I have been advised by the Central Bank of Ireland that there are requirements in the Code of Conduct on Mortgage Arrears (CCMA) relating to the information which must be provided to borrowers about legal costs. These are as follows:
- Under Provision 14 of the CCMA, a lender must prepare and make available to borrowers an information booklet with details of its Mortgage Arrears Resolution Process (MARP), which must include with regard to legal proceedings, a statement that, irrespective of how the property is repossessed or disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case.
- The borrower must also be reminded of the above information when three repayments have been missed (Provision 27), prior to being classified as not co-operating (Provision 28), where a lender is not willing to offer an alternative repayment arrangement due to concluding that the mortgage is unsustainable (Provision 45), and/or where the borrower is not willing to enter into an alternative repayment arrangement (Provision 47).
- Provision 27 of the CCMA also requires that where three mortgage repayments have been missed and remain outstanding, and an alternative repayment arrangement has not been put in place, the lender must notify the borrower of the potential for legal proceedings for repossession of the property where a borrower is not co-operating, together with an estimate of the costs to the borrower of such proceedings.
Also of relevance is that under Provision 14(1)(h) of the European Union (Consumer Mortgage Credit Agreements) Regulations 2016, the lender must make available to the borrower, on paper or another durable medium, “an indication of possible further costs, not included in the total cost of the credit to the consumer, to be paid in connection with a credit agreement.”
- In terms of existing provisions that are in place in the area of the imposition of charges or interest; provision 11 of the CCMA states that lenders are restricted from imposing charges and/or surcharge interest on arrears arising on a mortgage account in arrears, unless the borrower is not co-operating.
- Separately, under Provision 29(2) of the European Union (Consumer Mortgage Credit Agreements) Regulations 2016, any charge that a creditor may impose on a consumer arising from the consumer’s default “shall be no greater than is necessary to compensate the creditor for the costs it has incurred as a result of the default.”
Finally, the Central Bank has advised me that it is aware of the reported practice that some lenders apply legal costs to the mortgage accounts of borrowers in arrears before the conclusion of legal proceedings. The Central Bank is examining this practice to determine if it is permissible under the Code of Conduct on Mortgage Arrears (CCMA), the Consumer Protection Code 2012, and other regulations.