Fianna Fáil’s Michael McGrath says there's a dangerous gap in Irish regulation
A correspondence between a Central Bank official and Fianna Fáil’s finance spokesman Michael McGrath shows unease at the regulation of major firms hoovering up commercial loans and mortgages from banks and The National Assets Management Agency (NAMA) in the wake of Ireland's economic crisis.
In a letter dated August 16th Bernard Sheridan, director of consumer protection at the Central Bank, wrote: "The Central Bank consistently advocated for some time prior to the enactment of the Consumer Protection Act 2015 to have the gap in regulation for loan transferees closed in order to safeguard borrower protections. Our preferred policy approach was for the regulation of the actual loan owners," according to The Irish Times.
This would require the Government to regulate the actual funds, rather than the companies later hired to manage the portfolios.
Ultimately, the State chose to regulate the secondary firms who manage the loans. He noted that this offered increased protection for borrowers within the consumer protection framework - but added that it is too early to evaluate the overall effectiveness.
Mr McGrath has described the system as "half-baked" and said that there is a "dangerous gap" in the rules.
"The legislation that was passed last year was entirely inadequate as it focused on those who are servicing debts on behalf of vulture funds... who outsource the administration of loans [and] still control key decisions such as initiating action for repossession, foreclosing on a going concern business or raising the interest rate that applies to the loan without actually being subject to regulation," the TD added.
The Department of Finance said that the legislation, "ensures that relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale."