No Consent, No Sale Bill 2019: Discussion (Resumed)

We will resume with No. 7, the No Consent, No Sale Bill 2019 in the name of Deputy Pearse Doherty. I welcome the representatives of the Free Legal Advice Centres, FLAC, and the Irish Mortgage Holders Association to the meeting.

Before the opening statements I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I invite Ms Eilis Barry of FLAC to make her presentation.

Ms Eilis Barry

I thank the committee for inviting us to make a written submission, which we furnished in March 2019, and to address it today on the important issues raised by this Bill. We note the recent submissions and contributions made to the committee, in particular on 2 April, and the opinion furnished by the European Central Bank. We do not intend to reiterate our original submission but to draw the committee's attention to a number of points, which we have fleshed out in a supplementary submission, having regard to the other submissions that have been made.

The first point I wish to make relates to inequality of arms. As matter stand, there is a significant inequality of arms between the lender and borrower. 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. Even if the borrower is aware of the provisions, he or she may not be in a position to meaningfully negotiate individual terms and conditions with regard to what are, in effect, standard terms in such contracts. It is unfair to imply into such an agreement an irrevocable consent to the transfer of the person's mortgage in any circumstances. We have set out in the written opening statement an example of what we believe to be a typical standard clause. It provides that: "The borrower hereby acknowledges the Lender’s right, without further consent from or notice to the Borrower to transfer the benefit of this Letter of Offer, the Loan and the Lender's mortgage security (including any life assurance policy or policies) over the Property to any person, company or corporation on such terms as the Lender may think fit, without further consent from or notice to the Borrower or any other person".

What is particularly significant about this is that it is an absolute right and is not subject to any preconditions whatsoever, such as the specific circumstances affecting the borrower or the occurrence of a certain level or duration of arrears. I draw the committee's attention to the provisions of the EU directive on unfair terms in consumer contracts. Article 3 of this directive 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 fairness and enforceability of such clauses to sell on that are in the current standard terms and conditions have not yet been adjudicated upon by the High Court but we believe they are vulnerable to challenge.

Our second point is in respect of the Central Bank's report on the effectiveness of the code of conduct on mortgage arrears in the context of the sale of loans, which was furnished to the Minister for Finance in 2018. First, FLAC recommends, and has done for some time, that the provisions of this code must be given legislative force to ensure that all parts of the code are expressly admissible in repossession hearings.

Second, we do not share the view of the Central Bank expressed in the report furnished to the Minister for Finance. In the course of its recent contribution to the committee the Central Bank reiterated that view, that existing arrangements must be maintained by unregulated loan owners, ULOs. Specifically, the director of consumer protection stated that:

Where a loan has been sold by a bank to a non-bank, existing arrangements are honoured. We feel there are many protections in the existing consumer protection framework that keep borrowers in or facing arrears at the core of the process and protected.

The bank's view that where the borrower's circumstances have not changed at the point that a review of a long-term arrangement takes place, that "regulated lenders and ULOs must comply with the terms of the arrangement in place", is not supported by the relevant rules, particularly Nos. 42 and 43 in the code. We fail to see any clear provision in the code that imposes a specific legal obligation on a lender reviewing an arrangement to continue that arrangement where the borrower's circumstances have not changed. Even if it was to be interpreted that there is such an obligation, we question its enforceability in strict legal terms.

Our fears on this question are highlighted by the following passage whose substance recurs at a number of junctures in the Central Bank's report to the Minister. It states:

The Central Bank cannot interfere with the strategy and commercial decisions or the legitimate contractual rights of lenders where such firms are complying with their regulatory and contractual obligations. Regulated entities are entitled to rely on their contractual rights and make their own commercial decisions.

If it is the case, as the bank maintains, that it cannot interfere with a lender or owner’s contractual rights, how can it then impose an obligation on an unregulated loan owner to continue a long-term restructured arrangement against its will where there is no regulatory or statutory obligation to do so?

The next issue we wish to highlight is that of what actually constitutes a non-performing loan, NPL. The principal narrative up to now has been that the sale of loans to funds is justified to reduce the number of NPLs down to a perceived ECB target of 5%. The ECB opinion to this committee, however, did not provide a definition of non-performing loans. The last quarterly statistical mortgage arrears report from the bank, to the end of the last quarter of 2018, concerning principal dwelling houses clearly shows that the significant majority of the almost 14,000 loans apparently acquired by unregulated loan owners in the course of the last quarter are performing restructures. The director of consumer protection at the Central Bank informed the committee on 2 April that there are currently more than 110,000 restructured arrangements on such loans. She added that in 87% of those cases the borrowers are meeting the terms of the arrangements and that these arrangements "are working for those borrowers".

In more specific detail, the latest figures suggest that there are currently 111,504 restructures of principal dwelling house, PDH, mortgages in place. More than 27,000 of these are split mortgages, more than 36,000 are capitalisation of arrears arrangements, and more than 13,000 are term extensions. Some 19,323 come under the "other" heading. This heading mainly comprises accounts that have been offered a long-term solution pending the completion of six months of successful payments. This category also includes a small number of simultaneously agreed term extensions and arrears capitalisation arrangements.

Together these long-term arrangements amount to 87% of the restructures of PDH mortgages. Some 86% are classified by the bank as meeting the terms of the arrangement. Are these considered non-performing loans or not? A key question also arises as to why loans with such long-term restructure arrangements in place would be sold on in the first place? If sales of such loans are allowed, what was the point of the extensive mortgage arrears resolution process under the bank’s code of conduct, which the Central Bank actively promoted and which many borrowers and lenders sought to comply with? Is it the case that the ECB considers these performing long-term restructures to be non-performing loans? We note the comment from the deputy governor that it is not for the Central Bank to stop the sale of either a performing or a non-performing loan.

With regard to enhanced protection for consumers, we believe that legal protections need to be enhanced for consumers whose loans have already been sold to funds. In addition to putting the code of conduct on mortgage arrears on a statutory basis, this Bill could enhance protection for consumers by incorporating the six recommendations made in our original submission. I have replicated these in the written submission and will not now read them out.

We also wish to draw the committee’s attention to the relevant human rights and equality standards that apply to this discussion and which we note are wholly absent from the presentations and submission made by the Central Bank and the Department of Finance. Section 42 of the Irish Human Rights and Equality Commission Act 2014 requires all Departments and statutory bodies, like the Central Bank and the Department of Finance, to consider in the performance of all of their wide-ranging functions how they will advance equality for the groups protected under equality legislation and how they will protect the human rights of all citizens. We note that the Central Bank has committed in its strategic plan to carrying out a detailed assessment of human rights and equality issues relevant to its functions over the period of this plan.

The UN General Assembly guiding principles on human rights assessment of economic reforms provide that states and other creditors, including international financial institutions, must carry out a human rights assessment before recommending or implementing economic reforms or policies that could foreseeably undermine the enjoyment of human rights. These principles require that human rights impact assessments should seek to identify and address the potential and cumulative impact of measures on specific individuals and groups.

A human rights impact assessment of economic reforms requires a diverse range of both quantitative and qualitative data in order to ensure compliance with the human rights requirement of non-discrimination and that due attention is paid to the situation of groups at risk of marginalisation or vulnerability. It is essential that the indicators used to provide information are disaggregated by gender, disability, age region, ethnicity, and income. The submission and presentations from the Central Bank and the Department of Finance make no reference whatsoever to any such assessment and it is likely that the views and opinions they have furnished to this committee have been formulated in the absence of such an assessment and without such data having been gathered.

The reality is that we have very little information about the people in long-term arrears in terms of gender, age, employment status, income, the extent to which they have disabilities, caring responsibilities or both, or whether they receive social welfare. Can the Central Bank and the Department of Finance state with accuracy, based on properly gathered disaggregated data, what is the likely effect on borrowers of allowing creditors sell to vulture funds without further regulation? Has there been any assessment as to the likelihood of borrowers being exposed to acute deprivation such as homelessness or extreme poverty?

We note that very recently the UN special rapporteur on housing, Leilani Farha, sent a letter to the Irish Government and was critical of the lack of regulation of vulture funds. In that letter she talked about the need for a transformation of the relationship between the Government and the financial sector whereby human rights implementation would become the over-riding goal. She refers to the financialisation of housing. We will end by pointing to Article 2 of the preamble to the UN guiding principles, which states that:

Obligations under human rights law should guide all efforts to design and implement economic policies. The economy should serve the people, not vice versa.

Myself and my colleague, Mr. Paul Joyce, who drafted these submissions, are happy to answer any questions members may have.

Mr. David Hall

I thank the Chairman, the Deputies and the Senators for the invitation to address this meeting on Deputy Doherty’s No Consent, No Sale Bill which the committee is considering. The Irish Mortgage Holders Organisation is one of only two debt charities within the State. We have helped more than 10,000 families restructure their mortgages since we were established in 2012. It is with this front-line experience I make this address today with the support of my entire team.

