I have been advised by the Central Bank of Ireland (the Central Bank) that they have recently concluded an investigation into the practice of charging costs associated with the legal process, including third party costs (the costs) to borrowers in mortgage arrears and charging of interest on those costs.
In summary, their investigation concluded that:
1. Applying the costs prior to the conclusion of repossession proceedings and prior to the decision by a Court to award the costs to the regulated entity is not in borrowers’ best interests. Additionally, it is not in the borrower’s best interests to apply the costs prior to settlement between the parties concerned or prior to the borrower being in a position to redeem the mortgage and requesting to do so;
2. Pursuant to the terms of the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (the ‘CMCAR’), charging interest on the costs at any point is contrary to Regulation 29 (2) of the CMCAR.
On 23 October 2019, the Central Bank issued an industry letter to Credit Institutions, Credit Servicing Firms and Retail Credit Firms setting out its expectations in relation to applying the costs and charging interest on the costs. Additionally, the Central Bank reminded all regulated entities of existing obligations under the Code of Conduct on Mortgage Arrears 2013 (the CCMA), including the restriction on imposing charges and/or surcharge interest on arrears, unless the borrower has been classed as not co-operating. A copy of the letters issued can be found on their website: https://www.centralbank.ie/regulation/consumer-protection/consumer-protection-codes-regulations
As the Deputy will appreciate, as in any Central Bank investigation, no details of investigations can be shared until the investigation is complete and so I am unable to comment further.