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Dáil Éireann díospóireacht -
Wednesday, 4 Feb 2015

Vol. 866 No. 2

Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

I understand that Deputy Finian McGrath had concluded. I call Deputy Connaughton, who is sharing with Deputies John Paul Phelan and O'Dowd.

I very much welcome the extension of the Central Bank's code of conduct to lenders that are currently unregulated as it provides additional and much-needed security for home owners and owners of small and medium businesses whose loans are currently in arrears.

At the time of the sale of the Ulster Bank loan book by the IBRC, I was approached by many home owners who were concerned that their loans would end up with unregulated financial institutions and they would not enjoy the protection of the mortgage arrears resolution process, which is mandated by the Central Bank's code of conduct on mortgage arrears. These people, as holders of residential mortgages which were in arrears, had very real fears that they would be treated differently by an outside agency and I believe that this Bill will ensure that individuals, families and small to medium enterprises will continue to enjoy the protection of the Central Bank's code of conduct.

Deputies on all sides of the House have heard many harrowing stories of financial difficulties in the confidential setting of clinics in recent months and years. We regularly come face to face with the real people whose everyday financial struggles are only too evident and can see the long-term damage being done to families who find themselves in arrears with their mortgage. Their mounting debt appears to be insurmountable. In this regard the Government is committed to ensuring that people who find themselves in mortgage arrears enjoy the protection of the Central Bank's code of conduct.

In the past week, at clinics in east Galway, I have heard tales about the intransigence of the main banks in dealing with mortgage arrears, despite customers' willingness to tackle debt burdens. I have arranged meetings with various banks in an attempt to find a way to break the impasse, but too often bank customers are unaware of the protection they enjoy and in the dark in terms of their rights and entitlements.

Over 117,000 mortgages are in arrears, but for some families, their situation has improved in recent months. Jobs have been secured; additional income is starting to flow and, in some cases, the level of the arrears is beginning to reduce. Nevertheless, arrears continue to be a worry in over 117,000 homes. Of these, between 5,000 and 10,000 do not enjoy the protection of the code of conduct on mortgage arrears and the Bill seeks to extend the code to their loans. Some 5,000 or 10,000 families is a significant number and while the firms involved in these loans have stated their intention to comply with the code of conduct, that is not sufficient and needs to be underpinned by legislation. That is what necessitated today's decision.

The code of conduct is particularly important in communications between banks and borrowers in arrears. It regulates communications between the bank and the borrower to ensure there will not be excessive contact between the bank and the already stressed borrower. I acknowledge that the passage of the Bill may make it more difficult for banks to sell loan books in the future because of the increased regulatory burden, but with rights come duties and the increased burden of care towards the borrower - individuals, families and small or medium-sized businesses - is fair.

When one considers that unemployment rose from 5% in the first quarter of 2008 to over 15% in the first quarter of 2012, it is clear that huge numbers of workers who never envisaged themselves being out of work found themselves suddenly without jobs as a result of the economic downturn. Without a job, it is impossible to service a mortgage and, while half of the people concerned have since found work and it is hoped to get unemployment below 10% by the end of the year, two issues remain. The first is the overhang of debt from those years, while the second is the accrual of mounting interest. Added to this is the fact that mortgages were given out in the good times on the basis of high incomes that were forecast to rise and house prices are now just over half what they were at the height of the boom and we have the perfect storm for mortgage holders.

While the Bill provides welcome additional security in legislative terms for the 5,000 or 10,000 loan holders not covered by the Central Bank's code of conduct, our focus must remain firmly on the 117,000 individuals or families whose mortgages or business loans are in arrears. The ongoing creation of new and better paid jobs within the economy will provide the financial lever that many need to address their mortgage arrears; therefore, our focus must remain on fixing the flaws in the wider economy, reducing unemployment, reducing taxation for the low paid and creating a better environment in which to do business. However, while repairs are ongoing to the economic infrastructure, we must continue to care for those who were caught up in the perfect economic storm that hit Ireland in recent years. It is not enough to repair the banking structure or institute codes of conduct, we must focus on the casualties of the property boom and bust and help those families back to a sound economic footing through a variety of resolution options. They are not statistics, this is the everyday reality for over 85,000 families with mortgages in arrears for more than 90 days and 30,000 owners of buy-to-let properties. This legislation is one necessary step that has to be taken for this cohort of home owners, but, as the economy recovers, we must ensure they are not left behind and that their cases are resolved in a way that will allow their lives and those of their families to progress.

I welcome the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015. Like Deputy Paul J. Connaughton, I was inundated with representations from constituents who had mortgages taken out with institutions no longer in existence, which mortgages were subsequently sold to another mortgage provider primarily existing outside the State. These constituents raised real concerns about the prospect that the new entrants were not covered by the existing code of conduct and the mortgage arrears resolution process that applied to institutions based in the State. I am glad that the Minister has taken the necessary action in the legislation to ensure this group of often very vulnerable individuals will receive the same protection for their mortgage loans as is available to individuals and families that have loans with institutions based in Ireland. Without this legislation, we have the potential for unscrupulous credit institutions to gain ownership of loan books without enforcing the existing rules, as they stand. That is why I am an enthusiastic supporter of the provision being extended in this legislation.

I also welcome the news, widely reported in the media this morning, that the Taoiseach's office is becoming directly involved in finding solutions to the mortgage arrears issue more swiftly. It was mentioned by the previous speaker that well in excess of 100,000 mortgages were in arrears and that the figure for mortgages in arrears for two years or more was approaching 37,000. We are now in year eight of the economic crisis that has gripped country and there can be no more important matter for any individual or family than keeping a roof over their heads. I do not claim to be exceptional among Deputies, whether on the Government or Opposition side, in receiving many representations from people who find themselves in such mortgage difficulties. These are harrowing accounts of families being put to the pin of their collar in trying to keep a roof over their heads. Extending the existing provisions to new businesses entering the mortgage market in Ireland and buying existing mortgage and loan books is welcome. That is why I am a particular supporter of this legislation.

Many in the Opposition, although perhaps not the two Members in the Chamber at present, believe in ramping up Government expenditure, while continuing with high rates of income tax and perhaps higher rates in the future. The role of government should be to give people their money and let them spend it as they wish. I commend the efforts and pronouncements of the Taoiseach in the past few days in his recent RTE radio interview, which were in marked contrast to those of the Leader of the Opposition. When he did the same interview a few weeks earlier, he went on record as saying he did not believe income tax rates should be reduced but that expenditure should be increased in an improving economy. Has he not learned anything from his time in government in bringing the country to the position it has been in for years and from which it is now thankfully starting to emerge?

Táim i bhfábhar an Bhille seo. Tá sé práinneach agus tá sé in am dó. Maidir le daoine le mórgáistí atá rialaithe, or regulated mar a déarfá i mBéarla, tá sé an-tábhachtach, dá ndíoltar na leabhra iasachta, go mbeadh na rialacha céanna ag baint leis na morgáistí i ndiaidh an díolacháin is mar a bhí ann roimhe. Is bunchloch í d'aon tír dhaonfhlathach go leanfadh aon chearta a bhain le morgáiste ar aghaidh agus go mbeadh brú ar an gcumann nua géilleadh leis na cearta céanna agus nach mbeadh an seans ann na cearta sin a chaitheamh siar agus a rá nach bhfuil aon bhaint acu leis an gcumann nua.

Bhí próiséas sofheicthe ag baint leis an mBille seo. Bhí sé sin le feiscint sa tslí ina rinne an Rialtas agus an Roinn an scéal a scaipeadh. Do nocht 15 eagraíocht a gcuid tuairimí ar an mBille seo agus is féidir na tuairimí sin a léamh ar an Idirlíon, ina measc tuairimí an financial services regulator agus an consumer association. Is maith liomsa na cinn sin ach go háirithe.

Measaim go bhfuil an Rialtas tar éis an chomhairle sin go léir a thógáil ar bord.

I fully support this legislation. It is timely, essential and clearly urgent. Of the 760,000 mortgages on primary dwellings in this State, 15.5% or 117,000 are in arrears. In regard to mortgages on buy-to-let properties, 26.8%, or 38,463 are in arrears. That is a serious situation for the families concerned, particularly those who have mortgaged their homes. Every day people in severe financial distress come to our clinics seeking assistance. I commend MABS and local credit unions on working with these families to do whatever they can to help them get out of the distressing and stressful situation in which they find themselves. It was nobody's fault that people lost their jobs in the bust but many families do not know where to turn. This legislation will ensure that the rights attaching to mortgages managed by regulated institutions will accompany the mortgage books if they are sold onwards. That is constructive and positive.

