I remind members to ensure their mobile phones are switched off as they interfere with the transmission of the proceedings and cause serious problems for broadcasting, editorial and sound staff.
I welcome the Minister for Finance, Deputy Michael Noonan, and his officials. The purpose of the meeting is to consider Committee Stage of the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 which was referred to the select sub-committee by Dáil Éireann on 4 February.
Amendments Nos. 1, 4, 10 and 16 are related and may be discussed together.
I move amendment No. 1:
In page 3, to delete line 16 and substitute the following:
" "(iiia) a person authorised to carry on the business of a credit servicing firm,".".
These amendments deal with financial service providers that are already regulated. They are largely technical in nature. Our intent was always that an existing regulated financial service provider, authorised to provide credit and already undertaking credit servicing, would not be required to apply for additional authorisation as a credit servicing firm. These firms have been through the authorisation process and we do not want to impose an additional regulatory burden on them. We now propose, through amendment No. 10, that such firms be deemed or taken to be authorised as credit servicing firms rather than being excluded from the definition of credit servicing firms. The amendment will achieve that aim. The other amendments follow from this change in approach.
The changes will also ensure firms servicing credit for the newly authorised, or taken to be authorised, credit servicing firms will be treated equally in respect of that activity. In addition, if the Central Bank wishes to impose conditions on credit servicing firms, there will be a single cohort available to them.
In summary, the original Bill excluded from the definition of credit servicing existing regulated financial service providers authorised to provide credit. We have, however, changed the wording in order that these firms will now be taken to be authorised as credit servicing firms and will not need to seek additional authorisation for this activity.
Amendments Nos. 2, 15 and 18 are related and will be discussed together.
I move amendment No. 2:
In page 3, to delete lines 19 to 25 and substitute the following:
“(c) by substituting the following definition for the definition of “retail credit firm”:
“ ‘retail credit firm’ means a person prescribed for the purpose of paragraph (g) of other person who holds itself out as carrying on a business of, and whose business consists wholly or partly of, providing credit directly to relevant persons or owning such credit or both, but does not include—
(a) a person who is a regulated financial service provider authorised by the Bank or another EEA regulator to provide or own credit otherwise than under this Part, or
(b) a person who is an authorised credit intermediary under Part XI of the Consumer Credit Act 1995 when carrying on the activity of a credit intermediary, or
(c) a person who provides credit on a once only or occasional basis, but only if the provision of the credit does not involve a representation, or create an impression (whether in advertising, marketing or otherwise), that the credit would be offered to other persons on the same or substantially similar terms, or
(d) a person who is exempted, or who belongs to a class of persons that is exempted, under section 29A from being required to hold an authorisation as a retail credit firm;”.”.
There is a difficulty for many people who find themselves in a position where their mortgage holder is no longer regulated. A total of 18,000 people fall into this group, approximately 13,000 of whom are with the Irish Bank Resolution Corporation, IBRC. The stories I, as an elected representative, hear about their experiences are amazing. The danger is that the process has opened the door to firms which seek to profit strip from the crisis, having received reductions or write-downs on the size of mortgages. For example, they may have bought mortgages at 60% of face value and, therefore, see an opportunity to sell houses as soon as possible to realise a profit. The system has created a commercial opportunity that works against the interests of citizens whom we are here to represent and protect.
I know one individual who is in Leinster House today, who was a couple of days behind in his mortgage repayments and who received a letter from the mortgage provider which was outside the system of regulation for repossession. That shows that these guys were jumping at the opportunity to repossess. I know another individual who bought a house and was €2,000 in arrears for four months and whose house was forcibly sold. When it was sold, he was left with a debt of €80,000. That is a shocking and disgusting thing for any bank to visit on someone.
We also know that when citizens try to engage with these unregulated vulture funds, they deal with an opaque system. There are mortgage holders who receive letters from a company called Acenden in Sweden about particular mortgages. When they go back to the company, they think they are dealing with, Mars, for example, which knows nothing about Acenden and operates through a PO box number. When the individual writes to Mars, it takes a long time to obtain the information. There are no telephone numbers for these companies. Individuals receive statements with no opening balances, just the details for the year involved. If they look for information on their 2014 statements half way through 2015, that detail cannot be provided. They make payments to central accounts that have no reference codes and cannot obtain a digital receipt or information from the firm involved. We have a Wild West system of deregulation for a significant cohort of individuals. In the main, their situation is the result of a Government decision. I spoke to one of them today who told me he would have more rights if he bought a toaster than he has in the case of his mortgage.
We hoped the Government’s response to the crisis would be to fulfil and safeguard the rights of citizens as much as possible and we cannot understand why this has not been achieved. The Minister will recognise the paragraph in my amendment because it is taken from the original document. It seeks to regulate all players operating in the mortgage system. There should be no separation or difference between owners and service providers. It should include those who own the credit, too. It is a legally complex issue, but, first and foremost, the objective of any Government should be to ensure the people concerned are fully protected. I, therefore, appeal to the Minister to return to the track he was on initially to ensure full protection.
I thank the Deputy for his amendment and intervention. The occurrences he describes are totally unacceptable and the purpose of the legislation we are discussing is to ensure they will no longer be in accordance with law and will be prohibited under the terms of the Bill. The service provider, rather than the owner, interfaces with the customer who has the mortgage. In the legislation we are controlling the agencies that interact with mortgagees, but if the owner of the asset decides to do this, it will be treated as the provider and subject to the same regulation.
My briefing note on the amendment will explain the point more fully. The amendments are broadly aimed at the regulation of owners of credit. As I have made clear in previous discussions on this topic, this issue has been given much consideration. As I outlined on Second Stage, the best protection for consumers will be accorded if credit servicing firms, rather than owners, are regulated. My purpose is to regulate the activity of credit servicing and I do not propose to regulate ownership, unless the owner is undertaking activity which would result in a prescribed contravention if it were undertaken by a regulated firm. However, if the owner does not appoint a regulated credit servicing firm to service the credit, the owner must be authorised and regulated.
The purpose of the Bill is to ensure consumers retain the protections they had prior to the sale of their loans. The Bill will require entities dealing with consumers to be authorised by the Central Bank and subject to its codes of conduct. Dealing with a consumer is credit servicing and the definition of credit servicing is broad. Owners of loan books who deal directly with consumers, that is, those who are servicing their own loan books, will be regulated. Otherwise, they can have the loan book serviced by a regulated credit servicing firm. Either way, the entity dealing with the consumer will be regulated and this is the most appropriate and effective way to protect the consumer.
We spoke on Second Stage about the potential for a lacuna to develop if a foreign-based unregulated owner was to use a local credit servicing firm which was not regulated. It, therefore, became clear in the consultation process that if we were to protect consumers effectively, it was better to regulate the process of credit servicing as that was the customer-facing activity. In addition, in amendment No. 20 we are imposing a new statutory obligation on owners not to instruct a regulated credit servicing firm to do anything which would be a prescribed contravention if undertaken by a regulated retail credit firm. There is also an obligation on the credit servicing firm not to implement such an instruction.
This will prevent the owners from doing things we do not want them to do, and it will also ensure there is no way for such an instruction to be implemented. That is why I am not accepting the Deputy's amendments, but I accept the spirit in which he offers them. The credit servicing firm will be regulated, because it is the credit servicing firm that interacts with the person who has the mortgage. If the owner is passive and is working totally through the credit servicing firm, the owner does not enter into the regulatory space. If, on the other hand, the owner is not passive but acts as his own credit servicing firm, he is treated as a credit servicing firm and falls within this as a regulated entity. If the owner is a trust that is usually passive but on occasion becomes active and issues instructions to the credit servicing firm that is acting on its behalf, I would point to amendment No. 20, which we will come to later, which prohibits the owning entity from issuing any instruction which is one of the proscribed activities; therefore, we have it blocked out there as well. What we have done is now fully in line with the intentions the Deputy expressed, and the person with the mortgage is fully protected from the activities of the credit servicing firm and the owner.
Why not regulate all of the mortgage providers at all levels?
It is the activity that is regulated.
I understand, but why would we not simply regulate? We have experience of deregulation in this State. Our banking inquiry, which is taking place in another committee room, is focusing on the fact that there was a policy trend towards deregulation and a lack of implementation of regulation which resulted in the crisis that happened for us as a society. I understand the Minister has differentiated between the two aspects, the front end and the back end, with respect to the mortgages, but why would we not regulate? What is the negative outcome of regulating the owner?
We are not trending towards deregulation; rather, we are moving in the opposite direction. We are taking loan books that are now not regulated by the Central Bank and we are bringing in primary legislation to regulate the manner in which firms that regulate the credit are regulated. It is a move totally in the opposite direction. It is the activity that needs to be regulated. If the owner is a totally passive investor and is not acting in any way in credit servicing, then there is no need to regulate. We regulate the firm that services the loans on behalf of the owner. If, on the other hand, the owner intermittently acts by issuing instructions, we are prohibiting that as well under amendment No. 20, because then the owner would be instructing on an activity which falls within the scope of the Act. The reason we do not regulate the owners as well in the manner the Deputy suggests is that it would serve no purpose.
I will give the Minister an example of a constituent of mine who had a loan with a particular bank. He offered to pay 30% of that loan in a negotiated fashion, but the bank refused that negotiated offer and sold the loan to another firm. That firm was not incorporated on the day the loan was sold, and he understands the loan was sold for 15% of its value, which was 15% less than the money he was offering the bank. He understands also that the third-party financial institution it was sold to is staffed by people who were originally staff members of the first bank. I understand there is an opaque system in existence whereby individuals do not know who owns their mortgage at times and they cannot contact or deal with these organisations.
