Fianna Fáil legislation to extend protections to borrowers

Fianna Fáil are to table amending legislation in the next two weeks to extend protections to home borrowers whose loans will be bought by vulture funds, a move that could likely snarl plans by Government-owned Permanent TSB for a huge €4bn disposal of distressed loans.

Finance spokesperson Michael McGrath had first signalled his opposition last week to the plans of Government-owned banks to sell mortgage loans to vulture funds because homeowners won’t have the same consumer protections when their loans are sold to the new owners.

An amendment to the 2015 Regulation of Credit Servicing Firms Act would ensure new owners of the loans, and not just their service agents or intermediaries, are covered by consumer protections, he said.

The share price of Permanent TSB — 75% owned by the State — could be affected the most by any tightening of regulations.

“I think it is quite a scary prospect that there would be large-scale sell-offs by the high street Irish banks to these vulture funds and they need to be fully regulated,” he said.

Mr McGrath said other non-distressed mortgages which are meeting the terms of their loans could also be sold to vulture funds.

The ECB is putting pressure on Irish and other European banks to clean up the loan books of soured home and business loans, 10 years after the onset of the property and economic crash.

In its post-bailout surveillance report, the European Commission last week said that Ireland was “a relatively active market for distressed loan sales”.

“We are going to bring forward legislation which will require loan owners to be fully regulated in the same way banks are,” Mr McGrath said.

“Currently the so-called vulture funds are outside of legislation even though they make all of the key decisions to restructure a loan — to go down the enforcement road, to change an interest rate, and so on.

“We know banks have an interest in working out a loan over a 15 to 20-year period and that is not the time horizon they [equity funds] are operating to. They will in all likelihood not be here in that timeframe,” Mr McGrath said.

“Currently it is only the intermediary that is regulated. But the intermediary is not making any of the decisions on the loan. For all intents and purposes the only contact is with a call centre, and it is not with those making decisions about your mortgage or your SME loans,” he said.

Paul Joyce, head of policy at the Free Legal Advice Centres, or Flac, which has long campaigned for mortgage holders said that Flac had wanted the protections to be extended to all mortgage holders in the 2015 original legislation.

But he said the “key problem” of long-term debt distress was still not being addressed even under any new consumer protection.

There are over 31,000 mortgage accounts with arrears of over two years and the banks are still failing to write down debt, Mr Joyce said.

He said the ECB may be applying pressure but it was up to banks to come up with ways to deal with problem loans, which does not automatically mean they sell those loans.

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