Denis Naughten (Roscommon-South Leitrim, Fine Gael)
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Question 91: To ask the Minister for Finance the steps which he is taking to address the cost of sub-prime mortgages; the discussions he has had with the Irish Financial Services Regulatory Authority on the issue; and if he will make a statement on the matter. [18812/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy will be aware, the Government took steps in October 2007 via an amendment to the Central Bank Act, 1997, to provide for an appropriate system of authorisation and supervision of retail credit firms by the Financial Regulator engaged in specialist or so-called sub-prime lending. Such lenders were not previously subject to financial regulation in respect of lending activities. The primary purpose of this amendment was to extend to customers of these firms the benefit of the consumer protections provided for in the Financial Regulator's Consumer Protection Code. This regulatory regime has been in place since 1 February 2008 and is being implemented by the Financial Regulator. Consumer credit, including sub-prime lending, is also regulated in Ireland under the Consumer Credit Act 1995. The Act makes detailed provision for the form and content of loan agreements and for advertising of consumer credit.

The Consumer Protection Code requires all mortgage lenders to undertake suitability assessments before offering a product or service to consumers. In addition, the Consumer Protection Code sets out the requirements that a regulated entity must contact the consumer as soon as it becomes aware that a mortgage account is in arrears and that it must have in place a procedure for handling accounts in arrears.

The finalised recapitalisation scheme announced on 11th February 2009 includes a new code of conduct for Mortgage Arrears, which has been issued by the Financial Regulator and came into force on the 27 February 2009. The new Code applies to mortgage lending activities to consumers in respect of their principal private residence in the State and is mandatory for all mortgage lenders registered with the Financial Regulator including so-called "sub-prime lenders". Under the mortgage arrears code where a borrower is in difficulty the lender will make every reasonable effort to agree an alternative repayment schedule and will not commence legal action for repossession until after six months from the time arrears first arise.

The Financial Regulator wrote to all regulated mortgage lenders on 16 December 2008 with feedback following a 2008 examination of procedures in place within financial institutions to deal with arrears and repossessions. Their letter sets out best practices identified during the examination for dealing with arrears. The Financial Regulator is currently carrying out a further examination of mortgage lenders to ensure that they are in compliance with the specific provisions of the Consumer Protection Code and the Consumer Credit Act 1995. The examination will also review the application of the residential mortgage arrears and repossession procedures and practices in place in mortgage lenders, as advised to the Financial Regulator in 2008, to ensure that consumers are being treated fairly, and will seek an update on the implementation of the "best practices" outlined in the Financial Regulator's letter of 16 December 2008.

In terms of support for payment of mortgages, the Mortgage Interest Supplement, administered by the Community Welfare Service of the Health Service Executive on behalf of the Department of Social and Family Affairs, provides assistance where the mortgage relates to a person's sole place of residence.

If a consumer has a complaint about his/her mortgage a complaint must first be made directly to the lender. If the consumer is dissatisfied with the outcome of his/her complaint he/she can then refer the matter for further investigation to the Financial Services Ombudsman.

I am satisfied that the measures I have outlined ensure that the interests of such borrowers are safeguarded, consistent with the statutory consumer protection mandate of the Financial Regulator.