Alan Farrell (Dublin Fingal, Fine Gael)
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63. To ask the Minister for Finance the action he plans to take to address situations whereby when financial institutions and their customers are negotiating on the warehousing of debt the financial institutions allow arrears to accumulate during this negotiation period, subsequently adversely affecting the customer’s credit rating; and if he will make a statement on the matter. [44663/17]

Alan Farrell (Dublin Fingal, Fine Gael)
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64. To ask the Minister for Finance the action he plans to take in situations in which a self-employed person's credit rating has been adversely impacted with regard to home mortgage arrears resulting from the accumulation of debt during the period of negotiation on warehousing between the person and a financial institution; if he will address the fact that they will face increased difficulty in accessing future finance for their business, preventing it from growing and subsequently preventing them from creating jobs in their local community; and if he will make a statement on the matter. [44664/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 63 and 64 together.

In relation to situations whereby, when financial institutions and their customers are negotiating on the warehousing of debt, and that arrears accumulate during this time, and its subsequent affect on the consumer's credit rating, the Central Bank advises me that the type of consumer and the type of loan involved will dictate which of the Central Bank’s rules will apply to the particular case. 

The Central Bank’s Code of Conduct for Mortgage Arrears (CCMA) applies to the mortgage loan of a borrower (in arrears or pre-arrears) which is secured by their primary residence.The CCMA sets out how lenders must treat borrowers in or facing mortgage arrears, with due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits.All such cases must be handled sympathetically and positively by the lender, with the objective at all times of assisting the borrower to meet his/her mortgage obligations.As part of the Mortgage Arrears Resolution Process set out in the CCMA, lenders must explore all of the options for alternative repayment arrangements (ARAs) offered by that lender, which may include warehousing part of the mortgage.

Prior to completing a full assessment of the borrowers case, a lender may agree with the borrower to put a temporary ARA in place where a delay in putting an ARA in place will further exacerbate a borrower’s arrears or pre-arrears situation.Such a temporary ARA should be for a limited period of time and should be sufficient to enable the lender to complete a full review of the borrower’s case.

The CCMA requires lenders to provide borrowers in arrears with information about how data relating to the borrower’s arrears will be shared with the Irish Credit Bureau or any other credit reference agency or credit register, where permitted by contract or required by law, and the impact on the borrower’s credit rating.

The arrears handling provisions in Chapter 8 of the Consumer Protection Code (the Code) apply when the loan is not a mortgage loan to which the CCMA applies.The Code requires that regulated entities have in place written procedures for the handling of arrears.

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.Specified information in relation to arrears must be made available to personal consumers, including general information to encourage the consumer to deal with arrears and stating the benefits of dealing with arrears.

Where an account remains in arrears for 31 calendar days after the arrears first arose, a regulated entity must inform the consumer of the status of the account and other specified information. This includes the amount of the arrears to date and the interest rate applicable to the arrears, details of any charges in relation to the arrears that may be applied and the importance of the personal consumer engaging with the regulated entity in order to address the arrears.This must be updated every three months, where the arrears persist.

Where a regulated entity reaches an agreement on a revised repayment arrangement with a personal consumer, the regulated entity must provide the personal consumer with a clear explanation of the revised repayment arrangement and clarification on what data relating to the consumer’s arrears will be shared with the Irish Credit Bureau or any other relevant credit reference agency.

In relation to a self employed person's credit rating being adversely impacted with regard to mortgage arrears resulting from the accumulation of debt during the period of negotiation on warehousing between the person and the financial institution, and it's consequent affects, the Central Bank has advised me that in December 2015, the Central Bank published new regulations for firms lending to small and medium enterprises (SME Regulations), with which regulated lenders (other than credit unions) have been required to comply with since 1 July 2016, and in the case of credit unions, from 1 January 2017. 

The SME Regulations aim to strengthen protections for SMEs when borrowing from regulated lenders while also facilitating access to credit.They also set out a framework which regulated entities must comply with when dealing with SME borrowers in arrears and financial difficulties.The SME Regulations require regulated entities to establish and maintain in writing policies and procedures for dealing with borrowers in financial difficulties.Regulated entities must make available to borrowers an information booklet, to include:

- a statement emphasising that it is in the borrower’s interest to engage with the regulated entity about arrears or financial difficulties;

- a statement that the financial difficulties may impact on the borrower’s credit rating;

- the option of an immediate review of the borrower’s credit facilities.

Within 10 working days of a borrower entering financial difficulties, a regulated entity must inform the borrower of, among other things:

- the status of the account;

- the applicability of the SME Regulations;

- the availability of the information booklet referred to above; and

- that it is in the borrower’s interest to engage with the regulated entity about arrears or financial difficulties

Where a regulated entity offers an alternative arrangement to an SME borrower, the regulated entity must provide certain information in writing to the borrower including how the alternative arrangement will be reported by the regulated entity to a relevant credit reference agency or credit register and that it may impact on the borrower’s credit rating.  The decision to grant credit is a commercial decision for lenders.