Mortgage Arrears

Background and Application

The Financial Regulator issued its first Code of Conduct on Mortgage Arrears in February 2009. This is binding on all regulated entities. This includes credit institutions and others regulated by the Financial Regulator as well as lenders operating in Ireland under EU cross-border rules. A revised Code took effect on 1^st January 2011. The current Edition became effective on 1^st July 2013.

The initial code largely reflected the pre-existing IBF voluntary code on mortgage arrears. That code effectively became binding on credit institutions who entered the Government Guarantee scheme of bank liabilities in October 2008. It was a condition of the guarantee that participating banks legally committed to the existing voluntary codes of conduct.

The Code applies to the mortgage loan of a borrower which is secured by his/her primary residence. Lenders must apply the protections of the Code to borrowers in arrears and in pre-arrears; and in the case of joint borrowers who notify the lender in writing that they have separated or divorced, the lender should treat each borrower as a single borrower under the Code (except to the extent that an action requires, as a matter of law, the agreement of both borrowers).

Definitions

The following are defined for the purposes of the Code:

Arrears: arise on a mortgage loan account where a borrower has not made a full mortgage repayment, or only makes a partial mortgage repayment, in accordance with the original mortgage contract, by the scheduled due date.

Borrower: includes all parties named on the mortgage loan account.

Equity participation: means that the principal sum due on the primary residence is reduced, provided that a share in the borrower’s equity in the primary residence is transferred to the lender or a third party.

MARP: means the Mortgage Arrears Resolution Process as described below

Mortgage to rent: means where the borrower voluntarily allows the lender to take possession of the primary residence, and the borrower becomes a tenant in that primary residence, and this includes the situation where the lender sells the primary residence to a third party, and the borrower is a tenant of that third party.

Non-Cooperating

A borrower can only be considered as not co-operating with the lender when any of the following apply to his/her particular case:

• the borrower fails to make a full and honest disclosure of information to the lender, that would have a significant impact on his/her financial situation;
• the borrower fails to provide information, relevant to the borrower’s financial situation, within the timeline specified by the lender below; or
• a three-month period elapses where the borrower has not entered into an alternative repayment arrangement, and during which the borrower:
  • has failed to meet his/her mortgage repayments in full in accordance with the mortgage contract; or
  • meets his/her mortgage repayments in full in accordance with the mortgage contract but has an arrears balance remaining on the mortgage; or
  • where the borrower has entered into an alternative repayment arrangement, and during which the borrower has failed to meet in full repayments as specified in terms of an alternative repayment arrangement; and during which the borrower: (A) has failed to make contact with, or respond to any communications from, the lender or a third party acting on the lender’s behalf; or (B) has made contact with, or responded to communications from, the lender or a third party acting on the lender’s behalf but has not engaged in such a way that enables the lender to complete an assessment of the borrower’s circumstances;
• and the warning letter, required below, has been issued to the borrower and the borrower has not carried out the action(s) specified in that letter.

Pre-arrears

A pre-arrears case arises where either the borrower contacts the lender to inform it that he/she is in danger of going into financial difficulties and/or is concerned about going into mortgage arrears; or  the lender establishes that the borrower is in danger of going into financial difficulties which may impact on the borrower’s ability to meet his/her mortgage repayments.

Primary Residence: means a property which is the residential property which the borrower occupies as his/her primary residence in this State, or a residential property which is the only residential property in this State owned by the borrower.

The Standard Financial Statement is the document which a lender must use to obtain financial information from a borrower in order to complete an assessment of that borrower’s case

Procedures I

Each branch (or office of a lender in the case of a lender who does not operate a branch network), must have at least one person with specific responsibility for dealing with arrears and pre-arrears cases and for liaising with the lender’s Arrears Support Unit (ASU). Before a lender makes contact with a borrower, it must ensure that it has available all the relevant information that has been supplied to the lender by the borrower.

A lender must draw up and implement procedures for dealing with each of the following types of borrowers – those in mortgage arrears, those in pre-arrears and those who fall under the MARP. Such procedures must:

• allow for a flexible approach to the handling of these cases;
• be aimed at assisting the borrower as far as possible in his/her particular circumstances;
• set out how the lender will implement the four steps of the MARP; and
• set out how the ASU will assess cases referred to it, including the types of alternative repayment arrangements or any other relief method that may be offered to borrowers by the lender.

A lender must have in place management information systems to capture information on its handling of arrears, pre-arrears and MARP cases, including all alternative repayment arrangements put in place to assist borrowers. It must provide appropriate training for frontline staff dealing with borrowers in arrears or in pre-arrears. All other frontline staff must be made aware of the lender’s policy for dealing with arrears and pre-arrears cases and the relevant contact persons and process.

Procedures II

A lender must assist borrowers by ensuring that all requests from borrowers for documentation and information, required for the purposes of applying for State supports in relation to mortgages, are processed within ten business days of receipt of the request.