We are at a critical stage in families being fed to vultures. Deputies and Senators can note that I did say "fed to vultures”, because it is not just a matter of loans being sold but of real families, real people and real lives being fed to vultures. This is a real social issue. These sales are as a result of incompetence from banks in not offering realistic restructures to customers in mortgage arrears. The Central Bank has been a party to this failure by limiting the banks options. Banks have resisted the personal insolvency legislation and taken various legal challenges to aspects of the legislation to prevent its impact on writing down debt. We are amid bureaucratic corruption in which large bodies such as the Central Bank and the Department of Finance utter unevidenced statements with authority designed to scaremonger. A State-supported system is pitching citizens against each other with misleading commentary about the effects on interest rates if such a Bill as this passed. This was recently demonstrated when the same warnings were issued ahead of Deputy Michael McGrath's vulture fund regulation Bill and when commentary was made on both the low number of repossessions and on their ineffectiveness. Only last week AIB again reduced interest rates, which shows that the completely opposite effect to that suggested by the commentary is being experienced.

While trying to protect banks, these bodies fail to state that this is not an ongoing mortgage arrears issue but an historic issue. This is not an active concern of banks and is therefore currently having no effect on the banking system. This should be addressed as a standalone issue.

The Central Bank bizarrely says that vulture funds are okay. This is so inaccurate that it frightens one to think that the Central Bank has a consumer protection function. It published a report last October which reported on a period before the mass sales of loans to vulture funds by Permanent TSB and Ulster Bank. No competent body knowing such numbers of loans were about to be sold would have chosen such a window to carry out any report on vultures' adherence to a voluntary code unless a particular finding was being sought.

There has been a banking culture of blaming customers who have been in mortgage arrears. This has radiated around banks and has led to disgraceful behaviour by banks. Banks have forgotten the part they played in destroying thousands of lives and their direct responsibility for the loss of many lives.

As a citizen, it is concerning to hear the Taoiseach and the Minister for Finance state that vultures are good and that the protections available for those in mortgage arrears carry from the bank where a loan is sold to a vulture fund. This is simply not true. The protections referred to are administrative processes via the code of conduct on mortgage arrears, CCMA. This is a voluntary code, however. The Supreme Court, in Irish Life and Permanent plc v. Dunne in 2015, has confirmed it is a voluntary code.

Furthermore, there are no mandatory solutions that must be offered under the code of conduct on mortgage arrears. The front-line experience of the IMHO is that whatever CCMA solutions may have been offered by mainstream lenders historically or are being offered at present, vulture funds simply do not offer these solutions at all. Vulture funds want to take the family home, sell the home and leave with a profit. In addition, in Stepstone Mortgage Funding Limited v. Clarke, Mr. Justice White ruled that the lender does not have to give the family a solution even if they are eligible for a solution. In this case, where the family were eligible for mortgage to rent, Mr. Justice White ruled that no such solution was required.

Those who believe banks will conform under a voluntary code have a lot to learn. Indeed, the new Irish Banking Culture Board may discover this soon. Banks only respond to severe sanctions, direct regulation and consequences. In addition, and despite it being 2019, the Central Bank cannot accurately report repossession numbers and court proceedings as the current system is fundamentally flawed.

Vulture funds are interested in assets and they price their purchase on their value and the timeframe in which they can repossess and sell on. Banks must take responsibility for contributing to cause this crisis to recklessly lending to borrowers.

Banks have restructured 116,000 family home mortgages. This is welcome. The spin from the Taoiseach and the Minister for Finance infers that the protections transfer. The truth is the protections are administrative and do not provide any solutions to be provided by lenders to customers. This is deeply concerning if the respective officials do not understand the limitations of the code of conduct on mortgage arrears.

The No Consent, No Sale Bill is an extremely important one to apply pressure on banks to do as they always should have done and create aggressive restructuring options rather than the lazy approach they have taken to date. Banks resisted every effort to write off debt, although there now is a theme of willingness to write down debt for vulture funds but not for customers.

A spectacular environment was created to welcome vultures into Ireland, including magical charitable and tax status. This showed a policy of intent. In my view, the most egregious step taken by a bank against customers recently was that of Permanent TSB in selling restructured and compliant loans to a vulture fund.

I believe that the insolvency legislation needs to be revamped. Proposals that were prepared on a multi-party basis have been submitted to the Department but have not been implemented thus far. Many vulture funds will need to be tackled using the insolvency legislation. There have been some very successful personal insolvency arrangements recently that are exceptionally good and this will be a tool in the armoury in the future. Finally, we might just see the provisions of the Act coming into their own, albeit with a service that is understaffed, under-resourced and still privatised.

By way of example, I included in the pack I provided ahead of today's hearing two cases where, through iCare Housing of which I am the voluntary CEO, we offered to buy two homes for families who were deemed eligible for mortgage to rent. Without patronising the committee, I remind members that to be eligible for mortgage to rent means one has a very low income and is eligible for social housing and that the home is modest and in line with social housing homes. In the first case, Start Mortgages refused an offer of 15% below the open-market value. In the second case, Shoreline, through Pepper, refused an offer of 8% below the open-market value. Promontoria, to which Ulster Bank sold loans, does not do mortgage to rent. Permanent TSB has sold thousands of loans to Start Mortgages, and Ulster Bank has sold thousands of loans to Promontoria. The vultures paid for these loans at a discount of 50% or perhaps 60%. They want their money and they do not care how they get it. We have a housing and homelessness crisis and the aforementioned two families will eventually transfer to emergency accommodation. This is how vultures operate. They are not a friend to families in mortgage arrears.

Going back to those who made various comments on vultures and the deal they do, and explaining that vultures bought loans cheap and therefore must do good deals, this is simply false. There is a serious question of competency around those making these vulture-friendly comments. For clarity, vultures are great in the event that one wants to surrender one's home and have one's debt written off. However, if one wants to keep one's home and stay in it, as most people do, vultures are not in the business of doing a deal, restructuring or long-term solutions.

In conclusion, vultures are bad for Irish families and incompetent commentary about their willingness to do deals adds insult to injury to the families that are affected. If one is in mortgage arrears and facing the prospect of dealing with a vulture, one is in significant risk of losing one's home. We hear vulture lovers' comments on the numbers of repossession orders granted for banks in comparison to vulture funds to defend their supportive stance. They seem to forget that banks have been at this since 2009 while vulture funds have only recently been getting started with family homes. The two aforementioned cases have now been terminated out of mortgage to rent and moved to being repossessed. This is a true reflection of the actions of vultures, not the fairy-tale version promoted by some.

The No Consent, No Sale Bill is an essential tool in helping families in mortgage arrears as we are facing an avalanche of loan sales to vultures over the coming 12 months and these families face a very uncertain future. To those who say the Bill is unconstitutional, I say we have a mechanism in the form of a court process and let the courts decide on its constitutionality.

I thank Mr. Hall.

I welcome the witnesses and thank them both for the submissions and opening statements on this Bill.

I will start with the issue of the CCMA and its non-statutory basis, to which both have referred. Can they clarify that for me? Early on, the CCMA states, "This Code is issued under Section 117 of the Central Bank Act 1989." Can they explain why it is not statutory? The Central Bank disputes that. The Minister certainly disputes that. The Minister states it has a statutory basis. Does that not mean it is statutory? Can they take us through that? I do not mind who takes the question. This issue is knocking around for a while.

Mr. Paul Joyce

At the beginning of the code, it states, "Lenders are reminded that they are required to comply with this Code as a matter of law." That looks as if it is legally enforceable. It is, indeed, issued under section 117 of the Central Bank Act 1989. However, it is neither primary nor secondary legislation. It has neither been passed by the Houses of the Oireachtas nor signed into law by the relevant Minister, who in this case would be the Minister for Finance.

What it denotes or controls is the regulatory relationship between the Central Bank and the mortgage lenders which it regulates. For a start, to my knowledge, there has not been a single sanction imposed on a lender which has failed to comply with the code. In theory, it is subject to the Central Bank's administrative sanctions programme.

It is not, by my understanding, an offence nonetheless to breach the terms of the code. Mr. Hall mentioned the decision of the Supreme Court in Irish Life and Permanent plc v. Dunne and Irish Life and Permanent plc v. Dunphy. That was a seminal case to test the enforceability of the arrangements entered into by lenders under the terms of the code. The Supreme Court stated the only measure in the CCMA that was legally enforceable was the three-month moratorium on the bringing of proceedings against a borrower when the borrower had been exited from the mortgage arrears resolution process, that there was nothing else in the CCMA that the court could discover that was precise and tangible enough to provide legally enforceable rights to borrowers. The Supreme Court went further and stated that if it was the intention of the Central Bank or the Government to even up the relationship or the power between lenders and borrowers, it suggested that primary legislation was necessary to do that, and hence the call from ourselves and others that the code be put on a statutory basis. If it was a ministerial regulation that specifically stated that this code is admissible in legal proceedings in the courts, it would be of a different order in our view.

In essence, Mr. Joyce is saying that this code is a voluntary code.

