Cautious welcome for Financial Regulator's proposals

13 August 2010

Legal rights organisation FLAC today gave a cautious welcome to the Financial Regulator's consultation paper on the code of conduct for mortgage arrears. Noting that the document is a consultation paper only, FLAC said that it incorporated many of the interim recommendations of the Expert Group on Mortgage Arrears and Personal Debt published on 6 July 2010.

FLAC said that if the proposals recommended in the consultation paper are adopted, then borrowers will have a structured process for dealing with lenders if they are in difficulty with mortgages on their family homes. It will also require lenders to engage to some extent with those who contact them in anticipation of future difficulties. As recommended by the Mortgage Expert group, lenders will have a standardised process for collection of financial information and review of decisions.

If adopted, the proposed code will prohibit lenders from initiating repossession proceedings while reasonable negotiations are ongoing, or where a borrower is adhering to the terms of revised arrangements. Lenders will have to defer court proceedings for at least 12 months from the time arrears began or 12 months from the time that any new arrangement had fallen down. As is currently the case, the code will not apply where the borrower does not engage with the lender. In those cases, the code permits lenders to seek repossession whenever they wish.

FLAC spokesperson Noeline Blackwell said that if the code is implemented, it will represent a welcome advance in the protection available to borrowers in difficulty with mortgage repayments on their family homes.

"However," Ms. Blackwell continued, "the proposed resolution process lacks independent oversight. It is still one which is still very much an internal process which allows the lender to determine what is a suitable mortgage repayment package. The only external recourse will be a complaint to the Financial Services Ombudsman. There is no suggestion that additional resources will be available to the Ombudsman to deal with those complaints, or any indication of what assistance will be available to borrowers who wish to bring complaints.

FLAC also said that the revised code, if enacted, is also only one step in what needs to be a much wider solution for borrowers who are often trying to cope with many debts at the same time. "Callers to our legal information line and to our network of centres are telling us that they are under pressure from many different creditors, and unable to deal with them all," Ms. Blackwell said.

"An overall debt settlement system to address debt in a holistic way is still needed," concluded Ms. Blackwell.


Editors' notes:

  1. FLAC (Free Legal Advice Centres) is an independent human rights organisation which works to promote equal access to justice for all.
  2. FLAC issued this press release in response to the Financial Regulator's consultation paper entitled "Review of Code of Conduct on Mortgage Arrears, Consultation Paper CP45" published on Friday 13 August 2010.
  3. You can read more about FLAC's work on debt law reform online.
  4. FLAC recommended a complete overhaul of debt enforcement procedures in Ireland and the introduction of debt settlement legislation in a major report in 2003. That was followed in July 2009 by a second in-depth report which explored the debtor's perspective on the enforcement process. The organisation called for a greater range of remedies to assist those who are over-indebted.