Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015: Report and Final Stages

Question proposed: "That the Bill be received for final consideration."

I understand why the Minister was otherwise detained when Second Stage of the Bill was taken. The Minister of State was not available either and the Minister of State with responsibility for European affairs and data protection, Deputy Dara Murphy, came to the House to discuss this very important Bill. I assume the Minister's officials have given him details of the comments made and some of the points I raised on behalf of my group on some of the concerns I have with the Bill and what is omitted. Will the Minister review this in his own time? The legislation needs to be kept under review.

My biggest concern is the owner of any loan, be it a residential mortgage or a business loan, is not covered under the legislation. To give a specific example, Goldman Sachs purchased small and medium enterprise loans and established Beltany, a special purpose vehicle, in Ireland to manage them, but the loans are being managed by Pepper Asset Servicing. I will not mention any companies, but stories have been printed in the media of specific examples whereby Goldman Sachs is trying to exert its influence and control over companies via performing loans. These loans are fully paid up and Goldman Sachs is trying to put in place its own consultants and is coming down very heavyhandedly. I have specific examples of this and I know that the Department has been made aware of them. I would have thought the Bill could have been used to address this.

What we have now is a watered-down version of the Bill as it was mooted and published, whereby the protection that should be given is not nearly as strong as it should be. I am particularly concerned about loans which have been sold on to companies such as Goldman Sachs operating through a special purpose vehicle in this country and managed by someone else. In such instances companies and mortgage holders are at the mercy of those international companies and they are not covered by the Bill. Will the Minister keep this matter under close review and if specific cases are brought to the attention of the Department will it give them the consideration required and not just state it cannot get involved in an individual commercial transaction? I fully understand this is the case, but the regulations in place should protect Irish companies and Irish mortgage holders who are doing everything they should under the original loan agreements but find these agreements altered by a company such as Goldman Sachs. If over the course of the coming months I continue to see this happen I will continue to raise it.

I raised many of my concerns on Second Stage and will not repeat them now. I would not be given the time to do so. I raised them with the Minister of State, Deputy Dara Murphy, and hope he has passed them on to the Minister. I genuinely ask the Minister to keep under review this type of situation where a company such as Goldman Sachs can establish a special purpose vehicle, have the loans administered by someone else and exert control over companies in full compliance with making payments on their loans. It is not acceptable. I ask the Minister to keep it under review and the Department to take seriously any complaint it receives.

I welcome the Minister. I concur with my colleague on the other side regarding Goldman Sachs specifically. Anecdotal evidence has been made available. While the case in question involves large sums, the organisation involved has the wherewithal to take on Goldman Sachs and defend itself. My greatest fear is when it trickles down the line, smaller organisations and SMEs under the grasp of Goldman Sachs will be pulverised.

Some of the conditions imposed on the people concerned are unethical and unwarranted. In this specific case, although the company has made repayments of €6.5 million this year and has not come anywhere near a default or a missed payment, a representative is being sent to board meetings to put pressure on the company, and aggressive communication is also being used. Warning letters are sent out stating that if something is not signed by this evening it will be taken as a default. In fairness, when the banks were pestering and pulverising homeowners, telephoning them at weekly intervals and sometimes daily, a halt was put to their gallop. Something similar needs to be done in this case. I understand that in January 2016, legislation is coming forward to increase regulation, but will that be too late. As Senator Darragh O'Brien has said, if we are made aware of other anecdotal evidence about the likes of Goldman Sachs - or Goldman Sachs specifically - coming down heavy-handed on performing businesses and putting jobs at jeopardy, we should do something about it. Such pressure should not be put on companies with performing loans. They were not interfered with as a core tenet of banking. If cases are brought to the attention of the Department, as has been sought by Senator Darragh O'Brien, perhaps this legislation could be used to deal with it. I know the Bill deals specifically with homeowners, but where commercial loans are involved, especially with regard to companies that employ large numbers of people, they need protection too.

I thank Senator Darragh O'Brien for his contribution today and all Senators for their contributions on Second and Committee Stages. I apologise for not being here for the early Stages of the Bill. On account of the situation in Greece, over a ten-day period we have had Eurogroup meetings outside the country, one in Luxembourg and four in Brussels, as well as two full teleconferences. The seven meetings in one form or another have thrown the schedule and the plans I had for processing legislation in the Seanad. I am glad the Ministers of State, Deputies Simon Harris and Dara Murphy, were able to attend.

The background to this legislation is that the Central Bank had protocols and regulations in place as to how lending agencies should treat people with mortgages and loans, which applied to any institution that was licensed by the Central Bank, but developments in the market resulted in a situation, affecting 14,000 or 15,000 mortgage holders to date, in which loan books were acquired by non-regulated institutions. The first step was that we got the non-regulated institutions to voluntarily comply with the Central Bank's protocols and regulations. As far as I know, they honoured the commitment to apply these protocols voluntarily, but we thought it would be prudent to legislate.