Mr. Paul Joyce

It is a regulatory code. If a lender refuses or neglects to comply with the terms of that code, the Central Bank may conceivably take action against that lender, albeit under its own internal administrative sanctions programme. That seems to us to be the extent of the action that can be taken against the lender. As far as we are aware, even though the Central Bank has on occasions carried out inspections and has on occasions determined that some lenders have not complied with the requirements of the code, the Central Bank still, as I understand it, has yet to impose a single sanction upon a single regulated lender.

Mr. David Hall

Can I add to that?

Mr. David Hall

The code is slightly misleading in the sense that it is an administrative code. Sections 38 and 39 allude to a variety of solutions that can be provided but nowhere does it require any of the lenders to provide any of those solutions. It is quite misleading when people use the code in its entirety. It is an administrative process, and has a very unfortunate P45 letter, which people get at the time of their being evicted. It is an administrative code, so even if it was used on a legislative basis, it would make little or no difference.

That is a critique of its content as well, as much as the basis.

Mr. David Hall

It is misleading as well because the code lists a number of solutions. It is like going online, googling the list of solutions available and just putting them in there. In the case of Stepstone Mortgage Funding Limited v. Clarke, where mortgage to rents were deemed eligible for social housing, Mr. Justice White said they were not required to provide it.

Mr. Paul Joyce

The other point about the code is that it is quite deficient from a fair procedures point of view, in the sense that lenders must look at a variety of potential solutions but, as Mr. Hall has said, do not have to offer one. Even if one is offered and the borrower is not happy with it, the appeal is to the lender's appeals committee. There is a failure under the code specifically to provide that borrowers are entitled to the full detail of the deliberations of the lender under the mortgage arrears resolution process in order to frame their appeal. From a fair procedures point of view, it is completely deficient.

FLAC's opening statement referenced the standard clause in mortgage contracts that enables banks to sell loans on, and suggested that could be challenged under the EU directive on unfair terms in consumer contracts. Is it FLAC's view that this clause, which has not been adjudicated on by the High Court at this stage, could be struck down? We cannot know what the court will decide but is that what FLAC is suggesting?

Mr. Paul Joyce

The unfair terms directive has not got any huge traction in the Irish legal system. It is much underused. One problem is there is a very restricted number of entities that can refer a term to the Circuit Court or High Court to have its fairness tested. Ironically, it includes the Central Bank, and the Competition and Consumer Protection Commission. The point we are making is that there is a fundamental lack of fairness in the contract in the first place, that allows for the sale to take place. That is an issue that would arise in any assessment of the constitutionality of the Bill. In practice, borrowers do not know this term is in their mortgage contract. They are not asked for their consent, nor are they ever informed, except at the very last minute, that this is happening. There is a fundamental imbalance there. It is an open question as to what the courts would make of whether this is strictly an unfair term but the point we are making is that the imbalance is clear. These are pre-drafted terms in contracts to which the consumer has no opportunity to contribute.

I seek Mr. Joyce's opinion, given that that clause is in existing mortgage contracts. If this Bill is enacted and becomes law, can it be applied in respect of contracts already written, where that clause is there and has been signed up to by both parties? What is Mr. Joyce's legal view on that?

Mr. Paul Joyce

That is a very difficult question, because the contract is already in existence. For it to be overridden, as I understand it, the intention of the legislation is that it will be retrospective. It cannot but be retrospective to have proper effect.

Can it be retrospective, in Mr. Joyce's legal opinion?

Mr. Paul Joyce

There is difficulty sometimes about the retrospectivity of legislative provisions and that is a matter to perhaps be considered by the courts in due course. Without it being retrospective, I do not think it can have proper effect, because if it only applies to mortgages drawn down from this date onwards, its purpose is futile.

It is repeated ad nauseam by the Central Bank, the Minister, and others that protections travel with loans, and that borrowers are no worse off if their loan is sold on to a so-called vulture fund. The issue was raised in the FLAC opening statement that it does not see any specific legal obligation on the new loan owner to honour a restructure agreement that has been entered into. Is there a legal basis for that or not? Where does it say in the code or in any other provision that the new owner has to respect an agreement? Is that written down anywhere?

Mr. Paul Joyce


Mr. Paul Joyce

No. Rule 43, if I can have a few seconds to read it, states:

A lender must review an alternative repayment arrangement at intervals that are appropriate to the type and duration of the arrangement, including at least 30 calendar days in advance of an alternative repayment arrangement coming to an end. As part of the review, the lender must check with the borrower whether there has been any change in his/her circumstances in the period since the alternative repayment arrangement was put in place, or since the last review was conducted. Where there has been a change in that borrower’s circumstances, the lender must request an updated standard financial statement from the borrower and must consider the appropriateness of that arrangement for the borrower.

In answer to the Deputy's question directly, there is no specific provision that says that where the borrower's financial circumstances have not changed at the point of review, there is a legal obligation on the existing lender or the purchaser of the loan to honour that arrangement. The Central Bank is strongly of the view that the funds will honour those arrangements but we do not believe there is anything legally enforceable there. There is a view, and it has been heard in this committee from Permanent TSB that, for example, a split mortgage or other long-term arrangement is a variation of the original mortgage. There is a legal question there as to whether putting a long-term arrangement in place over time changes the underlying mortgage in the first place.

Mr. David Hall

By way of example, look at Ulster Bank's loan sale to Promontoria. We have 25 cases that are eligible for mortgage to rent, and agreed by Ulster Bank as being eligible. However, they have now been sold to Promontoria and Promontoria do not do mortgage-to-rent schemes.

My final question is for Mr. Hall. We hear from the Minister and the Central Bank that there are no data to show that borrowers are in any way disadvantaged or that vulture funds are more likely to take enforcement proceedings. They say that the repossession statistics do not bear out the claim that vulture funds are more aggressive. Can Mr. Hall give us his response to that claim we repeatedly hear from the Minister and the Central Bank?

Mr. David Hall

The simple response to that is that it is factually incorrect. Vulture funds have come late to repossession activity, although many had years of dealing with commercial loans and buy-to-let investment properties. At the time of Deputy Michael McGrath's Bill going forward, the Minister asked the Central Bank for a review of the adherence of the funds or their servicing agents to the code of conduct. It undertook that work in the knowledge that the same Central Bank said before this committee that it was notified in advance of sales and loan sales. It was aware of 13,500 loan sales, between Permanent TSB and Ulster Bank, being sold to funds. It carried out that review at that time, given its consumer protection component, and it engaged with FLAC and other organisations, but the manner by which we were engaged and how we were informed of how our engagement was being considered, was very misleading. It was clearly stated to the Central Bank that the code of conduct provides no solutions or protections to anybody, even if it was transferred to the funds, which it is not. The classic example is in relation to the most vulnerable cohort of people, which is those eligible for social housing and mortgage to rent. The two examples given today involved 12% and 8% discounts, and the Minister and others bizarrely stated that because the funds bought them cheap, logic dictates they are going to do a better deal. That is just factually incorrect. Respectfully, we are doing this every day, with a team of people who are also doing it day in, day out, with our colleagues in MABS and other organisations, as well as with personal insolvency practitioners around the country. I believe the Personal Insolvency Act needs an urgent review by both this committee and the Committee on Justice and Equality to provide some protection to customers. It is absolutely infuriating to hear our Taoiseach and the Minister for Finance making dangerous and misleading commentary, so whatever advice they are receiving is factually incorrect. People are not safe in the hands of vulture funds. That is a statement of fact.

I want to commend both organisations on the work they do with borrowers. They play a very important role and have helped an awful lot of people collectively.

I apologise that I must attend another committee meeting, whose time clashes with this meeting.

On that note, we were invited by the IMHO to visit some of the locations.

Mr. David Hall

Yes, to see some files and so on. We have received permission from borrowers to see them. Rather than providing anecdotal information, the best way to do it is to select randomly a number of files within our organisation - there are thousands that are live and hundreds with funds - to see the communication, engagement and responses at first hand. There are only two registered debt charities in the State, while there are hundreds of homelessness charities and cancer charities. It is not for no reason there are only two; it is a difficult to space in which to operate. That is where the information and evidence are, as opposed to anecdotal evidence from the Taoiseach, the Minister and other parties and commentators.

Due to a clash in the Chamber, we were not able to attend, although we took up the offer of the invitation. After Easter, if the clerk contacts Mr. Hall again, perhaps we can set up a meeting that is suitable for all of us. Is that okay?

Mr. David Hall

Yes, perfect.

I welcome both guests to the committee. Go raibh maith acu for their presentations, extensive submissions and case studies. Although I am the sponsor of the Bill, if one were to listen to much of official Ireland - the Central Bank, the Department of Finance and some others - one would have to believe there is no problem with these loans being sold to vulture funds and that everything is fine and will work out grand. One would believe it makes no difference whatever and that the Minister himself would have no problem with a vulture holding his loan. If one had a ministerial pension, perhaps one would not be as concerned about these matters as many others would. In Mr. Hall's view, as someone whose organisation has assisted 10,000 individuals through debt restructuring, how does that view stack up against the reality of what is happening on the ground in respect of how vultures are treating homeowners?

