Dáil Éireann Debate, Thursday - 16 January 2014
15. Deputy Pearse Doherty asked the Minister for Finance the legal protections provided for under the Consumer Credit Act for mortgage holders whose distressed mortgages have been sold by their original lender to a debt factoring company or other financial service provider; and if the holders of these mortgages continue to have recourse to the mortgage arrears resolution process and code of conduct on mortgage arrears. [1648/14]
Amharc ar fhreagraI have no statutory role in the sale of loan books which is a commercial matter for the financial institutions concerned.
The Code of Conduct on Mortgage Arrears and the Consumer Protection Code apply to services providers regulated by the Central Bank. The Consumer Protection Code obliges the regulated entities to ensure that their own activities and any outsourced activity, such as debt collection, complies with the requirements of the Code. This means that activity should uphold principles in the Code such as the requirement for institutions:
- not to exert undue pressure or undue influence on a customer;
- to act honestly, fairly and professionally in the best interests of customers and to act with due skill, care and diligence in the best interest of its customers; and
- to prohibit personal visits or oral communications except in specified circumstances.
The Code of Conduct on Mortgage Arrears sets out requirements for mortgage lenders dealing with borrowers facing or in mortgage arrears. The CCMA provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that long term resolution is sought by lenders with each of their borrowers.
The matter of sales of loans or transfers of loans is a very complex legal area, particular to the terms and conditions of individual consumer agreements and the specific ‘transfer’ involved. For example, some transfer documentation includes a clause which stipulates that the lender (not the transferee) remains responsible for administration including setting interest rates and arrears handling.
The position may be further complicated where the transferee (the new holder of the loan book) engages in a restructuring which changes the terms of the credit to the consumer.
Where Central Bank regulated financial institutions sell part, or all, of their mortgage loan book to another regulated financial institution, the same protections apply to borrowers, including the Code of Conduct on Mortgage Arrears and the Consumer Protection Code. Any agent acting on behalf of a regulated lender must comply with the requirements of Irish financial services law. Failure to do so may result in the Central Bank imposing penalties on the regulated lender concerned.
By virtue of an exemption in Part V of the Central Bank Act 1997 (as amended), an unregulated entity to which a cash loan is transferred by a regulated entity is not subject to Central Bank supervision under the Consumer Protection Code and CCMA.
However, statute law provides for certain protections where the property is a principal private residence. For example, the Land and Conveyancing Law Reform Act 2013 provides the power to a Court to adjourn repossession proceedings in respect of a principal private residence for a period to see if a Personal Insolvency Arrangement could be agreed as an alternative resolution of the matter. This statutory provision will be applicable in all repossession cases that involve a principal private residence, irrespective of the particular categorisation/status of the mortgagor.
I should also point out that to all debt collectors that operate across any or all sectors of the economy, including private individuals and debt collecting firms are subject to the provisions of the Non-Fatal Offences against the Person Act 1997. Under section 11 of this Act, it is an offence to demand payment of a debt in a way that is designed to cause alarm, distress or humiliation. A person found guilty of offences under this Act is subject to large fines and up to 14 years imprisonment.