Perhaps we need to do more for businesses. This legislation will apply to small and medium enterprises as well as to primary dwellings. The objective is to facilitate access to credit for sustainable and productive business propositions. The consumer code is essential in this regard. By supporting businesses and giving them security they will not have to worry about their loans being sold on or being unable to trade due to financial pressures.

While I accept that the primary purpose of this Bill is to provide protections for mortgages, we should also consider ways of dealing with loan sharks who are regulated by the Central Bank. As regulated entities, the maximum interest they can charge is 188%. One company charges an interest rate of 187.2%. It is time the Government tackled this problem. We should investigate these companies minutely because they are sucking blood from people who are in parlous financial situations, many of whom are living from day to day and need the loan to tide them over until they receive their unemployment assistance. These companies offer door step and pay day loans. Even though they may be regulated, it is unacceptable that people without alternative access to credit, employment or financial status, and who may not even own their own homes or cars, are forced to take out such loans. Notwithstanding the welcome fact that our unemployment rate has dropped to 10.5% from a high of 15%, unemployment is still far too high and too many people are still in extremely difficult financial circumstances. I suggest that further legislation be considered to put these loan sharks out of business.

MABS is the opposite of the loan sharks. It does fantastic work. As Deputies will be aware, if we contact MABS about somebody who is an extreme situation, it will prioritise that individual's case and get in touch with the loan sharks or other lenders. I must also mention the Society of St. Vincent de Paul, which is extremely supportive of decent, honourable people who through no fault of their own have fallen on hard times or into the hands of loan sharks. There has been a huge change over the past several years in terms of looking after people who are in financial distress. I welcome this legislation and urge the Minister of State, Deputy English, to consider reducing the rate of interest these blood suckers can charge. It is an appalling way to extract money from vulnerable people and we should not be allowing them to charge these unacceptable interest rates.

I welcome the opportunity to speak on this Bill, which aims to regulate agents. The principal financial institution which engages a credit servicing firm to act as agent will not be covered by the legislation. We were discussing the rental market earlier. Tenants who rent from a landlord enjoy certain protections. This Bill is akin to saying that if a landlord appoints a letting agent to manage the property, the landlord is off the hook in terms of obligations to the tenant. That is the principle this Bill will apply in respect of private homes. It will regulate the person who knocks on the householder's front door but the institution who sent the agent will not be regulated. This is bad legislation. There are a few scraps of goodness in the Bill but I cannot say much else for it. If it is passed, it will cause greater problems that have arisen heretofore. This morning we debated legislation on insolvency because the earlier legislation on insolvency has not worked. This morning's legislation was introduced to put a patch on legislation that does not work. While we were debating that legislation, the Taoiseach was meeting the Central Bank and the Insolvency Service to discuss the need for new systems to deal with insolvency. By his actions and his comments on Morning Ireland, he is implying that the insolvency legislation is not working. The same will happen with this Bill. It is farcical that the Taoiseach could claim that legislation we had not even finished debating is not working. The decent response would be to withdraw the legislation in order to get it right before reintroducing it.

The people who work in this business think logically rather than emotionally. They are in it to make a profit. When the Bill is passed, banks will sell their loan books to another institution. They will call it a special purpose vehicle or make up some other fancy title. This new institution will engage an agent to manage the loans. Banks will be able to avoid regulation by selling off their loans and ensuring the organisation or financial institution established to purchase the loans engages an agent.

The legislation provides the banks who do not want to deal with difficult customers with an incentive to sell off their mortgages. That is the logical outcome. We are putting an exemption in place for banks that says if they sell the loan and the buyer engages an agent, the new owner is not covered. Why would the pillar banks in Ireland - AIB and Bank of Ireland - want to continue in the Irish mortgage market where they are rightly heavily regulated if all they have to do is take a write-down, sell off the loan books in whatever packages suit them and get their money? An unregulated owner who will not be covered by this legislation will then be free to send in his agent to do what he likes. Ireland has a long history of landlords from outside the country sending in their agents to carry out repossessions. That is what will happen. Banks will look at this logically and consider that given the legislation they would be foolish not to go down this road.

The Governor of the Central Bank announced a few days ago new rules on people taking out mortgages. I did not hear him telling the public, as he has a duty to do, that new borrowers should beware that if they get a mortgage from one of the main institutions in Ireland it may be sold off at the end of the year to an entity that will not be regulated where it gets someone to come and do the dirty work as an agent acting on its behalf. The banks exist to make a profit and they will do it as easily as possible. They will go down this road. The legislation is also bad for small businesses. There are many small businesses which are viable but for the large property debts on foot of investments they made. These operators will want to realise that, even if it involves putting a small company out of business and causing job losses.

The legislation will cause more problems than it solves. First in the firing line will be those people who are well into their mortgages and not now in negative equity. If the value of their loans are way less than the value of their houses, these unregulated entities will cash in their chips straight away. They will not be as quick to go into houses where there is huge negative equity as they know they will not recover half their loan book if they sell. This is designed to attack the people who are well into their mortgages and have paid down a good bit of their debt without being in negative equity. That is where the cherry-picking will take place to get money back quickly. In those cases, it will be possible to get the full loan amount. It should be remembered that the people the legislation will facilitate will have bought loan books at a significant discount to start with. They do not even need to recover the full outstanding amount of the original loan to make a substantial profit as the loan was heavily discounted in the sale price.

The code of conduct on mortgage arrears is not working satisfactorily and some of these organisations do not want to know about rent to buy schemes. Other Members and I have encountered cases where people in serious mortgage arrears were told by one of the voluntary housing agencies that it would buy their house at a market rate written down from the original price and rent it back to the people living there. These companies do not want to do that in the cases I have dealt with because they want vacant possession. They do not want women and children in a house if they feel they can get more by vacant possession. Thankfully, Ireland is a great little country on the ground and there are many auctioneers who will not sell repossessed family homes. They will not take them, which is the right approach as we do not want to encourage the foreign vulture funds to come here and force people out of their houses unnecessarily and where there are other options they choose not to explore. That is a further flaw in the legislation.

Why is the Government doing this? It has backed away from tackling the financial institutions. One might say that the Bill contains some level of cover, which is better than none, but by giving cover to these agents, the Government is encouraging people not to get caught under the new legislation. They will take the simple way around it. Last year, we had 10,000 new repossession cases and that will increase the more we have of these kinds of activities. Before we conclude Second Stage, I ask the Minister to clarify if the legislation will apply to those customers whose loans have already been sold off. I am not sure of the answer and would like the matter clarified either way. We want to ensure that those people are covered by the Bill.

FLAC has made a submission on the legislation and said it is not clear whether legislation it provides that newly regulated credit servicing firms must apply the relevant Central Bank codes immediately. It says there may also be some doubt as to whether the definition of "credit servicing" is robust enough to ensure that all decisions made under the code of conduct on mortgage arrears are servicing matters. There is a difference between dealing with mortgage arrears and servicing an account on behalf of someone else. The definition of "credit servicing" in the Bill covers notifying people, which is sending them letters, but it also refers to managing and administering any charges imposed on the relevant borrower. Who is the invisible person who will impose new charges on the relevant borrower? They are not to be seen and may not even be in this hemisphere. This is a charter for banks to outsource their difficult loans to foreign companies who do not require to be regulated. The Government has done a disservice in this regard which will come back to haunt it.

The Bill is a missed opportunity. There was huge potential here had a proper concern been shown which has been missed. I listened to some colleagues welcome the fact that the Taoiseach will get involved in this area and talk to people. The Minister of State, Deputy Damien English, will be familiar with the fact that this time two years ago during the by-election in Meath East, the Taoiseach was very interested in talking to people about mortgage arrears. He even took a person telephone number and told him or her to telephone him. However, we did not see a great deal of action from that.

Here we are with a Bill that offered so much in terms of protection, but if we are to read the analyses being prepared on the Irish mortgage market by financial concerns and expert groups, including New Beginnings and the Irish Mortgage Holders Association, it appears that 2015 will see an avalanche of repossession applications on the part of banks. One has to ask oneself if the legislation will provide any protection against that avalanche. It will not. The legislation as presented is a PR person's dream. Irish banks will sell their loans to third parties who are not regulated under the legislation and wash their hands of the repossession activity that follows. If the Government is committed to making this as robust as possible, it will hopefully use Committee Stage to strengthen the Bill to prevent that happening.

