Following a public consultation process, the Central Bank introduced enhanced mortgage switching and transparency rules to the Consumer Protection Code 2012 (the Code) by means of the Addendum which became effective from 1 January 2019:
(www.centralbank.ie/docs/default-source/regulation/consumer-protection/other-codes-of-conduct/addendum-to-consumer-protection-code-2012---june-2018.pdf?sfvrsn=4).
As a result of the enhanced mortgage switching measures, an existing provision in the Code which required that information be provided to the consumer where a regulated entity offered an incentive on an existing mortgage holder, has now been extended to apply to all mortgages i.e. for existing, new and switching mortgage holders. This is to ensure that personal consumers have sufficient clarity about the precise nature and scale of the benefit of an incentive to them, including the potential impact of an associated incentive on the cost of their mortgage. This rule in the Code requires lenders to provide consumers with information needed by them to consider the incentive offered. This information must:
- quantify the implications for the 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;
- clearly set out the length of time during which the incentive will be available;
- clearly set out any assumptions used, which must be reasonable and justifiable;
- set out the advantages and disadvantages to the personal consumer of availing of the incentive;
- include other key information which the personal consumer should have available to them when considering the incentive; and
- include a statement that the personal consumer may wish to seek independent advice prior to availing of the incentive.
In relation to the advertising of mortgage products, including incentives, the Code already contains an extensive suite of advertising rules with which regulated firms must comply. These include requirements that the design, presentation and content of all advertisements must be clear, fair, accurate and not misleading, and must not seek to influence a consumer’s attitude to the product of the entity by ambiguity, exaggeration or omission. Key information must be prominent and not obscured or disguised in any way.
The Central Bank undertook a review of mortgage related advertising in 2018, with a focus on cash back incentives, to assess whether or not lenders were advertising mortgages with cashback offers in a clear and unambiguous way. The Bank advises that 183 advertisements were reviewed for compliance with the advertising requirements in the Code and the European Union (Consumer Mortgage Credit Agreements) Regulations 2016. In some cases, the same advertisement may have appeared across all formats of advertising reviewed (e.g. print, on-line, outdoor advertising etc).
As a result of the review, the Central Bank advised that it instructed lenders to withdraw or amend c.75% of the advertisements reviewed. In summary, it was found that:
(a) key information and qualifying criteria was not always included in the main body of the advertisements, or indeed in the small print (e.g. whether a current account with the lender was required in order to qualify);
(b) the content of some webpages was not accurate and/or up to date; and
(c) the content of some of the advertisements was unclear (e.g. how the cash back incentive was calculated).