The Minister mentioned that there is a clear delineation of interaction between service providers and the owners of the debt, but that is not always the case. I am dealing with a hundred different mortgage distress situations in my office, and if one telephones Pepper, a service provider, one will get to a certain level with it but then one has to go back to the original owner of the mortgage to ascertain and get clear information. In the day-to-day aspects of dealing with the banks, it is the citizens' experience that the clean delineation the Minister spoke of is not clear. He mentioned that the Government is on a trajectory of further regulation, but this Bill is on a trajectory of less regulation, because we had stronger regulation in its previous manifestation. Given the fact that under this Bill it will remain opaque as to where the mortgage lies, where it is sold to, that location and the behaviour of that bank, surely cleaning up this process would be to the benefit of the Department of Finance and to the benefit of the citizen. Given the billions of euro we have spent as a result of the lack of regulation, surely regulation should be the default system to which we go as the Legislature. There is no benefit to our leaving gaps in regulation and leaving cloaked or invisible sectors with regard to the citizen. Why is default regulation not the step being taken by the Government and why would it seek to allow for that cloaked sector?
The firms that provided mortgages - the banks and the building societies - are traditionally regulated by the Central Bank under protocols and regulations. In the new circumstances in which loans are sold as portfolios, we want to ensure that the same regulation applies to those as historically applied to the mortgagee and the mortgage offerers with which we are all familiar.
The Central Bank's quarterly report in April last stated that there were 758,988 mortgages altogether, which is a lot of mortgages. It showed that a total of 42,169 accounts were with non-bank lenders, which included both regulated retail credit firms and currently unregulated entities. I understand the breakdown between regulated and unregulated entities is that two thirds are regulated and one third are unregulated - that is, approximately one third of the 42,000 accounts are unregulated. The quantum we are talking about, and that we are enacting this legislation to cover, is 14,000 out of 750,000. With the additional sales since April, that 14,000 may now be 15,000 or 16,000. That is the nature of what we are doing.
Some owners, as investors, buy the portfolio. I do not have the examples the Deputy quoted, but loans are not sold individually but as portfolios. As for individual loans being sold on, I do not understand that. Once we pass this legislation, the people providing the credit servicing will have to follow the code of conduct on mortgage arrears which the Central Bank has prescribed. They will also have to follow the clear guidelines on how to communicate. The offensive way in which some mortgage owners communicated will have to stop, and they will be fully covered.
Our original intention, as the Deputy suggested, was to cover the credit servicing firms and also the owners, but there is a cost in regulation. If unnecessary regulation is applied to people who do not need to be regulated, there is a cost in that and, ultimately, the cost will fall on the borrower. After Second Stage and after the conversations we had here, we decided there was a more focused way of doing it.
We have decided that the provisions of the Bill would apply to the credit servicing agencies and firms and if the owners were acting in that capacity they would also be covered by the regulation, or if the owners were giving instructions, either day to day or intermittently, to the credit servicing agencies then they would be covered by amendment No. 20 and it would be illegal for them to give such instructions, so every eventuality is covered. Therefore, the Deputy's amendment is unnecessary and would add extra expense for borrowers if I were to accept it. That is the reason I am not accepting it.
In regard to this group of amendments, is the Minister saying essentially that the 16,000 mortgages, not many of which were with IBRC, will be left out? Is it the case that they are on their own and that there is no road back?
They are going in now. The legislation will bring them in.
They will come in retrospectively.
Some of them were complying voluntarily.
I understand.
Now they will have to comply under the law.
The issue I am concerned about is the owner of the loan who is not to give instructions. I would have thought that the owner of the loan, when about to engage a credit servicing firm, would lay out careful parameters at the beginning and that once the credit servicing firm took over its hands would be tied by these instructions. I accept the Minister's point that during the course of that credit servicing agreement the owner is not to give instructions either to take or not to take action. It has given its instructions in the contract when appointing the credit service firm. The real power the owner of the loans or the portfolio has is that it can, I presume, by contract, remove the credit servicing firm and appoint a different credit servicing firm that might be more amenable to following its instructions.
The owner can only make arrangements with the credit servicing firms in line with the code of conduct for mortgage arrears as laid down by the Central Bank.
The Minister is answering the question, so we are not wasting time. One question that I raised on Second Stage was about a situation in which one of the big banks - AIB or Bank of Ireland - sells the loan to a company outside Ireland, which in turn appoints a credit servicing firm to do the work for it in Ireland. Essentially, the Minister is saying that the owner, who could be in any other country - say, Canada - will not be regulated, because it is not giving instructions. I maintain that this is a way out. My main concern, which I highlighted on Second Stage, is about this issue. I think it is a way for Bank of Ireland and AIB, the banks with the greatest number of mortgages, or Permanent TSB or whoever, to put together bundles of their more difficult loans and sell them off at a discount to a company outside the State, which, in turn, will hire a credit servicing firm to do its bidding. It may satisfy the conditions of the Minister's new amendment, No. 20, to which he has referred, by saying, "We are not instructing it." Ultimately, the owner, who is unregulated, will be calling the shots, and when it seeks expressions of interest from different credit servicing firms it will appoint the firm that will do what it wants done. It would be similar to a passive owner of any company, where the management gets on with the job. I still believe the owner would have the ultimate power to give instructions because it can remove the credit servicing firm from the equation and appoint a new firm in due course. I believe, even though it would not appear to interfere, it would be well able to interfere by sacking the firm. Ultimately, it has the power to hire and fire the credit servicing firm. That is enough of a threat for any credit servicing firm to do the bidding of the owner without any visible trace of interference by the owner.
That would be the situation if we were not enacting this Bill, but there are clear guidelines on the role of the owner set out in section 1(f) of the Bill before us, which are being supplemented with amendment No. 20.
Which we are coming to.
It is clear from section 1(f) that the owner is constrained in what he may do. All credit servicing firms will follow the same regulations. On the issue of owners based outside Ireland, I have a note, which I read. Relevant Irish financial services law, including the Consumer Protection Code 2012, the code of conduct on mortgage arrears and the Consumer Credit Act 1995, applies to the regulated activities of regulated entities. The Central Bank codes apply to the lending activities of all regulated entities except credit unions operating in the State including, inter alia, a financial service provider that is authorised, registered or licensed in another European Union or EEA member state and that has provided, or is providing, lending activities in the State. Any agent acting on behalf of a regulated financial service provider - that is, where an activity is outsourced - must comply with the requirements of Irish financial services law, including the code of conduct on mortgage arrears, and a failure to do so may result in the Central Bank imposing penalties on the regulated financial services provider concerned. The Bill will work by requiring that firms that service credit are authorised by the Central Bank and are therefore subject to regulation by the bank and also have access to the Financial Services Ombudsman's regime. The Bill will therefore regulate the activity of credit servicing and the credit servicing firms engaged in such activity, irrespective of where the loan book owner is based. In order that the borrowers retain the protections they had before the loan book was sold, all consumer and SME loans which are sold by regulated financial institutions will be covered by these amendments and retain the protections they have already.
The approach we are taking to regulating servicing firms is taken because it is the credit servicing firm that interacts with customers. It is the customers who require the protection and it is the protection from the interaction that is required. But if the owner skips the middleman and decides to be his own servicer, he is regulated then as the credit servicing firm.
I understand all that and I appreciate the Minister's clarification. We are getting down to the net point. I accept that the credit service provider, no matter where it is based, that has the interaction will be covered. That is good. We can put that side of the issue to bed. However, the loan book owner is the real issue. I understand from what the Minister said that the loan book owner, once it is in the European Union area, is regulated by the European Central Bank, ECB. My original comment was about a situation in which the loans are sold outside Ireland - say, in Canada, a non-EU country. Earlier in his reply, the Minister said they would be regulated and he referred to the European Union. Where the loan book owner is outside the EU and European regulation, is that owner out of the system? What happens to the owner outside the EU system and where is he or she captured in the system? The Minister might say it is anti-competitive, and I accept that it would limit the sale process of some of these loans if the regulated institutions in Ireland who are selling off chunks of loan books were confined to selling them to organisations that are already regulated in the European Union. We could possibly live with that, because we are part of the EU, but what is the position in regard to the firm outside the EU?
What I was pointing out when I mentioned the EU and the EEA was that there are absolute reciprocal arrangements on regulation if a firm is within the EU. Deputy Peadar Tóibín said that in effect I had changed tack. I have changed tack. I changed tack precisely for the reason the Deputy has outlined. The reciprocal arrangements would not apply if it was a Canadian-based owner. Foreign-based owners are part of the reason we changed tack. Services must be regulated to be allowed interaction with Irish customers, so owners cannot circumvent the regulations. If an owner is in Canada, the credit service agency will be operating in Ireland and will interface with the customers.
If we are regulating at the point of interaction, it does not really matter where the owner is. In issuing instructions, the owner is constrained under section 1(f), as I pointed out, and will be further constrained under the provisions of amendment No. 20, which we can go into in detail when we come to it.
I think I am getting it. If the loan book owner is outside the State – in Canada, for example – it is not covered by this. It is covered only if it does the credit servicing itself. However, once it has a domestic-based credit servicing company doing its business, the position is different. This implies that the legislation is about regulating those who interface with the customers. That is a bit like regulating the estate agent rather than the owner of the property. The person who owns the property ultimately calls the shots. The loan book owner might not call the shots daily, but on the day it appointed its agent, the credit servicing company, it gave it the riding instructions. The main lacuna is that the loan book owner is not covered - if it is in Canada, for example. Can the Minister see how the owner could be covered? Could it be made a condition of the sale that it would have to agree to be covered? Is the Minister afraid it might limit the sale potential of some of the portfolios of loan books if there were a restriction on the sale, as it might frighten off some companies?
We are not talking about general regulation here. Let us go back to first principles. The purpose of this Bill is to extend to portfolios of loans that have been purchased the same code of conduct for mortgage arrears that is now applied by the Central Bank to the banks and building societies that we have been familiar with over the years. That is the regulatory space.
The code?
The code sets down many conditions to do with contact with mortgage holders, etc., with which the Deputy will be familiar. At all times, under Irish contract law, the mortgage itself, which remains subject to the laws of Ireland, and the credit servicing firm will be regulated by the Central Bank. We are not interfering with that.