There is a commitment in the legislation on SMEs. A number of banks that were formerly active in the market are actively deleveraging their interest in loans and selling them on to venture funds, which are also known as "vulture funds". The loans are being sold on in blocks. A person's loan, relationship with the bank and the money he or she may owe as a business person or individual to a bank is put together into a block of loans, given a fancy title, a few of which I notice are geographically related, and then sold on to entities we know nothing about. I have engaged with one of the banks in particular on two cases over the past few weeks for companies employing approximately 50 people in the service industry. Property loans were taken on by those companies and the economy is where it is at, but the day-to-day business and employment is still viable. The future of these businesses is still viable and if the bank were interested in the customer and the 50 people working in those companies, it would engage with them to come up with a solution that could be managed. That would involve a write-down of what in some cases is a disgusting rate of penalty interest and a commitment to servicing the principal of the loan. That is the offer that was made but because the bank involved is regulated by a Government outside this jurisdiction and that Government is putting pressure on the bank's parent company to sort its book out, there is no engagement and no willingness to engage.

There is certainly no concern for the people who work in the enterprises in question and no respect for those who have created the employment. There is a wish to sell the asset as quickly as possible and move on. The legislation will do nothing to offer protection to the loan holders or those working in these relationships.

My two cases are indicative of many across the country. The bank to which I refer is about to launch an avalanche by selling off its commercial loan book, particularly the distressed commercial loans. Although it will sell distressed loans to a vulture fund that will call them in and close businesses, in seven or eight months time it will state it tried to support the businesses and that they did not close on its watch. Nothing in the Bill offers any protection against this.

The Minister of State, Deputy Damien English, knows from his previous role as Chairman of the Oireachtas Joint Committee for Jobs, Enterprise and Innovation that one of the most significant issues facing SMEs is legacy debt on investments made in the so-called good times. Many businesses with very solid business models which have managed to trade on a day-to-day basis successfully, in spite of the challenges of the past three years, have come through and are still providing employment and making a day-to-day profit. However, businesses that invested in enhancements or expansion during the so-called boom are being brought to their knees by banks, including the pillar banks and unregulated banks. Will the legislation do anything for them, even offer a nod in their direction by acknowledging we have a problem, or give any indication that the Government understands the debt challenges facing SMEs? No, it will not.

The legislation reflects an ongoing approach of sticking one's head in the sand and hoping the problem will go away. It will not; it is getting worse. I regret to have to predict that by the end of the year many more businesses will have gone to the wall because there is no support to protect viable day-to-day businesses and make some arrangement to deal with the legacy debt to be paid off in the long term or parked until businesses can grow and we can grow employment or, more importantly, protect those who are employed by these businesses.

Deputy Fergus O'Dowd made a very important point about how loan companies advertised. The other day I saw an advertisement for a pay-day loan that showed, in the smallest print possible, an interest rate of 400%. Such companies are preying on people who find themselves in very difficult circumstances. We need to do much more to tackle them. We need to do much more to resource MABS which is doing phenomenal work to deal with the consequences of the economic crash throughout the country in providing staff and an ability to offer its services. MABS will be needed because of the weaknesses of the legislation as presented. Let us hope that on Committee Stage the Government will take on board FLAC's recommendations and the concerns expressed about the inadequacies of the legislation.

We must stand up and say we will not allow venture funds or vulture funds to take over Irish loan and mortgage books and repossess homes. Tenants in buy-to-let properties which the landlords are forced to sell and who need to rent another house or apartment at a time when rents are going through the roof are joining social housing lists which are already under enormous pressure. We have a code, to which the Tánaiste referred some weeks ago. Will the legislation do anything to assist these tenants and borrowers? The answer is "No". There is nothing in it, despite the awareness of the problem facing the buy-to-let sector and the need to protect tenants who are paying their rents and doing everything expected of them to keep their homes but whose landlords are not. When a landlord loses his or her house, the tenant often loses the roof over his or her head. The legislation could give protection if there was a commitment to do so. This is very important.

Although we have all dealt with cases in which the Central Bank code of conduct on mortgage arrears is being abused, no action has been taken to sanction any bank. We need to take the powers seriously and begin to sanction banks which abuse people's rights. We need to tell any bank that is considering divesting itself of its interests in Ireland that it cannot use legislation to protect its brand, while divesting itself of its interests in Ireland. The legislation offers this opportunity.

Like other speakers, I am glad to have the opportunity to speak about this very important Bill. I was one of the people who had severe reservations about the insolvency legislation introduced a couple of years ago and I was proved right. Since 2008, like everybody else in the House, I have made numerous interventions with lending institutions on behalf of constituents and had a variety of experiences. In some cases, lending institutions were conscious of the need to show compassion, accommodate and try to assist borrowers in their changed circumstances due to the downturn in the economy, unemployment and other factors that detrimentally affected their ability to repay. We were shown by some compassion by some institutions which I do not propose to name. We were also met by indifference and a reluctance on the part of some lending institutions to enter into any revision or arrangement.

Debt resolution has occupied the minds of many in recent years. Debt resolution means different things to different people. To some institutions, it means that borrowers should pay what they owe or get out. To others, including most Members of this House, it means accommodating the borrower, given the new circumstances that prevail, and recognising, in particular, the needs of family home owners and their anxiety to hold onto their homes. We lacked recognised guidelines or statutory arrangements which would be incorporated into any arrangement a borrower might enter into, other than at the discretion of individual lending institutions. Some lending institutions have dragged their feet, procrastinated and waited for negative equity to gradually recede and return them to a position in which they could get their money and force the borrowers out of their homes. This callous attitude should never be accepted or tolerated. Not long ago, the lending institutions offered loans in the full knowledge that the borrowers might not be able to live up to their commitments. Lending and borrowing involve risk for both sides. There are no guarantees because we can never guarantee what will happen in the future.

I ask the Minister to bear in mind the necessity to ensure the restructuring of loans can take place and will be accommodated and supported where it can be done within reason. In some cases, it may not be done. The same lending institutions loaned the money in the first place, knowing what it entailed and they did not seem to wonder how the money would be paid back. I find it very difficult to understand how the same institutions can state they are very sorry but things have changed, that they have regularised their positions and cleaned up their loan accounts.

I reject that. We need to impress upon such lending institutions the need to show a bit of consideration and compassion for the borrowers, given the change in circumstances.

Some lending institutions have adopted rather undesirable tactics in intimidating the borrower into conceding, walking away or robbing another bank to pay them off. They make repeated phone calls, all day, every hour on the hour, in the middle of the night, at 6 a.m. It is an absolute disgrace and should not be tolerated. It has driven many families in this country to the brink. It is not acceptable. Some lenders have been very helpful, tolerant, accommodating and have encouraged the customer to be at ease, saying they would try to help the customer out. I have admitted that from the beginning. Others have not and on one or two occasions have said to the customer and his or her spouse, “In case you have any problems or have not been in a situation like this before, we have paper hankies and glasses of water here, if you are overcome.” It took them a while to realise that stress goes in both directions and they soon found out that it is a two-way process. I reject that kind of attitude, particularly coming in the aftermath of the Celtic tiger when they indicated to all and sundry that they would give them as much money as they wanted, saying there was no need to worry about paying it back that it would come back automatically. We know now what was automatic. It is absolutely necessary to set down rigid guidelines, which I do not think are contained in this legislation, to ensure that lenders in the first instance, or the secondary lenders that we are providing for now, abide by some kind of rules and regulations other than a whim of the lending institution to recover its debts as quickly as possible.

Like everybody else in this House, I have dealt with several unregulated third parties and am conscious that they bought the loan books at a fraction of their value and that the original, primary lenders took a hit. I cannot understand why it would not have been possible for them to accommodate the borrower over a longer period. This is a question of debt resolution. Many institutions have been reluctant to enter into any kind of loan or debt restructuring and they need to focus on that urgently, particularly the unregulated third parties which have purchased loan books. They think they do not have any obligation but what is the morality of a case in which somebody buys a distressed loan of €100,000 or €150,000 and realises that by forcing the sale of the house it will yield €110,000 or €115,000, which is a regular occurrence? I cannot accept the morality of that because it would have been just as easy to enter into an arrangement to restructure the loan over time but that does not meet the requirements or the objectives of the third party loan book purchasers. I ask that particular attention be paid to this aspect of lending and borrowing. In my experience it is possible to restructure most loans because if it was not why was the loan made in the first place? Eight, nine or ten years down the road why is it not possible to restructure what remains in those loans now? There is no reason. The loans were made in certain circumstances.

