Speech to Dáil on Fianna Fáil Private Members’ Bill Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018

6th March, 2018


I wish to thank the Deputy for the work that he has put into preparing this Bill.


Before getting into the details of the principles of the Bill, I believe that it is important to give the issue some context.


This is an emotive issue and people are understandably fearful.


One of my key priorities as Minister for Finance, is to normalise the banking system, to ensure that the banks continue to support the economy by providing access to credit to households and businesses, within an appropriate framework of consumer protection.


This also includes ensuring that there is an appropriate framework in place for the resolution of complaints.


We must be careful to ensure the fairest and most effective support for any borrower who faces great difficulty.


We must be careful that any actions we take to further protect borrowers whose loans are sold do not have unintended and very negative consequences for the banks, their relationship with the regulator and all our citizens who depend on a functioning banking system in their day to day lives. 



I fully recognise the position that families in arrears are in when dealing with firms who they are not familiar with and whose reputations, whether warranted or not, are likely to make them extremely concerned about how they will act.


I want to put these fears in context.


The most recent Central Bank figures show that the number of mortgage accounts for principal dwelling houses (PDH) in arrears fell further in the third quarter of 2017; this marks the seventeenth consecutive quarter of decline.


The number of PDH mortgage accounts that were classified as restructured at end-September was 119,070.


Of these restructured accounts, 87 per cent were deemed to be meeting the terms of their current restructure arrangement, up slightly from the previous quarter.  


Repossession numbers in Ireland remain low in comparison with other countries and repossessions take longer in Ireland than elsewhere. 


To drill down further into the repossessions figures in the context of our debate here this evening, the following Central Bank statistics illustrate quite clearly the proportion of repossessions which have been taken by Banks and non-Bank entities. 


 It is worth stating them here.


  • In 2015, the total PDH properties repossessed was 1,535, this was made up of 1,299 by Banks and 236 by Non-Banks.
  • In 2016, the total PDH properties repossessed was 1,693, this was made up of 1,452 by Banks and 241 by Non-Banks.
  • In 2017 (up to end September), the total PDH properties repossessed was 1,106, this was made up of 982 by Banks and 124 by Non-Banks.


This is because the Government has also reformed personal insolvency legislation, and banks no longer have a veto on insolvency arrangements.


In addition, the Abhaile service helps borrowers in arrears to find the best solutions and keep them, if possible, in their own homes.


This is assisting borrowers, particularly those in longer term arrears. A dedicated legal and financial adviser can work with borrowers in arrears and their lender to find the best solution for them. 


If called to court to face repossession proceedings on their home, they will be able to meet a Duty Solicitor at the court.


A MABS staff member will also be present at court to help them.


Take up of the Abhaile scheme has been high, with over 10,000 vouchers for these consultations issued since the start of the scheme in July 2016.




So a lot has been done which is helping keep people in their homes.


As I say, context is important, things have improved in the Irish economy over the past years from the worst of the crisis and we are in a considerably better place than we were a few short years ago.


Non–performing loans (NPLs) at the banks in which the State has invested have reduced by 60% from €54 billion at their peak in 2013 to an estimated level of c. €22 billion at end-December 2017.


That said, they are considerably higher than is acceptable in the long run and the Single Supervisory Mechanism – the system of banking supervision in Europe-  has ordered that action be taken to ensure that the banks get back into a strong position so that they can provide support to the real economy.


Even if the SSM had not ordered something to be done, it would have been incumbent on the individual banks to take action.


Properly addressing and resolving NPLs will normalise the banking sector and should create more scope for proper competition between the banks which should benefit the customer in the long run.


We need to return the banks to a normalised state where they can provide funds for SMEs, for consumers and for people looking for mortgages without the drag on their funds caused by non-performing loans.


Banks with a low level of NPLs are an important element of a secure economy.




So what has the Government done to protect mortgage holders who have gotten into difficulties?


The Government brought in the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm. 


Under the 2015 Act, if the firm who bought loans from the original lender is an unregulated firm, then the loans must be serviced by a ‘credit servicing firm’ which is regulated by the Central Bank. 


Because the credit servicing firm is regulated by the Central Bank, the full range of protections which applied before the loan was sold continue to apply after the sale.


As things stand, the Code of Conduct on Mortgage Arrears is a statutory code which provides a strong consumer protection framework, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.


