Dáil Éireann Debate, Thursday - 28 October 2004
202 Mr. Haughey asked the Minister for Finance the measures he can take to assist endowment mortgage holders to make up the shortfall in the cash sum which will be available to them; if he proposes to intervene with the financial institutions in this regard; and if he will make a statement on the matter. [26478/04]
View answer207 Mr. Gregory asked the Minister for Finance his response to the endowment mortgage scandal; his proposals to assist the approximate 90,000 persons here adversely affected; and if he will make a statement on the matter. [26565/04]
View answerI propose to take Questions Nos. 202 and 207 together.
I have no intention of intervening with regard to endowment loan shortfalls at present. The Irish Financial Services Regulatory Authority, IFSRA, is already studying the situation, having commenced a survey earlier this year, to determine whether and to what extent there will be difficulties for customers. It would be premature at this stage to second guess the outcome of the survey. I will continue to review the adequacy of the relevant legislative framework as the information developed by IFSRA becomes available.
There is already a substantial volume of legislation in place relating to these products. The Consumer Credit Act 1995, which commenced in May 1996, contains specific provisions in relation to endowment loans and in particular prescribes certain information which must be included in any application form or information document issued to consumers applying for such loans. For example, since the commencement of the Act all endowment loan application forms must contain a prominent notice to the effect that "There is no guarantee that the proceeds of the insurance policy will be sufficient to repay the loan in full when it becomes due for payment".
The Act also obliges that in instances where there is a possibility during the lifetime of an endowment loan that borrowers may be required to increase premium payments on the insurance policy relating to the loan, any document approving the loan must contain a prominent statement of this possibility. Similarly information documents on endowment loans must, where the possibility exists that early surrender of the insurance policy may result in a net loss to the consumer, taking into account premia and other charges paid in, contain a statement of this possibility.
The Act also places an obligation upon insurers underwriting policies relating to endowment loans to issue a statement to the consumer every five years setting out not only the value of the policy at the time of issue but also a comparison of this valuation to the valuation at such date projected at the time the policy was first written and a revised estimate of the valuation at maturity.
In addition to the provisions of the Consumer Credit Act, the Life Assurance (Provision of Information) Regulations, which came into being in 2001, oblige insurers to provide policy holders, including holders of policies relating to endowment mortgages, with an annual written statement containing, inter alia, information on the current surrender or maturity value of the policy.
More recently, the Government has already very considerably enhanced the regulatory and supervisory regime governing the financial services industry, primarily through the enactment of the Central Bank and Financial Services Authority of Ireland Act 2003, which established the Irish Financial Services Regulatory Authority.
The Central Bank and Financial Services Authority of Ireland Act 2004, complements the Act passed last year and further enhances IFSRA's powers and strengthens the regulatory environment. Particular features of the 2004 Act are that it provides for an enhanced structure for dealing with consumers who have complaints about financial institutions and also provides consumer and industry consultative panels for the financial regulator. The consumer panel will have an important role in ensuring that the regulator is correctly reflecting the interests of consumers in its protective — issue of codes of conduct — and educational — information pamphlets — roles. These provisions will help IFSRA to ensure consumers have all necessary information to allow them to make considered and informed choices between differing financial products including mortgages.