To be helpful, could the Minister say that again?
At all times, under Irish contract law, the mortgage itself will remain subject to the laws of Ireland, outside this legislation.
Outside this legislation, normal contract law applies.
Yes, normal contract law applies. Our objective is to extend the protection of the code of conduct on mortgage arrears, which the Central Bank has applied to the generality of mortgages, to the new situation that arises when mortgage books are sold to unregulated entities.
I believe we are in agreement. In other words, the Minister is saying this legislation is not to deal with the loan book owners because they are not the entities directly involved with the customers to start with. I am just saying it is a pity they could not be captured also. I acknowledge the Minister's statement that contract law will technically apply at the end of the day.
That is correct, subject to the qualifications I outlined. If the owner decides to be his own credit service provider, he is caught then. He is in a different space.
We will agree, but I believe the legislation would have been better had we captured the loan book owner with some mechanism to cover circumstances in which that owner is not the servicing agent.
My parliamentary colleagues in all parties argued me out of this when we were processing the Bill. This is where we started. There is a better solution now.
Contract law has not offended the many people we have discussed so far in their interest. In the general mortgage sphere under the code of conduct, there are many mortgage holders who have had a disastrous experience. Let me give an example. A couple who are pensioners from my home town of Navan have a mortgage with one of the banks that are covered but had a disastrous experience over the past three or four years. Their relationship with the bank has been managed by a call centre, as such. It is not as if there is an individual managing the relationship. A member of staff might look at the computer today and read the last paragraph of the file to determine the relationship between the bank and mortgage holder, and then ring the latter with that shallow information. He or she might then either impart information, which could be wrong, or collect information, which could be wrong, or cause confusion. In the example in question, the family engaged with the mortgage company for three years and was literally given incorrect information. It seems as if this was on purpose at times and that at times boxes were being ticked just to move the family along the process to meet the eventual objective of the bank, which was to dispossess the family or repossess the house. Once the family complained to the Financial Services Ombudsman, the bank began the legal process, which stopped the ombudsman's office from actually being able to deal with the issue. As the Minister knows, the powers of the ombudsman's office are as weak as possibly could be with regard to upholding the rights of citizens.
That is the motivation for a normal bank functioning in Ireland. We know the motivation of the vulture funds is very different. These firms want to profit fast. In other words, they are not in it for the longer term or for a relationship over the years. They select portfolios of vulnerable individuals on purpose to determine whether they can repossess quickly. There is no doubt that these individuals are more likely than the existing banks to ride roughshod over the process. Therefore, the objective should be to ensure they are captured also.
Does the Minister believe the mortgage holder should know who owns his mortgage?
The Deputy is going over the same ground again. I cannot really deal with specific cases.
Should a mortgage holder know who owns his mortgage?
The Deputy made many points before coming to that question. I will deal with that as well. I cannot deal with the specific cases that the Deputy has drawn to my attention because I just do not know the facts. I cannot reply to them. The Central Bank has set out, in protocols and regulations, a particular code of conduct for dealing with mortgage arrears. Of the 750,000 mortgages in the country, all but 15,000 to 16,000 are already covered by that code of conduct. What we are doing here is extending the code to the residual group whose portfolios of loans were bought by companies not regulated by the Central Bank of Ireland. That is the purpose of the legislation, and the approach I have taken is reasonable.
I was going to say that the Deputy should refer his constituents to the Financial Services Ombudsman, but he said this was done and that they got into some other difficulty. Again, I do not know the details of the case. What we are doing here is covering the difficulties faced by people who are not already covered by the Central Bank's code of conduct.
I am not sure the Deputy is correct when he says the modus operandi of those who buy loan book portfolios is to acquire the asset and sell it. I do not believe that is correct. They normally buy at a discount. What they want to do is to recover a stream of income from the loan book and repair the loan book. Sometimes they want to sell on the loan book. If they repair it and it is performing, it is worth more than if it is impaired. However, repossession of the house and acquiring the asset would seem to be a measure of last resort and would not be normal practice among people who acquire loan books.
It is important that people know whom they are dealing with.
Does the regulation ensure that a person knows who the owner of his or her mortgage is?
The person can ask the mortgage provider whom the loan book has been sold to. I do not see where the difficulty arises.
Does this legislation guarantee to the mortgage holder that he or she will know who the owner of the mortgage is?
The purpose of the legislation is to ensure that everybody who has mortgage arrears and is being communicated with, through an agent or otherwise, by the owners of that mortgage has the same protection as all of the people who, up to now, have been regulated by the Central Bank and the terms of the code of conduct for mortgage arrears. That is the purpose of it. The purpose is not to give a list of who owns what in the country. It is a regulation Bill which will provide the same regulation by the Central Bank that everyone thought desirable. There was unanimity in the House that this legislation was necessary.
It would disadvantage me as a mortgage holder not to know who is holding my mortgage. My strategy in terms of engaging with my mortgage owner would be governed, to some degree, by who that owner is; it could be a vulture fund which looks to repair the mortgage and deal with it or a vulture fund which has a track record of seeking to repossess as fast as possible to realise a profit.
Borrowers need to know who they are dealing with, namely, the credit servicing firm and they will know that because that is who will send them letters or other forms of communication. There are later amendments on naming owners and we can talk about that issue when we get to those amendments.
How stands amendment No. 2?
I wish to press it.
Amendments Nos. 3, 5 and 7 to 9, inclusive, are related and may be discussed together by agreement.
I move amendment No. 3:
In page 3, line 27, to delete "person" and substitute "creditor".
Amendments Nos. 5, 8 and 9 are also in my name. I do not propose to accept amendment No. 7. Amendment No. 3 and the first part of amendment No. 5 are technical in nature and deal with the definition of the term "creditor". The amendments are intended to ensure the Bill covers only credit as issued by those in the business of lending and does not cover loans made between family, friends, etc. Without these amendments, a person who issues credit casually or outside the business would need an authorisation to service this credit.
Amendment No. 7 in the name of Deputy Tóibín is a cognate amendment and has, therefore, been included in this group, although it appears to be related to the regulation of owners, which was discussed when we debated the previous group. The Deputy's amendment would remove the exclusion in section 1(f) for owners who take certain limited actions in respect of credit owned by them. As I have made clear in previous discussions on this topic, this issue has been given much consideration. I outlined on Second Stage that the best protection will be accorded consumers if credit servicing firms, rather than owners, are regulated.
My objective is to regulate the activity of credit servicing. I do not propose to regulate ownership unless the owner is undertaking credit servicing or an activity that would result in a prescribed contravention if it were undertaken by a regulated firm. However, if the owner does not appoint a regulated credit servicing firm to service the credit, the owner must be authorised and regulated. While owners will be able to make certain decisions regarding loan books, such decisions will have to be implemented by a regulated credit service. Therefore, the owner will be able to make high level decisions without the need to be authorised, provided these decisions do not result in the borrower being deprived of the protection which would apply if the decisions had been taken by a regulated firm.
In addition, the purpose of amendment No. 20, which will be discussed later, is to impose a new statutory obligation on owners not to instruct a regulated credit servicing firm to do anything which would be a prescribed contravention if undertaken by a regulated retail credit firm. There is also an obligation on the credit servicing firm not to implement such an instruction. This provision will prevent owners from doing things we do not want them to do and ensure there is no way for such an instruction to be implemented. As such, I reject amendment No. 7.
On the definition of the term "prescribed contravention" in amendment No. 5, which term is also referred to in amendment No. 9, this is a technical amendment as there are now two references to "prescribed contravention" in the Bill. The definition in the 1942 Act remains unchanged.
It is important to focus on what is being done today. A group of people, some of whom are present in the Gallery, took out mortgages that were subject to regulation. As a result of a Government decision, however, their mortgages are no longer regulated. A whole sector of financial services is putting the squeeze on citizens. Families need a home because without a warm, safe and comfortable home, very little else flows in life, whether it is the education or health of one's children or one's mental well-being. The prospect of having the family home taken away is one of the biggest threats a human being can suffer in his or her life.
While I accept the Minister's point that not all vulture funds will have the same motivation or strategic commercial objectives, some of these companies are seeking repossession at the earliest possible date in order that they can make financial gains. The Bill does not fully regulate these vulture funds and, by default, allows them to operate in a universe of deregulation. In addition, regulation for regulated sectors is being watered down and the powers of the Financial Services Ombudsman and Central Bank to enforce the rights of citizens weakened. Let us take the example of a vulture fund that has purchased a portfolio of vulnerable mortgages for the purpose of pressing ahead with repossessions at the earliest possible date with a view to selling the repossessed properties to realise a profit.
Let us assume that this is a possibility. One method of pushing a family over the edge is to raise the interest rate, making it impossible for them to hold on to the family home. The Government could allow for this action to be regulated. My amendment would delete these aspects and negate this possibility. I have heard the Minister in the media a number of times speak robustly about the need for the pillar banks and the other operating banks to fall into line in terms of interest rates, given the damage being done to ordinary families trying to get by in life. He has met the banks to realise this objective, yet a section of financial groups, many of which are operating abroad, are not subject to the political leverage any Minister might bring to the table in the future and could easily raise interest rates, forcing defaults and repossessions. Instead of seeking minimalist control over vulture funds, I appeal to the Minister to increase the tools of the State apparatus and do no more than the right thing by citizens.
Let us consider first principles. The purpose of the Bill is to ensure the protection a home owner had before his or her mortgage was sold is restored fully, no more or no less. If someone has lost protection through a sale transaction from a regulated to an unregulated entity, this legislation will restore the status quo. There is no weakening of the regulatory provision. As we have shared, the Bill will apply to approximately 15,000 or 16,000 mortgages out of a total of more than 750,000.
