Written answers

Thursday, 20 January 2022

Department of Finance

Financial Services

Photo of Denis NaughtenDenis Naughten (Roscommon-Galway, Independent)
Link to this: Individually | In context | Oireachtas source

173. To ask the Minister for Finance if he will review the operation of debt recovery by vulture funds that are using the threat of court costs against heavily indebted persons as a mechanism to bully them into accepting financial terms that will still leave them with substantial residual debt; and if he will make a statement on the matter. [2769/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In the operation of debt recovery creditors are obliged to operate and enforce agreements within the law and the terms of the relevant agreement.

Where a creditor is a regulated financial services provider, such as an investment fund, they must in addition operate within the framework of relevant Central Bank regulatory and consumer protection requirements.  

When a consumer takes out a loan from a regulated lender it is subject to all the relevant Irish and EU consumer protections.  By virtue of the Consumer Protection (Regulation of Credit Servicing Firms) Acts, if the loan is subsequently sold to another entity those consumer protections will continue to apply and the new holder of legal title to the credit must, unless it is already authorised by the Central Bank, be authorised as a credit-servicing firm and it must act in accordance with Irish financial services law and regulatory framework that applies to ‘regulated financial service providers’. 

The operation of funds purchasing loans from regulated lenders such as banks fall within these requirements which are the result of legislation that has been put in place by the Oireachtas and changes made by the Central Bank to its own consumer protection framework in recent years.  

This existing framework ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale. This includes various statutory Codes of Conduct issued and amended by the Central Bank, such as the Consumer Protection Code 2012, Code of Conduct for Mortgage Arrears 2013, Lending to Small and Medium-Sized Enterprises Regulations 2016, and Fitness and Probity Standards (including minimum competency requirements).

The Central Bank has advised that, within the remit of its responsibilities for safeguarding stability and protecting consumers, its approach to debt resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that regulated entities have appropriate arrears resolution strategies and operations in place. 

The Consumer Protection Code 2012 (the Code) sets out the requirements that regulated firms must comply with when dealing with consumers in order to ensure a similar level of protection for consumers, regardless of the type of financial services provider. The Code specifies that regulated firms must, at all times, act ‘honestly, fairly and professionally in the best interests of its customers and the integrity of the market’ and that they do not ‘exert undue pressure or undue influence on a customer’

In relation to a mortgage loan which is secured on a primary residence, the Code of Conduct for Mortgage Arrears 2013 (the CCMA) provides a strong consumer protection framework, requiring relevant firms to ensure that borrowers who are in arrears or pre-arrears are treated in a transparent and fair manner.

Where an Alternative Repayment Arrangement (ARA) is offered to the borrower, the regulated entity must inform the borrower of the reasons why the ARA offered is considered appropriate and sustainable for the borrower’s individual circumstances. Where the borrower’s circumstances have changed, in line with Provision 40 of the CCMA, any change to the ARA must be appropriate and sustainable for the borrower’s circumstances. 

Where the entity does not offer an ARA, for example where it is concluded that the mortgage is not sustainable and an ARA is unlikely to be appropriate, the entity must provide the reasons on paper or another durable medium to the borrower, as well as other relevant information including other options available to the borrower and an estimate of associated costs or charges where known and, where not known, a list of the associated costs or charges. 

Furthermore, the arrears handling provisions in Chapter 8 of the Consumer Protection Code apply when the loan is not a loan which falls within the scope of the CCMA. 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 mutually 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. 

If the debtor is not happy with the service they receive from a credit servicing firm or any other regulated entity, they have the right to complain to that firm. The firm will handle the complaint in accordance with its complaints handling process.

The Central Bank’s Consumer Protection Code 2012 also includes rules that firms must follow when they handle the complaint. If the complaint is not resolved to the consumer’s satisfaction, they can refer the complaint to the Financial Services and Pensions Ombudsman, where they are an ‘eligible consumer’ covered by that Scheme. Further details on the Financial Services and Pensions Ombudsman can be found on www.fspo.ie.

More generally, details on the protections and options available to a borrower or any other debtor under Irish personal insolvency legislation can be found at isi.gov.ie.  This aspect of the framework of protections for individuals (including mortgage borrowers) is overseen by the Insolvency Service of Ireland and falls within the remit of my colleague the Minister for Justice.

Comments

No comments

Log in or join to post a public comment.