Mr. David Hall

It is slightly worse than the Deputy has presented, in that the official line is not just that there is no problem. Rather, the official line is that it is better to be in the hands of a vulture, which is the most concerning part. In other jurisdictions, cults say that. The invitation was issued to the Chairman in order that he could see the engagement and the length of time of the reply. When Permanent TSB and Pepper appeared before the committee, they were asked about Glenbeigh and about who owns it, which led to the most bizarre exchange. In the engagement from the servicing agents to seek consent from the vulture fund as to what happens next, we are now at the stage where our actions answer the Deputy's question. We are revising our internal structures to consider putting all clients, customers and vulture funds through the insolvency regime. We are wasting our time and customers' time engaging with vulture funds over restructures because they simply do not do them.

The most vulnerable cohort of people are eligible for social housing and the mortgage-to-rent scheme. There is a bizarre situation where people try to apply logic without evidence, where they believe that a vulture fund bought the loan at a discount. There are dozens of examples of such cases, before the sale of customers of Ulster Bank and Permanent TSB. To be fair to Permanent TSB, we negotiated a discount with those properties to make them work, but the discount does not follow to start and, therefore, those customers will not be eligible for mortgage-to-rent. It is factually incorrect to say vulture funds are easy and good to deal with. The insolvency legislation is the number one tool to fight these vultures in the coming months and years. It is torturous for our customers, staff and many advisers throughout the country who are trying to engage through a credit servicing firm. Saying it is okay is worse than just misleading people; it is far from okay. Giving the impression that everything is okay, or that one could actually be better off dealing with a company that has bought one's loan more cheaply, is the most bizarre and factually incorrect statement for official representatives, not only politicians but also departmental officials, to make. One of those officials appeared before the committee and said they were attending to speak truth to power. It was embarrassing. They need to understand the truth before they can speak it. The public commentary of the Taoiseach and the Minister for Finance is void in this regard. At Christmas, the Taoiseach indicated vultures are good and fine and the Minister of State, Deputy D'Arcy, said the same. While the Taoiseach qualified his comment the following day by saying it was based on the information provided to the Government, he should have a look at the evidence and the truth because if he did, the Bill would be a no-brainer.

My next question is for Ms Barry or Mr. Joyce. The Department, and by extension the Minister, relies heavily on the analysis carried out late last year. This was addressed in FLAC's opening statement and in its previous submissions to the committee in respect of the conclusions that there is no difference in restructuring arrangements and so on. FLAC was part of that engagement and process, where the Department engaged with it and gave it an opportunity to outline its view. The Department has told us it has engaged with organisations such as FLAC and the IMHO. It has outlined its conclusions, however, and instructed them to get back into their box and stay quiet because everything is fine. FLAC made the point in its statement that my submission to the Department was clear that it was far too early to make such a suggestion because the sales are only now beginning to increase and will start to be ramped up in respect of procedures and enforcement as time goes on. Would FLAC like to take this opportunity to outline its view of how reliable that work is in suggesting there is no difference between whether one's loan is with a vulture or with a mainstream bank?

Mr. Paul Joyce

We will not waste much time on this but we were not satisfied with the nature of the consultation with us. Formal written submissions were not sought and meetings were held at which opinions were presumably recorded in some form and subsequently appeared in the report to the Minister. As I understand, that work was carried out by the Central Bank in the latter half of 2018, furnished to the Minister in October 2018 and published in November 2018. Our simple point, which the Deputy and Mr. Hall have also made, is that there was not enough evidence for the Department's conclusion. In our original submission to the committee, we pointed out that in the course of quarter 4 2018, almost 14,000 loans navigated from regulated lenders to unregulated loan owners. As was outlined in the submission to the committee, however, it seems the significant majority of those loans are performing restructures. We find it surprising they were sold in the first place.

Deputy Burton asked a salient question on 2 April, which was what work the Department carried out to examine the profile of mortgage holders who are adjudged to be non-performing, even though their loans have been restructured and are being paid down. I do not think she received an answer to that question. The IMHO has quite a lot of clients while FLAC does not, but we do much work with the Money Advice and Budgeting Service and consider files in that regard. Many of the loans now in difficulty are ones where the household's problem is financial incapacity. While repayment arrangements have been in place, many of those arrears have been in place for five years or even up to ten years, which is the difficulty. The households do not have the financial capacity to make the kinds of payments we feel vulture funds, sooner or later, will demand.

Deputy Michael McGrath spoke about the code of conduct on mortgage arrears, which is an important administrative protection, although there are doubts, which I share, about its legal enforceability and so on.

Parking that to one side, is the real issue not that the vultures can take a different approach from the banks? This is not just my belief; I have evidence to back it up. I see from the files of many of the clients who come to me that vultures in some circumstances are just not interested in making arrangements. Consider the structures that have been set up. We talked about Glenbeigh. This vehicle was set up a couple of weeks before the purchase. It is in an SPV. Promontoria Scariff DAC, which I have been talking about in the past couple of weeks, is the same. It is a company that was set up just a couple of weeks before Ulster Bank sold the portfolio of €1.6 billion. Bearing in mind the Companies Act, the directors are the same directors of 360 other companies. The problem is that loans are now with this company. I have been trying to draw attention to the sale of the €1.6 billion portfolio. It was obviously sold at a discount. The purchase price might have been in the region of €900 million. It was made up of nearly equal numbers of buy-to-let properties and family homes. There were close to 3,000 buy-to-let properties.

The loans were sold late last year. I have a letter from an individual about what is happening. Cabot Financial Ireland, the administrator on behalf of Promontoria Scariff DAC, wrote to the individual on 18 February stating it is now servicing the loan rather than Ulster Bank. Exactly seven days after receiving the letter, the individual got another stating that, further to the correspondence on 18 February 2019 regarding the transfer of the individual's mortgage account from Ulster Bank to Promontoria Scariff DAC, Cabot Financial Ireland had been appointed by Promontoria Scariff DAC as the regulated entity responsible for providing to the individual mortgage administration services and assistance regarding all the matters of mortgage. It is very nice so far. The letter then states Cabot has noted there are arrears owing on the mortgage. It specifies the amount. It is stated that, to assist the individual in clearing the arrears in full, certain payment options are available. Relevant account details are given. The letter then states, in underlined text, that in the event of failure to contact Cabot and clear the arrears in full within 30 days from the date of the letter, it will have no further option but to appoint a receiver over the secured property. That is not an individually tailored letter. Cabot has done this as a policy.

I have raised this with the Minister for Finance and the Tánaiste. The owners of thousands of buy-to-let properties may be getting these letters. I know of quite a few cases. It is now policy within Cabot not to take on any solutions or arrangements, even when there is positive equity. I have a file in my office that is related to Cabot and that concerns a property in positive equity. The house is being sold. The owner is actually in it but Cabot is not willing to sign off on it because of its policy. The policy is that it does not care, that it owns the loan and that it has the right to appoint a receiver to the full portfolio if the demand that arrears be cleared within 30 days is not met. That is what is happening.

The banks could have done the exact same thing but it is not in their interest to do so because there would be an uproar. The banks rely on us to keep deposits flowing and to take out loans. How do we square the circle? The Tánaiste was saying today that the Central Bank of Ireland and the financial institutions have a responsibility, when loans are being sold, to ensure the public good is looked after. There is no responsibility, however. Neither the Central Bank of Ireland, Cabot nor any vulture fund has responsibility to deal with the public good. The responsibility is in the contract. As referred to in the opening statement, the contract states there is a right to sell the loan without further consent.

Given the number of loans stacked up — AIB is now considering another loan sale — where will this end? My point might be long-winded but it is a matter I feel passionate about. It is not just a matter of how the vultures are treating homeowners or buy-to-let property owners. There are tenants in all the houses who will get eviction notices. Some of the families will end up in hubs and we will see the same comments from children as we heard read out by the Ombudsman today.

The Central Bank confirmed to me it is aware of the Cabot letters and is engaging with the company. It can do nothing about it, however. As said in the witnesses' opening statement, the Central Bank cannot interfere in the contractual arrangements with the client. If Cabot does this with all its buy-to-let properties, what are we going to do as a nation if over 2,600 buy-to-let property owners evict their tenants in a couple of months?

Mr. Paul Joyce

I have similar letters here. It is rather disturbing to see debt collection outfits or credit servicing firms, if one wants to call them that, transferring loans among one another. We said in our original submission that the loan sale phase is towards the final end of a boom–bust scenario, as in the United Kingdom in the late 1980s and into the early 1990s. We said to the Department of Finance, among others, long prior to the passage of the credit servicing legislation in 2015, that this was a phenomenon that had happened in other countries. Loan sales comprise international business. Not only is the sale of loans to funds international business but so too is the sale of loans to other funds. Therefore, there are transactions down the line. The position of the Central Bank is that the credit servicing firms are regulated and, therefore, they are regulated entities just like banks, which suffices. The problem is that they are not regulated to the extent that their hands can be tied or they can be forced to take a certain course of action. It is absolutely true that the code of conduct on mortgage arrears now applies to credit servicing firms as a result of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, as amended. The code only obliges the credit servicing firm to do the same as it ever obliged the original lender to do, that is, to consider accommodations and decide for itself whether it wishes to offer an accommodation.