The legislation seeks to apply the same regulatory regime and the same code of practice to the new owners of loan books and to the acquisition of loan books in order that all mortgage holders are treated equally. When we examined it first we thought that if we simply widened the scope of what the Central Bank was doing to include unregulated owners as well as regulated owners, that would meet the requirements. As we scrutinised it, however, we found that the practice for new owners of loan books was quite frequently to hire a credit servicing firm, which would then act as an interface with mortgage holders; therefore, there was not much point in regulating the owner when it was the credit servicing firms' procedures and practices that needed to be regulated. That is why the focus is on the credit servicing firms, but it does capture the owners also. If an owner acts as his or her own credit servicing firm or if he or she is in and out of it and not fully at arm's length, he or she is caught by the provisions of this measure also. Therefore, it does capture owners that are intermittently involved in the practices we want to control under the Bill.

My advice and the advice from the Attorney General is that the legislation does what it says on the tin. It extends the Central Bank's regulation and its protocols and codes of practice to all loan books that are sold on at the point where it is relevant with the agencies that relate to them. I will take Senators' views into account and monitor the Bill. Principally, it is a job for the Central Bank. We have good relationships with the Central Bank and we will monitor what happens in practice. If there is any lacuna that has not been brought to my attention we will fix it. The intention is that, whether or not an institution falls within the scope of the Central Bank's regulation, its treatment of mortgage holders has to be in line with the Central Bank's protocol, and this now is a matter of law. That is the position and I am assured this is what the legislation does. I take the Senator's point. It is always worth keeping an eye on things. If the Senator comes across an instance such as that mentioned, I would appreciate it if he would send us the details.

I certainly will.

The Senator can be assured it will be treated confidentially.

I thank the Minister.

I echo the concerns of both of my colleagues. Perhaps this is an issue to which the Minister might return. In certain situations in which firms have removed themselves from the Irish market but, for the sake of argument, still own mortgages in the Irish market, even where those mortgages are performing, letters are being sent to those with loans - people have come to me with copies of such letters - which imply that if one does not get in touch with the lender advising how one intends to repay the loan in the longer term, or if one does not update it on one's current financial situation, one is in default. That is not the case. I am concerned that a number of people feel they are being pushed towards an early redemption of their mortgage in circumstances in which lenders no longer wish to be engaged in the Irish market. It is an issue that I will be keeping an eye on, but I draw it to the Minister's attention.

I thank the Minister for his response and commitment to keep this matter under review. Certainly, I will forward to him a couple of instances I have come across. I know that colleagues have come across instances also. I thank the Minister for his response.

I will be brief. Likewise, I thank the Minister. On a point of clarification, is the legislation retrospective to loans that have already been taken over? What the Minister said was that loans would from now on be covered by this legislation and the owners of the loans would be covered. Under the code of conduct, is it right and proper that they have consistently refused to meet and discuss the terms of facility agreements, that they have continued to use aggressive communications, that they have sought to impose the appointment of an external consultant to review businesses, despite the fact that there is no breach or potential breach of the loan terms, and that they insist that its nominated consultant be allowed to attend board meetings?

Would that come within the remit of the Central Bank, its terms and conditions or its code of conduct?

The legislation is not retrospective in so far as we use the word in legal terms. It is very difficult to legislate retrospectively. However, the legislation will apply to all loans as defined, regardless of when they were acquired, thus capturing loan books that have already been sold, which is the net point. A similar approach was used in 2013 on debt management firms. Also, when the requirements for retail credit firm authorisation were introduced in 2007, existing non-deposit-taking lenders which up to then did not require authorisation from the Central Bank had to get the authorisation from it in order to continue their business. The Bill has transitional provisions to allow existing firms to seek and obtain authorisation from the Central Bank to continue to do business. It fully covers what Members want it to cover.

I do not want to get into the detail of the protocols the bank has but we will acquire them for Senator Tom Sheahan. We will send him a copy of the obligations and how the Central Bank applies the protocols.

I thank the Minister for attending. This legislation was previously discussed by the Joint Committee on Finance, Public Expenditure and Reform, of which I am a member. It is very welcome, as I am sure a lot of people never thought they would see themselves in a position where a loan they originally had with a well known high street Irish lender would find it being sold on and administered by a third party. This will ease the disquiet of a lot of the people concerned.

While this will cover some of the issues, particularly around the extension of the code of conduct on mortgage arrears, we will have to keep an eye on the practices of firms which have secured distressed loan books. They did this to make a profit and there are other aspects to the arrangements, such as the rate of interest charged, over which they will have a free hand and they may do business in a way in which a traditional high street bank would not. I ask the Department to keep a close eye on this. We now find ourselves in a new situation and need to keep an eye on how these businesses progress. As ordinary citizens who took out loans with high street names now find themselves in a position they could never have envisaged, I ask the Minister to keep this matter under review.

Question put and agreed to.
Question, "That the Bill do now pass," put and agreed to.
Sitting suspended at 1.35 p.m. and resumed at 3 p.m.