We need to keep in mind the basis on which some of the loans were issued in the first instance. As far as I can see no attention was paid to the value of the property. There might have been attention to the ability of the borrower to repay but that is not enough to solve the problem. Where no regard is had to the value of the property if anything happens to the borrower, through illness or whatever, his or her ability to pay goes down. If a value for money assessment of the property had been made in the first place the same sum of money would not and could not have been lent. The local authorities traditionally did that until around 1989. Sadly, that has all changed. It is now possible, as I know from cases I have dealt with, that somebody was awarded a loan without any engineering or structural guarantee or report on the structure of the house and its value. Eight or nine years ago people paid up to €400,000 for a house that was probably worth €80,000 or €90,000. That is appalling. There have been numerous cases of this. To calculate the value of a house one calculates the building cost of a house of the same size, which gives an idea of what the price of the house should be, then add in the price of the site. For example, I saw a house advertised in the media recently, an artisan dwelling in the centre of this city, with two bedrooms, for €800,000. After all the bad experiences we have had, value for money must be brought into the equation at some stage. Guidelines must be introduced urgently. I have never referred a file to any third party, insolvency practitioners or anybody else and sadly I have had to do all the work alone. I have not lost too much ground yet and do not intend to. It now requires a legislative intervention that will give some guidelines within which those agencies, the primary or secondary lender, can operate and that can be made workable for the borrower.

Lending institutions say they have a restructuring product which, if it is examined carefully, the borrower will find it absolutely impossible to accede to. The institution will say that is the only product it has, and it does not do anything else but it had no problem initially in offering the loan to the person concerned in different circumstances when it was reasonable to assume those circumstances could not and would not prevail. I cannot understand how they managed to do it. There is an urgent necessity to introduce guidelines which will ensure that restructuring takes place and that it is done in such a way as to make it possible and feasible from the point of view of the borrower because the borrower bought and borrowed in good faith and it should not all be left to the borrower to determine whether the loan has a sound basis.

Other speakers have mentioned the lending institutions that no longer trade here and have moved off. There are two categories, one of which was particularly aggressive before the downturn. To be fair, it has given some indication of compassion and an intention to work with the borrower to resolve the problem and not push all the responsibility onto the borrower. There are a couple of others that have no such intentions.

Their only response has been to pull the plug and run, having handed over the property to somebody else to extort in terms of any equity that remains therein. It is appallingly callous in the times in which we live that we should be subjected to this type of attitude. That some of these agencies aggressively encroached on the market and having destroyed it walked away is totally unacceptable. I ask that the Minister and the Central Bank bear this in mind when dealing with these issues.

Deputy O'Dowd and others referred to the rates of interest being charged by those now involved in lending to high risk borrowers, which is another issue that needs to be looked at very carefully. There is no reason in the world any agency should be allowed to charge 300%, 400%, or even 180%, interest on loans. In such cases all a financial institution is doing is milking the system for all it is worth and milking the unfortunate borrower, who because he or she is between a rock and a hard place in terms of there being nowhere else for them to go, happens to be in the position of having to borrow from them. I ask that this too be borne in mind. I can assure the Minister of State, Deputy Sherlock, that all Members of the House will have examples of this which they can convey to him. Our job is to regulate, as we are doing in this particular case. This legislation has been long promised and is absolutely necessary. In all the cases with which we have dealt in this House over the past number of years there have been extremes on both sides, including over-borrowing by people, leading to their getting out of their depth financially.

Another trend has emerged in recent times. We have all dealt with cases involving two spouses who entered into borrowing arrangements with lending institutions that were in excess of what they could discharge, following which one of the spouses subsequently left the family home and disappeared into thin air leaving the other spouse, usually a woman with a couple of children, to defend the family home against the financial institution. In such situations, the financial institution does not care about the absconded borrower because he or she is out of the house. Its objective is the person who remains in the house with the children and how it will go about taking the house from them. There are umpteen examples of such cases. I again ask that the Minister of State bear in mind these cases and to try to ensure that in such circumstances the family home is protected in every way possible.

My final point relates to insurance agencies, some of which, having traded here and milked the system for what they could, evaporated into thin air over night or left this jurisdiction while others did everything they could to ensure they did not have to pay out on a mortgage protection policy and so on, resulting in appalling hardship for people the length and breadth of this country. There is a need for careful consideration of this group of people also because, again, what is affected is the family home. The family home is under attack by virtue of circumstances over which the person who remains in the family home has no control. What is required is an effort on behalf of the lending agency to come to their rescue in some way rather than a callous off-hand attitude to the effect that the agency has to live too. I will not comment on that other than to say that while that is true it is important to remain as even handed as possible in these cases. Some of the lending agencies that are slow now to accommodate the borrowers who are in trouble were themselves in trouble a few years ago. Had the Irish taxpayers showed the same contempt for them as they are now proposing to show some borrowers, a number of them would not be around today.

Like other speakers, I welcome this debate on this long overdue Bill. In my view, the Government has enabled and even empowered vulture funds. The sale of loan books to unregulated entities was the policy of this Government. The only reason this Bill is being introduced is because the citizens affected campaigned and lobbied on this issue.

The sale of IBRC was a brutal, calculated sale of citizens' loans to unregulated vultures to temporarily sort out a Government headache. I am sure the Minister of State will agree that this is an ongoing issue in that the sale of loans books to unregulated entities continues. While Sinn Féin hopes this Bill will do what it proposes concerns about it have been already raised. There are potential gaps in this legislation that need to be closely scrutinised. Simply put, it appears the Government has taken the path of least resistance and opted to regulate the middle man. In terms of ensuring the rights of mortgage holders it is unclear whether this approach will be satisfactory. The rights of mortgage holders with performing loans or in arrears must be central in this Bill. I am concerned that this focus may or has already shifted in terms of this legislation.

When a mortgage is sold the householder should be given the full details in regard to whom the loan has been sold and should also be provided with a list of his or her rights. This basic demand from campaigners and those who have lobbied on this issue is normal in business or other fields. Traditionally, when a person took out a mortgage he or she travelled the term of that mortgage with the lender. People of my generation, who often had to think long and hard about whether to take out a mortgage, had other options. Young people today do not have many options because the option of social housing no longer exists and the option of rented accommodation is limited and provides no security of tenure. Unlike in other progressive countries across Europe there is no security here in terms of rental costs.

People are being forced down the route of home ownership and mortgages. It is regularly said that Irish people have a fixation on property ownership. It is because there are few options available to them that people are choosing to go the home ownership route. For many people, it probably was not in their best interests to go the route of buying a house but they felt they had no other option but to do so. While there have been many glib statements as to the reason they did so, the main reason was security of tenure. Many people had hoped when opting to buy a home that their wages would improve into the future and allow them to repay their mortgages. As we know for many, unfortunately, this did not happen.

This Bill regulates credit servicing. However, the definition of what is not a credit servicing agency needs to be tightened up. The wording in this section is at best unclear and at worst indecipherable.

That lack of clarity could have real effects which mean home owners are still left exposed. Even the core aims of ensuring home owners have access to the Financial Services Ombudsman and the code of conduct on mortgage arrears, CCMA, is potentially not met in the legislation as drafted.

Thousands of families have been waiting - some would say praying - for this legislation. Some have been campaigning for it for a long time. Others are only waking up to the fact their mortgage is owned by a vulture fund as new letters with new demands and unusual letterheads start dropping in their letter boxes. Similarly with e-mails, people tend to ignore them as scams. Sinn Féin stands ready to engage fully on Committee and Report Stages and in the Seanad to get this legislation right and eliminate any gaps in it. Families thrown to the vultures want and need to get their rights back. My party will table amendments to bring clarity to and strengthen the effect of regulation of this area.

There is also the related issue of mortgage distress. The number of households now two years or more in arrears on their mortgages has risen to 37,500. It is estimated 118,000 household are in mortgage arrears and 110,000 mortgage accounts were restructured by the end of September 2014. That provides us with a snapshot of the difficulties experienced by many.

Life loans are loans for the over-65s where no interest or capital is repaid on home loans until the borrower passes away. At that point, the borrower’s executor sorts out any surplus with the lender for distribution as per the will. While many banks and lending institutions have dropped these financial products, I recently had an example of a woman who had taken out one of these loans several years ago. She had started work at 14 years of age, ending up working in the Civil Service. She was single and very proud. In her late 70s, she took out a loan because she had been advised by the Garda to get more secure windows and an alarm system in her house after it had been broken into on two separate occasions. She was convinced by the bank to take out a loan for more than €20,000 which is now the maximum for such loans. With the loan, she paid for the new windows, the new alarm, gave some to her family and the rest she put into a deposit account, thinking that the interest on that would assist with the repayments. A long time afterwards, the repayments began to increase, however, while the value of her house, essentially her legacy which she wanted to pass on to her nephews and nieces, was disappearing, going from €400,000 to €250,000 because of the recession. She realised the way her loan was going not much would be left when she passed away.