As the Deputy rightly pointed out, the pillar banks have customers, branches and contractual relationships and reputations to maintain in the State and do not want to be associated with the kinds of tactics funds get involved in. We are now seeing the most difficult part being shovelled on for others to deal with, and they will not have the same commercial scruples. That is the danger.

Mr. David Hall

If I were operating a vulture fund, I would be delighted with the code of conduct on mortgage arrears by comparison with any of the four Bills before the Oireachtas to deal with customers and protect consumers. The code is a spectacular failure and fudge. It is a computer programme that just dictates timelines and dates for letters to be issued and telephone calls to be recorded. That is all it does. It does not do anything else. It keeps getting referred to by various individuals as if it were the Holy Grail. It is an abject failure in terms of consumer protection by the Central Bank, which is completely conflicted. Having loan servicing agents regulated means absolutely nothing. These are commercial entities and they never said anything else, as may be seen on their websites. The vulture funds have done absolutely nothing wrong. They have never lied. Their purpose in life is to buy cheaply, sell high and exit. That is what it says on the tin. I do not wish to upset Deputy Doherty but, unfortunately, I am slightly immune to the behaviour of the Cabinet already. What is occurring is no surprise. It is a daily occurrence noted by all the MABS staff throughout the country. All the organisations involved in dealing with debt in the State came together twice in the past six months in private. It is the fist time we have done so. The evidence and experience of the 60 individuals present was universal. Everybody knows the truth and facts. There is a toll taken on those dealing with families. Everyone in this room has experience dealing with families in difficulty. Some believe there is a conspiracy theory related to banks but it is, in fact, a matter of incompetence. Deputy Doherty's point about the letter from Cabot and the speed at which it arrived proves such companies are used to tackling and dealing with people to extract money and profit. Their efficiency will be frightening.

Mr. Paul Joyce

It should be said Cabot is not a new organisation. It has been involved in the collection of debt for quite some time. It is not just mortgage debt, but also hire-purchase agreements and so on. It is quite experienced.

I never want to defend a debt-collection agency. However, in fairness Cabot is acting under instructions from Promontoria Scariff, an entity only established for the purchase of these loan books. It has instructions to appoint fixed-charge receivers. I am aware of a case of multiple properties in positive equity and there is no problem in selling those properties, but Promontoria Scariff does not want to know. It is appointing a fixed-charge receiver which means that legal fees and the receiver fees will eat into any positive equity they have. This is the same entity that wrote to a number of its customers a month after the event - I have this letter as well - to say, "By the way, we were subject to an email phishing attack a number of weeks ago and therefore your name, contact information and financial details, including outstanding balances, have been disclosed."

Mr. David Hall

However, they are regulated.

The same people then say, "Pay your arrears in 30 days or we are taking your home."

Mr. Paul Joyce

The buy-to-let situation is obviously slightly different in that the borrower is a landlord. It has knock-on effects in terms of homelessness. Focus Ireland and a number of other housing organisations have pointed out that much of the rising problem of homelessness they are seeing is down to the eviction of tenants in buy-to-let properties.

In the context of the Deputy's Bill it is more difficult. Who would prevent the sale of the loan? Would the tenant have the right to object to the sale of the loan? As it is not his or her loan, it is slightly different.

It is the borrower.

Mr. Paul Joyce

An issue does arise there if the loan is sold. What rights does the tenant have to have his or her lease honoured or his or her occupation of the property honoured? The landlord might exit stage left with any residual balance written off, but the tenant is the one with the immediate problem.

In fairness separate legislation, which we have also published, with the Focus Ireland amendment would deal with that.

I wish to put three questions together. Some other solutions are out there. I questioned the Central Bank and AIB, for example, about sales to non-profit organisations rather than to vultures at a discount. We now know of 52% across the €24 billion portfolio that so far has been sold. As Mr. Hall is the CEO of one of those non-profit organisations, I would be interested in his views on whether that is a real possibility.

I am very conscious of where this is going. Many people are worried. I have been stopped on the street by people who work in the banks on some of the funds. They are really annoyed that this Bill is before the committee and has already got the support of the Dáil. Everything has been thrown at it and that is fair enough. This is a take-your-side moment.

There are two big issues. One is the constitutionality argument that the Government put forward and the other is the money-message issue. We have a preliminary view that a money message is not required and therefore the Government would not be able to block it. I believe we have seen an abuse of the money-message system to block legislation; although we have had a new procedure here in recent months. I am not afraid to consider a legal challenge if one was warranted in the event that a money message is used to block this Bill.

On the constitutionality of the Bill, I agree with the FLAC submission. When we limit property rights, there is always an issue of whether it affects the right within the Constitution. However, we know that right within the Constitution is subject to certain restrictions relating to public good and so on. As there is always a question of constitutionality, I got legal counsel's opinion when we drafted the Bill. I agree with FLAC's point in that only the courts can decide. I took the Government and the Attorney General to court and won when they tried to deny us the right to hold a by-election in Donegal. I understand the Attorney General can be wrong on occasions.

The Irish Mortgage Holders Association's submission states that the Department of Finance had advice from the Attorney General that the Bill was unconstitutional. Under further questioning from me, I got a letter from the Department of Finance on that stating that the Attorney General had not said the Bill was unconstitutional. The Attorney General stated that there are issues that may lead to issues of constitutionality, which is obvious. That question would need to be answered in respect of anything that restricts property rights.

We frequently introduce legislation that affects contracts, such as employment law contracts. Notwithstanding the argument over the statutory nature of the code of conduct on mortgage arrears, does that not in a way restrict the contract that exists between a bank and a borrower in terms of its automatic right to repossess, which is in the contract? We were even told the change to the Personal Insolvency Act, which allows the courts to look at the issue of the veto, was not possible and would be unconstitutional. It is possible for it to impact and affect existing contracts, but it has to be careful, limited and subject to proportionality, which I would argue this is.

I do not know if the witnesses have a view on the money message. The Department of Finance's submission is its big ticket item; if it can convince the Houses of the Oireachtas, it will kill the Bill. It claims that if this goes through, the Department of Finance and the Central Bank will need extra staff. This is just farcical in my view. It is just bizarre that prohibiting banks from selling to a vulture fund unless they receive consent would require additional staff in the Department of Finance or the Central Bank. I ask for the witnesses' views on this. The committee has not dealt with it and I know we will need a further view on the money message from those in the Houses of the Oireachtas who will give that.

Mr. Paul Joyce

I do not know about the second issue and the money message. I do not believe we have sufficient expertise to address that.

Mr. Paul Joyce

However, it raises an important point. Perhaps one of the reasons for loan sales is to save money for the institutions that lent the money in the first place, properly dealing with these accounts and entering into legally binding arrangements such as personal insolvency arrangements and so on. Properly dealing with the accounts in arrears for more than two years in a systematic way would probably have monetary consequences for the institutions themselves. That might lead to needing a certain amount of extra supervision by the Central Bank and the Department, but I cannot see in principle that that would be enormous.

I think the Deputy is absolutely right on the constitutional issue. I am looking at a recent High Court decision under the personal insolvency legislation. As the Deputy knows, originally there was no right of appeal. When the Personal Insolvency Act was introduced in 2012 and came into operation in autumn 2013, creditors could decide at a meeting to accept or reject an arrangement. We were told back then that having an appeal mechanism that might result in the imposition of a solution upon a creditor was unconstitutional. At the time we all predicted that this would lead to very few arrangements, as it did. Eventually it was decided that the legislation needed to be amended, which happened late in 2015. At the beginning of 2016, a limited appeal mechanism to the Circuit Court was introduced but only in respect of a personal insolvency arrangement that involved arrears on a principal dwelling.

A limited appeal mechanism to the Circuit Court was introduced but only in respect of PIAs that involved arrears on principal dwelling houses. Since then, there have been some very interesting decisions in the High Court on appeal from the Circuit Court. The number of PIAs has begun to increase, but not quickly enough, unfortunately. It is running at approximately 3,200 but PIPs are becoming more expert, adventurous and creative with the legislation. The High Court decision in the Parkin case, for example, was 33 pages long and the judge very carefully went into the nuts and bolts of the constitutionality of imposing a write down on the lender in that case. The High Court does exactly what the Deputy describes. It talks about proportionality and cites case law, including Healy v. Ireland from quite a long time ago. Of course, there is a constitutional issue with the Deputy's Bill because it affects the property rights of creditors, notionally. The question is whether the public interest is sufficiently important to override that property right. There is a property right but in this particular case it was a PIA where there was a counterproposal from the lender, PTSB, that a split mortgage of 26 years duration should be put in place. That is what the appeal was about and the High Court ruled in favour of the applicant. It found that there was no certainty that a split mortgage would not return the borrower to solvency and, therefore, the arrangement as proposed went through. Again, this was an example of the courts, in a proportionate way, looking at legislation carefully. The High Court has very clearly drawn out the social objectives of the personal insolvency legislation on a number of occasions and has asked what the Oireachtas meant by this. It is a live issue. I would have thought that the appeal mechanism might have been challenged by a creditor at some point, from a constitutional point of view, but I am not aware of any challenge thus far, three years on.