The Deputy raised the issue of interest rates. The aim of the Bill is to ensure borrowers whose loans are sold to unregulated entities will be given the same protection as when their loans were held by regulated entities. That is what the Bill does. That protection will be restored to mortgage holders when it is enacted and signed by the President. Mortgage holders will have the same protection in terms of interest rates as those who have their loans with regulated banks. For example, the first protection for a borrower is his or her mortgage contract. The loan or mortgage contract between two parties specifies the conditions on which an interest rate can change. The regulation on unfair terms in consumer contracts specifies that interest rates cannot change without a valid reason. There is no situation where new owners can arbitrarily change interest rates in the interests of profiteering. That would not be a valid reason. Furthermore, competition applies to the generality of mortgages.
It is important to remember that the aim of the owner of a loan book is to have a book of performing loans. Therefore, significant increases in interest rates could hamper this. I have no evidence of new owners of loan portfolios acquiring ownership for the purposes of possessing property. That is not what happens. The purpose is to make profits on their acquisitions. I have no evidence to date of loan book owners seeking to buy up loans in order to increase interest rates. Nothing has been brought to my attention directly or by the Central Bank. They are prevented under law from doing so arbitrarily, outside the contract loan terms or without valid reasons.
The Minister has outlined the purpose of the Bill as he sees it, but I suggest the purpose should be to protect home owners from the predatory practices of vulture funds. Does he know what I mean?
The purpose of the Bill is as stated. It is not as I or the Deputy sees it.
Okay, but-----
It is as it is.
The purpose of my existence in Leinster House is to protect home owners from the predatory practices of vulture funds. The Minister mentioned that he had no evidence of vulture funds seeking to repossess asap for profit stripping. I have that evidence. There are numerous examples of families who are in arrears for a couple of days on unregulated mortgages only and who immediately have firms sending them letters seeking repossession. If I were involved in a firm and my objective was to work out the mortgage and make it function, that would not be my action. My action would be to sit down with the family, write a standard financial statement, determine affordability and work out a structure that would allow for the loan's repayment over a period. However, it is the opposite behaviour that we are seeing among some of these organisations.
The Minister mentioned influence over interest rates. No one seems to know who is involved in some of the vulture funds because they are hidden behind X, Y and Z companies, mortgages are wrapped up in this or that loan book, etc. The funds are inaccessible to many people who have mortgages with them and even their staff are not fully sure what the line of ownership is. It is difficult to ascertain what the determining factors will be for the interest rates of such companies and it is impossible for the Minister to replicate the level of influence he has over some of the main banks in the State, as the funds in question operate with a different objective and under a different relationship with the State. Instead of trying to weaken the Minister's ability to protect the home owner, how about viewing the Bill as an opportunity to strengthen it? I am seeking to give him more tools in his arsenal to deal with a disaster that could affect a family. If that disaster does not strike, happy days, but if the Minister was given the strength to deal with it, it would have a chilling effect on the possibility of it happening because the funds would know that, if he became angry, he would implement X, Y and Z. If, however, he does not have that strength, there will be no chilling effect and, if the worst comes to the worst, we will sit here in a number of years time and view this as a missed opportunity. It might theoretically be difficult and we empathise, but dozens, if not hundreds, of families could be thrown out onto the road as a result of the inadequacies of the Bill.
There is a consumer code on mortgage arrears, CCMA, which is set down by the Central Bank. The practices the Deputy describes and that are known to him personally would be in breach of that code. In the Bill we are extending its protection to the unregulated entities. Once we have passed the legislation and the President has signed it, the CCMA's protection will extend to the persons whom the Deputy describes as being arbitrarily and offensively dealt with by their mortgage owners. The code offer clear consumer protection. That is the purpose of the Bill. We want to ensure the code which is effective, as laid down by the Central Bank, will still apply to loan books sold on from regulated to unregulated entities. The Bill will be effective in doing this.
The Minister is failing to acknowledge the fundamental difference between a vulture fund and other credit institutions that operate on a longer term or permanent basis within the State.
As the Minister says, a bank or a building society might be subject to competitive pressures on interest rates because they will not wish to lose market share and they will want to enhance their brand reputation and so on. A vulture fund does not give a damn about any of those things. It is not in it for the long term. It is not in it to develop customer relations; it is in it to make money out of an investment. It might be true that at a particular point in time it suits a vulture fund to have a revenue stream coming in and therefore it will not push for repossession. But at other times a vulture fund might say, "The best way for us to maximise our profit, to get the best return on our investment, is just to move in on these people in every way we can, get the asset off them and make a whack load of cash out of it." That is the nature of these vulture funds and that is why they are called vulture funds. We need to recognise the difference. Furthermore, there is this more opaque line of responsibility via these credit financing or these credit service firms and the owners behind them, making it all the more difficult for the mortgage-holder. If we acknowledge those differences then we should have the most robust protections possible for the mortgage-holder and we should go for the maximum protection and powers for the State in dealing with these entities that have no loyalty to the customer nor to the jurisdiction, no loyalty other than to themselves to make as much money as possible. If we recognise that fact then we have to go for the most robust, comprehensive protections possible. That is the point of Deputy Tóibín's amendment and I would support it.
I will mention briefly that Deputy Naughten, who is unwell, had hoped to attend today to signal his intention to table an amendment to the effect that it should not be possible for any person to be forced out of his or her home by one of these credit-servicing companies unless that person has alternative accommodation. I wish to signal that I would support his amendment on Report Stage.
I agree with many of the concerns expressed by Deputy Boyd Barrett. The primary concern is that there was a code of conduct to deal with persons in mortgage arrears which the Central Bank applied to the lending agencies but because of the sale of loan books sometimes an agency which was regulated by the Central Bank and subject to the code of conduct on mortgage arrears applied by the Central Bank, the loan book was transferred to a non-regulated agency so the code no longer applied. We succeeded in getting practically all of them to voluntarily subscribe to the code but that is a weak situation because volunteerism can be quite weak. It was the desire of all members of this committee and indeed of all Members of the House, that we would extend the CCMA, code of conduct on mortgage arrears, under law to the entities to which it did not apply. That is what we are doing in this Bill.
There are other issues around mortgage arrears which are very important but it is not the purpose of this Bill to deal with them and we have dealt with them elsewhere. I am not in a position to help the Deputy in the various suggestions he is making because the suggestions are not within the scope of the Long Title of the Bill.
I move amendment No. 4:
In page 4, to delete lines 24 to 38 and substitute the following:
“ ‘credit servicing firm’ means—
(a) a person (other than the National Asset Management Agency or a NAMA group entity (within the meaning of the National Asset Management Agency Act 2009)) who—
(i) undertakes credit servicing other than on behalf of a regulated financial service provider authorised, by the Bank or an authority that performs functions in an EEA country that are comparable to the functions performed by the Bank, to provide credit in the State, or
(ii) holds the legal title to credit granted under a credit agreement in respect of which credit servicing is not being undertaken by a person authorised to carry on the business of a credit servicing firm,
and
(b) a regulated financial service provider taken to be authorised to carry on the business of a credit servicing firm by virtue of subsection (3);”.
I move amendment No. 5:
In page 4, between lines 38 and 39, to insert the following:
“ ‘creditor’ means a person who grants credit under a credit agreement in the course of the person’s trade, business or profession, and includes a group of such persons;
‘prescribed contravention’ has the same meaning as in the Act of 1942;”.
At this point I wish to record a correction in the last vote. I made a mistake when declaring the result. The result is Tá, 2; Níl, 7.
There was a problem because the division bell did not ring when the vote was called. I was outside, the bells were still ringing but the door was closed. It was a technical problem.
I move amendment No. 6:
In page 5, line 4, after “2003” to insert the following:
“to which credit has been provided by a financial service provider authorised, by the Bank or an authority that performs functions in an EEA country that are comparable to the functions performed by the Bank, to provide credit in the State”.
I move amendment No. 7:
In page 5, to delete lines 7 to 24.
I move amendment No. 8:
In page 5, line 7, to delete “subsection” and substitute “subsections”.
I move amendment No. 9:
In page 5, lines 23 and 24, to delete all words from and including “a” in line 23 down to and including line 24 and substitute “a prescribed contravention.”.
I move amendment No. 10:
In page 5, between lines 24 and 25, to insert the following:
“(3) For the purposes of this Part, a regulated financial service provider authorised, whether before or after the coming into operation of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, by the Bank or an authority that performs functions in an EEA country that are comparable to the functions performed by the Bank, to provide credit in the State, is taken to be authorised to carry on the business of a credit servicing firm.”.”.
I wish to signal that I will table an amendment to the section on Report Stage. I propose that on page 4 at the end of line 18, after the word "restructuring" to add the phrase "where the credit agreement is in financial difficulty". I also want to add the words "where the credit agreement is in financial difficulty" after line 16 on page 5.
I move amendment No. 11:
In page 5, between lines 34 and 35, to insert the following:
“(2) Section 33A of the Central Bank Act 1997 is amended by inserting the following subsection after subsection (5)—
“(6) The Bank shall also impose, on a debt management firm and or a credit servicing firm, a condition that a customer shall, within 30 days of his or her credit agreement being sold be:
(a) advised of the terms on which his or her credit agreement was sold,
(b) advised on any material change to the terms under which the credit agreement is serviced,
(c) advised whether the loan was sold at a discount, and
(d) provided with details of his or her rights under—
(i) the Code of Conduct on Mortgage Arrears 2013, and
(ii) the Financial Services Ombudsman.”.”.
Essentially the amendment proposes that the bank shall impose on a debt management firm and-or a credit servicing firm, a condition that within 30 days of a credit agreement being sold, the customer be advised of the terms on which his or her credit agreement was sold, and also be advised of any material change to the terms under which the credit agreement is serviced and whether the loan was sold at a discount. The customer should be advised of his or her rights under the code of conduct on mortgage arrears and the Financial Services Ombudsman.
The major issue is that the customer should be notified of all issues relating to proposed changes to his or her credit agreement within 30 days. Each of the paragraphs stands on its own merit, but the most important paragraph is that the consumer be advised whether the loan was sold at a discount.
