Dáil Éireann Debate, Thursday - 28 February 2019
31. Deputy Clare Daly asked the Minister for Finance the reason steps have not been taken to date to place the current code of practice on the transfer of mortgages on a statutory footing and to oblige lenders to abide by it in view of the concern over recent years in regard to the transfer of loans to vulture funds without the consent of the borrower. [9932/19]
Amharc ar fhreagraThe background to the issuing of the Code of Practice on the Transfer of Mortgages (the Code of Practice) by the Central Bank of Ireland in 1991 was that mortgage customers were offered free shares in their building society which gave them the right to vote on the conversions of building societies to public limited companies. Additionally, securitisations were becoming more prevalent during the 1980s and 1990s. If the member's mortgage was sold to a third party or had been securitised, the mortgage customer lost the right to vote on conversions.
The Code of Practice required that borrowers must consent to their mortgages being transferred and the lender was required to provide a statement containing sufficient information to enable the borrower to make an informed decision. The Code of Practice was issued as a voluntary Code (as opposed to the other Central Bank Codes of Conduct issued under Section 117 of the Central Bank Act 1989). Consequently, the Central Bank's regulatory powers, including the use of its Administrative Sanctions powers, do not apply to the Code of Practice.
I have been informed by the Central Bank of Ireland that it is considering the possibility of revoking or removing this Code of Practice as it leads to confusion regarding the protections available to consumers whose loans are being transferred. The mortgage market has changed significantly since the introduction of the Code in 1991, and mortgage contracts now generally include a clause that the borrower's loan can be sold, which the borrower consents to when signing their mortgage contract. As outlined above, the consumer protection framework around the transfer of loans has also evolved significantly since the voluntary Code of Practice was issued and the Central Bank is of the view that the voluntary Code of Practice is not appropriate in the modern financial environment.
The Central Bank of Ireland and I are both of the view that the regulatory framework currently in place provides sufficient protections to consumers whose loans are being sold. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 ensures that consumers whose loans are sold to another firm maintain the same regulatory protections they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 that came into effect on 21 January 2019, ensures that all transferees of credit are now entities which are regulated by the Central Bank, i.e. loans cannot be transferred to an unregulated entity. Under Provision 3.11 of the Consumer Protection Code 2012 (the Code), a regulated entity must notify the Central Bank immediately and provide a consumer with at least 2 months' notice before transferring all or part of its loan book covered by the Code to another entity.
Finally, the statutory Code of Conduct on Mortgage Arrears (CCMA) was put in place to ensure that relevant regulated firms have fair and transparent processes in place for dealing with borrowers in or facing mortgage arrears. The Central Bank of Ireland published its Report on the Effectiveness of the CCMA in the context of the Sale of Loans by Regulated Lenders in November 2018. It found that for borrowers who engage with the process, the CCMA is working effectively and as intended in the context of the sale of loans by regulated lenders.