Part V was another good example of limiting the right to private property in terms of legislation passed by the House but it has also stood the test.

Ms Eilis Barry

FLAC has drafted an amendment to the Land and Conveyancing Law Reform Act 2009 that would, if accepted, give the courts greater powers in dealing with people in long-term arrears. We obtained advice from senior counsel to the effect that it is possible to construct an Act that will withstand a constitutional challenge. It happens all the time but, equally, a questioning of the constitutionality of socially progressive legislation is almost always the first reaction.

Mr. Paul Joyce

The Land and Conveyancing Law Reform (Amendment) Bill recently moved by the Department of Justice and Equality purports to give the Circuit Court the right to decide to refuse to grant a possession order in specific circumstances. Again, there is a constitutionality issue there but that is a Department of Justice and Equality Bill.

Mr. David Hall

The insolvency legislation has changed and there is a structural deficit within the insolvency system and service. A number of PIPs are exceptionally competent and in many cases the arrangements are well thought out and well executed and provide good protection for customers in arrears.

I agree with Mr. Joyce on the constitutionality question. If Deputies and Senators were engaging with customers in mortgage difficulties who are genuinely under immense pressure on a regular basis, they would know that the time comes when one has to make a call. Historically, we have chosen banks and credit institutions but there is a dramatic imbalance against consumers. There needs to be a rebalancing here. Let them take the damn challenge if they want. All of the main banks have challenged various aspects of the insolvency legislation and have tried to object to it. That is their way of operating and vulture funds have done the same. Lovely, cuddly banks and vulture funds complying with the insolvency legislation is not always the true picture.

The Deputy asked a question with regard to AIB, which was before the committee recently. We are engaging with AIB and, as Mr. O'Keeffe and Mr. Hunt mentioned, there is an element of confidentiality involved for a host of reasons. Having been involved in this work since 2010, all of us in this room have wanted to see an alternative restructuring component to vulture funds. We have been informed, in the context of Deputy Pearse Doherty's Bill and other legislation, that certain things are not possible. In recent months, the engagement we have had with AIB gives me the clear understanding that this is absolutely possible. I expect to be making a bid in six to eight weeks. I hope that I am right in saying that what we all believe to be an alternative to what is happening at the moment - which is despicable - is possible. Hopefully, we will be back to discuss this with the committee, with or without AIB, at a future date. It is not easy. It is very adventurous and has required a significant leap of faith from AIB and its board, which has fully endorsed the programme. This morning, I am exceptionally positive.

Very good. That is interesting. I am not shy when it comes to criticising the banks when they need to be called out. It is worth acknowledging, however, that AIB has led in a number of areas, including the arrangement it entered into with IMHO a number of years ago. Other banks have followed its lead. AIB was the first bank to talk about debt write-downs for borrowers, which other banks should also be considering as part of their restructuring. I hope that this proves fruitful, whether it is through Mr. Hall's organisation or another not-for-profit organisation. The core problem does not relate to Promontoria Scariff or Glenbeigh per se; rather, it relates to their motivation, which is to make as much profit as quickly as possible. They have no ties to the rest of the portfolio, the individuals or the areas in which the loans were generated. A different structure is required.

I acknowledge that there are non-performing loans in banks that must be dealt with but, as FLAC and others have indicated, the banks should be forced to do the heavy lifting. They should not be allowed to take the easy option of selling on loans and stating that it has nothing to do with them any more.

Mr. David Hall

The misleading narrative put about is that everybody who is in mortgage arrears is a strategic defaulter. That is utterly disrespectful. If there was competency within the consumer protection section of the Central Bank, the question that would be asked of the banks is how many customers have engaged with them. They should be asked how many of their customers have proven to them that they cannot pay their mortgage and whose position the bank has determined is unsustainable, even though they have done everything they could. As we saw with PTSB, people complied and were given restructures. They complied with those restructures but their loans were still sold to vulture funds. We must forget about the messers and those who want to game the system. They will be dealt with in due course. There are many ways to deal with them. This is about the cohort of people who are too scared and who are sitting at home now, petrified. I would urge those who are watching these proceedings today who are in difficulty to get in touch with IMHO, FLAC, MABS, the Insolvency Service or the Phoenix Project. There are many competent and coherent people who work together, who share information and ideas and who can get them the best option available. Sitting at home and sitting on one's hands is no longer an option. There is a cohort of people who have gone the extra mile and engaged. Many lending institutions in the State are sitting down with those people in the full knowledge that their debts are unsustainable. Even if they kept their loans and did not sell them, those people would still lose their homes.

I ask Mr. Hall to talk about the significance of the Pepper letter and the offer of €236,000.

Was that made from iCare in order to purchase the home on a mortgage-to-rent basis? Pepper rejected the offer. What was the significance of the sum offered by iCare and the rejection of that offer?

Mr. David Hall

I will preface my remarks by stating that there are many examples of this and that will be obvious when anyone visits the office. This valuation - it was an independent valuation confirmed by Pepper, which was acting on behalf of Shoreline, and through the Housing Agency - put the property value at €265,000. The repairs required to bring it to a standard where iCare, as an approved housing body, would be able to manage property and have people living in it, as per the rules of being a landlord, would have cost €6,413. The offer made by iCare to buy that property from Shoreline, via Pepper, was €258,587. A discount of 8% was required in order to make it work the way the social housing model works. The other example related to Start Mortgages and the figure involved was 12%. These are examples of the nonsense, misleading information and assumptions regarding funds holding loans. It is worth pointing out - to be fair to Pepper, as opposed to Shoreline - that most of the mortgage-to-rent arrangements made prior to iCare's involvement were done by Pepper, which was dealing with 50% of all such arrangements. Mars Capital is also actively involved in mortgage-to-rent arrangements and other forms of restructuring. This goes back to the myriad connections that exist.

A discount of 8% would have been required in the case in question and the discount required in the case involving Start Mortgages would have been 12%. In the correspondence we shared with the committee, one can see that - this is even more sickening - our office's expectation is that anything above 15% will be rejected. When the solution involving a discount of 12% was rejected, our staff queried it on the basis that the company only normally rejects anything involving a discount of more than 15%. These are the lovely vulture funds that have swooped in and picked the carcasses of families who they will effectively throw out on the street. However, the Minister for Finance, the Taoiseach and many others state that vulture funds are wonderful to deal with, that they are nice and that they bought the stuff cheap so logically they will be able to do deals. That is factually incorrect. We are giving the committee this first-hand evidence from the coalface and we will supply more in the future.

I congratulate our guests on the wonderful work they are doing on behalf of people who have got into serious difficulties. When a loan is sold, is everything sold by the bank to the vulture fund, that is, the loan, the property and everything? I have come across a couple of cases where loans were sold and then the vulture funds sought vacant possession of the houses or apartments involved and went to the courts. In some instances, it could be the original bank that takes the case for the vulture fund to get eviction in the case of liquidation or eviction.

Mr. Paul Joyce

The Senator raises the very important point that it is commonly understood that each loan is sold on a loan-by-loan basis. In fact, it is usually a portfolio of loans, which is often quite large, that is sold. The buyers of loans do not look at the loans on a loan-by-loan basis. They buy at a particular price with a particular knock-down. In our experience, the buyer of the loan often does not have sufficient documentation, contractual or otherwise. The buyer often does not have correct information on the arrears, when they arose and so on. This problem sometimes arises where loans that are already the subject of legal proceedings or repossession proceedings in the courts are bought. In such cases, the new owners must seek to substitute themselves as the plaintiffs seeking to repossess the properties involved. It should be the case that all rights relating to a loan should transfer from the original lender to the buyer but it is not always as smooth and straightforward as that. Often, when repossession proceedings are brought by the buyer of the loan, the sworn statement that the lender must set out to ground the application does not often contain enough information about the history of the mortgage, how the arrears arose and so on.

Is Mr. Joyce stating that the affidavits involved could be shady and that they might not contain the whole truth?

Mr. Paul Joyce

There are Circuit Court rules which dictate that an affidavit to be set out in a particular form. These are quite detailed, but sometimes the affidavits do not contain the level of detail that one would wish to see. In such cases, the borrower may have the bones of a defence at least. The point is that it could be 2,500 loans. It is not as though the fund sits down and goes through each one by one. It is not done exhaustively but as a job lot.

In some of the cases to which I refer, it seems that the person who owns the property was trying to deal with the bank, then the bank sold the loan and now that person finds that it is the original bank which is trying to evict them.