At the borrower’s request and with the borrower’s written consent, the lender must liaise with a third party nominated by the borrower to act on his/her behalf in relation to his/her arrears situation. This does not prevent the lender from contacting the borrower directly, in relation to other matters, or issuing communications required under the Code directly to the borrower.

As soon as a borrower goes into arrears, a lender must communicate promptly and clearly with the borrower to establish in the first instance why the repayment schedule in accordance with the mortgage contract, has not been adhered to. A lender must pro-actively encourage borrowers to engage with it about financial difficulties which may prevent the borrower from meeting his/her mortgage repayments. This must include a written communication by the lender to all borrowers on at least an annual basis to encourage early contact with the lender if a borrower is in arrears or is concerned that he/she is in danger of going into arrears.

Lenders are restricted from imposing charges and/or surcharge interest on arrears arising on a mortgage account in arrears to which the Code applies unless the borrower is not co-operating.

Communications

A lender must ensure that:

• all communications about arrears and pre-arrears are provided to the borrower in a timely manner;
• all information relating to a lender’s handling of arrears and pre-arrears cases must be presented to the borrower in a clear and consumer-friendly manner, and
• the language used in communications must indicate a willingness to work with the borrower to address the situation and must be in plain English so that it is easily understood.

A lender must ensure that all meetings with borrowers in relation to arrears or pre-arrears are conducted with utmost privacy.

Provision of Information

A lender must prepare and make available to borrowers, an information booklet providing details of its MARP, which must be drafted in accordance with the requirements set out above and must include:

• an explanation of its MARP;
• an explanation of the alternative repayment arrangements available to borrowers, how these arrangements work, the key features of the arrangements and an outline, in general terms, of the lender’s criteria for assessing requests for alternative repayment arrangements;
• a statement that the availability of alternative repayment arrangements (as provided for below is subject to an individual assessment of each case and meeting the lender’s criteria;
• an explanation of all options offered by the lender, (other than alternative repayment arrangements) such as voluntary surrender, voluntary sale, mortgage to rent and trading down and a statement that the availability of these options is subject to an individual assessment of each case and meeting the lender’s (or a third party’s) criteria;
• if the lender makes use of a confidentiality agreement or similar agreement, in circumstances where an alternative repayment arrangement or an option, other than an alternative repayment arrangement, is offered to a borrower, summary information on the lender’s potential use of such agreements;
• an explanation of the meaning of not co-operating under the Code and the implications, for the borrower, of not co-operating including the imposition of charges and/or surcharge interest on arrears arising on a mortgage account,  that a lender may commence legal proceedings for repossession of the property immediately after classifying a borrower as not co-operating, a warning that it may impact on a borrower’s eligibility for a Personal Insolvency Arrangement in accordance with the eligibility criteria set out in the Personal Insolvency Act 2012 information about the potential availability of relevant State supports such as mortgage interest relief or Mortgage Interest Supplement;
• if the lender makes use of a confidentiality agreement or similar agreement, in circumstances where an alternative repayment arrangement or an option, other than an alternative repayment arrangement, is offered to a borrower, summary information on the lender’s potential use of such agreements;
• a reminder that borrowers who have purchased payment protection insurance in relation to the mortgage account which subsequently went into arrears may wish to make a claim on that policy;
•  how data relating to the borrower’s arrears will be shared with the Irish Credit Bureau or any other credit reference agency or credit register, where permitted by contract or required by law;
• relevant contact points (i.e., the dedicated arrears contact points not the general customer service contact points);
• a statement that the borrower may wish to seek assistance from Money Advice and Budgeting Service (MABS) and contact details for the MABS National Helpline and links to relevant website(s) operated by MABS;
• a link to www.keepingyourhome.ie;
• a summary of the lender’s policy regarding communications with borrowers,
• information regarding the borrower’s right to appeal a decision of the lender in accordance with the Code including the procedure and timeframe for submitting an appeal;
• information regarding the borrower’s right to make a complaint in accordance with the Code, including the procedure and timeframe for submitting a complaint; and
• with regard to the potential for legal proceedings, a statement that irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case.

Website Information

A lender must have a dedicated section on its website for borrowers in, or concerned about, financial difficulties which must include:

• the information booklet required under the code;
•  information on the level of charges that may be imposed on borrowers who are not co-operating with the lender;
• a link to any website operated by MABS that contains information about mortgage arrears;
• the standard financial statement;
• a copy of the lenders guide to completing a standard financial statement or a link to the Central Bank of Ireland’s Consumer Guide to Completing a Standard Financial Statement;
• a link to www.keepingyourhome.ie; and
• a link to any website operated by the Insolvency Service of Ireland which provides information to borrowers on the processes under the Personal Insolvency Act, 2012.

The dedicated section on the website must be easily accessible from a prominent link on the lender’s home page.

Mortgage Arrears Resolution Process

A lender must ensure that it has in place a Mortgage Arrears Resolution Process as a framework for handling cases as specified in the Code. The MARP must incorporate the steps set out in the Code, i.e.:

• Step 1: Communication with borrowers;
• Step 2: Financial information;
• Step 3: Assessment; and
• Step 4: Resolution.

