Vulture funds to avoid tougher regulations despite arrears review
Vulture funds will escape tougher regulations after a Central Bank report for the government and finance minister recommended no changes be made to the current code on mortgage arrears.
Finance Minister Paschal Donohoe will tell the Cabinet today that no alterations should be made to the code — despite low level breaches found by the Central Bank during inspections of lenders. Instead, the minister will reiterate that he cannot interfere with banking regulation, that pending opposition legislation will enhance protections and that only minor breaches have been uncovered.
The Central Bank review was commissioned by the minister in February after public uproar over the sale of 18,000 mortgages by Permanent TSB.
The review of the code of conduct on mortgage arrears (CCMA) included a discussion with consumer groups, state agencies as well as Central Bank inspections of credit firms as well as one bank. The Central Bank also looked at data relating to unregulated loan owners (ULOs) and whether they were active in repossessions.
Lenders must treat borrowers in a fair and transparent way under the current code. But advocates for borrowers complain protections do not go far enough.
The Central Bank check also looked at borrower complaints and interactions between unregulated lenders and credit firms.
The review found there were no big or “material breaches” of the code but that there were some “non-material breaches”, government sources confirmed. These included a failure to write to borrowers within prescribed timelines and alerting them to specific supports. In one credit firm, borrower appeals were not escalated properly.
Overall, the review for the minister found that for borrowers who engage with mortgage arrears process, the code is working “effectively”. Moreover, there is no evidence borrowers whose situations have not changed are being moved off their current loan arrangements by unregulated entities.
The Central Bank has committed to the minister to continue to monitor the use of the code, unregulated lenders such as vulture funds and they will track how borrowers are being treated.
Mr Donohoe will reiterate to colleagues that he cannot stop loan sales, even by State-owned banks, and that mortgage holders keep their full contractual rights, indifferent of who controls the loan.
Furthermore, he is expected to note to Cabinet colleagues that consumer protection legislation from 2015 already protects borrowers whose loans are offloaded to unregulated entities.
Lastly, Mr Donohoe will reassure ministers that more protections are coming when the government support a motion by Fianna Fail finance spokesman Michael McGrath to regulate loan owners. The Consumer Protection (Regulation of Credit Servicing Firms) Bill 2018 will return to the Houses of the Oireachtas later this year.
Cabinet today will also consider putting a national review panel of serious situations involving children on a statutory basis.
