Tuesday, 3 November 2009
Department of Finance
Financial Services Regulation
Question 357: To ask the Minister for Finance if his attention has been drawn to the fact that some banks are accepting a P60 as proof of income for the purpose of securing a mortgage; his views on requiring a P21 to be used as proof of income; and if he will make a statement on the matter. [38723/09]
The Financial Regulator's Consumer Protection Code contains requirements which must be followed by both lenders and intermediaries at point of sale. The mortgage provider must demonstrate that it has gathered sufficient information from the consumer to allow it to provide a recommendation to that consumer. It is therefore incumbent upon mortgage providers to satisfy themselves as to the financial situation of prospective customers, how they do this is a matter for the institutions themselves, subject to their processes being acceptable to the Regulator.
Mortgage Intermediaries are authorised in accordance with the relevant provisions of the Consumer Credit Act 1995. This sets out the necessary conditions which must be met prior to authorisation and also sets out a number of grounds where an authorisation may be refused, some of which relate to the holding of other types of licences (section 116 (9)). These restrictions do not include the holding of a licence to operate as an estate agency.
However, the Financial Regulator's Consumer Protection Code applies to mortgage intermediaries. Among the provisions included in this Code is the requirement to seek to avoid conflict of interest. The Code states that "where conflicts of interest arise and cannot be reasonably avoided, a regulated entity may undertake business with or on behalf of a consumer with whom it has directly or indirectly a conflicting interest, only where that consumer has acknowledged, in writing, that he/she is aware of the conflict of interest and that he/she still wants to proceed."
In addition, Section 127 of the Consumer Credit Act 1995 prohibits mortgage lenders from making the granting of a loan subject to a requirement that the borrower uses the services of a particular individual or firm. Section 127 reads as follows- (1) A mortgage agent shall not make or offer to make to any person, or arrange or offer to arrange for any person, a housing loan which would be subject to a condition that any financial services, conveyancing services, auctioneering services or other services relating to land which that person may require, whether or not in connection with the loan, shall be provided by the agent or through a subsidiary or other associated body of such agent. (2) Where, in connection with the making or arranging of a housing loan, more than one service is made available by a mortgage agent or one or more of his subsidiaries, the agent shall not, and shall ensure that each of his subsidiaries does not, make the services available on terms other than terms which distinguish the consideration payable for each service so made available; nor shall any of the subsidiaries make the services available on terms other than terms which make that distinction. (3) Where a person is providing auctioneering services, or constructing houses for sale, and is also a mortgage intermediary, he, or a subsidiary or other associated body, shall not sell, offer to sell or arrange to sell a house which is to be purchased with the aid of a housing loan, on terms which differentiate as between a person who purchases the house with the aid of a housing loan arranged by or on behalf of such intermediary and a person who purchases the house with the aid of a housing loan otherwise arranged.
The Financial Regulator conducted a themed inspection in 2008 to examine how mortgage intermediaries handle potential conflicts of interest when also providing property services to consumers. The inspection found that it was the policy of most intermediaries to avoid potential conflicts of interest or where a potential conflict of interest could arise that the intermediary would write to the customer advising them of the position before proceeding with the business.
It is my view that the existing legislation in this area sufficiently empowers the Financial Regulator to regulate effectively situations where conflicts of interest or potential conflicts of interest arise.