EU Directives

Dáil Éireann Debate, Wednesday - 15 November 2023

Wednesday, 15 November 2023

Questions (51, 52, 53, 54, 55, 56)

Mattie McGrath

Question:

51. Deputy Mattie McGrath asked the Minister for Finance to explain the reasons for delays in transposing EU Directive 2167 of 2021 into Irish law; and if he will make a statement on the matter. [50174/23]

Mattie McGrath

Question:

52. Deputy Mattie McGrath asked the Minister for Finance if he will accept that each day he delays signing the EU Directive 2167 of 2021 into Irish law, it results in family homes and farms which could otherwise remain with borrowers under forbearance arrangements being lost to banks and vulture funds; and if he will make a statement on the matter. [50175/23]

Mattie McGrath

Question:

53. Deputy Mattie McGrath asked the Minister for Finance to provide a specific date by which he expects to have EU Directive 2167 of 2021 transposed into Irish law; whether this will be done by ministerial order or primary legislation; and if he will make a statement on the matter. [50176/23]

Mattie McGrath

Question:

54. Deputy Mattie McGrath asked the Minister for Finance if he will investigate or instruct the Central Bank to investigate the interest rate gouging undertaken by vulture funds, which contradicts the objectives of EU Directive 2167 of 2021; and if he will make a statement on the matter. [50177/23]

Mattie McGrath

Question:

55. Deputy Mattie McGrath asked the Minister for Finance if he will publish the submission made by the Central Bank for the public consultation on the Credit Servicers Directive; and if he will make a statement on the matter. [50179/23]

Mattie McGrath

Question:

56. Deputy Mattie McGrath asked the Minister for Finance the number and specific details (including the name of the institution, date, and topics discussed) of any meeting or discussion he has had with a bank, credit service firm, vulture fund or their representatives in 2022 and 2023; and if he will make a statement on the matter. [50180/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 51, 52, 53, 54, 55 and 56 together.

The Credit Servicers Directive (EU 2021/2167) (‘the Directive’) primarily provides for a common EU framework for the transfer and management of bank-originated non-performing loans, including mortgages, which are transferred or sold after 29 December 2023. It sets out an EU-wide regulatory arrangement for both the purchasers and servicers of such credit agreements and in particular provides for a new EU authorisation framework for ‘credit servicers’ to be overseen by national competent authorities, which in the case of Ireland will be the Central Bank of Ireland. Any entity authorised under this framework will have the right to passport credit servicing activities across the EU based on a home Member State authorisation.

In addition, the Directive makes certain amendments to the Consumer Credit Directive (2008/48/EC) and the Mortgage Credit Directive (2014/17/EU) which will, inter alia, impose obligations on creditors to have adequate policies and procedures so that they will be required to exercise reasonable forbearance before initiating enforcement proceedings and which shall take into account, among other elements, the consumer’s circumstances.

My Department conducted a public consultation on the national discretions available in the Directive between January and March 2023. All of the submissions received in response to that public consultation, and the decisions made on each of the national discretions, were published on the Department’s website in June 2023.

The Central Bank did not make a formal submission to that consultation process but it is working closely with my Department on the transposition of the Directive. As indicated in the document setting out the decisions on each of the discretions, those decisions remained subject to change in the context of the finalisation of the transposition of the Directive.

The Directive, which requires Member States to adopt and publish the laws, regulations and administrative provisions necessary to comply with the Directive by 29 December 2023 and to apply those measures from 30 December 2023, will be transposed by way of a Ministerial regulation made under the European Communities Act 1972. Accordingly, there has been no delay in the transposition of the Directive and my Department is working with the Attorney General’s Office to meet this transposition date.

I would add that the current consumer protection framework already requires regulated entities to work with and assist a personal consumer in resolving arrears on a loan. In particular, in respect of a loan secured on a primary residence, the Code of Conduct on Mortgage (CCMA) arrears provides that, prior to initiating legal proceedings, a regulated entity must make every reasonable effort to agree an alternative repayment arrangement with a co-operating borrower. Any legal proceedings may only be commenced after the time periods as set out in the CCMA have expired.

The Deputy may also wish to note that there is no provision in the Directive regarding the regulation of retail interest rates. The formulation and implementation of monetary policy, including the setting and adjustment of official interest rates, is an independent matter for the European Central Bank (ECB). The setting of retail interest rates, which will be influenced by the level of official interest rates but also by other general economic and firm specific factors such as the cost of funds, capital requirements, loan default risk, operational costs, expected return and competition, is a commercial matter for individual firms. I have no function or role in such business decision making matters by financial institutions.

Nevertheless, the Government recognises the difficulties that increasing interest rates, and the rise in the cost of living more generally, is having for some mortgage borrowers. From a regulatory perspective the Central Bank has put in place a range of measures in order to protect consumers. This seeks to ensure that regulated entities are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle.

Specifically, in relation to variable rate mortgage holders, the Central Bank Consumer Protection Code requires mortgage creditors to explain to borrowers how their non-tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates. It also increased the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool.

Also, Budget 2024 provided for a one-year mortgage interest tax relief scheme for homeowners with an outstanding mortgage balance on their principal private residence of between €80,000 and €500,000 on 31 December 2022. Qualifying homeowners will be eligible for mortgage interest tax relief in respect of the increased interest paid on that loan between the calendar year 2022 compared to the calendar year 2023 at the standard rate of income tax, capped at €1,250 per property.

In relation to information on meetings with banks, retail credit firms, investment firms or their representatives in 2022 and 2023, I will compile this information and forward it to the Deputy as soon as possible. However, in advance the Deputy may wish to note that on 31 August 2023 I met with mortgage industry including the Banking and Payments Federation Ireland (BPFI), CEOs and senior representatives of all the main mortgage lenders and servicers.

I made it clear that banks and all other regulated mortgage entities should be fully aware of the significant challenges that some of their customers are facing and that lenders and servicers should respond by assisting their customers who are experiencing difficulty. In relation to customers’ ability to switch to another provider to avail of a more advantageous mortgage interest rate, I also highlighted that greater clarity should be provided to customers on the possibility of switching provider and that this option should be fully supported by all mortgage entities, including the existing mortgage creditor. Further,

I supported the steps taken by the Central Bank to ensure that firms proactively deal with emerging difficulties for their customers since the increase in interest rates. The Central Bank requires firms to enhance the range of supports available to borrowers in or facing arrears and to have sufficient operational capacity to manage applications by borrowers to switch their mortgage or mortgage provider.

Arising from that meeting, on 6 September the BPFI announced a number of further initiatives by the mortgage industry. This included:

• a second phase of a ‘Dealing With Debt’ campaign to highlight new and existing supports for concerned mortgage customers;

• mortgage servicing firms and MABS to collaborate on an expansion of streamlined customer engagement framework; and

• the provision of initial eligibility criteria by the main lenders to provide clear guidelines for home mortgage customers of credit servicing firms who are seeking to switch their mortgage.

This means that, for the first time, there is now an agreed industry wide set of initial eligibility criteria to facilitate people switching their mortgage from a non-bank to a bank. Credit servicing firms have committed to working with these criteria to support their customers switching and to ensure they are aware that they may have options to switch their mortgage. The main mortgage broker representative bodies, Brokers Ireland and the Association of Irish Mortgage Advisors, have also agreed to communicate these criteria to borrowers seeking to switch their home loans.

In order to be eligible to switch under these guidelines, customers need to be making full capital and interest repayments on their mortgage. In addition, customers must have no arrears on their home mortgage or any other lending in the past two years. Once customers meet these and other initial criteria, applications will be assessed on a case-by-case basis in line with individual lender credit policy. Decisions on credit provision will be a commercial matter for an individual lender.

Question No. 52 answered with Question No. 51.

Question No. 53 answered with Question No. 51.

Question No. 54 answered with Question No. 51.

Question No. 55 answered with Question No. 51.

Question No. 56 answered with Question No. 51.