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EU Regulations

Dáil Éireann Debate, Tuesday - 22 May 2018

Tuesday, 22 May 2018

Ceisteanna (140)

Michael McGrath

Ceist:

140. Deputy Michael McGrath asked the Minister for Finance the position under the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 with regard to the calculation by banks here of break fees for consumers exiting a period on a fixed rate of interest on their mortgage; if he will request the Central Bank to undertake a public awareness campaign in order that consumers are better informed of these changes; if the Central Bank has issued guidance to lenders in respect of the application of the new rules to the calculation of break fees; and if he will make a statement on the matter. [22212/18]

Amharc ar fhreagra

Freagraí scríofa

The European Union (Consumer Mortgage Credit Agreements) Regulations 2016, which transposed the Mortgage Credit Directive into Irish law, applies to all relevant credit agreements that come into effect after 21 March 2016.

While the Central Bank has not provided any formal guidance on the matter, part 10 of the Mortgage Credit Regulations provides that a consumer has a right to discharge fully or partially his or her obligations under a credit agreement prior to the expiry of that agreement. In such cases, the consumer shall be entitled to a reduction in the total cost of the credit to the consumer, such reduction consisting of the interest and the costs for the remaining duration of the contract.

On the other hand a creditor shall be entitled to fair and objective compensation, where justified, for possible costs directly linked to the early repayment, but shall not impose a sanction on the consumer, and any such compensation shall not exceed the financial loss of the creditor. The creditor's entitlement to compensation only arises where the borrowing rate provided for in the credit agreement:

- may not be changed, or

- may not be changed over a period of at least one year, or

- may not, for a period of at least five years, exceed the rate applicable on the date of the credit agreement by more than 2 per cent.

Where a consumer seeks to discharge his or her obligations under a credit agreement prior to the expiry of the agreement, the creditor must provide to the consumer without delay after receipt of the request, on paper or on another durable medium, the information necessary to consider that option. That information shall at least quantify the implications for the consumer of discharging his or her obligations prior to the expiry of the credit agreement and clearly set out any assumptions used. Any assumptions used must be reasonable and justifiable.

All regulated entities providing financial services within the State are also required to comply with the Central Bank’s Consumer Protection Code 2012. The Code’s General Principles provide that a regulated entity must ensure that in all its dealings with customers and within the context of its authorisation, it makes full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer. Provision 4.25 provides that where a regulated entity:

a) offers credit on a fixed interest rate to a personal consumer; or

b) offers a personal consumer the option to fix their rate or to switch to a fixed rate, on an existing credit agreement;

the regulated entity must provide, in the credit documentation, a worked example specific to the personal consumer of the early redemption charge in monetary terms and details in relation to the calculation of this charge.

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