The issue with the case against ‘Reckless lending’

In operations I have two main roles, firstly is the obvious operational aspect of any company which has to do with logistics of loan suppliers and our distribution to clients as well as looking at the general business planning to ensure we are always at the best of our abilities. The other role is regulatory, I act as a compliance officer, while that is not a legal position, it is one in which the practical aspects of law surrounding financial services are to be found, how it works in real life.

On that basis I was surprised to see that there were several articles talking about the use of tort law to prove negligence in lending, and with that, a particular reference to the Consumer Protection Code (CPC) which has since been updated. While I admire the initiative being taken by New Beginning I have some doubts which I will express here.

One issue we have had with regulation is that it actually …

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Regulation failure: Independent brokers unable to be ‘independent’

We were thinking of changing the way that brokers operate, by saying to our clients ‘our service comes at a price, we’ll advise you on any lender in the market and be totally independent, if we place your loan with one that pays commission you can set that against your fee, and if not then pay the fee’, doing so in the belief that totally transparent and independent advice is a good thing, and something that everybody wants, the broker, the consumer and the Regulator.

Sadly this is not the case, instead the Regulator (soon due another name change to ‘Central Bank Financial Services Authority of Ireland’) is relying on the letter of the law in the Consumer Credit Act of 1995 to ensure that brokers can’t give best advice. This is an example of total regulatory failure.

The actual portion of the code is S. 116.1.b which states ‘A person shall not engage in the business of being a mortgage intermediary unless— ( a ) he is the holder of an authorisation (“a …

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Short Sale Loans or Negative Equity Loans

We were asked to make a presentation to the Department of Finance’s ‘Expert Group on Mortgage Arrears’ which is made up of the main interest groups and representative bodies in finance and housing. This firm has long been an advocate of market oriented solutions (short sales, moving paper etc.). However, in Ireland there are several issues.

Firstly, short-sales are not possible because of the manner in which recourse to the loan exists, it is on the person and not just the asset, this gives no incentive to lenders to accept a short sale except for people who are already financially strong, our debt laws also work against the borrower.

Secondly, as a shareholder in the banks it may not be in the interest of the shareholder (taxpayer) to bail out the individual, personally I don’t want to continue to shoulder costs for anybody, not our banks, borrowers or anybody else, I want taxes to go toward vital services and not much else. Any scheme should be revenue neutral or profitable.

That is where the idea …

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