We have all dealt with several such cases, for example, a mortgage of €200,000 being sold to a debt management firm and-or a credit servicing firm at a 50% discount and yet the customer is still being pursued for €200,000 by the company who bought the loan for €100,000. If that company gets €150,000 they have made a mega profit. In many such situations, the customer would wish to settle at below the book value but at a substantially higher level than what the debt management firm bought his or her loan for, but it may not be willing to do that. People are entitled to know if their loans have been sold at a discount of 30% or 40%. I know the Minister will say that these loans were bundled and one cannot state the exact price of each individual loan in the 5,000 mortgages in the portfolio but I think people are entitled to assume that the average discount, by and large, applied across the portfolio. There must be some measure whereby people with distressed mortgages in substantial arrears can deal with the company which has bought their loans at a discount.
I equate my proposal with NAMA. NAMA acquired the loans from the major banks at rates ranging from 47% to 53%, but at approximately 50% of the book value. NAMA considers it has done its job if it collects what it paid for the loans, notwithstanding that the book value of the loans was almost double. I want the same principle that applied to the NAMA business loans to apply to householders. The cost to the Exchequer of the write-down of the loan from the bank on transfer to NAMA is between €35 billion to €40 billion.
NAMA is not pursuing the book value of €70 billion but is only going after the €35 billion at which it booked the loans and it is happy with that. The same principle should apply if one of these vulture funds buys loans at a 50% discount The customer is entitled to know that is the effective market value of the loan at this point. The original book value does not apply in the commercial world but it is being forced on home owners. I am looking for equality of treatment. One might say the new owner would not do a deal except on those terms but a home owner would be in a much stronger negotiating position if he or she knew what the investor had actually paid for the mortgage. People are entitled to know what their mortgages are worth and what has been paid for them.
This follows directly on from the previous amendment of Deputy Tóibín, which sought to allow people to know the ultimate owner of their mortgages. It is fine dealing with the local estate agent or local debt servicing company but they are only the front-of-house people for those who actually own the loans. People are entitled to know because they are looking at ultimately being forced to give up their houses and may have to do so even if they are in a position to pay far more than those who took over the mortgages in the first place. We want to see this matter addressed. That is the essence of amendment No. 11.
I thank Deputy Fleming for moving the amendment. I understand that the aim of Deputy McGrath's amendment is to ensure the consumer is correctly informed and protected and it does so by seeking to impose obligations on credit servicing and other firms in relation to the credit which is sold. The first set of obligations are around commercial information on the deal to sell the credit, that is the terms on which it was sold and whether the loans were sold at a discount. The terms of the individual's contract with the lender are not changed by the sale of the loan and therefore it is difficult to see the benefit of making the information known to the borrower. Even if the overall loan book is sold at a discount, as Deputy Fleming said, the amount owned by an individual borrower is not changed nor are the other terms and conditions. Furthermore, usually these loans are bundled for sale at an aggregate price and individual loans are not separately priced, making it impossible for customers to be advised on the exact terms or price under which their loan was sold. Also, when NAMA acquired loans the borrowers were not told what discount applied, for much the same reasons even though it is in the commercial space rather than residential loans.
The second set of obligations mentioned in this amendment are around the borrower's rights under the code of conduct on mortgage arrears and access to the Financial Services Ombudsman. Following the enactment of this legislation, these rights will not be changed by the sale of loan books. The rights in question are already provided for and when the President signs this law these rights will be maintained. I do not consider it necessary that the borrowers be given an additional reminder of their rights when these rights and all the rights they had before the loan book was sold remain the same. This debate and the assurances we are giving today should be communicated to persons whose loans are sold so that they are assured that they retain all rights and that these rights will be protected by the Central Bank under the code of conduct governing mortgage arrears. I do not think the amendment is necessary and I will not be accepting it.
I accept the Minister's point about giving information on the code of conduct on mortgage arrears and that the right to go to the Financial Services Ombudsman is effectively unchanged. However, the core issue of this amendment is the value of the loan sold at a discount. The Minister again drew the comparison with NAMA. The write-downs in respect of the loans transferred from AIB, Bank of Ireland and Anglo Irish Bank to NAMA were widely published. It was known that some sites were sold without planning permission and that, in such cases, there was a 90% write-down whereas other, performing, loans with only a couple of years to go were bought with very little write-down. People were able to work out the approximate discount but NAMA is happy if it gets back its booking price.
The Minister said he saw little benefit in giving people information as to their value of their mortgage. People are entitled to know that. If one of these service providers, on behalf of the owner who may be outside the jurisdiction and may not be regulated because somebody else is hired to do the dirty work locally, goes to court for a mortgage of €200,000 it would be useful for the judge to know that they were trying to evict people who owe €200,000 when only €100,000 was actually paid for that mortgage. The buyers felt the mortgage was only worth €100,000 because they knew it was distressed, even though it had an outstanding payment of €200,000. It would be very useful for people to know that they were being put out of their house for amounts far in excess of what the owner of the mortgage paid for it. This is the inequity in the system and it is essentially why people are still sore. They are being pursued for the last drop of blood by companies which will make a financial killing by getting them out of the house.
The citizen has to come into this situation. We are talking about the nuclear situation where people's homes are being repossessed in the courts. They have gone through the code of conduct and the Financial Services Ombudsman. It is not irrelevant for people to know, when they are being put out of their house, what the owner of their mortgage actually paid for it. There is an issue of fairness to the citizen which the Minister is not addressing because he is dismissing this amendment.
Everybody knows what his or her mortgage is because that is given under the mortgage arrangement which he or she initially entered into. People know what their obligations are in terms of their repayments and the capital outstanding. One line of argument is to say that if there are discounts they should apply to individual mortgage holders as well but the problem with that is what one would say to the neighbour who is fully compliant, not in arrears and liable for the full mortgage. How does one explain the difference? The arrangement that has been come to with the banks, through the Central Bank in particular, is that mortgages in arrears are treated on a case-by-case basis and restructuring arrangements are available through the lending agencies depending on the circumstances.
There is no universal right to a discount but discounts are applied on a case-by-case basis. The announcements made by the Minister for Justice and Equality to amend the insolvency laws will mean that, at the very end, there is an alternative to a repossession. A case before the courts will be tracked to a judge who will have, in effect, the same powers as an examiner has at present to adjudicate on the appropriateness of an insolvency arrangement and can decide in favour of the mortgage holder. It is not that there are no solutions but there are no solutions that are universally applied. There are solutions that attempt to fit the particular case.
This is not to say that this is not a very fraught area. Obviously, people who cannot afford to pay their mortgages suffer an awful lot of stress and trauma but I do not know any universal way of dealing with it. We have brought forward a whole series of proposals to deal with mortgage arrears on a case-by-case basis.
Some 115,000 mortgages have been restructured already and it is now running at about 2,500 a month on restructuring. People are keeping the new terms, with about 85% of restructuring arrangements still intact 12 months afterwards. That is the general approach.
Richie Boucher would be proud of the Minister. That is all I can say. He was here two weeks ago and gave the exact same line. He said people took out the debt, they knew the value of the mortgage, they should not be looking for him if they want a write-down and are not expecting their neighbours to carry the cost. That is the Richie Boucher line: there will be no write-offs. Bear in mind that when those loans were sold by those banks on to the other companies, the write-down and the hole in the balance sheet was fixed by the taxpayer. There was no problem with the taxpayer coming up with the money to repair the hole in the banks as a result of selling off these loans at a discount. The taxpayer has no problem with paying it to make that half of the equation good, but God forbid an individual should get a write-down. It is fine for the banks to write down their loans when they are selling them off at a discount and to ask the taxpayer to pay, but that should not trickle down to the individual. It is only at the commercial end that debts get written off in this country. That is what is annoying people. Only the businesses and the banks are getting their debts written off, but it does not apply to the individual. I understand what the Minister is saying about the neighbour next door who is fully tax-compliant and fully up to speed with their mortgage, but the taxpayer has picked up the tab where the bank loans were sold off at a discount, resulting in a hole in their balance sheets. I have made my point. There are discounts for everyone bar the homeowner.
In making his point, Deputy Fleming is misinterpreting my position. Mr. Boucher is chief executive officer of Bank of Ireland, which has a well known position of no discounts or write-downs. However, that is not the situation across the banks. AIB, for example, has given discounts amounting to €480 million in its restructuring of mortgages over the last two years, and other lending agencies have also come into arrangements where there are write-downs. My position is that this is a very serious issue. It is particularly serious for families in arrears and it is traumatic for families which, through illness or unemployment, cannot service their mortgages at all and face the risk of their houses being repossessed. I am saying the range of solutions involves dealing with mortgages on a case-by-case basis and I believe the solutions should involve write-downs. Some of the lending agencies do that, but Bank of Ireland does not, and the State does not have a controlling shareholder interest in Bank of Ireland; we have 14%.
The Minster mentioned that some of these mortgages are wrapped up in large loan books. All we need to do is to put a barcode on each mortgage so that individual mortgages can be ascertained. It is not rocket science. What we are looking for is transparency in this process. Transparency is good for the citizen and for the management of the economy. For example, on Monday I had a look at the share register of Siteserv shareholders. Many of them are hidden behind brokerage firms, so one cannot see the names of the individuals who were involved in the share transactions. I asked KPMG whether in its review it will be able to see exactly who were the shareholders behind those brokerage firms. It said it would not. That lack of transparency will make the review that the Government is involved in deficient. KPMG will not be able to ascertain why there was a transaction spike in the months before the sale of Siteserv. The problem is that we only seem to realise transparency is important after the problems have occurred. All this amendment suggests is that we build transparency into the system as soon as possible. Transparency is not a tool against strategic default. There are many other ways to prevent families or individuals from defaulting strategically on their mortgages. Keeping them blind to the fact is not a tool. This boils down to a hierarchy of priorities. Do we provide full transparency and give families the ability to understand what is going on with their own houses, or do we allow these firms to profit in these scenarios? We need to level the playing field.
I wonder if I may be excused. I have a meeting, and the Minister of State, Deputy Harris-----
We have decided to suspend the meeting for 15 minutes. We will let the Minister go.
