Leo Varadkar defends ‘vulture funds’ and criticises practices of Irish banks

Taoiseach says ‘vulture funds’ are more effective at writing down debts than banks

According to Taoiseach Leo Varadkar, so-called vulture funds are often better at write-downs of loans than our own banks. Photograph: Tom Honan/ PA Wire

According to Taoiseach Leo Varadkar, so-called vulture funds are often better at write-downs of loans than our own banks. Photograph: Tom Honan/ PA Wire

 

The Taoiseach, Leo Varadkar, has defended so-called vulture funds, stating that they are more effective at writing down debts than banks which “extend and pretend” rather than reaching settlements with homeowners.

Mr Varadkar also said that homeowners whose mortgages were sold off to such funds would be “no worse off” than those whose loans were owned by the banks.

The Taoiseach said he disagreed with the use of the term “vulture fund” and criticised the practices of our own banks.

“I’m always reluctant to use the term vulture funds because it is a political term. What we’re talking about here is investment banks, investment funds, finance houses, there are lots of different things and lots of different financial entities there and the term is used, vulture funds.

“But you’ll know from the numbers that they’re often better at write-downs of loans than our own banks.

“Our own banks tend to ‘extend and pretend’ rather than coming to settlements with people.

“Increasingly they’re covered by the same regulations and the same consumer protections as the banks,” he said.

Regulating legislation

Fine Gael is supporting legislation which is being brought forward by the Fianna Fáil finance spokesman, Michael McGrath, to regulate the funds for the first time.

“So, what we’re working on is enacting legislation that Michael McGrath has brought forward, which is to make sure that so-called vulture funds are being regulated,” Mr Varadkar said.

He said the Government was committing that people who made an effort to pay their bills even when the loan had been acquired by a “vulture fund” or credit servicing firm would have the same protections as other consumers.

“We support that and we are going to make sure that anyone who has a mortgage, who is repaying their mortgage, making a reasonable effort to pay it, continues to have the exact same protections, the exact same consumer protections as they would if the loan was still owned by the banks.

“That’s our commitment to make sure that people who pay their mortgages, pay their bills, are no worse off as a result and have the exact same protections,” he said.

His comments come after controversy over Permanent TSB entering into an agreement with Pepper Finance Corporation last month that will see a portfolio of non-performing mortgages removed from the bank’s balance sheet. The agreement will see more than 6,000 loans moved to a special purpose vehicle which will be financed on the bond markets. The company has pledged to deal with the PTSB customers “sympathetically”.

Mr Varadkar said that if PTSB had not sold the loans, the Government might have had to provide financial assistance.

“We wanted those that were split mortgages to be categorised as performing but we just didn’t win that argument, so unfortunately they were counted as non-performing loans.

“PTSB was required to get those loans off their books.

“If they had not done that, the bank would have found itself in a difficult position and potentially we would have had to put more money into the bank, which is something we would never do again and we managed to avoid that.

“But secondly, now that PTSB has been able to reduce the number of non-performing loans on its books, it’s now in a better position to do what it should be doing, which is to issue new mortgages, new loans to people.

Concern

Despite Mr Varadkar’s reassurances, Opposition parties have previously expressed concerns in relation to the sale of loans to vulture funds. Sinn Féin’s finance spokesman, Pearse Doherty, has said the “major concern when banks are selling to the vulture funds is that there is no long-term interest. The big concern here relates to certainty. Regardless of people’s opinions of high street banks, they know that they want to be here in 30, 40 or 50 years.”

The issue of home repossessions was brought to the fore earlier this month following the eviction of Anthony McGann and his two siblings from a house in Co Roscommon over a debt which had not been repaid to KBC Bank. Security personnel working for the bank were subsequently attacked at the property near Strokestown. Eight people were injured and six vehicles owned by security workers parked outside were burned out.