Bank sends letter over €5 mortgage arrears
So when you are actually managing to pay the mortgage every month, it can be disconcerting to receive a letter from the bank that refers to arrears, credit rating and repossession. I received a MARP (Mortgage Arrears Resolution Process) booklet in the post from Ulster Bank last week along with a letter informing me that I’m in arrears to the tune of €5.28. It goes on to say, “Under the regulation covering MARP, we must tell you that: If you miss your mortgage repayments it will affect your credit rating, which may affect your ability to get a loan in the future. If your home is ever repossessed, that would also affect your credit rating.”
So for the sake of just over €5, they are reminding me that missing a repayment will affect my credit rating and and that losing my home would affect my credit rating. I’m guessing if my home is repossessed, my credit rating won’t be uppermost on my mind.
It also said the bank had written previously about the matter .
I didn’t receive the previous letter but it struck me that rather than sending me two letters and a booklet to inform me about this massive debt, they might cast their mind back to their technical meltdown during the summer and deduce that the shortfall might somehow arise from this period.
If their systems hadn’t been down for some weeks and the payment was taken by direct debit as normal, then this mistake would never have happened . Now stick that in your bad credit rating.
When I phoned the bank to find out why I got a letter about such a small amount, the guy I spoke said under the law that banks have to send out a letter to customers “even if they are only 3 cent in debt.”
Is it just me or is that a complete departure from common sense? Shouldn’t there be at least one missed mortgage payment or at least an inquiry into why there’s a shortfall before a bank goes into overdrive, spouting out letters and booklets? No, according to Karl Deeter of Irish Mortgage Brokers who says that much of the banking system is automated and for a payment to be €5 short it would normally mean that it was done manually (at a branch) rather than by direct debit, because a direct debit will either clear in full or not .
“An arrear is typically formed when payment due is not cleared in full at the end of the ‘grace period’ which in Ireland is 30 days. This means that if you were short €10 on a €100 loan that after 30 days you would be €10 in arrears, if this happened 10 times in a row you would then be a month behind. This happens in mortgages that you see a loan classed as being 90 days in arrears, but in fact the problem has been ongoing for 2 years not 90 days (it has to do with the way it accrues rather than being a specific zero payment for three months).”
He sees no problem with the banks sending out letters to people who are behind by tiny amounts. “Prevention is better than cure. It’s better to get in there early if someone needs help than when it’s too late. If they don’t need the help then they can throw the booklet in the bin.”
He has no sympathy for people who that don’t appreciate being pulled up over a small amount and thinks the bank take the view they are being pro-active and showing some civic responsibility. But wouldn’t it be a more sensible approach if they first inquired into the cause of the shortfall before bandying the “c” word (ie credit rating) about while informing you about what will happen if your home is repossessed?