Banks accused of outsourcing ‘dirty work’ by selling bad loans

The banks have been accused of looking to “outsource their dirty work” by selling non-performing home loans.

Fianna Fáil finance spokesman Michael McGrath claimed the banks did not want "to go through their loan books, engage, restructure and take whatever steps they need to take".

He told the Dáil on Thursday there was no compelling reason for the banks to sell large loan portfolios.

"They are under pressure from the European Central Bank to reduce their non-performing loans, but they can do so by working through their loan books," he added.

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Earlier, his party colleague Dara Calleary said Permanent TSB was beginning to market a portfolio of home loans worth nearly €3 billion to a range of international investors, including vulture funds. He said it was estimated that up to 20,000 loans were involved.

“That is 20,000 families facing a very uncertain future,” he added.

He said in the third quarter of last year, there were more than 11,000 family home loans held by unregulated vulture funds.

“This one sale could nearly triple that figure in one go,” Mr Calleary added.

He said while the loans would be sold at less than their actual value, borrowers would still have to pay every cent of the loan plus interest.

Many of the potential bidders for the portfolio were already in business in Ireland and it had not been a good story, he added.

“They are impossible to engage with,” said Mr Calleary. “They do not have branches; they have call centres.’’

Mental stress

He said they were aggressive in dealing with borrowers and their families, to the point of causing considerable mental and physical stress to the people involved.

Tánaiste Simon Coveney said last June, at 28 per cent, Permanent TSB's non-performing loan ratio was one of the highest in the eurozone.

“Given the volume of borrowers who have not engaged with the bank in recent years, and the number of cases where treatments were not possible or have failed, the bank has said that achieving an acceptable non-performing loan ratio will not be possible without some form of loan sales,” he added.

He said loan sales did not require the Minister for Finance’s consent under the terms of the relationship framework with the bank. However, the bank would be required to consult with the Minister and would do so in due course.

Mr Coveney said it was important to highlight that the contractual terms of borrowers, or indeed tenants, remained in place after the loan sale. The Central Bank’s code of conduct for mortgage arrears still applied, he added.

“In other words, mortgage holders have the same rights regardless of who owns the loan book,” he said. “While loan sales are regrettable, the Minister for Finance is conscious of the need for the bank to continue on a path of recovery.”

Mr Coveney said people were concerned about those managing their loans and who they were engaging with.

“We are very conscious of that,” he added.

He said the Government was also conscious of the rules applying, and there was a significant onus on the Central Bank to make sure that when loans were sold, the contractual rights of those linked to them continued to apply.