Banks may get greater powers to contact clients in arrears

BANKS MAY be granted greater powers to contact customers who are in mortgage difficulty, under proposals being considered by the Central Bank.

It is understood the Central Bank is considering a review of parts of the code of conduct on mortgage arrears which would give lenders greater leeway in contacting customers who are in arrears on their repayments.

Under the existing code of conduct set out by the Central Bank, lenders are forbidden from contacting customers who are in arrears more than three times in one calendar month.

It is understood the Central Bank is seeking to review this stipulation, amid concern that some customers are not addressing their arrears problem. The development comes as the Government highlighted the role played by the code of conduct on mortgage arrears in tackling the mortgage arrears issue.

Speaking in the Dáil yesterday evening in response to a private member’s motion tabled by Fianna Fáil, Minister of State Brian Hayes said the code of conduct was “an important framework that governs the relationship between a borrower and mortgage lender who is experiencing difficulty and provides a number of protections to the borrower.”

According to the latest figures from the Central Bank, almost 71,000 mortgages – around 9 per cent of total home loans – were in arrears of 90 days or more at the end of December. The revised code of conduct on mortgage arrears came into force on January 1st, 2011.

The code sets out the framework that lenders must use when dealing with borrowers in mortgage arrears.

Banks are required by law to adhere to the code which offers a number of protections to consumers, including restrictions on the level of unsolicited contact banks are permitted to make with customers.

This includes all forms of communication, such as phone, email, letter or personal contact. It is understood the banking community has informed the Central Bank the current restrictions on contacting customers is preventing them from dealing with arrears effectively.

Rachel Doyle, chief operating officer of PIBA, the professional insurance brokers’ association, said any change to the rules governing contact between banks and mortgage customers would be a cause for concern.

“While we would advise people who find themselves in mortgage difficulty to engage with their banks and not to put their heads in the sand, you can not put people in a situation where they can constantly being hounded by banks.”

She said that most people in mortgage arrears are likely to be struggling with other kind of debt such as credit card debt or personal loans.

Last month the Central Bank said that mortgage arrears would be one of a number of issues the bank would examine this year as part of a “series of themed reviews and inspections” planned for 2012.