Dáil Éireann Debate, Thursday - 26 November 2020
225. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he and the Central Bank, along with his Department, continue to monitor the activities of investment funds that have bought up distressed or semi-distressed mortgages, with particular reference to the manner they continue to go about a resolution process; and if he will make a statement on the matter. [39475/20]
Amharc ar fhreagra226. Deputy Bernard J. Durkan asked the Minister for Finance if legislation will be considered to set down regulations to protect the consumer in cases in which lending institutions have sold off their distressed loans to third parties; and if he will make a statement on the matter. [39476/20]
Amharc ar fhreagraI propose to take Questions Nos. 225 and 226 together.
The financial services legal and regulatory framework provides a significant range of protections and supports for consumers and other borrowers.
All Central Bank regulated firms, including banks, retail credit firms (RCFs) and credit servicing firms (CSFs) are obliged to comply with the applicable consumer protection and other regulatory requirements including the Consumer Protection Code 2012 (the CPC) and the Code of Conduct on Mortgage Arrears 2013 (the CCMA), the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 and other applicable legal and regulatory provisions. Furthermore, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 provides that if a loan is transferred, the holder of the legal title to the credit must, unless it is already authorised by the Central Bank, be authorised by the Bank as a credit servicing firm. Therefore, the range of consumer protections which applied when the loan was initially made will continue to apply following the sale of the loan.
The CCMA in particular provides a strong consumer protection framework for borrowers who are in arrears or pre-arrears on a mortgage loan secured on a primary residence. The overriding objective of the CCMA is to ensure the fair and transparent treatment of consumers in mortgage arrears or pre-arrears, and that due regard is had to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. It sets out the Mortgage Arrears Resolution Process (MARP), a four-step process that regulated entities must follow:
- Step 1: Communicate with borrower;
- Step 2: Gather financial information;
- Step 3: Assess the borrower’s circumstances; and
- Step 4: Propose a resolution
When the loan is not a mortgage loan to which the CCMA applies, the arrears handling provisions in Chapter 8 of the CPC apply. Amongst other protections, that CPC requires that where an account is in arrears, a regulated entity must seek to agree an approach that will assist the personal consumer in resolving the arrears.
The Central Bank carries out its supervision of regulated entities, including banks, retail credit and credit servicing firms in a number of ways, which includes both desk based and on-site reviews of various activities. At my request, in 2018 the Central Bank carried out a review of the CCMA to ensure it remains as effective as possible in the context of the sale of loans by regulated lenders. Based on a point in time analysis and informed by various strands of work including inspections, data collection, and stakeholder engagement, the Central Bank found that for borrowers who engage with the process, the CCMA was working effectively and as intended in the context of the sale of loans by regulated firms. When a loan is sold by a bank, any existing Alternative Repayment Arrangements (ARAs) in place with a borrower under the CCMA continue to be honoured until the agreed term of the ARA ends and no material breaches of the CCMA by these firms were identified. As a follow-up action to this review, the Central Bank wrote to banks, retail credit and credit servicing firms in August 2019 to set out its expectations of all firms in respect of loan sales.
