Dáil Éireann Debate, Thursday - 14 February 2019
69. Deputy Bernard J. Durkan asked the Minister for Finance if the activities of primary and secondary lenders will be monitored with a view to ensuring that they deal with their customers in a fair and equitable manner (details supplied); and if he will make a statement on the matter. [7619/19]
View answer71. Deputy Bernard J. Durkan asked the Minister for Finance if lending institutions are encouraged to give similar consideration to their customers who found themselves in a difficult situation arising from the banking collapse (details supplied); and if he will make a statement on the matter. [7621/19]
View answer72. Deputy Bernard J. Durkan asked the Minister for Finance if the Central Bank can ensure that customers who are in indebted to the banking system have the benefit of a code of conduct in which all avenues to resolve their difficulties are explored in all cases before taking recovery action; and if he will make a statement on the matter. [7622/19]
View answerI propose to take Questions Nos. 69, 71 and 72 together.
As the Deputy will be aware, a key priority for the Government and the Central Bank of Ireland is ensuring that the interests of consumers of financial services are protected. A key element of the Central Bank’s role is ensuring that the consumer protection regulatory framework is fit for purpose and ensures that consumers best interests are protected.
The Central Bank's approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers in keeping with its remit and responsibilities for safeguarding stability and protecting consumers. This is achieved through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations in place.
The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework. This statutory Code was first introduced by the Central Bank in February 2009, with the current CCMA becoming effective from 1 July 2013. The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner and that due regard is had to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits.
Banks, retail credit firms and credit servicing firms are all required to comply with the CCMA. The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. It sets out the Mortgage Arrears Resolution Process (MARP), a four-step process that regulated entities must follow:
Step 1: Communicate with borrower;
Step 2: Gather financial information;
Step 3: Assess the borrower’s circumstances; and
Step 4: Propose a resolution
Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm. The CCMA does not prescribe the solution which must be offered.
Under the CCMA, a regulated entity may only commence legal proceedings for repossession where it has made every reasonable effort to agree an alternative repayment arrangement (ARA) with the borrower and other clear requirements are met or the borrower has been classified as not co-operating. This framework requires lenders to exhaust the options available from the suite of ARAs offered before taking action which may result in the borrower losing his/her home (whether by voluntary sale or repossession). During the legal process, borrowers have opportunities to re-engage with lenders to find a solution. In some circumstances, however, loss of ownership may be unavoidable.
As you will recall last year, I asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible. The key finding was that for borrowers who engaged with the process, the CCMA is working effectively as it is intended in the context of the sale of loans by regulated lenders. On foot of this review, the Central Bank also stated that although strategy, commercial decisions and contractual rights of regulated entities cannot be interfered with, they will investigate any patterns of behaviour it becomes aware of that suggests the CCMA is not being followed, and they will engage with industry on providing fuller information to borrowers on the assessment of their case in relation to arrangements being considered or not.
There are two other pieces of legislation that are relevant here. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (the 2015 Act) was introduced to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm. Under the 2015 Act, if the firm that bought loans from the original lender is an unregulated firm, then the loans must be serviced by a ‘credit servicing firm’ which is regulated by the Central Bank. Credit Servicing Firms are typically firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities.
Credit servicing firms must act in accordance with the requirements of Irish financial services law that applies to ‘regulated financial service providers’. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank.
Last year, the Government supported and assisted Deputy Michael McGrath's Private Members Bill, now the Consumer Protection (Regulation of Credit Servicing Firms) Act, 2018 (the 2018 Act) which requires owners of loan books to be authorised and regulated by the Central Bank of Ireland. Specifically three activities, which were not regulated, are now regulated:
- holding the legal title to credit granted under the credit agreement,
- determination of the overall strategy for the management and administration of a portfolio of credit agreements; and
- maintenance of control over key decisions relating to such portfolio.
The 2018 Act gives owners of the legal title to credit 90 days from the commencement of the Act to apply for authorisation, i.e. by 21 April 2019. A loan owner must keep the existing authorised credit servicing firm in place until their application for authorisation is approved or refused.
The Government, along with the Central Bank, will continue to monitor and ensure that the consumer protection framework in place is applied appropriately.
