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Consumer protection codes and mortgages

Introduction

Lending institutions such as banks and building societies are bound by two statutory codes of conduct in relation to mortgages. These are the Central Bank's Code of Conduct on Mortgage Arrears (CCMA) and its Consumer Protection Code 2012.

Local authorities operate under similar rules. There are two pieces of legislation and a set of guidelines that provide for local authorities to make arrangements to deal with people who are having difficulty repaying local authority loans - (see ‘Local authority loans’ below).

If you are having difficulties paying your mortgage, you should talk to your lender as soon as possible. Your lender must take certain steps to deal with any problems you have paying your mortgage. Repossessing your home should be the lender's last resort.

Code of Conduct on Mortgage Arrears (CCMA)

The Central Bank’s Code of Conduct on Mortgage Arrears (CCMA) is the main code of relevance to people whose mortgage is in arrears or in danger of slipping into arrears. The core process under the CCMA is the Mortgage Arrears Resolution Process (MARP). The Central Bank has information explaining the CCMA and how it works.

Under the CCMA mortgage lenders must follow specific procedures when dealing with borrowers experiencing arrears and financial difficulties. These procedures must be aimed at helping you as much as possible.

In general, the CCMA requires lenders to wait 8 months before taking legal action about mortgages in arrears. However, this requirement does not apply if a borrower is deliberately not co-operating with the lender - see below.

Regardless of how long it takes your lender to assess your case, and provided that you are co-operating, you must be given 3 months’ notice before they can commence legal proceedings where either:

  • You do not accept an alternative repayment arrangement offered to you

This will give you time to consider other options, such as voluntary surrender, voluntary sale or a Personal Insolvency Arrangement.

Not co-operating

You may be classified as not co-operating with your lender if you:

  • Do not fully and honestly disclose significant information or
  • Fail to provide relevant information within a reasonable time or
  • Are in arrears for 3 months, during which you either failed to contact the lender or respond to their communications, or your response is insufficient for a complete assessment of your circumstances or
  • Have entered an alternative repayment arrangement and 3 months have passed, during which you have not fully made the alternative repayments or
  • Have not entered an alternative repayment arrangement and 3 months have passed, during which you have not fully paid your mortgage or have not cleared your arrears

Before classifying you as not co-operating, the lender must write to you, giving you 20 business days to take specific actions so it can assess your circumstances. The lender must tell you what steps you need to take to avoid being classified as not co-operating. It must warn you about the implications of not co-operating and suggest that you seek appropriate advice. It must also highlight the position about debt outstanding after repossession or sale.

If you are classified as not co-operating, you lose the protections of the MARP. Your lender may commence legal proceedings immediately which could result in you losing your home. You can appeal the decision to classify you as not co-operating.

Scope of CCMA

The CCMA applies to mortgages on primary residences only. It defines primary residence to include “a residential property in this State which is the only residential property owned by the borrower” as well as the more common definition of “the residential property which the borrower occupies as his/her primary residence in this State”.

The purpose of this wider definition is to apply the protections of the CCMA to people who are trying to maximise their income to help pay the mortgage on their main residence or home, whether or not they actually live in it.

The CCMA also covers borrowers in pre-arrears. It defines pre-arrears as follows: "A pre-arrears case arises where the borrower contacts the lender to inform them that he/she is in danger of going into financial difficulties and/or is concerned about going into mortgage arrears".

The CCMA applies to all regulated mortgage lenders operating in the State when dealing with borrowers facing or in mortgage arrears on their primary residence, including any mortgage lending activities outsourced by these lenders.

It does not apply to credit unions or to local authorities (see ‘Local authority loans’ below).

In recent years there have been changes to the protections that are available to you if your mortgage is sold on to a third-party, for more information see ‘Codes that apply if your mortgage is sold’ below.

Requirements of CCMA

The CCMA sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears. It requires lenders to handle all such cases sympathetically and positively, with the objective at all times of helping people to meet their mortgage obligations.

Under the CCMA, lenders must have the following:

  • A Mortgage Arrears Resolution Process (MARP) to be used when dealing with arrears and pre-arrears customers. The 4 steps for the MARP are:
    1. Communication
    2. Financial information
    3. Assessment and
    4. Resolution
  • An Arrears Support Unit (ASU) to assess arrears and pre-arrears cases
  • An internal Appeals Board to consider appeals from borrowers

Read more about the Mortgage Arrears Resolution Process.

