The Central Bank has acknowledged that a legal loophole means certain complaints by mortgage customers whose loans are owned by investment funds cannot by considered by the Financial Services and Pensions Ombudsman (FSPO).
Speaking at the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach, Deputy Governor, Derville Rowland, said the Central Bank would support any efforts to have the gap closed.
Sinn Féin finance spokesman, Pearse Doherty, explained that the loophole came to light in recent decisions of the FSPO.
He said the issue relates to a gap around 2015 legislation which extended consumer protections to credit servicing companies.
"Thousands of loans who have been sold to vulture funds now, do not have the same protection that they used to have when their loans were with a mainstreet lender," he said.
"The Financial Services and Pensions Ombudsman has made a number of determinations to say that the conduct that people are complaining about is outside the scope of their investigations, as a result of their loans being sold to a vulture fund."
He added that because of the gap, certain issues defined in law as "key decisions", lie not with the credit servicing firm, but the owner of the loan or the vulture fund, which were generally unregulated up until 2019.
He said that means that anyone who has an issue with a key decision around how their loan was dealt with between 2015 and 2019 cannot make a complaint to the FSPO.
"That is a basic right that people should have in relation to financial dealings with institutions, and they were sold a pup when it comes to your own staff," he claimed, referring to assurances given previously by the Central Bank that borrowers whose loans were sold to investment funds would continue to enjoy the same protections.
Derville Rowland said the Central Bank has no special insight into FSPO decisions as it is an independent statutory office.
But she said she understands some of the complaints made by people in relation to credit servicers are "in scope" and can be determined by the FSPO.
She added though that an issue has arisen where the FSPO thinks it has a limit in its jurisdiction because the underlying loan owner from the period from 2015 to 2019 is not designated as a regulated financial services provider, which is a pre-requisite for the matter to be determined.
"That is a new decision, the system was not aware of that determination before now and it is of the utmost importance that the ombudsman is supported in any way to close that gap," she stated.
"Anything that his office thinks is necessary to close a gap, we would be absolutely supportive of because we want to make sure the system serves all customers who have legitimate complaints to make."
Central Bank Governor, Gabriel Makhlouf, told the committee that the Code of Conduct on Mortgage Arrears and the Consumer Protection Code stilll apply regardless of who the lender is.
But this assertion was challenged by Mr Doherty who said he believes they don't.
Mr Doherty also claimed that investment funds who are transferring the legal titles on loans to credit servicing firms, while maintaining beneficial ownership, still remain unregulated, despite the change in the law in 2019.
He added that what he is hearing is that "vulture funds" in order to ensure they are not regulated by the Central Bank are transferring title to credit servicing firms.
"Yes that seems to be the case in certain instances that the legal title has rested with the credit servicer," Ms Rowland replied.
She agreed that this meant the loan owner technically remains unregulated.
"So we have 2019 legislation here that is supposed to regulate the owners of the loans," said Mr Doherty.
"The owners of the loans are transferring the legal title there because now they are no longer captured by that legislation. The Central Bank seem to be aware of it, I only became aware of it recently. What are you doing about it because you are regulating these entities which they are finding a way around it?"
Ms Rowland said in such cases the 2019 legislation is being followed.
But she agreed it is an important point and added she would be happy to follow up in detail in writing when she had further information.
