Central Bank admits vulture fund loophole leaves borrowers outside protections

“We fully support that gap being fixed in any way that is possible,” deputy Central Bank Governor Derville Rowland said on Wednesday. “We want to have a policy framework that fully protects consumers.”

She said that the Central Bank’s own code of conduct on mortgage arrears applies fully to all regulated entities, whether they are retail banks or vulture funds. She said that the Financial Ombudsman had not raised the issue with the Central Bank during its regular “engagement”.

Sinn Féin finance spokesperson Pearse Doherty said the public had been “sold a pup” when a new law came into force in 2015 that promised to regulate vulture funds. He said this amounted to a “major loophole in the law”.

He said there was a legal loophole around the “beneficial ownership” and “legal title” on the loans.

“Households who have had their loans sold to vultures, as exists today, do not have the same protections as those who have their loans with regulated financial lenders,” Mr Doherty said.

As reported in the Irish Independent today, it has emerged that large numbers of mortgage holders whose loans were sold to vultures are unable to use the Ombudsman service to make complaints if they are in dispute over the handling of their loans.

The loophole appears to have arisen between 2015, when the credit servicing bill came into force, and 2019, when it was tightened up to regulate credit ­servicers, who act for the funds, and who have since been required to register with the Central Bank.

As many as 100,000 borrowers have had mortgages sold to vulture funds, with credit servicing firms acting on behalf of the funds.

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“I can only say that the policy framework that is there to support customers fully applies to all lenders in the system,” Ms Rowland said.

“I can see that this new decision from the Ombudsman has put at risk an opportunity for customers who have serious, distressing issues, to complain when they haven’t had a satisfactory response from the regulated entity.”

The issues emerged after individual complaints were made to the Financial Service and Pensions Ombudsman, which told some people that it does not have “jurisdiction” to regulate complaints against financial services providers that were not regulated by the Central Bank at the time.

Ms Rowland said it was “a new decision” and that she would get back to Mr Doherty about the matter in writing.

She said the Ombudsman was independent but must be “supported in any way” to close the legal loophole.

“I don’t say what the solution is, but I do completely join our voice to say that a solution will be found,” she aded.