A lender must establish a centralised and dedicated Arrears Support Unit (ASU), which must be adequately staffed, to manage cases under the MARP. A lender must ensure that the MARP framework is applied to the following cases:

• a mortgage account where arrears have arisen on the account and remain outstanding, 31 calendar days from the date the arrears arose;
• a pre-arrears case;
• where an alternative repayment arrangement put in place breaks down; and
• where the term of an alternative repayment arrangement put in place expires.

Step 1: Communication with Borrowers

A lender must inform the borrower, on paper or another durable medium, when it has appointed a third party to engage with the borrower in relation to his/her case and must explain the role of the third party. A lender must produce and implement a policy regarding communications with borrowers. That policy must be approved by the board of directors and must ensure that the requirements of Code are met.

A lender must ensure that:

• the level of communications from the lender, or any third party acting on its behalf, is proportionate and not excessive, taking into account the circumstances of the borrowers, including that unnecessarily frequent communications, are not made;
• communications with borrowers are not aggressive, intimidating or harassing;
• borrowers are given sufficient time to complete an action they have committed to before follow up communication is attempted. In deciding what constitutes sufficient time, consideration must be given to the action that a borrower has committed to carry out, including whether he/she may require assistance from a third party in carrying out the action; and
• steps are taken to agree on future communication with borrowers.

31 Days’ Arrears

When arrears arise on a borrower’s mortgage loan account and remain outstanding 31 calendar days from the date the arrears arose, a lender must:

• inform each borrower and any guarantor on the mortgage, unless the mortgage loan contract explicitly prohibits such information to be given to the guarantor, of the status of the account on paper or another durable medium, within 3 business days. The letter must include the following information:
  • the date the mortgage fell into arrears;
  • the number and total monetary amount of repayments (including partial repayments) missed;
  • the monetary amount of the arrears to date;
  • confirmation that the lender is treating the borrower’s situation as a MARP case;
  • relevant contact points (i.e., the dedicated arrears contact points not the general customer service contact points);
  • an explanation of the meaning of not co-operating under the MARP and the implications, for the borrower, of not co-operating including:
• the imposition of charges and/or surcharge interest on arrears arising on a mortgage account and details of such charges;
• that a lender may commence legal proceedings for repossession of the property immediately after classifying a borrower as not co-operating; and
• a warning that not co-operating may impact on a borrower’s eligibility for a Personal Insolvency Arrangement in accordance with the Personal Insolvency Act 2012;
• a reminder that borrowers who have purchased payment protection insurance in relation to the mortgage account which subsequently went into arrears may wish to make a claim on that policy;
•  how data relating to the borrower’s arrears will be shared with the Irish Credit Bureau, or any other credit reference agency or credit register, where permitted by contract or required by law, and the impact on the borrower’s credit rating; and
• a link to any website operated by the Insolvency Service of Ireland which provides information to borrowers on the processes under the Personal Insolvency Act 2012.

Unsolicited personal visits

A lender may only make an unsolicited personal visit to a borrower’s primary residence in the following circumstances:when all other attempts at contact in relation to the borrower’s arrears have failed; and  immediately prior to classifying a borrower as not co-operating.

Where a lender wishes to make an unsolicited personal visit, in accordance with the above, the lender must give the borrower at least five business days’ notice, on paper or another durable medium, and must provide the specified timeframe within which it intends to make the visit. The specified timeframe must be no longer than 15 business days from the date of notification (including the five business days’ notice).

The lender must ensure that the notice issued outlines the importance of engagement between the borrower and the lender, setting out the protections no longer available where a borrower is not co-operating with the lender to address the arrears situation; explains that the intention of the visit is to discuss the borrower’s arrears situation and the next steps for dealing with the arrears;  outlines the contact details for the lender’s Arrears Support Unit; offers the borrower the facility to meet in a local branch instead of in the borrower’s home; and informs the borrower that he/she may have a third party present, if he/she wishes.

When carrying out an unsolicited personal visit, a lender must offer to explain the standard financial statement to the borrower and offer to assist the borrower in completing the standard financial statement. The lender must not compel the borrower to complete the standard financial statement during the visit. A lender may agree on a further personal visit with the borrower in compliance with the Consumer Protection Code 2012.

Non-Co-operating Borrower

Where three mortgage repayments have not been made in full in accordance with the original mortgage contract and remain outstanding, and an alternative repayment arrangement has not been put in place, the lender must notify the borrower, on paper or another durable medium, of the following:

• the potential for legal proceedings for repossession of the property where a borrower is not co-operating, together with an estimate of the costs to the borrower of such proceedings;
• the importance of taking independent advice from his/her local MABS or an appropriate alternative; and
• that irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case.