The Code is part of financial services legislation and applies to all regulated financial service providers.


This Bill seeks to apply the CCMA to mortgages which are not already covered by the Code.


Presumably this would include buy-to-let mortgages and mortgages where the borrower is not in any danger of falling into arrears.


I have asked the Central Bank to review the existing CCMA to see areas where it may need to be strengthened and to report to me on the issue as soon as is practically possible.


We also have to look at the other side of the equation, at the lenders who have issued the loans that are now in arrears.


We have to acknowledge that PTSB, one of the banks in which the State has a significant investment has particular difficulties which it needs to resolve.


PTSB’s latest published NPL ratio of 28% is one of the highest in the Eurozone. It is over five times the European average.


Therefore, PTSB must deliver a significant reduction in its NPL ratio, and within a timeframe that meets the expectations of the Single Supervisory Mechanism.


Under the terms of the Relationship Framework with the bank, loan sales do not require my consent as Minister for Finance.


This Framework is a legally binding contract which cannot be changed unilaterally.


It was put in place at the insistence of the European Commission to protect competition in the market place.

However, the bank is required to consult with me when a loan sale reaches an advanced stage and is of significant scale and will do so in due course. Although


I have been briefed on the matter, the formal consultation has not yet taken place.


It is important to again highlight that all mortgage holders receive their full contractual conduct rights, regardless of the owner of the loan.


They still have the same rights and obligations as they had before the sale.




As I have said, I fully recognise the very real concern that the public have in relation to this sale and I also acknowledge the good intent behind the Private Members Bill.


The Government has agreed to support the Bill.


However, there are a lot of significant drafting issues with the Bill which need to be addressed in order to make it more effective and even to make it practical to implement.


My officials have consulted with the Central Bank and it has raised a number of specific issues which will need to be addressed including some concerns that it has in relation to the possible impact that the Bill as currently drafted could have on the independence of the Bank.


It would also appear that it may be appropriate that this Bill be referred to the European Central Bank for their observations. Under Standing Order 149(3), it would be a matter for the relevant Committee to consult with the European Central Bank.


I am also aware that as part of the European Council Action Plan on NPLs published in July 2017, the European Commission will publish in the next week its proposals for the authorisation of credit servicers across the European Union.  


The definition of “credit agreement owner” in the Bill appears to include securitisations while there appears to be an intention to exclude them in section 9 and I would welcome further exploration of this issue.


It is always an issue for legislation of how to achieve the objective while avoiding unintended consequences.


I think that I need to stress that it may be difficult to formulate the Bill in a manner which permits securitisation vehicles as they are currently formulated to continue to function as unregulated entities, without also providing an opportunity for more active loan owner purchasers to structure themselves in a way which falls outside the scope of the Bill.


This is not just a theoretical matter, if Irish banks cannot use securitisation effectively they will have less finance to provide to the real economy and it will come at a higher cost.


I also have concerns about how we square the circle of the practicalities of regulating loan owners who are based outside Ireland with the free movement of capital in the EU and with EU competition law and these issues will require further exploration.


Some of the issues with the Bill as drafted are fairly easy to resolve. For example, the Bill refers to the Financial Services Ombudsman in a number of places but the appropriate reference should be to the Financial Services and Pensions Ombudsman since the passage of last year’s legislation.


There are a number of other technical issues which are too detailed for discussion here today where we are looking at the high level principles of this Bill. 


Regulation comes with consequences and the Bill as initiated could have a number of unintended consequences which we should seek to mitigate as far as possible.

I would hope that any technical issues can be resolved relatively quickly and without controversy.


Therefore I would like to take this opportunity to make my officials available to provide whatever drafting assistance they can to the Deputy in advance of the consideration of the Bill at pre-legislative Committee.


We may be able to progress the Bill quicker in this way than the line by line amendment process which takes place at Committee Stage.


I should also say that I met with a number of the main banks last week as part of my normal engagement process.


I took the opportunity to again make it clear to the banks that they need to be fully cognisant of customers’ concerns in relation to their actions.




In conclusion, I welcome the Bill as introduced by the Deputy and support the policy intent behind it but it will take significant work to develop it to a level where it can be an effective piece of legislation.


The Government has committed to support this Bill and I will provide whatever assistance that my Department can to ensure that the Bill attains its objective.  


Thank you.