I thank members for their contributions. It has been an interesting discussion.
We are back in public session. The Minister of State can resume answering Deputy Tóibín's question.
Deputy Tóibín might recap, if he does not mind.
Will Deputy Tóibín read slowly?
My apologies.
I shall go through the issues. One of the points that the Minister for Finance made was that a lot of mortgages were simply rolled into very deep loan books, which made it impossible to determine individual experiences when trying to outwork a mortgage. I suggested that a barcode be put on each mortgage, which is done in the United States. Such an initiative would allow for rolled-up mortgages to be individually identified for the purpose of management.
Another point I made was that transparency leads to proper management. I am reminded of the old saying that one cannot manage if one cannot measure. Transparency leads to accountability. Last Monday I was with KPMG, where we looked at the Siteserv share register and all the different entries. I discovered that most of the share transactions that happened at the peak, before the firm was sold, were in the names of brokerage firms. Therefore, I could not see who the owners of the shares were. I presumed that KPMG could do so, given that it is carrying out the review, but KPMG told me that it could not see through the list either. Therefore, KPMG must review a system that is not transparent and, thus, will be unable to find out the identity of the individuals behind the share transactions. Obviously that situation puts the Government on the back foot in terms of getting to the bottom of what happened. As Deputy Fleming mentioned a few minutes ago, the motion would allow for greater transparency, which would put the Government in the driving seat in the future.
There is a hierarchy of priorities. On one side, there is the importance of facilitating families in staying in their own homes. However, vulture funds operate in a blind spot and away from families and the State.
I support the amendment, as I did the last one. I wish to signal that I may table an amendment on Report Stage.
I fundamentally oppose and object to the idea that people's mortgages can be bundled up and sold to vulture funds. That kind of carry-on produced a global economic crisis. I would like to see a regulation that precludes companies, firms or vulture funds which are not real companies in the proper sense from engaging in such activity. They are not interested in the customer, the consumer, the country or developing market relations even on a commercial basis. They are just vulture funds. I would prefer if the Central Bank of Ireland did not give these people the right to come in and buy bundles of mortgages. I am pretty certain that the Government is disposed to allowing this kind of thing in the belief that the global financial system works in this way and there is not much one can do about the situation. Therefore, at the very least, we should have the highest level of transparency and the greatest level of protection for customers and, potentially, victims of these firms. It seems entirely reasonable that people should be informed as soon as their mortgage is sold to one of these funds or sold to anybody. People should be told all of the rights they are entitled to in this situation and the discount that the vulture fund received. That is the point that Deputy Fleming made.
Let me outline what the Minister for Finance said before the Minister of State arrived. First, it was a demand made by some of the people who are in this position that they should be allowed, individually, to buy back their mortgages at the same discount as vulture funds. In some cases, people have even offered to pay more than the vulture funds were willing to pay. That means people were willing to pay over and above the discounted rate in order to get their mortgages back. It was in that regard that the Minister invoked the issue of moral hazard as the reason people could not buy their mortgages back. He said there would be other people who are paying the full amount of their mortgage repayments and asked why, therefore, we should facilitate individual mortgage holders in getting big discounts. There is a great inconsistency when it come to the invocation of the moral hazard argument, particularly when one considers the Siteserv case. In that sector there is no problem with moral hazard, and very wealthy people who owed money to-----
We can----
I was making a point.
I shall speak, if the Deputy does not mind. I ask the Deputy to make some attempt to keep to the amendment. If he keeps going at this rate we will be here again until midnight.
I am responding to a point the Minister made.
I understand. I do not mind being here all night if it will give the Deputy an opportunity to take a good swing at the matter.
I will only make the following point.
The Deputy's contributions are getting damn long.
Good luck.
None the less, the Minister made the argument and I shall not sit here all night making that argument. He made the point, but I do not understand the double standard. It is unfair that very wealthy people who owed money to a bank, in corporate loans, were facilitated with big write-downs for companies that they bought. There might have been other companies that had loans and were paying them back fully but did not receive big write-downs. Siteserv was propped up and benefitted from a massive write-down, and we know of other examples. What about all the companies that made repayments? They were disadvantaged. A moral hazard existed, but that did not seem to matter because we were talking about big corporate loans and, possibly, because we were talking about very wealthy people. I do not know the reason for such treatment. It was a case of double standards, because the issue of moral hazard was not invoked. An attitude was adopted that moral hazard should be avoided at all costs. The moral hazard excuse is invoked in the case of the poor distressed mortgage holder who wants to get the same discount on his or her mortgage that a vulture fund gets. I do not understand the double standards and inconsistency in that regard. At the very least, people deserve transparency, and to know the discount that a vulture fund gets which is the point of the amendment.
I thank the committee for providing a few minutes for the switchover. I have followed some of the debate and I know the Minister has responded to some of the issues raised by the amendments. Let me add a few of my own thoughts on the matter.
First, we must remind ourselves what this Bill is and is not about. The Bill is not about some of the issues that Deputy Boyd Barrett has raised. The Bill is about making sure that when we pass this legislation through the Houses of the Oireachtas and it is enacted, every mortgage holder has the same level of protection that they had before the loan was sold to the credit servicing firm. That is the nub of what the Government wants to do here.
While the Minister, Deputy Noonan, did not use the phrase "moral hazard", he was making the point that, in a scenario where one neighbour is breaking his or her back to pay the mortgage in full and on time each month, and struggling to make ends meet, while the person next door might not be in a position to pay the mortgage although he or she is also doing the best, the Government has to take a holistic view. The Minister has made it clear that we believe the way to deal with mortgage arrears is on a case-by-case basis and by putting in place structures, supports, schemes and systems to enable assistance to be offered. Colleagues will have seen other such measures from the Government in recent weeks.
It is also important to say that there is a legally binding contract in place, the terms of which are not changing. If one has taken out a mortgage for X amount, even if the mortgage is sold to somebody else, that amount is still owed. A borrower and a lender usually enter into a lending agreement, which is a financial contract whose terms do not typically provide a borrower with the right to be informed by the lender of the value the lender attributes to the contract itself. For those fundamental reasons, I am not in a position to accept the amendment.
Amendments Nos. 12 and 24 are related and may be discussed together, by agreement.
I move amendment No. 12:
In page 5, between lines 34 and 35, to insert the following:
“(2) Section 33A of the Central Bank Act 1997 is amended by inserting the following subsection after subsection (5)—
“(6) The Bank shall also impose a condition that debt management firm and/or a credit servicing firm shall be subject to the Code of Conduct on Mortgage Arrears 2013, in relation to all mortgages, including a mortgage that was not previously covered under said code.”.”.
The amendment provides for a condition that the debt management or credit servicing firm shall be subject to a code of conduct in respect of all mortgages, including mortgages not previously covered under the said code. There may be a simple answer that it is going to be covered, in which case I will not waste time discussing the amendment.
In respect of amendment No. 24, it provides that the consumer protection code shall continue to apply to all loans to which the code was previously applicable. If there is a straight positive answer to both questions we will move on.
That is very reasonable of Deputy Fleming and I will try to be brief. The purpose of the legislation is to restore borrowers to the position they were in prior to the sale of their loan book. While we welcome the thrust of the Deputy's amendments, which seek to ensure that the Central Bank codes will continue to apply when loan books are sold, we are not in a position to accept the amendments. I am pleased to inform the Deputy that the activity of all credit servicing will become regulated under the Bill and therefore all relevant Central Bank codes will apply, including the consumer protection code and the code of conduct on mortgage arrears. We therefore do not consider it necessary to include the amendments.
In addition, I hope the Deputy will agree that it would not be appropriate to refer to specific Central Bank codes in primary legislation because, as we know, the bank could issue a new or updated code while the reference could only be changed by primary legislation.
I move amendment No. 13:
In page 5, between lines 34 and 35, to insert the following:
“Provision for newly regulated credit servicing firms
4. The Central Bank Act 1997 is amended by inserting the following section after section 34D:
“Provision for newly regulated credit servicing firms
34E. Notwithstanding section 29, a person seeking to provide credit servicing facilities, shall, prior to the commencement of such a facility, secure authorisation from the Bank.”.”.
We want to amend the Central Bank Act and are talking about the provision for newly-regulated credit servicing firms. We are asking that a person seeking to provide credit servicing facilities shall, prior to commencement of such a facility, secure authorisation from the Central Bank. Essentially, we do not want businesses that are up and running and carrying out their business as credit servicing organisations to apply retrospectively for authorisation from the Central Bank. There could be a lacuna while they are out there doing their business, getting their dirty work done first while the paperwork is going through subsequently.
We have often seen that people can get so busy and these things can take a long time. It is essential firms have authorisation prior to getting directly into this business. That would be necessary because the Central Bank authorisation process involves checking that the management is up to speed, that the appropriate people are doing the work, and that the correct controls and regulations are going to be in place. That should not all happen after the fact. When people have a licence, or whatever form of authorisation, they can conduct their business, but they should not be let out without a licence.
I thank Deputy Fleming and appreciate the intention of this amendment. Although I agree with the Deputy's objective, I cannot accept the amendment as the provision is already made in the legislation. The Central Bank Act 1997, as amended, already specifies at section 29 that a person shall not carry on a regulated business unless the person is the holder of an authorisation. This Bill will add the activity of credit servicing to the list of regulated businesses by the change in the definition of regulated businesses provided for in section 1(b). It provides that people would have to hold authorisation before they can undertake credit servicing. The proposed amendment is therefore not needed.
Amendments Nos. 14 and 17 are related and may be discussed together, by agreement.
I move amendment No. 14:
In page 6, line 8, to delete “3 months” and substitute “1 month”.
The amendment is similar to amendment No. 13. I would appreciate if the Minister of State could recap. Is he saying that the firm would not be able to deliver or manage credit before authorisation is achieved?
Yes, and existing firms are "grandfathered", in other words, they will have to have it within the three months.
What exactly can the firm do in the three months?
