Dáil Éireann Debate, Tuesday - 30 January 2018
74. Deputy Bernard J. Durkan asked the Minister for Finance if his attention has been drawn to the increasing aggressive policies being pursued by third parties that have purchased distressed debt from the main banks (details supplied); if he has consulted the Governor of the Central Bank on the issue; and if he will make a statement on the matter. [4302/18]
View answerThis question relates to the extreme pressure being brought upon borrowers whose distressed debt was purchased by third party, unregulated entities which are now squeezing every single cent they can get from the borrowers, using all kinds of measures to intimidate them to extract the maximum moneys.
Most loan agreements include a clause that allows the original lender to sell the loan on to another firm. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, if a firm which bought loans from an original lender is unregulated, then the loans must be serviced by a credit servicing firm which is authorised and regulated by the Central Bank. The legislation ensures that relevant borrowers whose loans are sold to unregulated third parties maintain the regulatory protections they had prior to the sale. Credit servicing firms must comply with all relevant requirements of financial services legislation, including the regulatory requirements set out in the Central Bank's statutory codes of conduct and regulations, including the consumer protection code 2012, the code of conduct on mortgage arrears 2013, the Central Bank (Supervision and Enforcement) Act 2013, the minimum competency code 2017 and other important legislation.
Provision 3.11 of the Central Bank's consumer protection code 2012 requires that, where a regulated lender intends to transfer all or part of its regulated activities to another regulated entity, it must provide advance notification to both the Central Bank and affected consumers. Specifically, a lender must provide a consumer with at least two months' notice before transferring all or part of its loan book covered by the code to another person, including where the transferee is an unregulated entity. Where the transferee is an unregulated entity, the code requires that the regulated lender also notify the consumer of the regulated entity that will be servicing the loan for the unregulated entity. In the event that there is a change in the credit servicing firm, the existing credit servicing firm must also notify the Central Bank and the consumer in advance, in accordance with the timelines set out under provision 3.11 of the code.
I appreciate the position as outlined by the Minister. Unfortunately, things have taken on a life of their own and even where borrowers entered into commitments during the bad times and are making payments in line with what was advised to them, thereby doing their utmost to discharge their debts, this is being dismissed by the new operators. Borrowers are now being asked how much they can pay up front and for amounts that represent a sizeable part of their debt. This is an attempt by these firms to make their profit before they start, notwithstanding the fact that they bought the debt for a fraction of what it was.
People who are already under financial pressure are being subjected to continued mental pressure as a result of the activities of these operators, which is worrying. What action can be taken to interrupt the momentum of these companies?
Two Deputies have indicated on this issue. I ask them to be brief.
Would the Minister consider revising the mortgage arrears resolution process, MARP? If an individual or couple have completed one year of the process, a number of banks come knocking on their door and they are back to square one. If people successfully complete their commitments in year one, can the MARP be extended for another two or three years? That would take a lot of people out of the eviction range and would de-stress their lives enormously as they would otherwise face a repeat of what they had already gone through.
I am not sure if the Minister is aware that unregulated loan owners, so-called vulture funds, have refused to engage with the Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach. The committee will write to the Minister shortly and we will put a motion before the House on the matter. Is the Minister satisfied with the situation where the loan owners remain beyond regulatory reach? They are the parties which make all the key decisions around loans, such as on the interest rate or whether to take legal proceedings, enforcement action or appoint a receiver. It is not the credit servicing agency that does this as that is just a call centre. It is the loan owner which makes all the big calls but they are beyond the reach of the regulator and, it would seem, the Oireachtas too.
I am not in a position to give Deputy Burton an answer to her question on the MARP but I will look into the matter. It is overseen by both my Department and the Department of Justice and Equality and I will write to the Deputy with an answer in the coming days.
Deputies Durkan and McGrath asked about the roles of the different entities. If companies are active in Ireland, they should answer questions the Oireachtas puts to them. I am in a different committee every week and I do not see why financial entitles should not be able to answer questions the Oireachtas wants answered. Deputy McGrath asked about the entities in question being outside regulatory reach and I am looking at the code we have in place at the moment. The code was successful in averting some of the darker predictions made at different points in our recent history, and if we need to make further changes to ensure the objectives of the code are delivered on, I will make those changes.
I am glad the Minister referred to the code because that is one of the keys. These institutions are ignoring all the codes and imposing their own. A typical reaction they have to a submission by a borrower to discharge his or her debt is to say something does not comply with their code of conduct but it is their own code and they are the arbiters of it. Nobody else has any say in the matter and they are bringing a huge amount of pressure to bear on householders and small businesses at the moment. If this is allowed to go unchecked, it will have disastrous consequences.
As I said in my reply to the Deputy, a code of conduct is in place and there is a very clear set of laws which I expect to be complied with. I believe the code of practice has made a contribution to dealing with the great pressure people have been under in recent years. I have asked my Department to give me an assessment as to whether the code will continue to have the effect I want it to have. Discussions that take place between lenders and borrowers on high and potentially unsustainable debts are always very difficult and that is why we need to have a code of practice in place. It will make sure the discussions happen in the most appropriate way and I will continue to monitor the matter.
