GOVERNMENT HAS MOVED to close a legal loophole which resulted in thousands of people whose mortgages were sold to vulture funds having no access to the State’s financial ombudsman service.

In February, in a heated exchange between Sinn Féin’s Pearse Doherty and the Deputy Governor of the Central Bank Derville Rowland, she confirmed that a “gap” existed which meant some homeowners whose loans are with vulture funds did not have the same rights and protections as others. 

It resulted in complaints over disputes regarding the handling of loans not being dealt with by the ombudsman with mortgage-holders left in limbo as to what course of action to take. 

The issue related to complaints from a time before the credit ­servicers, who act for the funds, were registered with the Central Bank.

Credit servicers were only required to be registered with the Central Bank since 2019 after earlier legislation was introduced.

The Financial Services and Pensions Ombudsman (FSPO) is an independent and free service that helps resolve complaints from consumers with financial institutions.

Finance Minister Jack Chambers yesterday received government approval for a Committee stage amendment to the Financial Services and Pensions Ombudsman (Amendment) Bill 2023.

This proposed amendment, which was drafted following advice from the Attorney General and consultation with the Office of the Parliamentary Counsel (OPC) and the ombudsman, seeks to close the legal gap.  

Right to protections for all 

A government spokesperson said: “It is important that all residential mortgage holders can avail of consumer protections, including being able to bring a complaint to the FSPO, no matter what the background of their mortgage is or whether their provider was previously unregulated.”

In a statement to The Journal, Doherty said the legal loophole, which he highlighted in February, meant that even if there was wrongdoing or a mortgage holder was mistreated, the ombudsman could not investigate the complaint or require the vulture fund to pay compensation to the consumer for misconduct.

“This is a basic right which every consumer and mortgage holder should have. Access to the Financial Ombudsman is a key part of the consumer protection framework,” he said.

“For years government ministers have claimed that mortgage holders who had their loans sold to vulture funds would keep all and lose none of the consumer protections that they had when their loans were held by retail banks.

“That was not true. In February I made clear to the government that this loophole must be closed.

“I look forward to scrutinising the legislation to ensure that it achieves what I raised in February,” he said.