Amend Code to give borrowers stronger hand in dealings with banks

10 April 2013

How banks treat borrowers in mortgage arrears on their family home is the focus today of the Central Bank in its review of a code of conduct for lenders. Legal rights group FLAC (Free Legal Advice Centres) is making some 14 recommendations that it says will strengthen the hand of borrowers in what is often a very unequal exchange with their banks.

"The Code of Conduct on Mortgage Arrears is the rulebook that lenders must follow in assessing the capacity of borrowers to service their mortgage into the future. We in FLAC are saying that the Code needs better consumer protections on a range of issues," said FLAC Director General Noeline Blackwell.

"For example, the Code needs to take into account unsecured creditors as well. It needs to ensure that families have enough to live on adequately while paying down their debt. The Code itself needs to be put on a legal footing so that it can be legally enforced, as opposed to banks just facing administrative sanctions for breaches. And if the Central Bank wants to increase unsolicited contacts with borrowers, then it must first regulate debt collectors, explicitly acknowledge the pressure on borrowers from multiple creditors and properly monitor bank contacts with clients before doing so," she added.

Echoing remarks by the Minister for Finance Michael Noonan last month, FLAC also calls for borrowers in arrears to receive proper legal and money advice and information, as otherwise they are not on a level playing field going into negotiations with banks.

The review comes on the eve of a series of important developments in the area of personal debt, such as the introduction of required targets for lenders on mortgage arrears resolutions, the publication of the Land & Conveyancing Law Reform Bill 2013 that will make repossession of family homes more straightforward (reversing the 'Dunne judgment' ) and the rollout of the Personal Insolvency Act 2012.

"As well as sufficient legal and money information, borrowers need robust rights of appeal against bank decisions. Wherever possible and in line with government policy, the code must work to avoid repossession of family homes - especially in light of the law being introduced to make repossession easier," said Paul Joyce, FLAC Senior Policy Analyst.

Mr Joyce also drew attention to the growing problem where relationship breakdown meets over-indebtedness, leading to very complex issues around responsibilities for mortgages and property ownership, especially where couples split but cannot afford one party moving out or one party leaves the country with no way of contacting him or her.

However, FLAC has serious concerns around the gaps in the government's overall personal debt strategy. "The various mechanisms set up by the state to tackle the debt issue do not join up neatly. FLAC fears that many people may fall through these gaps with no further legal recourse or help available to them. For example, it is questionable to what extent the CCMA and the Personal Insolvency Arrangement under the insolvency legislation match up," said Mr Joyce.




Editors' notes:

  1. FLAC (Free Legal Advice Centres) is a human rights organisation which exists to promote equal access to justice for all. As an NGO, FLAC relies on a combination of statutory funding, contributions from the legal professions and donations from individuals and grant-making foundations to support its work. We offer basic legal information through our telephone information line and free legal advice through a network of 80 volunteer evening advice centres. FLAC also campaigns on a range of issues including personal debt, fairness in social welfare law, public interest law and civil legal aid.
  2. FLAC's submission to the Central Bank's review of the Code of Conduct on Mortgage Arrears is available to download online
  3. We have summarised our recommendations on the review in a document available on the FLAC website
  4. The Consultation Paper (CP 63) on the review is available on the Central Bank website
  5. The deadline for submissions on the review is today, Wednesday 10 April 2013. Submissions should be sent to