Gerald Nash (Louth, Labour)
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269. To ask the Minister for Finance his views on the policy of banks requesting mortgage applicants to confirm whether their employer is seeking State Covid assistance through the employment wage subsidy scheme; his views on whether banks may use the publication of the list of firms availing of the scheme to deny entire cohorts of workers the opportunity to obtain mortgages; his plans to address the issue; and if he will make a statement on the matter. [36732/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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I have met with the CEOs of the banks on a number of occasions since the pandemic arose to discuss the measures banks and other regulated lenders can put in place to assist their borrowers who are economically impacted by COVID-19 and also the need to continue to support overall credit and lending in the economy, including new residential mortgage lending. In regard to the specific issue of new mortgage lending, the three main retail banks assured the Tánaiste, Leo Varadkar T.D., Minister McGrath and myself at meetings last July that they were considering mortgage applications and mortgage drawdowns in relation to their customers who were on the Temporary Wage Subsidy Scheme (and which has now been replaced by the Employment Wage Subsidy Scheme) on a case by case basis and that they are taking a fair and balanced approach.

The Central Bank has also advised that it also expects all regulated firms to take a consumer-focused approach and to act in their customers’ best interests at all times, including during the COVID-19 pandemic. As indicated, lenders continue to process mortgage applications and have supports in place to assist customers impacted by COVID-19. Therefore, if mortgage applicants have any queries or concerns about the impact of COVID-19 on their mortgage application, they should in the first instance contact their lender directly on the matter.

However, within the parameters of the regulatory framework, as set out below, the decision to grant or refuse an individual application for mortgage credit is a commercial decision to be made by the regulated entity. Also a formal loan offer may contain a condition that would allow the lender to withdraw or vary the offer if in the lender’s opinion there is any material change in circumstances prior to drawdown. In such cases, the decision to withdraw or vary the offer is also a commercial and contractual decision for the lender.

The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR) provide that, before concluding a mortgage credit agreement, a lender must make a thorough assessment of the consumer’s creditworthiness with a view to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement.  The CMCAR further provide that a lender should only make credit available to a consumer where the result of the creditworthiness assessment indicates that the consumer’s obligations resulting from the credit agreement are likely to be met in the manner required under that agreement.  The assessment of creditworthiness must be carried out on the basis of information on the consumer’s income and expenses and other financial and economic circumstances which is necessary, sufficient and proportionate.

In addition, the Central Bank’s Consumer Protection Code 2012 imposes ‘Knowing the Consumer and Suitability’ requirements on lenders.  Under these requirements, lenders are required to assess affordability of credit and the suitability of a product or service based on the individual circumstances of each borrower. The Code specifies that the affordability assessment must include consideration of the information gathered on the borrower’s personal circumstances and financial situation.

Where a lender refuses a mortgage application, the CMCAR requires that the lender must inform the consumer without delay of the refusal. In addition, the Code requires that the lender must clearly outline to the consumer the reasons why the credit was not approved, and provide these reasons on paper if requested.

If a mortgage applicant is not satisfied with how a regulated firm is dealing with them, or they believe that the regulated firm is not following the requirements of the Central Bank’s codes and regulations or other financial services law, they should make a complaint directly to the regulated firm. If the mortgage applicant is still not satisfied with the response from the regulated firm, he or she can refer the complaint to the statutory Financial Services and Pensions Ombudsman.

Gerald Nash (Louth, Labour)
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270. To ask the Minister for Finance if he or the regulator have plans to develop a public information campaign to highlight the potential savings available through mortgage switching as outlined in a recent Central Bank report; and if he will make a statement on the matter. [36733/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Department of Finance, as part of its remit to ensure that consumers are protected within the financial sector in Ireland, facilitates the Switch Your Bank public awareness campaign. The purpose of the Switch Your Bank public awareness campaign is to raise awareness and promote customer switching of financial products. AIB and Permanent TSB provide the funding for the campaign as part of a range of competition measures agreed with the European Commission under their respective EU restructuring plans. Two phases have been successfully delivered to date, on time and to budget, with advertisements running on TV, radio and online supported by a dedicated website, www.switchyourbank.ie.

The final phase of the campaign, which will commence in the new year, moves away from promoting awareness on the benefits of switching and focuses on identifying and developing trial tools which will better enable consumers to complete their switches. My Department is currently undertaking a tender competition, using the services of the Office of Government Procurement, to engage a firm to complete this research. 

The Central Bank has advised me that while financial education is within the remit of the Competition and Consumer Protection Commission (CCPC), the Central Bank is committed to raising awareness of the savings that consumers can make by switching their mortgage, as is evidenced by the recent publication of  the Economic Letter entitled .  

The Letter estimates the potential for savings available to mortgage holders and highlights some of the potential barriers to mortgage switching in Ireland. The research undertaken by the Central Bank demonstrates that a large number of mortgage holders could see significant reductions in repayment costs by switching. The Letter also highlights that behavioural characteristics may pose a barrier to customer engagement, and that those with lower levels of financial literacy and education are more likely to exhibit a high degree of inhibition to switching.

The Central Bank has also published an to raise consumer awareness and understanding of mortgage switching rules.

The Economic Letter and associated activity is building on work undertaken in previous years to promote mortgage switching.

The Central Bank has made amendments to the consumer protection framework to help consumers make savings on their mortgage repayments, provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework.

Following a public consultation in 2017, the Central Bank introduced changes to the Consumer Protection Code 2012 (the Code) by means of the Addendum to the Consumer Protection Code 2012 (June 2018). The new and enhanced requirements took effect on 1 January 2019. The changes made to the Code are as follows:

- For consumers with fixed rate mortgages, regulated entities are required to inform their consumers at least 60 days in advance that they are about to come off their fixed rate and provide details of the new rate applicable from the expiry date. The regulated entity should provide information on other possible options that may be available to the consumer.

- For consumers on variable rate mortgages (other than on a tracker rate), regulated entities are required to notify consumers every year as to whether they can, or cannot, move to a cheaper interest rate as a result of a move in their Loan to Value interest rate band, subject to the provision of an up-to-date valuation and any other requirements that may apply.

-In relation to potential switching savings, regulated entities must provide, on request, an indicative comparison of the total interest payable on the consumer’s existing mortgage and the interest payable on the new mortgage or alternative interest rate on offer by that regulated entity. Where the regulated entity provides this information, it must also provide a link to the relevant section of the CCPC’s website to allow consumers to compare potential mortgage switching savings available from other lenders.

- The changes impose a time-bound mortgage application process on regulated entities, including  requirements to acknowledge receipt of a completed mortgage application  within three business days and make a decision within 10 business days following receipt of all required information for assessment of a mortgage application.

- In relation to incentives, the existing provision 6.12 in the Code has been extended to apply the same protections to all mortgage holders i.e. for new, existing and switching mortgage holders. This is to ensure that consumers have sufficient clarity about the precise nature and scale of the benefit of an incentive to them, including the potential impact of an associated incentive on the cost of their mortgage. 

The Central Bank has also introduced a number of increased protections for variable rate mortgage holders. The enhanced measures, which are provided for in an Addendum to the Consumer Protection Code 2012, and became effective in February 2017, require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an increase. The measures also improve the level of information required to be provided to borrowers on variable rates about other mortgage products their lender provides which could provide savings for the borrower and signpost the borrower to the CCPC’s mortgage switching tool.