Pre-Classification

Prior to classifying a borrower as not co-operating, a lender must write to the borrower

• inform the borrower that he/she will be classified as not co-operating if he/she does not undertake specific actions within at least 20 business days of the date of the letter to enable the lender to complete an assessment of the borrower’s circumstances;
• outline the specific actions that a borrower must take within the period allowed, to avoid being classified as not co-operating;
• outline the ongoing actions that a borrower must take to avoid being classified as not co-operating, including a statement that if any of these ongoing actions are not undertaken at any point in the future, the lender may classify the borrower as not co-operating without further warning;
• outline to the borrower the implications of not co-operating, including: that the borrower will be outside of the MARP, and the protections of the MARP will no longer apply;  that a lender may commence legal proceedings for repossession of the property immediately after classifying the borrower as not co-operating; and a warning of the impact it may have on the borrower’s eligibility for a Personal Insolvency Arrangement;
• include a statement that the borrower may wish to seek appropriate legal and/or financial advice, for example from MABS; and
• with regard to the potential for legal proceedings, include a statement that irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case.

Notification of Classification

Where a lender has classified a borrower as not co-operating, following a period whereby the borrower has been given the opportunity to co-operate the lender must notify the borrower on paper or another durable medium that he/she has been classified as not co-operating and inform the borrower of the following:

• that legal proceedings can commence immediately;
• that the borrower is now outside of the MARP and the protections of the MARP will no longer apply;
• other options that may be available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower and his/her mortgage loan account, including: an estimate of the associated costs or charges, where known, and where it is not known, a list of the associated costs or charges; the requirement to repay outstanding arrears, if this is the case; the anticipated impact on the borrower’s credit rating; and the importance of seeking independent advice in relation to these options;
• the borrower’s right to appeal the lender’s decision, including that the borrower must make the appeal in writing and set out the grounds for the appeal; and
• the borrower’s right to consult a Personal Insolvency Practitioner, notwithstanding the fact that the classification as not co-operating may impact on the borrower’s eligibility for a Personal Insolvency Arrangement.

Step 2: Financial Information

A lender must use the standard financial statement to obtain financial information from a borrower in arrears or in pre-arrears. In relation to all MARP cases, a lender must:

• provide the borrower with the standard financial statement at the earliest appropriate opportunity;
• offer to assist the borrower with completing the standard financial statement; and
• inform the borrower that he/she may wish to seek independent advice to assist with completing the standard financial statement, e.g., from MABS or an appropriate alternative.

The lender must pass the completed standard financial statement to its ASU immediately upon receipt and provide a copy of the standard financial statement to the borrower. The lender may require the borrower to provide supporting documentation to corroborate the information provided in the standard financial statement.

Where the lender imposes a timeline for the return of information, including a standard financial statement, the timeline must be fair and reasonable, and it must reflect the type of information requested and whether the borrower may need to obtain the information from a third party.

Step 3: Assessment

A completed standard financial statement must be assessed in a timely manner by the lender’s ASU. A lender’s ASU must examine each case on its individual merits. It must base its assessment of the borrower’s case on the full circumstances of the borrower including:

• the personal circumstances of the borrower;
• the overall indebtedness of the borrower;
• the information provided in the standard financial statement;
• the borrower’s current repayment capacity; and
• the borrower’s previous repayment history.

Prior to completing the full assessment of the borrower’s standard financial statement, a lender may agree with the borrower to put a temporary alternative repayment arrangement in place where a delay in putting an alternative repayment arrangement in place will further exacerbate a borrower’s arrears or pre-arrears situation. Such a temporary alternative repayment arrangement should be for a limited period of time, but it should be sufficient to enable the lender to receive and complete a full review of the standard financial statement.

Step 4: Resolution

In order to determine which options for alternative repayment arrangements are viable for each particular case, a lender must explore all of the options for alternative repayment arrangements offered by that lender. Such alternative repayment arrangements may include:

• interest only repayments on the mortgage for a specified period of time;
• permanently reducing the interest rate on the mortgage;
• temporarily reducing the interest rate on the mortgage for a specified period of time;
• an arrangement to pay interest and part of the normal capital amount for a specified period of time;
• deferring payment of all or part of the scheduled mortgage repayment for a specified period of time;
• extending the term of the mortgage;
• changing the type of the mortgage;
• adding arrears and interest to the principal amount due;
• equity participation;
• warehousing part of the mortgage (including through a split mortgage);
• reducing the principal sum to a specified amount; and
• any voluntary scheme to which the lender has signed up, e.g. Deferred Interest Scheme.

A lender must document its considerations of each option examined including the reasons why the option(s) offered to the borrower is/are appropriate and sustainable for his/her individual circumstances and why the option(s) considered and not offered to the borrower is/are not appropriate and not sustainable for the borrower’s individual circumstances. The lender must not require the borrower to change from an existing tracker mortgage to another mortgage type, as part of an alternative repayment arrangement offered to the borrower, except in the circumstances set out below.

