FF Bill to regulate ‘vulture funds’ moves towards finishing line – McGrath

Published on: 21 November 2018

Fianna Fáil Spokesperson on Finance Michael McGrath TD says a Fianna Fáil private members’ Bill, which will bring so called ‘vulture funds’ within the full suite of Central Bank regulation, is needed more than ever, following a ramping up in recent times of loan sales by banks to foreign owned private equity funds.

The Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018 will be debated at report stage in the Dáil tomorrow. It is expected to complete its journey through the Dáil tomorrow before proceeding to the Seanad. The government is now supporting the Bill.

Deputy McGrath commented, “Under pressure from European and domestic regulators to reduce their level of non-performing loans (NPLs), we have seen an acceleration in the trend of banks selling off their loans to ‘vulture funds’ in recent months.  Permanent TSB, Ulster Bank and AIB – to name just a few retail banks – have progressed loan sales in recent months. Significantly, Bank of Ireland has not ruled out loan sales into the future. Mortgages, business and farm loans are now being sold on in very significant numbers.

“Under the present system, the borrower never gets to see or meet the people in the fund who make all the important decisions concerning their loan. Instead, all contact is with a regulated credit servicing firm or ‘middleman’, which is making no decisions and is in effect a conduit between the borrower and the fund. This is not an acceptable situation. Those controlling the loan and making the vital decisions must be regulated and held accountable.

“Fianna Fáil has been consistently questioning the need for such loan portfolio sales.  While I accept that pressure is being applied from the Single Supervisory Mechanism to reduce NPLs, it would be far better if the banks worked through the loan books in a proactive way and dealt with loans on an individual basis. When it comes to mortgages, last week’s report from the Central Bank confirmed that unregulated ‘vulture funds’ offer a narrower suite of restructuring options to mortgage holders in arrears and any arrangement entered into is more likely to be short-term in nature.

“When our Bill becomes law, these ‘vulture funds’ can be directly inspected and investigated by the Central Bank. The regulator will also, if necessary, be able to take enforcement action against these funds. Up until now, these funds have been untouchable. The Central Bank will now, for the first time, be able to have direct contact with these funds and apply strict regulation directly to them. The Bill will ensure that whoever is ultimately calling the shots on the management of a loan portfolio will be regulated.

“Fianna Fáil believes that further reforms are needed to tackle the tens of thousands of legacy mortgage arrears cases.  The current process sees nearly half of all personal insolvency arrangements failing.  As a result, it has been judges who have prevented large scale repossessions rather than the government.  The bank veto needs to be removed and fair and sustainable loan solutions need to be put in place.

“I welcome the Government’s commitment to support our legislation to regulate these ‘vulture funds’.  We must now ensure that it passes all stages of the Dáil and Seanad without delay so that it can be enacted as soon as possible”, concluded Deputy McGrath.

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