Vulture fund legislation will not stop repossessions, TD warns

Proposed legislation to regulate vulture funds will not offer any additional protection to stop those funds from repossessing the homes of mortgage holders, TDs have been warned.

The warning came as the Government accepted the Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill, 2018, introduced by Fianna Fáil finance spokesman Michael McGrath.

Mr McGrath introduced the Bill after it emerged that Permanent TSB (PTSB), which is 75 per cent owned by the State, wanted to sell billions of euro worth of non-performing loans.

He said that with the passage of the Bill the Central Bank would be able to inspect vulture funds “and impose sanctions on them as required”.

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He said that enacting this Bill was a vital and necessary step. He acknowledged that it was “not a silver bullet for people struggling with excessive debt, but it is a crucial step in the right direction”.

PTSB had previously agreed almost 6,300 split mortgage arrangements with owner-occupiers, but several thousand of these mortgages are to be included in the sale.

Mr McGrath said that “if a vulture fund buys these loans, they can quite literally terminate that split mortgage agreement at the stroke of a pen for any reason that they think fit.

“We must not throw these mortgage holders to the wolves in this manner.”

However, in the Dáil on Tuesday Sinn Féin finance spokesman Pearse Doherty warned that while the Bill was a "progressive step", it "doesn't protect homeowners".

The Donegal TD said he was "very concerned that the country is being sold a pup here".

He was worried that an impression was being given “that because of this legislation, which is an important step forward, that these homeowners are going to be protected somehow”.

The Bill “gives homeowners no additional protection to stop vulture funds repossessing their homes”.

He said the core issues were that PTSB, a State-owned bank, was about to embark on selling 18,000 loans, and that vulture funds had only a short-term interest.

“When this legislation is passed it doesn’t make a difference to the homeowner. There is no additional requirement on the vulture to offer any of the options on the code of conduct on mortgage arrears because that code is entirely voluntary.”

The only way to protect mortgage holders was to prevent the sale of the bank’s loans and for PTSB to engage with its customers, he said.

‘Emotive issue’

Minister for Finance Paschal Donohoe confirmed the Government's acceptance of the Bill.

He acknowledged it was an “emotive issue and people are understandably fearful”.

The Minister said PTSB was required to consult him “when a loan sale reaches an advanced stage and is of significant scale and will do so in due course”.

He said it was “important to again highlight that all mortgage holders receive their full contractual conduct rights, regardless of the owner of the loan”.

He said PTSB had to deliver a “significant reduction in its non-performing loan ratio and within a timeframe that meets the expectations of the Single Supervisory Mechanism”, because at 28 per cent its ratio was one of the highest in the euro zone.

Mr Donohoe stressed that repossession numbers in the State "remain low in comparison with other countries and repossessions take longer in Ireland than elsewhere".

The number of homes repossessed in 2016 was 1,693 and in 2017 the figure was 1,106.