The woman in question tried to negotiate with the bank on the terms of the loan but the individual she had originally dealt with was on maternity leave and there were different personnel in place. The situation, even after a year, is still waiting to be resolved. It is an example of where the system can go wrong. The top bankers are due to appear before the banking inquiry in due course and no doubt the area of debt write-down will be raised with them. This activity was morally wrong. We have sold people a pup. Well-known personalities are still selling these types of products on the airwaves.

I know of another individual who took out such a life loan but his wife is now in a nursing home and he is covered by the fair deal scheme. Again, the value of their home is shrinking because of the interest to pay on this life loan, meaning there will be very little left in the end. While this might not be the subject of this legislation, if we are concerned about the impact of these financial products on consumers, it is worth examining this area. I hope some of the smart alecks in the banks will take notice of this. The banks sold these life loans very slickly, promising people could go on holidays and so forth without any worry. In fact, judging from the two cases I have encountered, these loans are worrying people into an early grave rather than them having a few bob as they get older.

I call on Deputy Alan Farrell who is sharing time with Deputies Peter Fitzpatrick and James Bannon. Is that agreed? Agreed.

In September 2014, there were almost 118,000 mortgages in arrears with approximately 5,000 to 10,000 being held by institutions not regulated by the Central Bank or covered by the CCMA. This alone shows why the implementation of the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 is necessary. I was not particularly pleased when this Bill was set out that we were allowing the sale of loan books to unregulated financial institutions which could rule over borrowers and mortgage holders who were repaying their loans correctly. I accept, however, this legislation is a priority and the Government will enact it as promptly as possible.

Enacting this legislation will ensure consumers retain the same protections under the Central Bank codes when their loans are sold by regulated financial service providers to firms which are currently unregulated. This will include, for example, the protection afforded to borrowers under the CCMA. It will also ensure in cases where loan books have been sold to unregulated firms that consumers have access to the Financial Services Ombudsman.

While some of those who have purchased loan books have agreed to voluntarily apply the Central Bank codes, they are under no obligation to do so.

As regards section 1 and definitions, I am pleased to see that the insertion of the definition of credit servicing firms will ensure that those managing credit agreements for relevant borrowers will be regulated, while there is also allowance for exclusion from this provision. Institutions that do not outsource credit servicing, where instead the owner of the credit is already a regulated financial service provider, will not be required to be regulated under the provisions of the Bill. That is an important factor because if we were to include those firms we would most likely end up over-burdening the industry with overly bureaucratic approaches to regulation. I would hate for us to go from a complete lack of regulation to far too much regulation. The balance has to be found and that is why I am pleased to see the provisions of this Bill.

The inclusion of transitional provisions for retail credit and credit servicing firms is important as it simply is not feasible to expect regulatory approval to be granted to credit service providers immediately after the enactment of this legislation. If transitional provision were not included it would simply be counter-productive in terms of ensuring that applications for regulatory approval are examined properly. The Bill will allow for existing retail credit and credit servicing firms to be authorised to carry out their business until such a point as the Central Bank has either granted or refused authorisation, provided that the firms have applied for authorisation from the Central Bank under section 30 no later than three months after the legislation comes into effect.

I wish to talk briefly about the code of conduct on mortgage arrears, CCMA, and the aspects of this legislation that effect the framework to which tenders must adhere. I have had a couple of instances over the past year or two where my own constituents have been in contact because they have an unregulated financial institution managing their debt. In both instances that I can recall they were mortgages. In both instances, as I outlined from the outset of my contribution, they were in fact complying with the loan agreements they had signed but additional pressure was being put on them in order to ensure that the loan was repaid faster than had originally been agreed or - most distressingly - pressure was being applied simply to sell the property and liquidate the loan book. When someone is servicing a debt and might be struggling in other areas of life, given the circumstances we all find ourselves in in this recession from which we are now emerging, the one thing they would not expect to lose if they are managing to pay the mortgage is the house. It is particularly distressing when young families are involved, of which there are many in my constituency, which is one of the youngest in the country.

In the instance to which I am referring, the constituents are in negative equity, so by selling the asset they were going to be lumbering themselves with completely unsustainable debt and no asset to place next to it. As the mortgage in question was sold to a third party, my constituent found himself outside of the CCMA and outside of the Central Bank's code. Up until recently I was not able to tell him what we were going to do about it and that is why I am pleased to see this legislation being treated as a priority.

I do not propose to use up the last minutes of my time. While I have mentioned, quite critically, that it is about time this matter was addressed by the Department, there are a number of other concerns, not just in respect of the CCMA but also regarding the treatment of debtors and the undue time - I know this does not necessarily fall under this particular Bill - for which repossession orders can hang over people. It can take years - I came across one the other day that was seven years outstanding and the individual had been struggling to meet payment agreements. The whole area of mortgage arrears should be looked at. At this stage of the recession and our emergence from it, when individuals are starting to restore their working lives, having been unemployed, or where a number of factors have led them to be unable to service the debt they have had, they are still facing uncertainty within their own four walls. They should be allowed to try to achieve what is best for their family by paying down their debt and ensuring their children are brought up in a decent loving environment. There are uncertainties over the length of time for which these foreclosure orders are in place. These issues should be looked at in tandem with Bills like this one.

I welcome the opportunity to speak on the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015. This is an extremely important piece of regulation which I fully support and I commend the Minister on bringing it to the House. It is quite clear that consumers need protection when they are taking out credit, whether it be personal loans, car loans or mortgages. It is also quite clear that consumers should be entitled to the same protection even if their loans are sold on to a third party. It is simply not fair that these protections can be avoided due to the fact that the firm buying the loan books is not regulated. It is my belief that consumers should always maintain the protections they had when taking out their loans even if that same loan is eventually sold on. The proposed legislation seeks to fully address this issue. I have constituents in County Louth who have raised many issues with me with regard to their loans and mortgages being sold on to third parties and this legislation will be welcome news to them. It will bring clarity and certainty on how their loans, and in particular loans that were sold on to third parties, will be regulated and governed.

As we know the purpose of this legislation is to protect consumers who have loans with regulated financial service providers who subsequently sell them on to unregulated firms. The Bill will once and for all address the concerns surrounding the continued protection of the Central Bank's codes and also give borrowers access to the protection of the Financial Services Ombudsman if their loans are sold to unregulated entities. I am also pleased to note that the Bill will regulate the activity of credit servicing and require that firms engaged in credit servicing will be authorised by the Central Bank and will therefore afford the same protection to borrowers if their loans are sold on. These borrowers will now have and maintain the same protection they had on their original credit agreement even if their loans are sold on to a third party.

I also note and welcome that the Bill will allow borrowers to make complaints to the Financial Services Ombudsman. The Bill ensures that the relevant Central Bank codes will also apply to credit unions who sell on their loan books. I deal with many local businesses in County Louth and in particular in my home town of Dundalk and surrounding areas like the Cooley region, Ardee and Dunleer. Amongst the many worries and concerns that these businesses and SMEs have are those regarding their borrowings. Many have found themselves in a position where they have borrowed too much and are under pressure to service their loans. I am particularly pleased that the Bill will also help these businesses and SMEs and that they will be afforded the same protection under the code of conduct for business lending to small and medium enterprises, which protects them regarding arrears handling and complaint resolution among other things.

This will be particularly welcomed by the business community, which is now seeing at first hand green shoots starting to appear in the Irish economy after many years of difficult trading conditions.

I thank the Minister for bringing the Bill to the House. I have no doubt it will bring much-needed relief and comfort to many people who have had their loans sold on to unregulated firms.

The consultation paper on the regulation of loan portfolio buyers was issued by the Department of Finance in July 2014. The focus of the proposed draft legislation at the time would have required the holders of credit provided to individuals to be authorised under the existing retail credit regime. However, I am pleased to note that under this Bill the focus has shifted greatly. The emphasis is now placed on the regulation of the providers of the credit rather than the holders. This is an important move and one I welcome.

This much-anticipated legislation serves to tackle certain concerns around the loss of regulatory protections for borrowers following the sale of loans to unregulated entities. Before the Bill was published a major concern shared by many Members was the fact that the protections under the Central Bank's code of conduct on mortgage arrears could be lost if the underlying loan book and security was sold by the regulated entity to an unregulated entity. It is true that an unregulated purchaser of loans and security can voluntarily apply the codes. However, as we all know, voluntary compliance is not enforceable. As a result, the Government made a commitment in March 2014 to ensure the same protections would be made available for all consumers whose loans have been sold on. Essentially, we are regulating the practice and ensuring that borrowers retain all their regulatory protections under the relevant codes when a loan is sold by a regulated entity to an unregulated entity.