Alternative Arrangement

Where an alternative repayment arrangement is offered by a lender, the lender must advise the borrower to take appropriate independent legal and/or financial advice and provide the borrower with a clear explanation, on paper or another durable medium, of how the alternative repayment arrangement works, including:

• the reasons why the alternative repayment arrangement(s) offered is considered to be appropriate and sustainable for the borrower as documented by the lender including demonstrating, by reference to the borrower’s individual circumstances, the advantages of the offer for the borrower and explaining any disadvantages;
• the new mortgage repayment amount;
• the term of the alternative repayment arrangement;
• the implications arising from the alternative repayment arrangement for the existing mortgage including the impact on the mortgage term, the balance outstanding on the mortgage loan account, and the existing arrears on the account, if any;
• a statement that the alternative repayment arrangement may impact on the borrower’s mortgage protection cover;
• the frequency with which the alternative repayment arrangement will be reviewed the reason(s) for the reviews and the potential outcome of the reviews, where:  circumstances improve,  circumstances disimprove, and circumstances remain the same;
• details of any residual mortgage debt remaining at the end of an alternative repayment arrangement and owed by the borrower;
• how interest will be applied to the mortgage loan account as a result of the alternative repayment arrangement;
• how the alternative repayment arrangement will be reported by the lender to the Irish Credit Bureau or any other credit reference agency or credit register and the anticipated impact of this on the borrower’s credit rating; and
•  the timeframe within which the borrower must accept or decline the offer.

Review of Alternative Arrangement

A lender must review an alternative repayment arrangement at intervals that are appropriate to the type and duration of the arrangement, including at least 30 calendar days in advance of an alternative repayment arrangement coming to an end.

As part of the review, the lender must check with the borrower whether there has been any change in his/her circumstances in the period since the alternative repayment arrangement was put in place, or since the last review was conducted. Where there has been a change in that borrower’s circumstances, the lender must request an updated standard financial statement from the borrower and must consider the appropriateness of that arrangement for the borrower.

A lender must carry out a review of an alternative repayment arrangement at any time, if requested by the borrower.

No Alternative Arrangement Offered

If a lender does not offer a borrower an alternative repayment arrangement, for example, where it is concluded that the mortgage is not sustainable and an alternative repayment arrangement is unlikely to be appropriate, the lender must provide the reasons, on paper or another durable medium, to the borrower. In these circumstances, the lender must inform the borrower of the following:

• other options available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower; and his/her mortgage loan account including: an estimate of associated costs or charges where known and, where not known, a list of the associated costs or charges;  the requirement to repay outstanding arrears, if this is the case,  the anticipated impact on the borrower’s credit rating, and the importance of seeking independent advice in relation to these options;
• the borrower’s right to appeal the decision of the lender not to offer an alternative repayment arrangement to the lender’s Appeals Board;
• that the borrower is now outside the MARP and that the protections of the MARP no longer apply;
• that legal proceedings may commence three months from the date the letter is issued or eight months from the date the arrears arose, whichever date is later, and that, irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case;
• that the borrower should notify the lender if his/her circumstances improve;
• the importance of seeking independent legal and/or financial advice;
• the borrower’s right to consult with a Personal Insolvency Practitioner;
• the address of any website operated by the Insolvency Service of Ireland which provides information to borrowers on the processes under the Personal Insolvency Act 2012; and
• that a copy of the most recent standard financial statement completed by the borrower is available on request.

In the case of an existing tracker mortgage, if, following consideration of the options, the lender concludes that none of the option(s) that would allow the borrower to retain his/her tracker interest rate is/are appropriate and sustainable for the borrower’s individual circumstances, the lender may offer the borrower an alternative repayment arrangement which requires the borrower to change from an existing tracker mortgage to another mortgage type, if that alternative repayment arrangement:

• is affordable for the borrower, and
• is a long-term sustainable solution which is consistent with Central Bank of Ireland policy on sustainability.

Refusal of Arrangement

If a borrower is not willing to enter into an alternative repayment arrangement offered by the lender, the lender must inform the borrower on paper or another durable medium of the following:

• other options available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale, and the implications of these for the borrower and the borrower’s mortgage loan account, including; an estimate of the associated costs or charges where known and, where these are not known, a list of the associated costs or charges;the requirement to repay outstanding arrears,the anticipated impact on the borrower’s credit rating, and the importance of seeking independent advice in relation to these options;
• the borrower’s right to appeal the lender’s decision on the alternative repayment arrangement to the Appeals Board;
• that the borrower is now outside the MARP and that the protections of the MARP no longer apply;
• that legal proceedings may commence three months from the date the letter is issued or eight months from the date the arrears arose, whichever date is later, and that, irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case;
• that the borrower should notify the lender if his/her circumstances improve;
• the importance of seeking independent legal and/or financial advice;
• the borrower’s right to consult with a Personal Insolvency Practitioner;
• the address of any website operated by the Insolvency Service of Ireland which provides information to borrowers on the processes under the Personal Insolvency Act 2012; and
• that a copy of the most recent standard financial statement completed by the borrower is available on request.

A lender’s ASU must formally review the borrower’s case, including the standard financial statement, immediately, where a borrower ceases to adhere to the terms of an alternative repayment arrangement.

