The Government is planning new legislation to protect borrowers whose loans were sold to unregulated financial entities in the wake of the crash.

Up to 10,000 mortgages are now controlled by institutions which are under no obligation to act in accordance with the Central Bank’s code of conduct on mortgage arrears.

The code obliges financial institutions to act within certain parameters when it comes to dealing with problem loans.

It also affords borrowers complaints and appeals procedures should they feel unfairly treated.

The proposed legislation, which will be brought forward by the end of the year, aims to make companies that purchase loan books subject to the consumer protection rules here.

Specifically, it will make ownership of credit, as distinct from the provision of credit, a newly regulated activity which requires Central Bank authorisation.

The Government essentially wants to return borrowers to the position in which they were before the loan book was sold.

While the legislation is not retrospective it will apply to all owners of loans regardless of the when they were purchased, the Department of Finance said.

The department today initiated a public consultation process, which will feed into the drafting the legislation.

Earlier this month, Minister for Finance Michael Noonan said he had received assurances from Permanent TSB that the buyer of its Springboard sub-prime mortgage portfolio would sign up to the terms of the Central Bank's code on arrears.