Mr. David Hall

Many proceedings are before the courts that are being mixed up with repossession proceedings. We were dealing with Start Mortgages on behalf of one of Deputy Ó Broin's constituents. Proceedings were issued against the young lady - this was some weeks ago - and, unfortunately, she passed away. She was buried on a Thursday and the big panic for us was to try and have the case adjourned on the Monday. The panic was because everyone, including Deputy Ó Broin, had interpreted that these were repossession proceedings whereas, in fact, they were to change the name to Start DAC. Start Mortgages had taken proceedings in the Circuit Court against this lady. The Circuit Court rejected this and Start Mortgages was appealing to the High Court. However, it was listed as being Start Mortgages. Start Mortgages was originating the loan. On the same day, the same issue arose with Ulster Bank and Promontoria. Again, Ulster Bank had initiated the legal proceedings. Promontoria had bought the loan among a mishmash of loans. It then had to substitute proceedings for Promontoria's name, but the originating ones would still be in the name of Ulster Bank. Again, it is devoid of any consumer clarification or protection and it is very confusing for someone who is genuinely trying to engage, as seems to be the case with the person to whom the Senator referred.

Is this within the law?

Mr. Paul Joyce

The Court of Appeal made a decision in respect of Mars Capital, which sought to have an omnibus order made where it could be substituted as the plaintiff lender in a large number of cases. In other words, it was seeking to take the place of the bank from which it bought the loans. The court refused this and stated that it had to be done on a case-by-case basis. What it involves is a motion on notice to the other side to be substituted, as in this case, in the repossession proceedings. As Mr. Hall indicated, it is sometimes very confusing for the borrower. Part of the problem we, as an organisation that campaigns to improve civil legal aid services, see is that people do not have access to legal aid from the Legal Aid Board law centres to defend their position. If the affidavit does not contain adequate information, to whom will the borrower go to represent him or her or defend his or her interests?

Mr. David Hall

We have many cases where loans have been sold to a fund. Files do not automatically transfer. There is no obligation on anyone to transfer anyone's file to the new loan owner. We have many cases where we are seeking copies of files that everyone used to get and funds respond that they do not have them. They state that they have bought the loans so that the engagement history, the contacts which took place with the person -----

Is Mr. Hall stating that it is separate?

Mr. David Hall

They did not buy the files, they bought the loans.

Mr. Paul Joyce

It is standard practice in money advice work to make a data access request simply in order to get the full files and be in a position to understand the history of the loan, when the problem started and so on.

I thought all this data was circulated between the banking institutions.

Mr. Paul Joyce

There is one particular credit servicing firm that is saying it does not have to provide specific copies and that the information should have already been provided from the original lender. Complaints have been made to the Office of the Data Protection Commissioner in that regard but it is another illustration of difficulties which arise when dealing with credit servicing funds. I have seen some correspondence where, to be fair, the firm has indicated that it does not have the information and that it did not receive it when the loan was sold.

Indeed, I have seen correspondence in which a firm has pointed out that it is a common misconception that when a loan is bought the full suite of information transfers from the originator to the buyer. There is a certain element of speed in the sale of loans and we are in a race against time. There are more than 3,000 personal insolvency arrangements in place but, at the last count, approximately 27,500 accounts of principal dwelling houses had been in arrears for more than two years. One third of those are already in the hands of unregulated loan owners and retail credit firms. While it is a finite problem, these firms are already moving to bring legal proceedings or to continue proceedings that have already commenced.

Mr. David Hall

Let us imagine a case of a customer who engaged with the former lender, whatever bank it might have been, but had no money and his or her loan was sold to a fund which adopts an aggressive response to try to have the case resolved.

Through the courts.

Mr. David Hall

Yes. If the customer tries truthfully and honestly to assure the fund that he or she engaged with the former owner of the loan and did what was asked of him or her but does not have any money, the fund may say it does not have the file and it is kicking the case on. That is the carry-on that is taking place. It is very concerning to have senior officials and politicians state as a matter of fact something that is factually incorrect. The view that vultures are good, adhere to best practice and are regulated is very worrying. We already discussed the regulation that is in place around the code of conduct. Data files are not automatically transferred and people are making data requests. Genuinely sincere people who have engaged with their former lender now find themselves at the receiving end of this and they do not even have the data to protect themselves. What happens to recordings? What happens to all the recordings related to the files that formed part of the various loan sales? Did they transfer in the case of the Permanent TSB sale? No, they did not transfer. What happened in the case of the Ulster Bank loan sale to Promontoria? If I were a vulture fund, my automatic response to a customer would be to tell him or her to talk to Ulster Bank because I do not have the file.

Mr. Paul Joyce

I am looking at a letter from Promontoria in which it states that it is writing to let a customer know some important information about their loan and that Promontoria has agreed to transfer its interest in the loan. The company bought the loan from Ulster Bank and is now transferring it to a third party. This means not only that the loan was sold to one party but that it is being passed on to another entity to deal with. The borrowers are simply informed that this is happening, without consent being sought or notice provided.

Do they have any recourse?

Mr. Paul Joyce

They have the same recourse they had against the original lender.

Mr. David Hall

The biggest concern has been the sale of loans by vulture funds to super vulture funds. Banks selling to vulture funds of varying levels of despicability has always been a concern. It is an awful pity that the vulture funds do not have the wherewithal to appear before the committee because their representatives would speak honestly. One of them asked me why a fund would repossess a house in County Clare where the owner is in arrears, having not paid the mortgage, and the value is increasing at a rate of 8% per year. In such circumstances, why would the fund not sell on the loan given that it had exceeded its entire target on the portfolio three years previously? People are saying that these companies are not issuing as many repossession proceedings. We do not have proper data on repossession proceedings from the Central Bank. The committee would be well advised to ask the Central Bank for effective repossession data on the number of proceedings that are before the courts because, as Mr. Joyce mentioned and we have discussed this previously, it is recording adjournments as separate repossession proceedings. We do not actually know what they have.

I do not believe there is anywhere else in the world where the vulture funds have recovered as much money on their investment as they have in Ireland. This is a major challenge and concern and the most concerning aspect and the one about which they smile most is that many of them will not have had to repossess many properties. They will get a chance to sell them on to super vulture funds and make the money they intended to make without having to do the dirty work of repossessing a family home.

Is there any link between vulture funds and banks at board level? I refer to people who make the decision for the banks that they have to sell on their non-performing loans, NPLs?

Mr. David Hall

It is a very small pool of people and funds. It is like a secret society because one finds these announcements are just made. They are not done like public tenders and there is no public transparency or public process involved. In the commercial world that is perfectly acceptable but these cases involve families and individuals whose lives and futures are being sold without any impediment to doing so.

Mr. Paul Joyce

I do not believe the strategy is decided within the confines of this country. There is a requirement that the owner of the loans have a presence here but often the companies are set up specifically, as Deputy Doherty mentioned, with the same directors who may be directors of 360 other companies. There is an official front and the company often instructs the credit servicing firm. However, in terms of who decides what happens to the overall portfolio, where it goes and what action is taken, our view is that those decisions are made far from this city and country.

Some years ago, people took out insurance with their mortgage in case they lost their job or whatever. Have the witnesses come across cases of insurance companies not paying out when people lost their homes because they had lost their job and were not able to pay their mortgage?

Mr. Paul Joyce

There have been cases of what one would call inappropriate selling of mortgage protection policies, redundancy protection policies, critical illness cover and so on. These policies have been available to people drawing down mortgages and other types of loans for several decades. This arose in the context of the Financial Services and Pensions Ombudsman service. A number of people were sold policies that did not cover them. For example, someone would be sold a product that would technically only be available to someone working under a contract of employment, that is, directly for an employer. One would then find that the person was designated as self-employed and when he or she made a claim, no cover was available. It is a little like the tracker mortgage scandal. In Ireland, but particularly in the UK, there was a programme of restitution to people who had paid premiums and thought they were covered by policies only to find that the policy did not cover them.

Mr. David Hall

To be fair, one or two banks adopted a good policy whereby when a payment was made against the mortgage, irrespective of it being a full payment, the first part of that payment that was taken out was the insurance premium for life cover. Many people do not pay it. Unfortunately, life cover is one of the costs that many people sacrifice. Part of the problem is the behaviour of consumers caused by the fear and pressure they are under.

Mr. Paul Joyce

Sometimes the payments are on top of the mortgage. Unfortunately, house insurance often goes by the board as well, which is particularly dangerous. People stop paying all kinds of insurance which can have very damaging consequences. That is a product of pure financial difficulty in many cases.

I do not intend to delay the meeting with questions because we have had a good exchange. Both parties have put forward a detailed narrative, which would concern anyone and should concern Members of this House. Deputy Michael McGrath's Bill, Deputy Pearse Doherty's Bill and the Bill, which the former Master of the High Court, Mr. Edmund Honohan, assisted in writing, have been torn to shreds by the vested interests in this State, including the political establishment. I find that extremely concerning. We do not seem to be able to reach a point where we can safely say to people we represent who are in mortgage difficulties that we can offer them the protection they need in their lives, including the human rights protections cited by Ms Barry.