Appeals

A lender must have an appeals process to enable a borrower to appeal in relation to a decision of the lender, including:

• where an alternative repayment arrangement is offered by a lender and the borrower is not willing to enter into the alternative repayment arrangement;
• where a lender declines to offer an alternative repayment arrangement to a borrower; and
• where a lender classifies a borrower as not co-operating,

and for this purpose, must establish an Appeals Board to consider and determine any such appeals submitted by borrowers.

A lender must allow the borrower a reasonable period of time to consider submitting an appeal to the Appeals Board, which must be at least 20 business days from the date of notification of the decision of the lender’s ASU. A lender must apply Provisions of the Central Bank of Ireland’s Consumer Protection Code 2012 to deal with complaints submitted by borrowers in relation to the following:

• the lender’s treatment of the borrower’s case under the Code, or
•  the lender’s compliance with the requirements of the Code.

Appeals Procedure

A lender must have in place a written procedure for the proper handling of appeals. At a minimum, this procedure must provide that:

• The Appeals Board will only consider written appeals;
• The lender must acknowledge each appeal on paper or another durable medium within five business days of the appeal being received;
• The lender must provide the borrower with the name of one or more individuals appointed by the lender to be the borrower’s point of contact in relation to the appeal until the Appeals Board adjudicate on the appeal;
• The lender must provide the borrower with a regular written update on the progress of the appeal, at intervals of not greater than 20 business days;
• The lender must consider and adjudicate on an appeal within 40 business days of having received the appeal;
• The lender must notify the borrower on paper or another durable medium, within five business days of the completion of the consideration of an appeal, of the decision of the Appeals Board and explain the reasons for the decision and the terms of any offer being made; and
• The lender must also inform the borrower of his/her right to refer the matter to the Financial Services Ombudsman and must provide the borrower with the contact details of that Ombudsman.

The Appeals Board must be comprised of three of the lender’s senior personnel, who have not been involved in the borrower’s case previously. At least one member of the Appeals Board must be independent of the lender’s management team and must not be involved in lending matters, for example, an independent member of the lender’s Audit Committee or an external professional such as a solicitor, barrister, accountant or other experienced professional.

Appeals Log

A lender must maintain an up-to-date log of all appeals received from borrowers. This log must contain:

• details of each appeal considered by the Appeals Board;
• the date the appeal was received;
• a summary of the lender’s response(s) including dates;
• details of any other relevant correspondence or records (including grounds on which an appeal was considered);
• the action taken to determine each appeal;
• the date the appeal was determined (and the decision of the Appeals Board); and
•  where relevant, the current status of the appeal which has been referred to the Financial Services Ombudsman.

A lender must undertake an appropriate analysis of the patterns of appeals from borrowers on a regular basis including investigating whether appeals indicate an isolated issue or a more widespread issue. This analysis of appeals from borrowers must be escalated to the lender’s ASU, compliance/risk function and senior management.

The analysis of such complaints from borrowers, under the Consumer Protection Code 2012, must be escalated to the lender’s ASU, compliance/risk function and senior management.

Repossession I

Where a borrower is in mortgage arrears a lender may only commence legal proceedings for repossession of a borrower’s primary residence, where:

• the lender has made every reasonable effort under the Code to agree on an alternative arrangement with the borrower or his/her nominated representative; and
• the relevant period, as applicable, has expired; or the borrower has been classified as not co-operating, and the lender has issued the notification required.

Where a borrower is in mortgage arrears the lender may apply to the courts to commence legal proceedings for repossession of a borrower’s primary residence:

• in the case of a fraud perpetrated on the lender by the borrower; or
• in the case of breach of contract by the borrower other than the existence of arrears.

A lender, or its legal advisors on its behalf, must notify the borrower on paper or another durable medium immediately before it applies to the Courts to commence legal proceedings for the repossession of the primary residence.

Repossession II

Where legal proceedings have commenced, a lender must continue to maintain contact with the borrower or his/her nominated representative periodically. If an alternative repayment arrangement is agreed between the parties before an order in relation to the repossession of the property is granted, the lender must seek an order from the court to put the legal proceedings on hold, for the period during which the borrower adheres to the terms of the alternative repayment arrangement.

Where a lender has disposed of a property which it has repossessed, the lender must notify the borrower on paper or another durable medium, of the following information and of his/her liability for:

• the balance of the outstanding debt, if any;
• details and amount of any costs arising from the disposal which have been added to the mortgage loan account; and
• the interest rate to be charged on the remaining balance, if any

The information specified above must be provided to the borrower in a timely manner following the completion of the disposal.

Records and Compliance

A lender must be able to demonstrate to the Central Bank of Ireland that it is in compliance with the requirements of the Code. A lender must maintain full records of all the steps taken, and all of the considerations and assessments required by the Code, and must produce all such records to the Central Bank of Ireland upon request.

A lender must maintain records of all communications with borrowers in mortgage arrears and in pre-arrears. Such records must be readily accessible and capable of being reproduced in legible form and in a timely manner. Such records may include contemporaneous notes of meetings. A lender must maintain recordings of all Arrears Support Unit telephone calls made to or from a borrower in relation to his/her arrears or pre-arrears.