Under this legislation the customer is protected in four ways. First, the code of conduct on mortgage arrears sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or pre-arrears. More important, perhaps, it requires lenders to engage positively with the objective of helping borrowers to meet their obligations. Second, protection exists for small and medium-sized enterprise customers of regulated financial institutions. These protections revolve around the issue of arrears handling and complaint resolution. Third, the consumer protection code provides protections. These include limits on communications, personal visits and other contacts, error handling, resolution processes and so forth. Finally, we will ensure that protection is provided for credit union customers whose loans are sold to unregulated entities.

I am pleased to note that customers of regulated financial institutions will have access to the Financial Services Ombudsman as well. The role of the Financial Services Ombudsman is to investigate, mediate and adjudicate complaints about the conduct of regulated financial service providers. I warmly welcome all of these points since they offer far greater protection and security to consumers across the board.

Welcome to the bizarre, surreal and labyrinthine world of financial capitalism in the early 21st century. That is about all I can say when I consider this Bill and what it is trying to deal with. It is difficult to know where to start. Of course, this is part of the problem faced by ordinary human beings trying to do simple things like put a roof over their heads. How simple these things were once upon a time. Now when a person tries to put a roof over his head, he is faced with problems that are summed up with the following statement from one of the helpful guides on Bills given to Deputies by the Oireachtas Library and Research Service - I love this stuff:

In short, the institutions that typically purchase loan books in order to service them are structured in such a way that the legal entity which employs people to service said loan books is a separate entity than the one that owns the loan book. This means that the owner of the loan book would be regulated but the entity that interacts with the customer would not be.

It is like something from a science fiction novel. In fact, it would not be a bad first paragraph in a science fiction novel, because we are not dealing with human beings, the bank manager down the road or any substantial being. We are dealing with an entity that is also a special purpose vehicle.

I am unsure whether the Minister has ever read Iain Banks. He is a fantastic Scottish science fiction novelist who used science fiction and space opera to create analogies for the madness of modern capitalism. The big spaceships that dominate the universe in his books are also called SPVs. This is exactly where we are at. SPVs are floating around the global financial markets looking for opportunities to make money. No one knows who is driving these vehicles: they are simply entities. These entities are swooping down on the mortgage books of the poor unsuspecting human being who lives in an estate somewhere in Dublin or Cork and who is simply trying to put a roof over his head with considerable difficulty. He has been battered by the consequences of the financial madness and corporate gambling of the past ten or 20 years. Then, down from outer space comes the SPV, driven by the entity, which is not regulated by anything and which no one knows about or understands but which will soon have control of the person's mortgage. It is totally bizarre.

We may ask how we got to here, whether we have learned any lessons about the mess that we are in, the causes of that mess or how we got to this pass. However, we only have to read some of the reportage to know that we have learned absolutely nothing whatsoever and we are about to do it again. The Irish Times from 19 January has a headline: "Record year for investment in Irish commercial property". The article begins:

Investment in Irish commercial property reached a record high in 2014, with some €4.5 billion invested. This represents a 25 per cent increase on the previous peak of €3.6 billion reached in 2006.

My God, we are now surpassing the level of gambling in the property market in Ireland in 2006, two years before an absolutely catastrophic crash that beggared the nation and for which our children and grandchildren will be paying the cost. It produced unsustainable debt that has been loaded onto their backs as well as the crushing austerity, injustice, unfairness and inequality that goes with it. It could almost be funny if we looked at it as science fiction, but when we get down to the human reality underneath it is not funny at all; it is tragic and terrible. It produces anxiety, worry, terror, uncertainty, homelessness, the loss of homes and evictions.

That is how it translates at the level of human reality. The Government will state the Bill attempts to extend a little regulation to the entity and the SPV floating somewhere in the financial markets, the spaceship that is hoovering up mortgage books and loans, and that at least it is trying to extend some regulation to this madness. The problem is that we allowed this to happen in the first place after what happened in 2006, 2007 and 2008. The Minister and the Government have facilitated the hand-over of loan books and the mortgages of real human beings to these entities. They have allowed it to happen. Then, after the fact, they say, "Oh my God, we had better do something to regulate it because the Central Bank regulations do not cover it." They are trying to extend the code of conduct on mortgage arrears to these entities and SPVs, or their "credit servicing firms". I am sorry, but I forgot about those because the matter is even more complicated than I explained. The irony is that we cannot regulate the SPVs because they are not banks; therefore, we have to regulate the service companies they employ to manage and administer mortgages. It becomes even more labyrinthine as we go along. We do not know with whom we are dealing. We are not dealing with the SPV or the entity driving it; rather, we are dealing with a shuttle that has been sent from the main spaceship to planet Earth to pick up the mortgages and loans. It is totally bizarre and mad.

The Government has facilitated this by allowing the sale of loan books when, of course, many of the mortgage holders asked whether they could buy back their own mortgages. No, we could not have that. We could not have something simple such as people being able to buy their own mortgages in order that there would be some relationship with real human beings and the things they need, namely, a secure roof over their heads and some knowledge of who owned the loan, but no, that would be far too simple. Instead, we must sell to the subcontractor of the entity in the spaceship. Why? There is logic behind it from the Government's point of view, namely, selling off all of these things as quick as it can to get some cash back in order that it will be able to say it has recovered some of the cost of the shocking, outrageous and unfair bailout of the banks and other financial institutions and in order that it can put out a statement, like many it has put out before, stating, "We have covered the cost of the bank bailout. NAMA is going to pay for itself. It is all fine - really. We have done a wonderful job". The truth is, however, that the country is being sold from under our feet. The mortgage books and property assets are being sold to the spaceships, the SPVs, the vulture funds, to the alien entities that do not give a damn about human beings here, the economy or whether people have a roof over their heads and who are just in it for money. It is amazing.

As a socialist, I am actually becoming nostalgic for the old-fashioned bank because we now have these entities that are not even the old-fashioned banks to which one could go. I have been banking with Ulster Bank for years. I am a socialist and want to nationalise all of the banks, but now I have real nostalgia for the old days when one could go to the Ulster Bank brank in Blackrock and actually talk to a human being and there was some accountability, which we do not now have. We are going to talk to the subcontractor of the vulture fund in the special purpose vehicle. One will call the bank in Blackrock and get through to a call centre in Scotland which will reroute it.

Scotland. It will then be rerouted back to Blackrock which will send a text message.

It is beyond madness.

It is beyond belief. This Bill is going to make no difference; it is absolute decoration. As an aside, according to the schedule, I was due to speak at 3.30 p.m. on the personal insolvency legislation, but Government speakers did not turn up. It comes back at a micro level to what is happening in Greece. The debate about Syriza and the Government is about why these big financial entities - the bondholders, the SPVs, their subcontractors or whatever one wants to call them, or the creditors - will call the shots on people's personal indebtedness.

The Deputy mentioned that Government speakers did not turn up. In fact, it was Opposition speakers who did not turn up, as I well know, because I was waiting to speak. That is just a correction.

That is not what our office told us. I have a schedule which I can show the Acting Chairman and which indicates that I was down to speak at 3.30 p.m. About six or seven speakers did not turn up. I was told that they were on the Government side, which was very unfortunate since we were dealing with the very important issue of personal insolvency.

On this issue the same central points can be made. The Government has continued in the same way in terms of personal indebtedness, how the banks operate and now in the case of these entities, how, in the last analysis, these guys will call the shots. They will decide whether they are going to turf someone out. That is the bottom line and the Government has allowed this to happen and believes it is just inevitable. When is it going to get what is starting to happen in the rest of Europe? The pendulum is swinging against this approach to the problem. It is not because of a charismatic individual by the name of Alex Tsipras in Greece; rather, it is because the people of Greece have had enough. There were 26 general strikes and eventually, after everybody else had let them down, they found an organisation that stated it would stick with them on the madness being inflicted on them. Now it is spreading to Spain and there are even echoes of it in this country in the water movement, which is not just a campaign about water, as the Taoiseach rightly spotted, but about everything. It is about the housing crisis, being battered, having no money, the threat of eviction from one's home, the diktat of the bondholders, the SPVs and the entities in the financial markets. It is a case of saying, "Sorry, could you remember the human beings? Could you remember us and the simple things we need - a secure roof over our heads, a decent wage packet at the end of the week so that we are not the working poor and that, when we go to the hospital, we will not be on a trolley for a week, or on a waiting list for an operation for two years?"

The Deputy was entertaining for a while, but he has begun to wander from the Bill. I ask him to steer back onto the course he was on at the beginning.

