Lenders must engage ‘sympathetically’ with borrowers in difficulty, says Central Bank

Derville Rowland says regulatory focus remains unchanged

Lenders must ‘engage sympathetically and positively’ with customers, said Derville Rowland, director-general of financial conduct at the Central Bank of Ireland. Photograph: Nick Bradshaw

Lenders must ‘engage sympathetically and positively’ with customers, said Derville Rowland, director-general of financial conduct at the Central Bank of Ireland. Photograph: Nick Bradshaw

 

Lenders must offer “appropriate solutions”, including forbearance, to borrowers who continue to experience difficulties after coronavirus payment breaks expire, the Central Bank’s director general of financial conduct Derville Rowland said today.

Ms Rowland said banks must meet all of their consumer protection obligations in relation to the breaks, which are providing borrowers with vital breathing space during the economic shutdown.

“We have set out our expectation to industry that at the end of the agreed payment break, customers should be given the option to either repay the loan within the remaining term or extend the term of the loan by the length of the payment break,” she said.

Expectations met

This choice should apply for all loans, including mortgages, with the impact of the options on the overall cost of credit and monthly repayments “fully explained” to customers.

Ms Rowland was speaking during an online event held by the Association of Compliance Officers in Ireland (ACOI).

“We expect lenders to engage with borrowers well in advance of the expiry of the payment break to support customers, and our existing arrears handling frameworks, including the statutory Code of Conduct on Mortgage Arrears, will apply in the normal manner,” she said.

The frameworks require all lenders “to engage sympathetically and positively” with their customers and the Central Bank will be “assertively supervising this process to ensure our expectations are being met”.

The first coronavirus mortgage repayment breaks were agreed in March and were for a duration of three months, with the option to extend for a further three months later introduced. This means the first breaks are due to expire in September, leading to fears of a “cliff-edge” for households.

Borrowers in need of a payment break have been urged to apply as soon as possible as a deadline of June 30th has been set by the European Banking Authority for lenders to process the breaks.

Financial system

Ms Rowland said the Central Bank continues to focus on promoting the welfare of the people of Ireland as a whole.

“All of our actions have been aimed at ensuring the financial system absorbs the shock, is better placed to support households and businesses through the crisis, and that consumers and investors are protected in line with our mandate,” she said.

“The stability of the system, and the resilience of firms within it, are as essential in protecting consumers and investors as our statutory codes of conduct, assertive supervision and robust enforcement powers.”

While the Central Bank has “had to reprioritise in light of Covid”, its mission to hold regulated financial firms and the people who run them accountable where there are breaches of regulatory requirements and standards remains unchanged.

“The crisis cannot give regulated firms a waiver from meeting their obligations aimed at protecting consumers and investors.”