The organs of state must put manners on the banks

Brendan Burgess

Brendan Burgess

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I have an article in The Irish Mail on Sunday.

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CorkHome2022 said:
will the current crew do anything meaningful ?
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Probably not...

Central Bank scrapping consumer protection division

https://www.independent.ie/business/personal-finance/central-bank-decision-to-disband-consumer-protection-unit-fuels-fears-customers-will-be-weakened/a964031703.html The Central Bank is disbanding its consumer protection division. ... Now, the Central Bank has admitted it is abolishing its...
www.askaboutmoney.com

The Central Bank has published a new Consumer Protection Code

https://www.centralbank.ie/regulation/consumer-protection/consumer-protection-code
www.askaboutmoney.com
 
'But protecting the prisoners of vulture funds is a higher priority'

Yet the headline focuses purely on the banks.
 
The harsh reality is that if you want European interest rate levels you need European eviction levels.

If i buy a house with a 90% mortgage today and never make a single repayment, never respond to legal proceedings, never show in court, and basically don't do anything to either facilitate or block recovery of the debt or property by the lender it'll still be several years at absolute fastest before the lender actually sells the house.

Ireland is an outlier in more ways than one....

And those people in hock to vulture funds? They would have gone bankrupt and lost their homes 15 years ago.

Be careful what you wish for.
 
Good article. It is grossly punitive and I do not see any net gain for society in people being condemned to this scenario (given everyone else still is lumped with USC and high tax).

Is it possible to end up with a vulture fund through no fault (or limited fault) of your own? Or have everyone of these people been in serious arrears?

Is it impossible to switch? I would expect not everyone in arrears in 2010 is in the same circumstances in 2025 and their 15 year old credit history may be irrelevant? Can vulture fund hand not be forced with some sort of insolvency claim?
 
Brenda you raise important questions but hit the crossbar

Re CCPC supposed to have a mandate. But actually have a signed Memorandum of understanding with Central Bank not to exercise any powers for example

Also high rates in funds the Central Bank is body for policing unfair terms but never has done anything
 
presidenttttt said:
It is grossly punitive and I do not see any net gain for society in people being condemned to this scenario (given everyone else still is lumped with USC and high tax).
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Let's say something was done to force the vulture funds to charge less - is this good for society? In the short term the answer would be yes. 25,000 would be better off.

But

What happens when the next crisis hits. A whole new swath of households get into trouble. What do our banks do? They can't reposes, our legal system is pretty much the same as it was during the crisis.

They can try and sell those loans but no one will touch them at any price as the government now has history of interfering.

So the banks are left do deal with it themselves. Fair enough some night say. Except the problem is when banks spend all their time dealing with troubled loans they don't have time, or appetite to lend to anyone new.

A bank that doesn't lend is pointless. Given the small number of banks that operate here it's very possible that more than 25,000 households could be effected if our banking sector stopped lending.

So while it's terrible for those who are in the grips of a vulture fund I see the reason why the organs of the state don't go after them.

It's less clear to me why the state hasn't tried to fix things like the shockingly slow legal system.
 
Re the High Court case about funds obliged to give same rate as PTSB , that has gone to mediation , my guess is there will be a settlement and non disclosure agreement attached to it and we will never hear anymore about it .The Central Bank should have been on top of this for the consumer protection side of things but no they sit on their hands until somebody takes a cases and wins it .
 
presidenttttt said:
Is it possible to end up with a vulture fund through no fault (or limited fault) of your own?
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Yes. Some borrowers whose loans were never in arrears or restructured have ended up with their mortgage being owned by a vulture fund. But, unlike those with prior arrears/restructuring, they should be able to move to a more cost effective lender. But there's still cost and hassle in moving lenders as mentioned in @Brendan Burgess's article.
presidenttttt said:
Or have everyone of these people been in serious arrears?
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No.
 
Raging Bull said:
Re CCPC supposed to have a mandate. But actually have a signed Memorandum of understanding with Central Bank not to exercise any powers for example
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Have you a link to this?