Within the three months, the existing firms are presumed to be authorised, but they have to have been authorised within the three months. If they have not gone through the authorisation process within the three months they will be operating illegally. They have a three-month period in which to go through the authorisation process. That is for existing firms. New firms will have to be authorised before they can begin their activities.
A brand new firm would have to get authorisation before it would operate at all. In that case, I withdraw the amendment.
I move amendment No. 15:
In page 6, between lines 18 and 19, to insert the following:
“(c) direct that a purchaser of a credit agreement shall be subject to the provisions of this Act, except where such purchase is made by way of securitisation.”.
Amendment, by leave, withdrawn.
I move amendment No. 16:
In page 6, line 23, after “person” to insert the following:
“(other than a regulated financial service provider taken to be authorised to carry on the business of a credit servicing firm by virtue of section 28(3))”.
I move amendment No. 17:
In page 6, line 29, to delete “3 months” and substitute “1 month”.
I move amendment No. 18:
In page 6, between lines 39 and 40, to insert the following:
“(c) direct that a purchaser of a credit agreement shall be subject to the provisions of this Act, except where such purchase is made by way of securitisation.”.
I move amendment No. 19:
In page 6, between lines 39 and 40, to insert the following:
“(3) A person who carries on the business of credit servicing exclusively for an already regulated financial service provider shall be required to be regulated under this Act.”.
I am hoping this will have the same answer as previous amendments. We want to provide that a person who carries out the business of credit servicing exclusively for an already regulated financial service provider shall be required to be regulated under the Act. I am presuming they will not be allowed do this unless they are already regulated, and that there is a simple, straight answer.
I thank the Deputy. The model which operates for regulation by the Central Bank is that a single entity is responsible and answerable to the Central Bank for actions it undertakes, or which are undertaken on its behalf. If a firm is undertaking credit servicing solely or exclusively for a firm which is already regulated, then the regulated firm is answerable to the Central Bank for any actions it takes or that are undertaken on its behalf. As such, the borrower is adequately protected, as there is always one regulated entity dealing with his or her loan and therefore subject to Central Bank supervision. Therefore I cannot accept the amendment.
Am I right in saying one can now have a credit servicing company that does not require to be regulated? I am seeing a bit of a lacuna here, although the Minister of State will tell me there are not any. It is a bit like a company having a branch that is not separately incorporated. If a regulated owner of the loans sets up a company or engages a credit servicing company to deal with its loans exclusively, that credit servicing company does not have to be regulated. The Minister of State is basically saying that the principal firm is regulated. This is not in keeping with the essence of the legislation so far.
The Minister has said time after time today that, no matter what happens, the people in the front line who are dealing with the customers and mortgage holders, knocking on the doors, bringing them to court and issuing the legal letters will all have to come under the regulations of the legislation as credit servicing organisations.
However, the Minister of State is now saying there is an exception to the rule if a company has an exclusive credit servicing arrangement with an already regulated institution. It appears to be an exception. It is black and white. The person in the organisation doing the front-line contact with the customers in this situation does not require to be regulated. I thought the essence of everything the Minister said here during the past three hours was that-----
No, the essence of what the Minister said was to ensure there is a regulated entity, somebody is answerable and there is consumer protection. The owner bank is responsible for everything the credit servicing firm does. Somebody is responsible at all times, therefore the consumer is protected. The practice currently takes place. As it stands, the regulated financial service provider is the responsible entity and must ensure the company it is using for its credit servicing is behaving correctly towards the consumer. There is no evidence to suggest that the arrangement is not effective. If there were such evidence, I would welcome it. The Bill will not change the arrangement, given that the Minister feels the consumer is adequately protected when one of the entities dealing with the credit is regulated and, therefore, subject to the supervision of the Central Bank and responsible for behaving in a manner that is not a prescribed contravention. The Bill is being introduced to ensure that, at all stages, one entity is responsible to the Central Bank and the consumer is protected. It is already the case and there is no evidence to suggest it is not an effective way of doing it.
We are back to the situation with the insurance company some time ago. An entity is already regulated if it is regulated anywhere in the EU. If we are in Greece or Malta and the owner of the loan is in Greece, it is deemed to be regulated in Ireland under reciprocal regulatory agreements. If a Greek bank buys the loans and has an exclusive arrangement with a debt servicing company to manage them in Ireland, the debt servicing company is not regulated and we rely solely on the Greek regulator, which is regulated. The Minister should reconsider it for Report Stage. There is a slight difference in emphasis between what the Minister of State said and what the Minister, Deputy Noonan, said. In most situations, both bodies are regulated. The banks which own the loans are regulated generally in Ireland and if they outsource it to a credit servicing company which is doing the hands-on work, it is regulated. In most situations, we have double regulation. Generally, the owner of the loan is regulated, unless it is in Canada. The Minister of State has always maintained that the person doing the credit servicing arrangement was regulated. Now, we find that if the bank is in Greece and regulated by the Greek central bank, or whoever they are out there, the Minister of State is saying if it has an exclusive credit servicing arrangement, the credit servicing company does not have to be regulated because it has an exclusive arrangement with an entity that is regulated through the institution which is regulated by the Greek central bank. It is not good enough.
That is the Deputy's understanding. Let me try to clarify exactly what the position is. There is no difference in emphasis between me and the Minister, Deputy Noonan.
There is no rift.
There is no rift. Do not get too excited. The hypothetical Greek bank to which Deputy Sean Fleming referred would be regulated for conduct of business by the Irish Central Bank. The idea that there is no link with the Irish Central Bank is incorrect.
What about Setanta?
All regulated firms can outsource. This is the reality of the world in which we live. However, they must ensure the agents to which they outsource comply with regulation, or the regulated firm has the liability in terms of fines or sanctions. If an Irish bank hires a credit servicing firm, the Irish bank remains responsible. I do not see why we would double regulate, and I do not think it was the Deputy's intention, although maybe it was. The regulatory structure is very clear. If a company outsources, it cannot outsource its responsibility. There must always be one regulated entity, and given that it is what provides the consumer with protection today, it is not a policy change.
The Deputy has a problem with the Greek bank.
I have, and with the Greek regulator and the regulators in several countries. The essence of my problem is that if any of the main Irish banks want to bundle off 10,000 of their troublesome mortgages and put them on the market, and a regulated institution in Spain, Portugal or Greece buys them, we have a reciprocal arrangement that as long as they are regulated in the EU, we accept their regulation in Ireland. However, they are not regulated in Ireland. We just recognise their regulation. I am not happy that, in this situation if there is an exclusive arrangement, the only regulated entity dealing with Irish customers and taking Irish mortgage holders to court might be unregulated, and the only regulated institution in the system might be a bank in Spain or Portugal. I hope I am wrong.
It is good to tease these matters out. Let me try to be clear. When we say conduct of business must be regulated by the Irish Central Bank, we refer to the interaction the bank has with its customer, and it is done here, whereas prudential issues such as solvency are regulated in Greece. The legislation is about consumer protection, which will be regulated by the Irish Central Bank.
Where will it be regulated?
The conduct of business by the Greek bank we are using as an example must be regulated by the Central Bank of Ireland. The Deputy may feel free to reflect on it between now and Report Stage. The suggestion that there is something going on in Greece, the Irish consumer has no protection here and conduct of business regulation is done in Greece is not true. In the Greek bank example, the conduct of business and interaction with the customer is answerable to the Irish Central Bank.
It is because it is doing business in Ireland.
Yes, but the prudential insolvency issue comes under the home regulator, in this case Greece.
And that is done by the Financial Regulator, not the Central Bank. We are into the differentiation between the Regulator and the Central Bank as overseeing the overall prudential strength of the bank as opposed to the regulatory aspect by the Financial Regulator.
The Department has discussed it with the Central Bank and is happy the Central Bank will have all the powers it requires under the existing framework in the example the Deputy cited. We have that assurance. The essence of the Bill is to ensure the Irish consumer has the same level of protection he or she had before the loan book was sold, which will be the case.
I will press the amendment anyway.
I will reconsider it and resubmit.
I move amendment No. 20:
In page 6, after line 42, to insert the following:
“Obligation on credit servicing firm and holder of legal title to credit
5. The Central Bank Act 1997 is amended by inserting the following section after section 34F (inserted by section 4):
“34G. (1) A credit servicing firm shall not, on its own behalf or on behalf of, or on the instructions of, a person who holds the legal title to credit granted under a credit agreement, take or fail to take an action, if the taking of or the failure to take the action would otherwise be a prescribed contravention if a retail credit firm took or failed to take that action.
(2) A person who holds the legal title to credit granted under a credit agreement shall not instruct a credit servicing firm to take or fail to take an action, if the taking of or the failure to take the action would otherwise be a prescribed contravention if a retail credit firm took or failed to take that action.
(3) A person who contravenes subsection (2) commits an offence and is liable—
(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months, or both, or
(b) on conviction on indictment, to a fine not exceeding €250,000 or imprisonment for a term not exceeding 5 years, or both.”.”.
The purpose of the legislation has, at all times, been to protect the borrower. The Minister for Finance has listened carefully to the comments made on Second Stage and the new section addresses the concerns that were raised relating to the relationship between the owner of the credit and credit servicing firm. We have already discussed the policy decision to regulate the credit servicing firm, which was considered to be the best way to protect the consumer, given that it is the credit servicing firm that is interacting with the consumer. However, in this amendment, we propose a statutory obligation that will ensure a credit servicing cannot do something or fail to do something which would be a prescribed contravention if performed or not performed by a retail credit firm and which prevents the owner of credit from instructing a regulated credit firm to perform such an action.
Under the terms of the amendment, if the unregulated owner instructs the credit servicing firm to do something which would be a prescribed contravention if undertaken by a retail credit firm, the credit servicing firm cannot implement such a decision. It is an offence by the unregulated owner to instruct the credit servicing firm to do this. We consider the obligation necessary to restore borrowers to the situation in which they were before the sale of a loan book when they were protected as they were dealing with the regulated financial service provider and, as such, would have been protected by the codes and the original lender not committing a prescribed contravention.
