Central Bank clarifies rules for lenders on contacting consumers in arrears 

Information Release 1 May 2012

The Central Bank of Ireland has issued a letter to lenders, clarifying the protections and limits on contact with consumers in arrears set out in both the Consumer Protection Code 2012 (‘2012 Code’) and the Code of Conduct on Mortgage Arrears (‘CCMA’).  

Both Codes are based firmly on the principles of early and proactive engagement by lenders to identify the best possible solution and outcome for consumers in an arrears situation.  In addition, there is an overriding requirement for lenders’ contact with consumers in arrears to be proportionate and not excessive.  In order to further support these requirements, the Central Bank has issued guidance to lenders on its interpretation of a number of the arrears handling provisions of the 2012 Code and the CCMA.

Director of Consumer Protection, Bernard Sheridan said: “the Central Bank believes that early, proactive and positive contact is key to assisting the borrower and lender to discuss and agree the best solution and outcomes to an arrears situation. The Codes seek to protect consumers from undue pressure by emphasising the requirement for all lenders to be proportionate and not excessive in their communications and engagement. While unsolicited personal visits could be particularly difficult for some borrowers, the Central Bank believes that it is in consumers’ interests for a lender to be able to visit the home where attempts at contact have failed and before deciding to take legal action.

Our guidance provides further clarification to aid lenders’ understanding and to ensure they are meeting the consumer protection requirements of both Codes when making contact with consumers in arrears by telephone and through visits to their home. The guidance has been developed following engagement with the members of the Consumer Advisory Group, and industry and consumer bodies”. 

The main clarifications issued relate to:

1.     Initial contact - ‘communication’ means a successful communication, i.e. a conversation held with the consumer, a letter sent, a text or an email. This communication is not subject to the limit of three unsolicited contacts. Once this communication is successfully made, any further contacts will count towards the monthly limit on unsolicited communications. 

2.     Monthly limit on unsolicited communications (3 contacts) – missed calls and engaged numbers do not count towards the monthly limit.

3.     Unsolicited personal visits - a lender can make an unsolicited personal visit in relation to arrears, when all other attempts at contact have failed and prior to taking legal action. With regards to how the visit should be conducted:

The lender must give at least five working days’ notice to the consumer in writing.

  • The letter and visit do not count towards the limit of three unsolicited contacts per month.
  • The letter should outline the importance of the engagement and the intention of the visit, the consumer protections available and the relevant contact details for the lender (or its Arrears Support Unit in the case of mortgages).
  • The lender should offer to meet the consumer in a local branch instead of their home and should be advised that they may wish to consider having a third party present.
  • During visits in relation to mortgage arrears under the CCMA, a lender should offer to explain the Standard Financial Statement (SFS), but cannot insist that the consumer completes the form at that time. 
  • A further personal visit may be agreed with the consumer in compliance with provision 3.38 of the 2012 Code.

While the Central Bank is issuing this guidance on interpreting the Codes, the provisions of the 2012 Code and CCMA remain unchanged.  The Central Bank plans to review the CCMA later in the year.

Notes to Editor

The Consumer Protection Code 2012 is imposed under Section 117 of the Central Bank Act, 1989 and came into effect on 1 January 2012.  The publication of the revised Code follows two public consultations in October 2010 and June 2011. Contraventions of the Code may be subject to the imposition of administrative sanctions.  The Code builds on the protections of the previous version, but includes more detailed requirements in many areas.

The revised Code of Conduct on Mortgage Arrears for all regulated mortgage lenders became effective from 1 January 2011.  Lenders were informed of a six month period (ended 30 June 2011), where the Central Bank would be cognisant of issues relating to systems development or other technical difficulties and required staff training.

The Central Bank has information for consumers on mortgage arrears on their website www.centralbank.ie including: