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Code of Conduct on Mortgage Arrears

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Questions\Written Answers\Code of Conduct on Mortgage Arrears

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Code of Conduct on Mortgage Arrears

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Senator


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Minister for Finance (Deputy Michael Noonan)

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Minister for Finance (Deputy Michael Noonan)

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Michael Noonan

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Snippet Contents:

The Central Bank’s Code of Conduct on Mortgage Arrears (CCMA) is a statutory Code issued under Section 117 of the Central Bank Act 1989 and lenders are required to comply with the CCMA as a matter of law.
The Deputy will be aware that the Central Bank’s revised CCMA came into effect from 1 July 2013. This followed an extensive consultation process where over 200 submissions were received from consumers, consumer representative bodies, industry and other representative bodies. A Feedback Document and Consumer Guide to the CCMA have also been published on the Central Bank’s website which can be accessed at www.centralbank.ie.
I am informed by the Central Bank that the CCMA provides an integrated and cohesive package of consumer protection measures for borrowers facing or in mortgage arrears. It seeks to deliver on the following principles, to:
- ensure appropriate resolution of each borrower’s arrears situation;
- ensure that lenders deal with borrowers in a fair and transparent manner;
- support and facilitate meaningful engagement between lenders and borrowers; and
- ensure borrower awareness of the benefits of co-operating with their lender, and the consequences of not co-operating.
The main changes to the CCMA include:
- Requirement on lenders to have a communications policy, which must be ratified at Board level, that will protect borrowers against unnecessarily frequent contacts and harassment, while ensuring that lenders can make the necessary contact to progress resolution of arrears cases;
- A new requirement for lenders to provide the Standard Financial Statement (SFS) at the earliest opportunity, and to offer assistance to borrowers with completing it. In addition, lenders can now agree with the borrower to put a temporary arrangement in place to prevent the arrears from worsening while the full SFS is being completed and assessed;
- Where there is no other sustainable option available, lenders can now offer an arrangement to distressed mortgage holders which provides for the removal of the tracker rate, but only as a last resort, where the only alternative option is repossession of the home. The arrangement offered must be a long-term, sustainable solution that is affordable for the borrower;
- Co-operating borrowers must now be given at least eight months from the date arrears first arise before legal action can commence and at the end of the MARP process, lenders will be required to provide a three-month notice period to allow co-operating borrowers time to consider their options, such as voluntary surrender or an arrangement under the Personal Insolvency Act, before legal action can commence;
- Greater clarity around when a borrower is considered to be co-operating and, in recognition of the serious impact of being classified as not cooperating, a new requirement that lenders must provide a warning letter giving at least 20 business days’ notice to the borrower, outlining the implications of being classified as not cooperating and providing specific information on how to avoid this classification;
Transparency for borrowers has been improved through increased information requirements for lenders, including more detail in the MARP booklet on:
- how the alternative repayment arrangements offered by the lender work and their key features;
- explanations of other options such as voluntary surrender or trading down;
- explanations of the meaning and implications of not co-operating;
- summary information on a lender’s potential use of confidentiality agreements;
- information on the borrower’s right of appeal;
- a link to keepingyourhome.ie, where borrowers can get further information and assistance; and
- summary of the lender’s communications policy.
The Central Bank has advised that, where a borrower believes that their lender has not complied with or in any way disregarded the Central Bank’s Code of Conduct on Mortgage Arrears, he/she may make a complaint to their lender. The lender must seek to resolve the borrower’s complaint in line with the complaints handling process set out in provisions 10.7 to 10.12 of the Central Bank’s Consumer Protection Code.
Each lender must also have an appeals process in place to enable a borrower to appeal in relation to a decision of the lender, including:
a) Where an alternative repayment arrangement is offered by a lender and the borrower is not willing to enter into the alternative repayment arrangement;
b) Where a lender declines to offer an alternative repayment arrangement to a borrower; and
c) Where a lender classifies a borrower as not co-operating.
For this purpose, each lender must establish an Appeals Board to consider and determine any such appeals submitted by borrowers.
If the borrower remains dissatisfied following the outcome from the complaints or appeals process, he/she may then refer the matter to the Financial Services Ombudsman who deals independently with unresolved complaints from consumers about their individual dealings with all financial service providers.