Dáil Éireann Debate, Tuesday - 12 February 2019
178. Deputy Pearse Doherty asked the Minister for Finance if the attention of the Central Bank has been drawn to customers being contacted by banks that are offering to buy out tracker mortgages by replacing them with a fixed or standard variable mortgage plus an upfront cash payment; the views of the bank on such a practice; and if he will make a statement on the matter. [6802/19]
View answerThe Central Bank of Ireland advises that, depending upon a customer’s personal circumstances, any such practice as outlined by the Deputy would have to comply with certain requirements of the Consumer Protection Code and be in the customer’s best interests.
In particular, the following requirements of the Consumer Protection Code will be relevant:-
Provision 6.9(b) requires that where a regulated entity offers a personal consumer the option to move from a tracker interest rate to an alternative rate on their existing loan, the lender must provide the personal consumer with the following information on paper or another durable medium;
i) indicative comparisons of the cost of the monthly loan repayments at the personal consumer’s current tracker interest rate and each of the alternative rate(s) being offered;
ii) an indicative comparison of the total cost of the loan if the personal consumer continues with the existing tracker interest rate and the total cost of the loan for each alternative rate(s) and terms being offered (any assumptions used must be reasonable and justifiable and must be clearly stated); and
iii) details of the advantages and disadvantages for the personal consumer of the tracker interest rate compared to each of the other rate(s) being offered.
Furthermore, the following warning statement should also appear with the information above, in circumstances where a personal consumer will not be able to revert to a tracker interest rate if they move to an alternative rate:
Warning: if you switch to an alternative interest rate, you will not be contractually entitled to go back onto a tracker interest rate in the future.
Provision 6.12 also requires that, where a regulated entity offers an incentive to a personal consumer on an existing mortgage, the regulated entity must provide the personal consumer, on paper or on another durable medium, with the information needed to consider the incentive offered. This information must:
a) quantify the implications for the personal consumer of availing of the incentive including an indicative cost comparison of the total cost of the existing mortgage if they do not avail of the incentive and the total cost of the mortgage if they avail of the incentive;
b) clearly set out the length of time during which the incentive will be available;
c) clearly set out any assumptions used, which must be reasonable and justifiable;
d) set out the advantages and disadvantages to the personal consumer of availing of the incentive;
e) include other key information which the personal consumer should have available to them when considering the incentive; and
f) include a statement that the personal consumer may wish to seek independent advice prior to availing of the incentive.
In addition, for those mortgages which will fall within the scope of the Code of Conduct on Mortgage Arrears, provision 41 of that Code also provides that the lender must not require the borrower to change from an existing tracker mortgage to another mortgage type as part of any alternative repayment arrangement offered by the borrower except in the circumstances set out in provision 46 where the alternative repayment arrangement is affordable for the borrower and is a long term sustainable solution which is consistent with Central Bank of Ireland policy on sustainability.
The Central Bank has also indicated that if the Deputy has any relevant information which he wishes to bring directly to its attention on this matter, it will consider such information in the context of its supervisory activity.