We would not have to worry about such things as the sale of people's mortgages and other loans to entities and special purpose vehicles, otherwise known as vulture funds, if we were not flogging the family silver and, literally, selling off the city. We are flogging the country. Billions of euro worth of loans and property is being flogged to the very same people who helped to pump up the property market in the first place. It is beyond belief. The levels of gambling have now surpassed those in 2006. At what point will we say we have to stop the madness?

It must stop because all over Europe, including in this country, people are demanding that we stop it. This is another accident waiting to happen.

In terms of the Bill, the effects of all of this are felt by the poor unfortunate individuals who do not know who owns the loan on their mortgage or who they are dealing with. In any event, current borrowers are the beneficiaries of a code of conduct on mortgage arrears that does not make a blind bit of difference to those to whom it applies because the creditors have a veto. They will ultimately decide whether to do a deal with the borrower. If it does not suit them or they cannot make money out of a deal, it will be tough luck for the borrower who will be evicted. Who picks up the bill in such circumstances? The answer can be found in the spiralling numbers of people on the waiting lists for social housing.

Flogging off loan books and assets held by the National Asset Management Agency, NAMA, is a false economy. It may allow the Minister to announce that NAMA will make a profit or that the banks have repaid the moneys provided by the State. However, the number of families on the social housing list has increased by 10,000 and many of them are threatened with homelessness. The price will have to be paid through the rent allowance system or the new leasing arrangement known as the housing assistance payment. Who will get the €750 million that taxpayers will be required to fork out in housing assistance payments? It will be paid to special purpose vehicles, which is beyond madness as I believe the Minister, in his heart of hearts, knows.

Europe is waking up as the winds of change sweep across the Continent. What was the famous line from the Bob Dylan song?

Is the Deputy referring to the song "A Hard Rain's A-gonna Fall"?

It is a line from the song "The Times They Are a Changin'" to the effect that those on the old road should get off the new one if they cannot lend a hand. People have to change because the current approach has not worked. This legislation is not even a sticking plaster. It is purely decorative and meaningless and covers up the continuing insane gambling in the financial markets. The property market has been cut loose from reality and any type of consideration for the human beings who are affected by movements of money and financial and profit considerations.

In addition to Iain Banks, it is worth reading the third voyage of Gulliver in Jonathan Swift's Gulliver's Travels as it describes a similar phenomenon.

While I accept that the Deputy is most entertaining, there is nothing about Gulliver's travels in the Bill.

There are entities floating above the country which are controlled by crazy people who are making decisions that affect the human beings down below.

If the Deputy wishes to sell the film rights to his script, I have Stephen Spielberg's number.

The Government is often criticised for a failure to reform. I welcome the use in recent years of the pre-legislative scrutiny process which allows for legislation to be discussed, debated and examined. The procedure enhances legislation, as is clear from the Bill before us. Its only downside is that it extends the legislative process.

The Department initiated consultation on this Bill last summer. It received 19 submissions from various organisations, including civil society groups, and officials subsequently met some of them to clarify issues they had raised. The changes implemented as a result of the consultation demonstrate the importance of the pre-legislative scrutiny process. Officials also met British officials who had worked on similar issues a short time previously. They also discussed the proposed legislation with members of the Joint Committee on Finance, Public Expenditure and Reform.

The Bill provides that Central Bank codes of conduct will continue to apply and borrowers will continue to have access to the Financial Services Ombudsman after their loans are sold to unregulated entities. They will have the same protection under the Central Bank code of conduct on mortgage arrears as they had before their loans were sold. As officials pointed out at the joint committee, the simple objective of the Bill is to ensure that, where loans are sold by a regulated entity to an unregulated entity, the regulatory protection that applied prior to the sale will continue to apply.

The Bill also regulates credit servicing and ensures borrowers can complain to the Financial Services Ombudsman. All loans to consumers and small and medium enterprises are covered by the provisions. The Central Bank consumer protection code limits the number of communications a bank may have with consumers and the number of personal visits it may make. It also deals with compliance in the case of outsourced activity. I am aware of an individual who took out significant loans with a bank, partly because he was pressurised by the bank to do so. I do not propose to go into detail, other than to state that the level of contact by the bank and the comments made by its staff to the individual in question have caused him serious stress. The pressure exerted by banks on some individuals with substantial loans is a cause of grave concern as it is having a serious impact on people's state of mind and health.

Small and medium size enterprises will also enjoy protection under the business lending code regarding arrears and complaints resolution. Furthermore, in the event that credit union loan books are sold, borrowers will be afforded the same protection as other borrowers. This is a welcome provision.

The Government has listened and the Minister has acted on foot of concerns that have been raised. I received an e-mail some time ago from a person pointing out that he and many thousands of other borrowers with IBRC have loans that are repayable on demand because this was a condition of the loan. This means that a bank acquiring these loans can force a borrower to sell the property at whatever price the bank decides, thus making the borrower either bankrupt or forcing him or her to suffer a loss on an investment. The individual in question stated that as loans purchased by foreign banks or venture capitalists were not governed by the Central Bank of Ireland, the new creditor would be able to do as it wished with them. I am sure Deputies have been contacted by many other people who were in similar circumstances and will welcome this legislation.

As a member of the Joint Committee on Jobs, Enterprise and Innovation, I welcome the initiatives in respect of small and medium size enterprises. We often hear about the importance of access to finance. Equally important, however, are the terms and conditions that apply to such finance. Where leeway is shown to businesses, it can sometimes mean the difference between saving jobs and job losses. Local bank managers play an important role as they know their clientele and are familiar with the particular circumstances of customers. Outside bodies will not show any regard for such issues as they will not know a customer's business or employees and will view him or her as nothing more than a number. Regulation is, therefore, important.

The Financial Services Ombudsman, FSO, has stated that consumers dealing with unregulated entities "experience considerable frustration and a sense of unfairness when the regulatory protection of access to the FSO is denied to them by virtue of the regulatory status of the financial services provider." I welcome the measure allowing such consumers to avail of the services provided by the Financial Services Ombudsman. I welcome this badly needed Bill and the consultation that took place in its preparation.

I welcome the Bill, which arose from discussions in the Joint Committee on Finance, Public Expenditure and Reform on IBRC loans being sold to unregulated entities. Borrowers are entitled to continue to enjoy the level of protection afforded to them when they took out a loan, regardless of which entity is holding their loan.

People throughout the country, including small mortgage holders and SMEs, are entitled to that level of protection.

I hope we do not have a situation where credit unions are required to sell their loan books outside the credit union movement and that some process can be found to ensure they stay within the family of credit unions. There is a great affinity with the way the credit union movement has operated throughout the country, so I hope this could be looked at and taken on board.

Another issue that arises is that this is supposed to be a protective measure for people who have mortgages as well as those with personal, household and SME loans. I hope there is not the indirect by-product that it becomes a licence for various holders of loans to sell on those loans to unregulated entities. While such bodies will be regulated, this is something that needs to be looked at to ensure that while we live in a market economy, there is some element of control which ensures the loan books are sold to entities that are of good standing and have a history of dealing with consumers in a proper way.

On a broader issue, countries around the world are now borrowing money on a much longer-term basis. Ireland successfully launched a 30-year Government bond yesterday. In keeping with that mood and frame of mind, we need to consider the banks themselves extending mortgages for a longer period. For example, if a person on a 20-year mortgage is under enormous pressure, we need to look at lengthening the period over which the mortgage can be paid. While this is happening it should become more commonplace. I still hold that, in Ireland, the family home is sacrosanct and most people would like to remain in it. Nonetheless, we have seen an increase in repossessions by financial institutions. While some people get an initial sense of relief that the burden has been lifted from them, in many cases these people then get into the rental market, which proves to be very costly and means there is no future for many in terms of being able to own a property.

In summary and in conjunction with what is being proposed here, we need to ensure mortgages are rescheduled over a much longer period to ensure people can remain in the family home. We need to ensure credit union loans are kept within the credit union movement itself rather than being sold outside those organisations. We need to ensure this legislation, which is a protection measure, is not abused by institutions selling their loan books to bodies that may not have a particularly good reputation in terms of how they deal with people's loans over a period.

The Bill is very much to be welcomed. It will provide security for people who take out a loan and ensure the normal protections that are in place when a loan is taken out with a regulated entity will apply. The bodies that were unregulated heretofore will now be regulated, although it is very important that resources are put in place to ensure they can be properly regulated. I commend the Bill to the House.

I welcome the introduction of the Bill. It is very important that the issue that surrounded the sale of the loan book was dealt with swiftly. The Minister previously indicated that prior to the sale of a loan book he would do everything possible to ensure a voluntary code was put in place for anybody purchasing one. That was very welcome at the time.

