Loan sales to unregulated & unaccountable vulture funds should not go ahead – McGrath

Following recent reports that some Irish banks are set to sell large loan portfolios to vulture funds, Fianna Fáil Spokesperson on Finance Michael McGrath has said that “the sale of a vast swathe of loans by Irish banks to unregulated and unaccountable vulture funds should not proceed.”

“It is evident that banks have shown very little willingness to work through their non-performing loan book. Instead of selling their loan book and outsourcing their dirty work to vulture funds, the banks should be providing sustainable and reasonable solutions for customers willing to cooperate with them.

“It is clear now that vulture funds are lining up to buy portfolios of loans from the main banks in Ireland. It is expected that these portfolios will involve SME loans and buy-to-let investment properties. However, the Government has allowed these funds to go completely unregulated in Ireland. These funds recently refused to come before the Oireachtas Finance Committee to be questioned on their approach to managing loans.

“Recently it emerged that AIB is gearing up to sell a portfolio of distressed loans called Project Redwood and it is clear that the same funds are preparing to buy these loans as in the past. Permanent TSB also looks set to sell on loan portfolios.

“These funds are accountable to nobody and are completely beyond the reach of the Central Bank. In 2015, the Government introduced a half-baked measure that regulates only the intermediate, the credit servicing firm. But we know that the major decisions are still made by the unregulated loan owner themselves. In many cases, these funds refuse to engage with the borrower and seem intent on securing the underlying property.

“The loan owner – and not the credit servicing firm – decides whether to restructure a loan, to initiate enforcement proceedings or to change the interest rate and they do so without any supervision from the Central Bank. Both homeowners and SMEs throughout the country are living in fear that their loans will be sold to these vulture funds.

“Fianna Fáil is opposed to the banks selling their loans to unregulated vulture funds. We understand that the banks are getting pressure from the European Central Bank to reduce the level of non-performing loans but in the same light the banks have done far too little by way of putting sustainable and workable solutions on the table for customers.

“The bottom line is the banks should not be selling Irish loans to unregulated vulture funds,” said McGrath.