All records required by, and demonstrating compliance with the Code, must be retained by the lender for six years. In addition, all records relating to a borrower must be retained for six years from the date the relationship with the borrower ends.

Status of the Code

In Irish Life and Permanent PLC v. Duff [2013] IEHC 43 Hogan J. dismissed an application for possession of a borrower’s principal private dwelling, on grounds (inter alia) that the bank had failed to comply with the code of conduct as issued by the Financial Regulator in that it failed to offer the borrowers an alternative repayment schedule.

In Stepstone Mortgage Funding Ltd v. Fitzell [2012] IEHC 142 Laffoy J. held that the plaintiff was not entitled to possession of a dwelling house having failed to comply with the code of conduct on mortgage arrears.

 “… I find it impossible to agree with the proposition that, in proceedings for possession of a primary residence by way of enforcement of a mortgage or charge to which the Current Code applies, which comes before the court for hearing after the Current Code came into force, the plaintiff does not have to demonstrate to the Court compliance with the Current Code. To take what is perhaps the best known provision of the Current Code, the imposition of a moratorium on the initiation of proceedings, which is now contained in provision 47 of the Current Code (and which was also to be found in the earlier codes, although the moratorium period in the case of the earliest code was six months, rather than twelve months), surely a court which is being asked to make an order which will, in all probability, result in a person being evicted from his or her home, is entitled to know that the requirement in provision 47, which has been imposed pursuant to statutory authority, is complied with.”

In McGuinness -v- Allied Irish Banks Plc [2014] IEHC 191 Gilligan J. wrote

“ It is also clear that the status of the Code has not been conclusively determined by the courts, but the particular facts in this instance do not indicate that this is an appropriate case for this determination to be made. The decisions of the courts in Irish Life and Permanent plc v Duff [2013] IEHC 43 and Stepstone Mortgages Funding Ltd v Fitzell [2012] 2 I.R. 318 are narrow in nature and only determined that compliance by a lender with the Code was necessary in order for the making of an order for repossession. They are not relevant to the facts at issue in these proceedings and would not have a bearing on the status of the Code in relation to the right of the borrower to use non-compliance with the Code as a cause of action against a lender. This matter has yet to be determined but given the facts of this case it is clear that this issue could not be appropriately determined in these proceedings, particularly since the plaintiff was at all times able to make a further application under the MARP to the ASU and the Mortgage Appeals Board of the lender. Though a legal issue in relation to the status of the Code exists that does not equate to the raising of a fair issue to be tried. In this instance, given the facts as presented, to hold otherwise would be to allow this legal issue to be determined in a factual vacuum. There is no fair issue to be tried in these circumstances in relation to the status of the Code”.

Non- Mortgage Consumer Arrears

A regulated entity must have in place written procedures for the handling of arrears. A regulated entity must make the following information available for personal consumers, including on a dedicated section of any website it operates:

• general information to encourage a personal consumer to deal with arrears and stating the benefits of dealing with arrears;
• relevant contact details of the regulated entity for dealing with arrears;
• details on the charges that may be imposed on personal consumers in arrears; and
• a link to the Money Advice and Budgeting Service (MABS) website.

The information on the website must be easily accessible from a prominent link on the homepage.

Procedure

Where an account is in arrears, a regulated entity must seek to agree an approach (whether with a personal consumer or through a third party nominated by the personal consumer in accordance) that will assist the personal consumer in resolving the arrears.

Where an account remains in arrears ten business days after the arrears first arose, a regulated entity must immediately communicate clearly with the personal consumer to establish in the first instance why the arrears have arisen.

At the personal consumer’s request and with the personal consumer’s written consent, a regulated entity must liaise with a third party nominated by the personal consumer to act on his or her behalf in relation to an arrears situation. This does not prevent the regulated entity from contacting the personal consumer directly in relation to other matters.

Notifying Status

Where an account remains in arrears 31 calendar days after the arrears first arose, a regulated entity must within three business days inform the personal consumer and any guarantor of the loan, on paper or on another durable medium, of the status of the account. This information must include the following:

• the date the account fell into arrears;
• the number and total amount of repayments (including partial repayments) missed (this information is not required for credit card accounts);
• the amount of the arrears to date;
• the interest rate applicable to the arrears;
• details of any charges in relation to the arrears that may be applied;
• the importance of the personal consumer engaging with the regulated entity in order to address the arrears;
• relevant contact points;
• the consequences of continued non-payment, including where relevant, sharing of data relating to the consumer’s arrears with the Irish Credit Bureau or any other credit reference agency;
• if relevant, any impact of the non-payment on other accounts held by the personal consumer with that regulated entity including the potential for off-setting of accounts, where there is a possibility that this may occur under existing terms and conditions; and
• a statement that the personal consumer may wish to seek assistance from MABS and contact details for the MABS National Helpline and the link to the MABS website.

