Weaknesses Identified In Lenders’ Approach To Mortgage Arrears

The Central Bank of Ireland (CBI) published the outcome of its latest themed inspection this morning. The results do not bode well for consumer confidence.

The CBI reviewed over 350 files and telephone recordings with borrowers in financial difficulties during the course of the inspection which examined seven Lenders’ compliance with specific provisions of the Code of Conduct on Mortgage Arrears (“CCMA”).

The current CCMA was introduced in 2013. It sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears.

The CBI focused on Lenders’ compliance on the following key areas:

1. Resolution of Arrears in a Timely Manner

2. Transparency

3. Fair Process

4. Process Improvements and Controls

While a number of favourable practices were found, each of the seven Lenders was found to have fallen short in terms of their obligations under the CCMA.

The inspection identified significant and undue delays in Lenders processing cases through the Mortgage Arrears Resolution Process (MARP).

More worryingly, a number of unfair practices were identified which are in clear breach of the code. Lenders’ are often not adhering to fair procedures which in turn causes the borrower unnecessary stress.

In a number of instances the Lender:

  1. continued with legal action, notwithstanding that an alternative repayment  arrangement (ARA) had been agreed with the borrower;
  2. continued to seek additional ad hoc payments from borrowers on top of agreed revised repayments, without formally assessing the borrowers’ ability to make such additional payments;
  3. had an internal policy that permitted unilateral changes by the lender to the Standard Financial Statement after it was completed by the borrower;
  4. had an internal policy that permitted the lender to remove borrowers from the MARP solely because the borrower had not agreed to an ARA over the telephone (under the CCMA, the lender is required to write to the borrower with the terms of the ARA for consideration); and
  5. did not liaise with third parties, even though borrowers had formally nominated these persons to act on their behalf, but continued to call borrowers directly.

The CBI has stated that it “expects lenders to go beyond tick-box compliance and to have a greater focus on delivering fair outcomes for distressed borrowers”.

The CBI is considering further use of its regulatory powers including, but not limited to, enforcement action as a result of this themed inspection.

For further information on the practical implications of the CCMA, please click here for an article by Ronan McGoldrick

Contact Laura Daly or Ronan McGoldrick for further information.


This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Ogier Leman for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.

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