Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015


Dáil Éireann 4 February 2015

I very much welcome the extension of the protection of the Central Bank’s code of conduct to borrowers who 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 Irish Bank Resolution Corporation, 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 or 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 where they find themselves in arrears with their mortgage and mounting debt appears to be insurmountable.

This government is committed to making sure 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 of the intransigence of the main banks in terms of 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 through the impasse, but I believe that too often bank customers are unaware of the protection they enjoy and are in the dark in terms of their rights and entitlements.

Over 117,000 mortgages are currently in arrears. For some families their situation has improved in recent months. Jobs have been secured and additional income is starting to flow and in some cases the level of the arrears is beginning to reduce. Nevertheless the arrears continue to be a worry in over 117,000 homes. Of those, between five and ten thousand do not enjoy the protection of the Code of Conduct on Mortgage Arrears and today’s Bill seeks to extend the code of conduct to their loans.

Five to ten thousand is a significant number of families 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 in legislation, which is what necessitated today’s discussion.

The code of conduct is particularly important in terms of the communication between banks and borrowers who are in arrears. It regulates the communications between the bank and the borrower to ensure that there is not excessive contact between the bank and the already-stressed borrower.

I acknowledge that the passage of this 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 I believe that the increased burden of care towards the borrower, be they individuals, families or small or medium 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 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 those people have since found work, and it is hoped to get unemployment below 10% by the end of this year, two issues remain, firstly an overhang of debt from those years and secondly the mounting accrual of interest.

Added to this is the fact that mortgages were given out in the good times on the basis of high incomes which were forecast to rise and house prices are now just over half what they were at the height of the boom and you have the perfect storm for mortgage holders.

While this Bill provides welcome additional security in legislative terms for the five to ten thousand loan holders not currently 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 Irish economy will provide the financial lever that many need to address their mortgage arrears, so our focus must remain on fixing the flaws in the wider economy, reducing unemployment, reducing taxation on 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 which 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 that property boom and bust, and help those families back to a sound economic footing through a variety of resolution options.

These people are not statistics, these are the everyday realities for over 85,000 families with mortgages in arrears of over 90 days and 30,000 owners of buy to let properties. This piece of legislation is one necessary step that has to be taken for this cohort of home owners, but as the economy recovers we must ensure that they are not left behind and that their cases are resolved in a way that allows their lives and those of their families to progress.