The Central Bank has been asked to review its code of conduct for how financial institutions deal with those in mortgage arrears following recent controversies over so-called "vulture funds".
Minister for Finance Paschal Donohoe said he had asked the Central Bank to undertake the review after Fianna Fáil called for protections for borrowers to be strengthened.
Mr Donohoe also announced that he would accept a Bill put forward by Fianna Fáil finance spokesman Michael McGrath calling for vulture funds to be regulated by the Central Bank. The Bill is due to be heard in the Dáil this week.
Mr McGrath said, however, that the new measures must be implemented within months and before the sale by Permanent TSB (PTSB) of billions of euro worth of loans.
“The Bill will require some significant work from a drafting and amendment point of view but I have indicated to Deputy McGrath that my department and I will be working with him on this matter and we will be looking at how the objectives of that Bill can be implemented,” Mr Donohoe said.
When asked if this move would have any effect on the PTSB sale – with the 75 per cent State-owned lender under pressure to clear its books of non-performing loans – Mr Donohoe said a number of consequences were possible.
“There are many consequences possible of what we are doing. We are in the very, very early phases of the Permanent TSB sale. I’m not in a position to indicate if those effects will be material and it will be up to Permanent TSB to determine that themselves as they lead the process.
“As Minister for Finance, I am aware of and understand the need that our banks, and particularly Permanent TSB, face at the moment to get their balance sheets and their financial affairs in line with the requirements of regulators. However, I also understand the anxiety that this matter is causing at the moment and the concern that mortgage owners have regarding their future affairs and how they would be treated in the future.”
He also said that a number of other loan book sales had taken place in recent years “that have not contributed to the kind of mass surge in repossessions that were predicted” and that tenants’ rights were outlined in legislation.
It is also envisaged that those whose loans were sold to so-called vulture funds in recent years would also be covered by the new regulations, even though the details had yet to be worked out.
While Mr McGrath said he was “not precious” about how the Government implemented the changes he had called for, Mr Donohoe said it would be quicker to adopt and amend Fianna Fáil’s proposals.
“The indications are the Government will work with us, that the Government will accept our Bill. From our point of view, the most important thing is that this Bill is not allowed gather dust,” Mr McGrath said.
“This is an absolutely necessary step because, in our view, the loan owner, the vulture fund, calls all of the shots, [and makes] the big decisions around the future of the loan, whether it be to initiate enforcement proceedings, to restructure a loan or indeed to change the interest rate.
“The borrower is at a very significant disadvantage and is far more likely to have aggressive action taken against them by the funds. It is important that people are fully protected.”