Legislation to protect consumers whose loans are sold to unregulated service providers including “vulture funds” has been introduced in the Dáil.
Minister for Finance Michael Noonan said the Bill would provide for borrowers to "retain protections after their loans are sold" to unregulated financial services providers, which are not bound by the Central Bank codes.
He said that under the Consumer Protection (Regulation of Credit Servicing Firms) Bill, borrowers would retain Central Bank code protections including the “code of conduct on mortgage arrears”, which set out the framework that lenders had to use when dealing with those in mortgage arrears.
The Minister said many purchasers of loan books had already agreed to voluntarily apply the Central Bank codes but “voluntary compliance is not enforceable”.
He told the Dáil 19 submissions had been made on the legislation from a range of people including the financial services industry, consumer groups and politicians, and these were available on the Department of Finance website.
Mr Noonan said the Bill “will give consumers a legally enforceable right to complain to the financial services Ombudsman and it will ensure that consumers whose loans have been sold will have the benefits of the Central Bank codes”.
‘Half-baked system’
Fianna Fáil finance spokesman Michael McGrath said, however, that the Bill “will leave us with a half-baked system” and the Minister was proposing “to replace the current two-tier system with a different type of two-tier system”.
It meant the servicing agent for the mortgage would need to be regulated but the same requirement would not apply to the owner of the mortgage.
His fundamental concern was that an opportunity to provide for the effective regulation of the sale of mortgages had been lost.
Mr McGrath added that there was a “legitimate concern that loans may be sold more than once, with each subsequent transaction resulting in a deterioration of the conditions applying to the borrower in respect of interest rates, penalty charges and the status of any restricting agreement”.
Sinn Féin finance spokesman Pearse Doherty said there had been a "substantial change in Government thinking on what and how to regulate and where the regulation falls" and this had caused major concern for people dealing with this issue "at the coalface".
Mr Doherty said the issue was whether the same type of regulation that currently applied to banks holding loans would apply when the banks sold those loans to unregulated third parties.
“The answer is that it does not,” he said. There was now a more convoluted structure where regulation would “instead apply to the servicing of the loans by third parties”.
He criticised the emergence of vulture capitalism at an “unprecedented level” and criticised as “sickening” what he described as the Government’s tolerance and reliance on their actions.
Mr Doherty also expressed concern about what he believed was the weak position of the financial services Ombudsman.