Course of Arrears

Where a personal consumer has purchased payment protection insurance (PPI) from the regulated entity in relation to the loan account or credit card account which subsequently went into arrears, the communication required above must also advise the personal consumer of the following:

• that the personal consumer has purchased PPI;
• the personal consumer’s policy number; and
• that the regulated entity will provide the personal consumer with a copy of the policy on request.

Where the arrears persist, an updated version of the information must be provided to the personal consumer, on paper or on another durable medium, every three months.

Secured Lending

In respect of a mortgage, where a third full or partial repayment is missed and remains outstanding, and an alternative repayment arrangement has not been put in place, a regulated entity must notify the personal consumer, on paper on another durable medium, of the following:

• the potential for legal proceedings and proceedings for repossession of the property, together with an estimate of the costs to the personal consumer of such proceedings;
• the importance of seeking independent advice, for example from MABS; and
• that, irrespective of how the property is repossessed and disposed of, the personal consumer will remain liable for the outstanding debt, including accrued interest, charges, legal, selling and other related costs, if this is the case.

A regulated entity must inform the personal consumer, on paper or on another durable medium, when it intends to appoint a third party to engage with the personal consumer in relation to arrears and must explain the role of the third party.

Revised Payment Arrangements

Where a regulated entity reaches an agreement on a revised repayment arrangement with a personal consumer, the regulated entity must, within five business days, provide the personal consumer, on paper or on another durable medium, with a clear explanation of the revised repayment arrangement and clarification on what data relating to the consumer’s arrears will be shared with the Irish Credit Bureau or any other relevant credit reference agency.

Where arrears arise on an account and where a personal consumer makes an offer of a revised repayment arrangement that is rejected by the regulated entity, the regulated entity must formally document its reasons for rejecting the offer and communicate these to the personal consumer, on paper or on another durable medium.

Communications

A regulated entity must ensure that the level of contact and communications from the regulated entity, or any third party acting on its behalf, with a personal consumer in arrears, is proportionate and not excessive. Each calendar month, a regulated entity, and/or any third party acting on its behalf, must not initiate more than three unsolicited communications, by whatever means, to a personal consumer in respect of arrears.

The three unsolicited communications include any communication where contact is attempted but not made with the personal consumer but do not include:

• any communication that has been requested by, or agreed in advance with, the personal consumer; and
• any communication to the personal consumer the sole purpose of which is to comply with the requirements of this Code or other regulatory requirements.

References and Sources

Irish Texts

Breslin Banking law + Supplement     3^rd Ed  2013

Mortgages Law & Practice     Maddox 2^nd Ed            2017

NAMA Act 2009: A Reference Guide Raghallaigh, Kennedy, Whelan

Money Laundering & Anti-Terrorist Financing Act 2010

Financial & Emergency Provision Legislation Annotated      2011

Shelley & McGrath     National Asset Management Agency Act Annotated 2011

Dodd & Carroll            Law Relating to NAMA 2012  0

Ashe & Reid    Anti-Money Laundering: Risks, Governance & Compliance             2013

Johnston & Ors           Arthur Cox Banking Law Handbook               2007

Dr Mary Donnelly  The Law of Credit and Security, 2nd Ed, 2015

UK Texts

A Hudson The Law of Finance 2nd Ed (Sweet and Maxwell 2013)

Veil (Ed) European capital markets law (Hart Publishing 2013)

IG MacNeil An Introduction to the Law on Financial Investment 2nd Ed ( Hart Publishing 2012)

E Ferran Principles of Corporate Finance 2nd Ed ( OUP 2014)

Gullifer (ed) Goode and Gullifer on legal problems of credit and security (6th edn Sweet and Maxwell London 2017).

MA Clarke et al (eds) Commercial Law: Text, Cases and Materials (5th edn OUP Oxford 2017)

McKendrick (ed) Goode on commercial law (5th edn Penguin London 2017)

G McCormack Secured credit under English and American law (CUP Cambridge 2004)

L Gullifer and J Payne Corporate Finance (2nd edn Hart Oxford 2015)

D Sheehan The Principles of Personal Property Law (2nd edn Hart Oxford 2017)

Ross Cranston, Emilios Avgouleas, Kristin van Zwieten, Christopher Hare, and Theodor van Sante Principles of Banking Law 3^rd Ed 2018

E.P. Ellinger, E. Lomnicka, and C. Hare Ellinger’s Modern Banking Law 5^th Ed 2011

Andrew Haynes The Law Relating to International Banking  Bloomsbury Professional 2009

Charles Proctor Mann on the Legal Aspect of Money 7^th Ed 2012

Charles Proctor The Law and Practice of International Banking 2^nd Ed  2015

Sheelagh McCracken The Banker’s Remedy of Set-Off   2010 Bloomsbury Professional

Louise Gullifer, Jennifer Payne Banking & Financial Law 2018

Hubert Picarda QC The Law Relating to Receivers, Managers and Administrators 4^th Ed  2006 5th Ed 2019

Lightman & Moss on the Law of Administrators and Receivers of Companies 6th Ed  Sweet & Maxwell 2017

Timothy N Parsons  Lingard’s Bank Security Documents 6^th Ed 2015