Fianna Fáil is calling for the funds to be properly regulated when they buy mortgages.
The Taoiseach has said it is “disingenuous” to suggest there is no regulation for vulture funds.
It comes after Fianna Fáil introduced a bill aiming to regulate the funds when they buy mortgages.
The party has accused Permanent TSB of 'outsourcing its dirty work' over its plans to off-load 20,000 distressed mortgages to so-called vulture funds – with fears large numbers of evictions could follow.
The loans are worth around €4 billion and Fianna Fáil has called for their sale to be blocked, warning that the funds will be less likely to work with customers and seek ways to work out their difficulties.
However this afternoon, the Taoiseach Leo Varadkar said there are already protections in place for mortgage holders and ways to ensure they're handled properly by whoever buys them.
“It is a little disingenuous to say that loans are being sold on to an unregulated entity,” he said.
“It is the law – we made it the law in 2015 – that any purchaser of a loan book must either be regulated by the Central Bank or their agents must be.
“As I say, we are open to any further proposals to strengthen that protection.”
However Fianna Fáil's Finance Spokesperson Michael McGrath has warned that new law is needed to ensure that anyone who purchases a loan-book - and not just their agent - is fully regulated by the central bank.
He told The Pat Kenny Show he is optimistic the Fianna Fáil bill will be passed into law:
"It is not just about getting the bill through Second Stage," he said.
"We need the bill - or a bill like this - to become law and to become law quickly.
"Because our objective here is to ensure that any portfolio sales can only go to entities that are fully regulated in the normal way by the Central Bank.
"It is as simple as that.
"That is our requirement and in our view that is the thrust of what is in the confidence and supply agreement and we will require support, including from Government to do that."
He said that Permanent TSB is “taking the easy option” by selling on the loans.
“It's the easy way out,” he said. “Instead of putting in the work and doing what banks should be doing - working through their loan book; dealing with customers; restructuring loans; giving a write-off, if necessary, to the borrower as opposed to the vulture fund; and taking enforcement action as an absolute last resort.
"They're outsourcing their dirty work - that's exactly what this is about, and it worries me."
Yesterday, the Social Protection Minister Regina Doherty said people have protections even if their mortgage is sold to a vulture fund.
The Taoiseach said that no sales had yet been put through – adding that the Minister for Finance had to be consulted before any sale could be finalised.
Reporting from Sean Defoe ...