I wish to bring to the attention of the Minister the current situation that borrowers of term mortgages in the commercial sector are experiencing if they have some temporary difficulty in making the scheduled repayments set out when they originally availed of the facility. I have been made aware of a number of cases. The Minister will appreciate it is sensitive information and I will not disclose the specifics at this stage.
I am informed that the financial institutions concerned have no difficulty in converting capital and interest-type repayments to interest-only type but they are demanding large increases in the interest rate on the entire sum borrowed. To add further insult to injury, the by now almost fully State-owned banks are not only taking advantage of small businesses that are struggling to meet repayments in the challenging economic climate but are essentially defrauding the customers by charging the increased rate of interest on the entire sum of moneys borrowed and not on the amount of capital in question during the proposed capital repayment holiday of 12 to 24 months.
I believe that any person who is making a real effort and fighting to allow his or her business to survive over the next few years must receive a level of co-operation from his or her banks when the pressure is on him or her to make scheduled repayments that were agreed and negotiated in an entirely different economic environment.
This House will also recognise that every business person who is making a genuine effort is aware of the reckless lending that went on between banks and the borrowers, with some banks lending up to €2 billion to individuals to speculate on the property market. These same business people will also be aware that the institutions which carried out this type of reckless lending will most likely never see the return of either capital or interest on these larger accounts. Instead the Irish taxpayers, including every business person in the State and many more, will foot the bill for years to come.
To consider the subject of interest-only repayments on borrowings in general, I cannot see what difficulty the banks would have with any customers who are making a genuine effort and are in good communication with their bank to convert to interest-only repayments in the short term. After all, there is absolutely no loss of revenue to the bank. The only revenue the institution concerned will make from a particular account is the interest element of that account so, in essence, by deferring some of the capital for a prolonged period the bank will earn more interest on that account than it would by sticking to the original agreement.
At present, many people are so worried they cannot sleep at night, they cannot enjoy family life at home, and they cannot concentrate on making their business the success it used to be because the banks are their biggest nightmare and fear. I am aware that in many cases, computer-generated letters are the first thing to reach borrowers who find themselves in difficulty, which can be very intimidating and distracting to borrowers, even making them afraid of doing the right thing, which is to communicate with the bank. The banks need to review their methods of handling these situations and I firmly believe the House should have a role in introducing such legislation.
I respectfully ask the Minister to take on board my request to review the manner in which the two pillar banks in the State deal with persons requiring a move to interest-only payments for a period of time to allow for the drastic changes in economic circumstances which have befallen so many business people throughout the State. I do not accept that raising the interest rate for the duration of the holiday in capital repayments is just, moral or helpful in these times when we are all trying to reignite the engine of our economy. At a time when we as legislators proposed to ban upward-only rent reviews in the property sector, perhaps it is time the House also considered similar action to prevent the two State pillar banks from upward-only interest reviews for struggling businesses throughout Ireland.