The provision of credit is governed by legislation including, the Consumer Credit Act 1995 and the European Communities (Consumer Credit Agreements) Regulations 2010. In addition, Regulated Financial Service Providers must comply with the Consumer Protection Code 2012 when offering, recommending, arranging or providing regulated activities, including mortgages and loans, to consumers.
The decision on the approval of a loan for a borrower must remain a commercial decision for the lending institution concerned and as Minister for Finance, I have no role in that matter. It is important that each lending institution is allowed to assess properly and independently the risks that it is considering when deciding to approve a loan.
However, chapter 5 of the Consumer Protection Code 2012 requires lenders to undertake, in particular, a 'Knowing the Consumer' and a 'Suitability and Affordability' assessment before offering, recommending, arranging or providing credit to a consumer. As part of such an assessment, lenders are obliged to take into consideration the consumer's age, known future changes to his/her circumstances, income, savings, debts and financial commitments. This legislation allows for lending institutions to offer bridging finance, as appropriate.
I have been informed by the IBF that demand for bridging finance is very limited. I understand that two lender banks have confirmed to the IBF that they offer bridging finance. These banks that offer bridging finance report that it will be considered on a case-by-case basis. It may be offered only where there is a binding and unconditional contract in place for the sale of the existing property. The bank may also require a letter of undertaking from the customer's solicitor. The customer must demonstrate repayment capacity for the bridging loan.