I am shocked that the CCPC has actually signed a Memorandum with another government body not to do its job.

The CCPC should be out there advocating on behalf of consumers and challenging the Central Bank and the government when they are not doing their job.

Why is it left to individuals like David Hall, Padraic Kissane and me to advocate when these guys are paid to do it?

Brendan
 
skrooge said:
Let's say something was done to force the vulture funds to charge less - is this good for society? In the short term the answer would be yes. 25,000 would be better off.

But

What happens when the next crisis hits.
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I took a very unpopular stance at the time of the sales to vulture funds saying that they were absolutely necessary when we were not allowing the lenders to repossess.

But I also said that the borrowers should be protected from exploitative interest rates.

The vulture funds would still buy these loans if the only restriction on them was that they must charge market rates and not exploitative rates.

Brendan
 
Thanks

Nothing in that prevents the CCPC from doing its duties. It specifically says so:


This Agreement is a Co-operation Agreement and is not intended to create binding or legal obligations on either Party.

10. Performance of Concurrent Functions​

For the avoidance of doubt, nothing in this Clause 10 or in this Agreement shall prevent either Party from exercising any of its powers under applicable legislation.


Now, maybe the CCPC reads it differently. But where the CB is letting down consumers as it is when it comes to mortgage rates, the CCPC should be shouting about it from the rooftops.


The CCPC is charged with: (a) promoting competition; (b) promoting and protecting the interests and welfare of consumers; (

6. General Co-operation​

The Parties will seek to maintain strong and constructive relationships with each other, in particular in order to promote and protect the best interests of consumers of financial services.
 
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Brendan Burgess said:
But I also said that the borrowers should be protected from exploitative interest rates.
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The concern for me is trying to determine what should be classed as fair versus what is excessive rate. This is so subjective and there are many factors to consider.

Much of this lending is subprime, higher risk should attract a higher rate. The fact the banks could shift it from their balance sheet means current bank mortgage rates are lower than what they would otherwise have been. While there are stark differences between lending perhaps a lot of it is justified by the fact banks have exceptionally good loan books now compared to what was disposed of.

Throw into the mix the uncertainty of our judicial/non-judicial processes. Recourse to the property could take decades. That only aggravates the gap between the two.

As we all know banks are well funded by an Irish depositors who seem to have no interest in earning a decent return. Whereas vulture funds have no such benefit and are exposed to market pressures.

Given all of the above how (and who) would determine what is a fair rate. Seems arbitrary to stop at vulture funds why not regulate all mortgage rates.

Brendan Burgess said:
The vulture funds would still buy these loans if the only restriction on them was that they must charge market rates and not exploitative rates.
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They may very well bid for the mortgage but you can be sure that any such policy intervention would be reflected in the price they would be willing to pay.

This could ultimately prove counterproductive if it just means the banks have to take a bigger hit in the form of even higher right offs. It's back to weighting the costs and benefits to 25,000 current mortgage holders with the impact a policy action could have on all future mortgage lending.

Ultimately the best thing to do is not to get in that mess in the first place. The CBI's mortgage rules are a good first step. But they're not a panacea.

A functioning legal system that allows lenders to efficiently foreclose would also help. As terrible as losing a home must be the fact some people have spent near 20 years living in limbo is hardly a good place for society to sit either.

The danger here is of treating the symptoms and not addressing the underlying problem(s). Maybe there is a situation where vulture funds can be removed from the system but I'm not sure the State has taken all the steps it could have since the financial crisis.
 
skrooge said:
Much of this lending is subprime, higher risk should attract a higher rate.
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That's always been my Devil's Advocate argument against forcing vultures to charge what the original lender charges. On the other hand some of the vulture rates do seem excessive even for subprime customers, some of their customers were never subprime and some who were have got back on track so arguably shouldn't be penalised further.

Obviously, the dysfunctional/ineffective repossession system also needs to be addressed in order to reduce the risks of moral hazard but I'm not sure if that's something for the judiciary rather than politicians to figure out?
 
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