I have been advised by the Central Bank of Ireland (the Central Bank) that the Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework. The CCMA is a statutory Code, the provisions of which must be complied with as a matter of law by relevant firms. The CCMA provides a strong consumer protection framework, requiring 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.
An alternative repayment arrangement (ARA) is a contract that is entered into between the regulated entity and the borrower, and the process for arriving at the ARA is stipulated in the CCMA. Provision 39 of the CCMA requires that in order to determine which options for ARAs are viable for each particular case, a regulated entity must explore all of the options for ARAs offered by that regulated entity. A non-exhaustive list of ARA options which may be included in a regulated entity’s suite is set out within this provision.
It is a commercial decision for each regulated entity to determine the suite of ARAs it considers putting in place for borrowers. Any ARA offered to a borrower must be appropriate and sustainable for his/her individual circumstances. The Central Bank cannot interfere in the contractual rights between regulated entities and borrowers such that it could require a regulated entity to consider or put in place specific ARAs for borrowers. Rather, in regulating conduct of business, the Central Bank seeks to ensure that regulated entities comply with relevant conduct of business rules, including providing consumers with all relevant information, putting in place a process for the management of customers’ financial difficulties and not exerting undue pressure or influences on customers.
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).
The CCMA also requires regulated entities to have an appeals process in place to enable a borrower appeal a decision by a regulated entity, including where the borrower is not willing to enter into an ARA or where the regulated entity declines to offer an ARA. The appeals procedure must inform the borrower of his/her right to refer the matter to the Financial Services and Pensions Ombudsman.