It is very important that this issue now comes under the remit of the Central Bank and its codes. Many people have been under a lot of pressure in recent years because of the economic downturn and find it hard to pay their mortgages. Small and medium size businesses have been under severe cash-flow pressure, which has resulted in major difficulties in the past six or seven years. Thankfully, through the economic measures being pursued by the Government, economic activity is increasing and the difficulties are decreasing, as is evident nationally.

The Bill provides that borrowers will retain their existing consumer protections after the loan is sold, which is very welcome and takes away much of the uncertainty and doubt that was created due to the sale of loan books. This will in no small way go towards helping people feel confident that they enjoy those protections. On its own it will perhaps not make a huge difference to people's lives but at least it gives them an assurance that there will be serious pressure on the banks, more than would have been the case.

While I do not have much to add to what has been said by previous speakers, this is a small but welcome measure. Any measure like this that can be introduced to alleviate the pressure on both individuals and small businesses, and ensure they enjoy the protection of the Central Bank, is welcome. I wish the Minister well in introducing future measures like this which will drive forward economic growth in this country and alleviate the uncertainty that remains among households and businesses in terms of the payment of mortgages and loans.

I welcome the opportunity to speak on the Bill. I wish to raise an issue that is not covered in it and address what I believe is a deficiency in financial and mortgage legislation in this country. As we know, on average, one person was killed on an Irish farm every fortnight last year. Every second day, one person was killed on Irish roads in 2014. For each one of those individuals, there are also other individuals who, in the prime of their lives, have had their mental capacity diminished, some literally overnight, because they have been involved in a road traffic accident, a farm accident or for some other reason. This, of course, has a devastating personal impact or an impact on their immediate family. However, it can also lead to huge financial hardship for families.

As the Minister knows, banks make the issuing of a mortgage conditional on the applicants - usually a couple - taking out house insurance and life insurance. This is not because the bank is concerned about the long-term financial stability of that couple but purely to protect its own investment should anything happen. For example, if one of the couple were to die suddenly, the bank's security and asset is intact and the mortgage is cleared. In some countries it is routine that, as part of the mortgage application, the applicant must also verify they have made a will and have made provision for enduring power of attorney. Taking out a mortgage is a huge financial step, probably the biggest financial commitment a person is going to make. I believe it should be a requirement that people make a will at the issuing of all mortgages and that they make provision for enduring power of attorney in order to safeguard themselves and their families in the long term.

In countries such as Canada, it is compulsory that this specific provision has been put in place when drawing down a mortgage. The reason for that is very simple, namely, the potential for a devastating financial impact on individual families.

In many cases it causes extreme financial hardship for those left behind. All of us here have personal experience of cases where serious financial hardship has been caused to young families because an individual has died suddenly intestate. A case I remember from a number of years ago involved a constituent - a widow with five young children. The couple had taken out a small mortgage and bought a home that required work. The husband was a handyman and intended to do much of the work himself, but he dropped dead from a massive heart attack at the age of 45. The small mortgage was cleared on his death, but because the man died intestate his estate was left in financial limbo.

The widow was left in a situation where the mortgage with the bank was sorted out, but she could not raise a loan to complete the work on the house. There was no ceiling in the sitting room or kitchen and a partly completed extension to the side of the house brought the wind running through the house from one side to the other. This woman had five young children, but she could not draw down a mortgage because she did not have title to the property because her husband had died intestate. This widow was left in a serious financial crisis. She was stuck with an unfinished property which was worthless to her and had to try to find accommodation for herself and her children.

I urge the Minister to ensure that as part of this legislation a new condition be placed on the transfer of any loan book to ensure that all couples verify that they have made a will and made provision for enduring power of attorney. Approximately one family every day in this country finds itself in these particular circumstances, where a person dies suddenly or is left mentally incapacitated and cannot properly function. While it is a difficult situation when a person dies, at least the mortgage is cleared on the family home. However, is a person is mentally incapacitated, the mortgage is not cleared and the other partner cannot dispose of assets or property. This causes significant financial hardship for many people.

I urge the Minister to make provision for this in this legislation. I urge him to introduce a condition requiring that for all new mortgages issued from now on, couples must make a will. I urge him to require that they make provision for any children out of the relationship and that they make provision for enduring power of attorney. Unnecessary financial hardship is being caused due to the current position. Enduring power of attorney is a simple provision and it should be put in place. It has been put in place in countries like Canada and many other parts of the world. Not only would these provisions protect families from severe financial hardship, they would also save the State from having to provide for them. In many cases currently, these families have to fall back on the supports and resources provided by the State because they cannot access their assets due to the estate being left intestate. I hope the Minister will consider this in the context of this legislation.

I thank Deputies for their contribution to this debate. As I outlined this morning, this is a priority issue for the Government. The purpose of the legislation is to protect consumers whose loans are sold by regulated financial service providers to unregulated firms and I welcome the broad support given by Members to this overall objective. We are all agreed our aim is to protect the consumer.

As was indicated earlier, while many purchasers of loan books have already agreed to voluntarily apply the Central Bank codes when managing loan books, voluntary compliance is not enforceable. As a result, the Government committed to bringing forward this legislation to protect consumers. The legislation provides that borrowers retain protections after their loan is sold. It addresses concerns surrounding the continued applicability of the Central Bank's codes and access for borrowers to the Financial Services Ombudsman. For example, borrowers will retain the protections provided by the Central Bank codes, such as the code of conduct on mortgage arrears, known as the CCMA.

The points raised by the Deputies have been noted during the course of the debate and will be carefully considered. We will also have more time on Committee Stage to explore the issues that have been raised. It is opportune to flag that, as usual, the Government is likely to have some amendments of its own on Committee Stage.

As many Deputies raised the issue of who should be regulated, I would like to explain further the evolution of thinking on the Bill. As a number of Members pointed out, the initial thinking was that the best approach would be to regulate the new owners of credit. However, over the course of preparing the legislation, the views on this evolved. The Department of Finance ran a public consultation last July and August, seeking views on this proposed legislation. This was followed by further clarification meetings and examination of options, including intensive work with the Central Bank and Office of the Attorney General to progress the legislation. The public consultation process highlighted an issue with this approach, as it was possible to envisage cases where owners would effectively be a passive special purpose vehicle, SPV, and would outsource servicing of the loans to a firm that would not be regulated.

In this context, Deputies also referred earlier to complexities around foreign-based owners. This was one of the factors we considered and we saw there was potential for a lacuna to arise if a foreign based unregulated owner was to use a local credit servicing firm which was not regulated. It therefore became clear from the consultation process that if we were to effectively protect consumers, it was better to regulate the process of credit servicing, as that is the customer facing activity. However, if an owner does not outsource credit servicing and instead undertakes the activity themselves, they will be required to be regulated. In other words, some regulated entity will be responsible for all credit agreements.

Deputy McGrath raised the issue of a loan book being sold more than once. I am satisfied that the legislation will be effective, no matter how many times a loan book is sold. This is because the customer facing entity, the credit servicer, will have to be regulated. If a new owner decides to continue with the existing servicer, then the borrower may not even be aware of the change but, in any event, will still be able to make a complaint about the servicer. The new owner could decide to go with a different regulated credit servicer, in which case the borrower can make a complaint about the new servicer. If new owners decide to service the book themselves, then they will need to be regulated and a complaint can be made about them to the Financial Services Ombudsman.

Deputy Fleming raised the question of whether the legislation is retrospective. The position is that it will apply to all loans, once the legislation is passed, regardless of when the loan was taken out, including loans that were bought out in the past. This applies not just for loan books and loans in loan books that are acquired from the passing of the legislation onward, but to loans that were bought out in the past.

Deputy Naughten raised an interesting point in the context of tragedies arising from sudden deaths in circumstances where people die intestate. I will reflect on this point. I cannot be exact on the figures, but from memory I believe there are approximately 1.8 million houses and homes in the country, but that only approximately 750,000 of them have mortgages on them. Therefore, if we made a provision on the mortgage side, I doubt it would reach the full target the Deputy has in mind.

Over time it would.

On the other hand, the Family Home Protection Acts, sponsored by the Department of Justice and Equality, make provision for the distribution of property if a person dies while making a will or without a will and for certain rights for husbands and wives. I will reflect on the issue, but perhaps the Deputy will raise the issue separately with the Minister for Justice and Equality as the base legislation in that Department might provide a more suitable vehicle than mortgage related legislation for what he has in mind. His comment is fair and a very good idea.

I thank Deputies for their constructive engagement on this very important Bill and I look forward to working together on Committee Stage. Our aim is simple, to protect consumers by ensuring those whose loans are sold by regulated financial service providers to unregulated firms retain the protections that they had under Central Bank codes and retain access to the Financial Services Ombudsman.

Question put and agreed to.
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