In all of the exchanges we have here with banks, I think one fund appeared before us. The other funds have just refused to co-operate in any way with the banks. My question is to both parties. What can we do next to bring to the Oireachtas the true story of what is happening with the vulture funds and the courts and the steps that need to be taken, not in the future but now? What are the urgent steps that are required? At the previous meeting of this committee, I asked that we would look at the possibility of bringing all parties together, including those who have been affected, to get a clearer picture and have it properly exposed for everyone interested in this area or affected by what is happening. In the context of Deputy Doherty's Bill, it might be helpful if that piece of work was brought forward. We will take up Mr. Hall's invitation to visit the offices and see that. It is a step forward, but I would like to hear both witnesses tell me what we should do next. I am suggesting that a day could be devoted to people associated with this issue, who could come before this committee with clear specifics as to how they are affected, while others could tell us how best to address the issue. The Personal Insolvency Act was mentioned. I was interested in the point in Mr. Joyce's opening statement relating to the piece of the contract that says the loan could be sold on regardless and whether we could encourage someone to challenge that, which would deal with the retrospective argument they have about Deputy Doherty's Bill. What do the witnesses think we can do next to make something happen? What can we do to make the powers within this House and the Government take note that they are spinning a yarn or a downright lie when they say that the protections travel with the loan? What can we do to undermine that argument, cut through the fog, give people some sort of hope that we are doing something and try to do something as a committee with the Government?

Mr. David Hall

A consultative forum was involved with the Insolvency Service of Ireland that involved creditors and debtor advocates, including me, and personal insolvency practitioners. It was sent in some time ago, between eight and 12 months ago. Changes to the legislation were agreed by all parties, creditors and debtors. In parallel with anything this committee undertakes, we need to accelerate the changes made because, undoubtedly, the hand-to-hand combat that will be required in dealing with vulture funds and indeed the remainder of banks will take three strands. It is very important to remember that banks have just given up on engaging with people in long-term mortgage arrears. Some banks will still continue to do it but many people will not have received answers from banks over a period of time. They are lining up and there will be an avalanche of loan sales. The prediction will be that during the summer when people are on holidays, they will do what they have historically done, namely, make those announcements. The Insolvency Service of Ireland, personal insolvency practitioners and the Abhaile scheme all need to be reviewed and combined. There will be some good news stories from that. There will also some challenging stories from that because all is not well within that structure. The Insolvency Service of Ireland was privatised. There is no public insolvency practice. Why MABS was never converted into a large personal insolvency practitioners practice is beyond me. Our board is now considering changing our entire tack regarding informal arrangements to look at doing them through insolvency arrangements. In parallel with anything that happens, that will take time. As Mr. Joyce mentioned, only 3,200 insolvency arrangements have been done. A total of 27,000 people are in mortgage arrears. At the current rate, for all those eligible for one, it could take 100 years to resolve. Legislation needs to be adopted incorporating the changes that were agreed.

Fine, but I am asking about Deputy Doherty's Bill, this committee and the work we have done up to now on this, which has been fought against every step of the way. Can we organise a day to bring in the interested parties not just to explore but put forward views that might have already been put forward? I go back to what was said by Senator Burke. It tells its own story in that exchange. I know what happens. People ask why it was not taken to court why the person did not go back to the original borrower and take them to court for the information that the person needs. We are talking about broken people. We are talking about people who are trying to live every day.

Mr. David Hall

As with our own gathering of those involved, leaving aside commentators, it is a very small community of people who are actively involved in helping those in mortgage arrears in terms of providing services, help, guidance, advice and training between the collective. Regarding having a day with those people, I would also respectfully suggest that in respect of the Bill by the Minister of State, Deputy Kevin Boxer Moran, and all of the other legislation, we could have a day where everybody comes together. I would love to see what the Oireachtas would agree out of all the legislation that is there. This is an isolated cohort of people. It is not a current banking challenge. It is rubbish for the Central Bank to infer that mortgage rates will increase with regard to certain things that will happen. This is a finite group of people who have been abandoned. Conflating them with current customers and pitting customers and members of the public against each other to try to isolate and alienate these people is disgraceful. Involving all the parties, including those affected in whatever form - some are stronger than others - would help. I know the people affected by the tracker mortgage scandal were exceptionally strong in being able to speak but not everyone is able to speak. Many are broken and many have great challenges and difficulties in their personal circumstances, but the evidence is clear if people want to see it.

I am anxious to expose this evidence to whoever in these Houses or in Government is interested. We will extend an invitation to the Minister to come here to hear it at first hand. I want to expose what I see as the lie that vultures are happy-clappy people and a person can engage with them. That is not the case. Mr. Hall said that 60 of them met-----

Mr. David Hall

Mr. Joyce and I organised a fantastic gathering of MABS staff, who travelled from all over the country, the head of the Insolvency Service of Ireland and a dozen of so of the active personal insolvency practitioners in the country to have a conversation about what to do about the hard cases. It would be useful to include some of the contributors to that. We will furnish the committee with the information for that but we had our own conversation, which was held in private. We were not looking to grandstand simply because we all had a shared issue and challenge listening to this rubbish in the background.

I do not consider appearing here to be grandstanding on the part of anybody.

Mr. David Hall

We met privately just to assure ourselves that we were not all mad and that we were witnessing the same thing and facing the same challenges on the off-chance that we were wrong.

We would love to hear from them.

Mr. Paul Joyce

We plan further days of that nature. It might be interesting for members to attend and listen to the deliberations. Deputy Doherty's Bill will only deal with one aspect of this problem and I think he knows that. What it purports to do is at least to seek the borrower's consent for his or her loan to be sold, which might not be withheld. Individual borrowers might say that they do not mind their loan being sold because the way the vulture fund might deal with them or their financial circumstances might be such that it might be in their interests for the loan to be sold. If loans were never sold to vulture funds and if vulture funds did not exist, we would still have the fundamental problem of loans that have been in arrears for a long time. The number of people in the two years plus category is 27,500. Mr. Hall knows that we wrote to the Insolvency Service of Ireland and the Department of Justice and Equality a few years ago asking whether we could look at the profile. The Central Bank is carrying out a review and seeking information from the likes of us. We need an awful lot more detail about the two years plus category of arrears. They are the dangerous cases.

My question concerns that group, including some of those affected.

Does Mr. Joyce believe, as part of that group, that an open session here, in public, to discuss the very issues that we have been talking about would be helpful? As data are collected and provision is made for legislation, more and more loans are gone. They are sold on. There is frightening speed in this.

Mr. Paul Joyce

We do not know how many households are involved in the 27,500 accounts because many people got top-ups. A history lesson is needed for some of the institutions that oppose this Bill. Between 2000 and 2008, which we remember well because we were there, there were no controls on the amount that one could borrow to fund the purchase of a dwelling.

Is Mr. Joyce willing to give that history lesson along with the current set of circumstances that face people who are in this type of distress?

Mr. Paul Joyce

Absolutely. Everybody in that category should be modelled for a personal insolvency arrangement first of all. The personal insolvency arrangement is the backstop in the system, in the courts and so on.

I am sorry for rushing this but, as I said, it is towards the end of the day here. In Mr. Hall's opening statement, he made fairly serious comments about the incompetence from banks, bureaucratic corruption and so on. I agree with the sentiments that he has expressed but I think that we need to flesh it out in a way that is bold and in the face of the banks. Some of the lies being spun need to be challenged.

Mr. David Hall

It is utterly disrespectful to all of the people who are helping, including politicians, advisers and organisations such as MABS to hear this. That was why one of the gatherings was to confirm that we were not all mad and that this was something we believed. There should be a meeting with all of those parties, contributors and people directly affected. Another category that will be most interesting to this committee will be those whose mortgages have been sold. The Glenbeigh category will be the most fascinating, based on its behaviour towards borrowers in recent weeks. I want to understand what benchmark is required in the Oireachtas to protect citizens over banks.

With Deputy Doherty's approval, I believe that it would be helpful not just to the Bill but to the issue that we are trying to raise if we were to give that challenge to the witnesses' organisations and others to come back with a format that would do exactly what we want to do. That would have regard to the work the witnesses do and the legislation that we have to put together, and it would challenge the Oireachtas by asking what we have to do to pass legislation that will work for those who are most in distress.

I welcome anything that is helpful to scrutinise this Bill further. My views are well known. I want to ensure that this gets through as speedily as possible, but with the proper views having been heard. We have sought the views of many others who have given us written submissions. I am eager to do that, if it can be arranged as soon as possible. We need to draw a line.

With the willingness of the Deputy's group and maybe some who are affected, and with the type of information that the Deputy has exchanged with Senator Paddy Burke, it would be worthwhile. I invite Deputy Doherty to engage with the clerk to see how that can be constructed in the best possible way, with the outcome being focused on either regulation or legislation that could be dealt with immediately or quickly if the Government was of a mind to do it.

The Chairman has in mind a looser engagement here as opposed to structured questions.

Yes. We would facilitate that.

We would observe more than engage.

It would also be a day when people would get information. Many people suggest that there are different things going on within the courts, banks and vulture funds. The witnesses have confirmed that what we have discussed will show people whether what they believe is true or false. I would like to do more of that as early as possible after Easter. We could prioritise it. The committee has agreed to do something such as this. Will the Deputy come back to the clerk with his proposals? We will try to structure it in a way that gets the best possible information and support for the Bill. Can I leave it with the Deputy?

I thank everyone for coming along. It has been worthwhile and informative.

The joint committee adjourned at 3.45 p.m. until 9.30 a.m. on Thursday, 9 May 2019.