Thursday, 3 December 2009

Ceisteanna (61)

Terence Flanagan


56 Deputy Terence Flanagan asked the Minister for Finance the protection available to homeowners that have taken out sub-prime mortgages; his plans to make statutory the code on mortgage arrears; and if he will make a statement on the matter. [42785/09]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Minister for Finance)

The Government took steps in October 2007, via an amendment to the Central Bank Act 1997, to provide for an appropriate system of authorisation and supervision of retail credit firms engaged in specialist or so-called sub-prime lending by the Financial Regulator. Such lenders were not previously subject to financial regulation in respect of lending activities. The primary purpose of this amendment was to extend to customers of these firms the benefit of the consumer protections provided for in the Financial Regulator's Consumer Protection Code. This regulatory regime has been in place since 1 February 2008 and is being implemented by the Financial Regulator. Consumer credit, including sub-prime lending, is also regulated in Ireland under the Consumer Credit Act 1995. The Act makes detailed provision for the form and content of loan agreements and for advertising of consumer credit.

Some non deposit-taking mortgage lenders are required to notify charges under Section 149 of the Consumer Credit Act, 1995 (as amended) to the Financial Regulator for approval. However interest rates are excluded from this requirement. Also, legal fees tend to be imposed by 3rd parties and then passed on directly by the institution to the consumer. In general these do not require approval.

When approving fees, the Financial Regulator takes the following criteria into consideration:

promotion of fair competition;

commercial justification;

passing on any costs to customers; and

the effect on customers or a group of customers.

The Financial Regulator has a Code of Conduct for Mortgage Arrears, which came into effect in February 2009 and which applies to mortgage lending activities with consumers in respect of their principal private residence in the State. The Code is mandatory for all mortgage lenders registered with the Financial Regulator. Under the Code, where a borrower is in difficulty the lender will make every reasonable effort to agree an alternative repayment schedule and will not commence legal action for repossession until after six months from the time arrears first arise.

I should also point out that people in serious debt or in danger of getting into serious debt can avail of the services of the Money Advice and Budgeting Service (MABS). This is a national, free, confidential and independent service.