The Financial Regulator has published a Code of Conduct on Mortgage Arrears and a Code of Conduct for Business Lending to Small and Medium Enterprises.
The Code of Conduct on Mortgage Arrears applies to all mortgage lenders operating in the State (whether authorised here or operating on a passport from another EU member state). The Code imposes specific requirements with regards to the handling of arrears in respect of a consumer's mortgage on a principal private residence.
While a consumer will be regarded as having fallen into arrears once the first repayment has been missed, a formal demand must not be issued until the third repayment is outstanding. This formal demand must be accompanied by certain specified information (i.e. total amount of arrears, any excess interest that may be charged etc).
All genuine cases (e.g. where there has been a change in the borrower's circumstances) must be handled sympathetically and positively by the lender with the objective of assisting the borrower to meet his/her obligations. Other than where the borrower is deliberately not engaging with the lender where a borrower is in difficulty, the lender must make every reasonable effort to agree an alternative repayment schedule.
Legal action for repossession cannot be commenced until after six months from the time arrears first arise. Therefore, repossession is seen by the Code as a last resort. The Code does not however prevent repossession by voluntary agreement or where the property has been abandoned. Where a repossession action is commenced the lender must maintain contact with the borrower and must inform the borrower of any liability for costs, accrued interest or outstanding debt.
The Code is to be read in conjunction with the Financial Regulator's Consumer Protection Code.
The Code of Conduct for Business Lending to Small and Medium Enterprises applies to all regulated banks and building societies (excluding credit unions) operating in the state. This code sets out processes regulated entities are required to adopt to facilitate access to credit for businesses. Small and Medium Enterprises are defined as "enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million". The Code covers overdrafts, loans, term loans, leasing, hire purchase and invoice discounting. By way of key changes regulated entities are now required by the Code to offer annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints.
As regards taking security, a regulated entity must not impose unreasonable collateral requirements or personal guarantee requirements having regard to the value of the credit being offered. In cases where credit is declined, the regulated entity must explain clearly to the borrower the reasons why. Where a customer gets into difficulty the banks will seek to agree an approach to resolve problems and provide reasonable time and appropriate advice.