition.
The vulture funds have their defenders. The Taoiseach thinks they are good, as does the Minister for Finance. The Central Bank is okay with them. The European Central Bank has recently been putting more pressure on Irish lenders to reduce the number of non-performing loans on their books. This is where vulture funds come into play. In many cases, banks are happy to sell large portfolios of non-performing mortgages to these funds, generally at a significant discount when compared with the original value of the loans.
This motion asks the House to say once again that vulture funds are not okay and that we must keep reminding the Government and the financial establishment that they are not working in the best interests of Irish families. Politicians who fail to challenge the credo that vulture funds are good are not doing their duty. Politicians who support the unregulated activities of vulture funds are working against the interests of Irish families. The reality for those whose loans are sold to a vulture fund is that they are far more likely to lose their homes.