Lenders must also:

  • Ensure that communications with borrowers are presented in a clear and consumer-friendly manner. The level of communications should be proportionate and not excessive.
  • Not make unnecessarily frequent communications
  • Ensure that communications with borrowers are not aggressive, intimidating or harassing
  • Ensure that borrowers are given sufficient time to complete an action they have committed to before follow-up communication is attempted
  • Make an information booklet available to borrowers in arrears (or pre-arrears) including details on the MARP, relevant contact points for arrears issues and details of websites with mortgage arrears information, such as mabs.ie
  • Provide a dedicated section on their website for borrowers who are in or facing financial difficulties. This section must include the above booklet and links to the above websites
  • Wait at least 8 months from the date the mortgage arrears arose before applying to the courts to commence legal action for repossession of a property (this does not apply if the borrower is not co-operating with the lender)

Lenders must not:

  • Make a borrower in arrears or pre-arrears change from an existing tracker mortgage to another mortgage type as part of an alternative arrangement offered to the borrower, unless none of the options that would allow the borrower to retain the tracker interest rate are appropriate and sustainable for the borrower’s individual circumstances.

If you have a tracker mortgage and your lender is offering you an alternative repayment arrangement that means you will have to change to another mortgage type you should get independent financial and/or legal advice.

If you are not happy with the lender’s treatment of your case, or if you feel they have not complied with the CCMA, you can complain to the lender under the Central Bank’s Consumer Protection Code 2012 - see below.

If you are not happy with the outcome of an appeal or complaint, you can refer it to the Financial Services and Pensions Ombudsman. However, the Financial Services and Pensions Ombudsman cannot pursue complaints against the Irish Bank Resolution Corporation (IBRC) without the consent of the High Court.

The Free Legal Advice Centres (FLAC) have published a guide to the Code of Conduct on Mortgage Arrears 2013 (pdf).

Consumer Protection Code 2012

The Central Bank's Consumer Protection Code 2012 applies to the regulated activities of regulated entities operating in the State.

The Code includes requirements setting out how regulated entities must deal with and treat consumers who are in arrears on a range of loans including credit cards, personal loans and buy-to-let mortgages. It does not apply to mortgages on a primary residence – these are covered by the Code of Conduct on Mortgage Arrears, described above.

The Consumer Protection Code requires lenders to seek to agree an approach that will assist a consumer in dealing with an arrears problem.

The Code also provides that the lender must:

  • Have written procedures for handling arrears and make information available to you to assist you in dealing with arrears
  • Contact you immediately (if your account remains in arrears 10 business days after the arrears first arose), to find out the reason for the arrears
  • Ensure that the level of contact and communications from them, or from any third party acting on their behalf, is proportionate and not excessive.

Lenders must not:

  • Initiate more than 3 unsolicited communications with you, in a calendar month, other than correspondence required by the CCMA or other regulatory requirements. (This limit does not include missed calls or engaged numbers.)

The Code also sets out rules on how lenders must handle any complaints you make about how your lender is dealing with you. These complaints must be handled speedily, efficiently and fairly. There are detailed rules in the Code about how often a firm should contact you to keep you updated on your complaint.

The Central Bank has published a consumer guide to the Consumer Protection Code (pdf).

Codes that apply if your mortgage is sold

Prior to 2015, if a lender sold your mortgage to a third-party firm who was not regulated by the Central Bank, you could lose the protections under the CCMA and Consumer Protection Code.

Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, any firm who bought mortgage loans and who was not regulated themselves, needed to appoint a credit servicing firm to act on their behalf. Credit servicing firms were regulated by the Central Bank and needed to adhere to the CCMA and Consumer Protection Code, just like the original lender.

On 21 January 2019, the law was updated by the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018. Now firms who purchase loan books from the original lender must be regulated by the Central Bank.

Local authority loans

Section 11 of the Housing (Miscellaneous Provisions) Act 1992 provides that the local authority may make such monetary arrangements with you as it considers equitable to take account of your particular circumstances. In effect, this means that, if you are having problems making your repayments, you should approach the local authority to see if you can make an arrangement to facilitate you paying over a longer term or to restructure the repayments in some other way.

Detailed guidelines (pdf) have been issued to local authorities on how to deal with such cases. These guidelines are based on the Central Bank’s Code of Conduct on Mortgage Arrears, described above.

The Housing (Miscellaneous Provisions) Act 2009 provides that where you owe money to a local authority either for rent or loan repayments and the local authority is satisfied that you would otherwise suffer undue hardship, it may make an arrangement with you to repay by instalments. This section (Section 34) is in effect with respect of loan repayments since 14 June 2010 but not in respect of rent.