We are specifying an offence for the unregulated owner, while also ensuring that the breach cannot be implemented by the regulated servicer over which the Central Bank has oversight as a regulated entity. This will mean a quicker response to possible breaches. Furthermore, this oversight will allow the Central Bank to investigate cases in which an unregulated owner instructs a credit servicing firm to do something which would be a proscribed contravention if done by a retail credit firm. Such a breach is actionable by the Central Bank against the credit servicing firm. The holder of legal title could also be liable for credit servicing without authorisation under section 1(f) of the Bill. The obligation on the regulated credit servicing firm not to perform the action also means that the borrower has access to the Financial Services Ombudsman. This amendment was introduced to respond to legitimate issues raised on Second Stage and I hope it will be welcomed by members.
I acknowledge the principle of the amendment but we are discussing the actions of an unregulated organisation. The Central Bank has enough difficulties supervising the institutions that are currently regulated. How can it possibly know what is going on in bodies that it does not regulate? If the Minister of State can assure us that a division within the Financial Regulator's office is dealing with organisations that are not regulated, I would love to hear about that division. The purpose of this amendment is to deal with unregulated bodies but he has acknowledged that if an unregulated organisation owns the loan book, it will not come within the remit of the Financial Regulator. How will the regulator know what is happening in these organisations, never mind issuing a class A fine or a term sentence?
I appreciate that the amendment at least acknowledges the concerns of members and people in this situation about the prospect of loans being sold to vulture funds. Deputy Fleming made the point that if the credit servicing firm is breaching the code of conduct on mortgage arrears and consumer rights generally it can be taken to task but the owners of the loans should also be subject to sanctions if they try to get the firm to take actions which violate the rights of the mortgage holders. That begs the question of how we can supervise vulture funds which are based abroad and operate through the credit servicing firms. How can we even be made aware the pressures they bring to bear?
I have not tabled an amendment in this regard on Committee Stage because I do not know how I would address the issue but I may prepare an amendment on Report Stage. If the purpose of the Bill is to protect consumers, it should simply keep vulture funds out of the mortgage business. I do not see what they contribute. I might have difficulties with private banking but I understand the purpose of a bank. I would prefer the banks to be in public ownership but I recognise that they have a role to play. I do not see what useful purpose these vulture funds serve. They are parasitical entities that speculate and gamble in a way that affects human beings who are trying to put a roof over their heads. I would love to see a prohibition on mortgages being sold to this kind of entity. It should only be possible to sell them to proper credit institutions. Perhaps the Minister of State can explain why that is not what we need to do to protect mortgage holders. The amendment at least attempts to provide protections but I wonder whether it will have that outcome in reality.
I welcome Deputy Boyd Barrett's acknowledgement that we are trying to address the concerns expressed on Second Stage by adopting a belt and braces approach. Without getting into an ideological debate on banking, a considerable number of people would like to take out mortgages to purchase their own homes. Home ownership is important for people in this country and many people want to get on the property ladder and to put a roof over their heads. We need a functional mortgage market. I do not think too much State intervention in terms of reducing the appetite for competition is ultimately good for the consumer. The Government's goal in this debate is to ensure that consumers are protected regardless of who owns the loan book and that they are not discriminated against or put at a disadvantage in accessing supports put in place by the State and the Central Bank simply because the loan book is owned by A, B or C. The bottom line for those of my constituents whom I have encountered is that they do not want to be put at a disadvantage depending on who owns their loans. As I think is recognised by all, this Bill is trying to achieve that goal.
One of the benefits of the amendment is that a regulated credit servicing firm cannot use as a defence the claim that it breached a regulation on the instruction of an owner. It will not be possible for the firm to argue that the owner told it to break the rules. The regulations will apply and there will be no escaping from that reality. The Central Bank views this in the context of breaches of the code by the credit servicing firm. Evidence of a contravention would be apparent in the treatment of the borrower, which gives the Central Bank an avenue to pursue the credit servicing fund and the otherwise unregulated owner. It is a belt and braces approach that removes the defence that the firm was instructed by an unregulated entity. The amendment also provides access to the Financial Services Ombudsman in pursuing a claim of contravention. We discussed this with the Central Bank and it is satisfied that it can fulfil its obligations under the amendment.
I welcome that firms cannot use as a defence the claim that they were ordered to breach the regulations but we are back to my first question about the unregulated owner. If it is unregulated, it is outside the ambit of the Financial Regulator. How will the regulator know whether the unregulated entity is behaving properly? We have had a lengthy debate on providing transparency on transactions so that when an individual's loan is sold on he or she is entitled to know who owns it. The Minister for Finance's opinion was that if somebody owes money on a mortgage, it simply has to be repaid and there is no benefit in knowing the identity of the creditor. We might not easily know who was behind a company which purchased a portfolio of mortgages. We will have a problem with establishing the identity of the new owner, which will therefore be both unknown and unregulated. People should know who owns their mortgages. The legislation will bring some improvements in this regard but we have argued all along that the owners of the loans should also be regulated.
Without sounding circular in my position on this, I do not see what is earth-shattering about the comment by the Minister for Finance that if one takes out a loan of €300,000, by signing on the dotted line one has committed to paying back that loan. If somebody decides to sell one's loan to somebody else, one still owes the money. We need to make sure that people in such circumstances are not put at a disadvantage in terms of consumer protection and in terms of access to the various supports and codes that have been put in place in recent years. When we leave our bubble in Leinster House and talk to our constituents, they just want to know how they are going to pay their mortgages. That is certainly the case when I talk to my constituents. They are more interested in the principle of being treated in a fair manner and being able to access all the codes and supports they could access before the loan was sold than they are in who owns their loans.
I want to make it clear, as I did during the discussion on a previous amendment, that there will always be a regulated entity and that the buck will always stop with that entity. All we are doing in this amendment is providing that one cannot use the excuse that one cannot do anything because one was told to do something by an unregulated entity that was outside the ambit of the regulator. We are making sure there can be no break, breach or lacuna on the basis of which people can be ignored. I do not see a need for the regulation of owners, in addition to the credit servicing firms, because there is always a regulated owner. It would also increase costs. As we all know, these costs are ultimately passed on to borrowers. On the question of how a breach of this section would be pursued, I remind the committee that it would be a criminal offence by the holder of the legal title. The Central Bank has an obligation under section 33AK of the Central Bank Act 1942 to report any suspicion of a criminal offence to the Garda Síochána, regardless of whether the suspicion relates to a regulated financial services provider or to an unregulated entity. That is why I believe this amendment is very important. I do not want to repeat myself at this stage.
We will revisit it on Report Stage.
I move amendment No. 21:
In page 7, line 17, to delete "paragraph (b)" and substitute "paragraph (c)".
This is a technical amendment. The reference in the Bill as initiated should have been to "paragraph (c)" rather than "paragraph (b)".
We do not need a conversation on that.
Amendment No. 22, in the name of Deputy Michael McGrath, has been ruled out of order.
I move amendment No. 23:
In page 7, between lines 32 and 33, to insert the following:
"(c) by inserting the following after paragraph (c):
"and, in relation to an unregulated service provider means a consumer who is, in relation to any aspect of his or her credit agreement,
(i) a customer of credit servicing firm engaged by an unregulated service provider, or
(ii) a customer of an unregulated service provider which buys and services such agreements.".".
We are dealing with unregulated service providers again in this amendment. I will let the Minister of State say his bit. We might be covering similar ground.
I hope I have got the right interpretation of the amendment. The Deputy can correct me if I do not. Section 6 amends the definition of an "eligible consumer" in section 57BA of the Central Bank Act 1942 to include a person whose loan is being serviced by a regulated credit servicing firm. This part of the 1942 Act deals with the Financial Services Ombudsman. The Deputy's amendment appears to seek to give access to the Financial Services Ombudsman to customers of credit-servicing firms and customers of unregulated buyers of credit agreements. However, the borrower of a loan being serviced by a regulated credit servicing firm is already able to make a complaint to the Financial Services Ombudsman about the activity of the regulated firm. If an entity buys a loan book and services the book itself, it is involved in the servicing of credit and will need to be regulated, and will therefore have access to the Financial Services Ombudsman through that route. Therefore, I believe the amendment is superfluous. It is not that I am disagreeing with the Deputy. The amendment is not needed to ensure access to the Financial Services Ombudsman.
Okay.
I move amendment No. 24:
In page 7, between lines 32 and 33, to insert the following:
"Consumer Protection Code
7. The Consumer Protection Code shall continue to apply to all loans to which the code was previously applicable.".
Amendments Nos. 25 and 26, in the name of Deputy Tóibín, have been ruled out of order.
I move amendment No. 27:
In page 8, line 6, after "2014" to insert ", the Central Bank (Amendment) Act 2015".
This is another technical amendment. The collective citation refers to all Central Bank Acts that may be cited together. The Central Bank (Amendment) Act 2015, which was enacted on 4 February, was not included in the original Bill as initiated.
I would like to raise an issue under this section. I do not even understand it but I said I would raise it for Deputy Naughten. I have already mentioned the other matter he wishes to have inserted. He is not actually ill, he is undergoing foot surgery. That is why he is not here. He wants to signal his intention to ensure everyone taking out a mortgage is required to make a will. I am not quite sure where this fits in. I presume it fits into some sort of regulation in this area. I will not try to explain. I am merely putting it on the record that Deputy Naughten intends to-----
He can certainly propose an amendment on Report Stage.
The Deputy has flagged it for Report Stage.
Exactly.
We will allow that.
At this stage I should signal to the committee that there may be further amendments on Report Stage. One possible amendment may centre around the requirements on credit servicing firms, arising from our discussions with the Central Bank.
That concludes our consideration of the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015. I thank the Minister of State and his officials for attending today's meeting. I thank the members of the committee for their in-depth contributions.
I thank the Chair for his patience.
Thank you, Chairman.
