Address by Head of Consumer Protection Colm Kincaid to the Griffith College Property Law Update

03 October 2013 Speech

I would like to thank The Honourable Miss Justice Laffoy and Griffith College for inviting me to speak this afternoon on the Central Bank’s Code of Conduct on Mortgage Arrears (the “CCMA”), which was reviewed in the first half of 2013. The revised CCMA was published in June with an effective date of 1 July 2013. I would like to also give you an overview of the Central Bank’s response to the growing problem of mortgage arrears, explain the requirements of the CCMA at a high level and take the opportunity to highlight the importance of your role as legal professionals in resolving the mortgage arrears problem.

The Scale of the Problem

As at end June of this year, there were 770,610 private residential mortgage accounts for principal dwellings in Ireland. 142,892 of these were in arrears. That’s 18.5%, of which 12.7% (97,874) were in arrears of longer than 90 days and 7.4% (57,163) were in arrears of longer than 360 days (with just over half of this 7.4% figure being in arrears of longer than 720 days). Remember, these are loans for private residential properties. So, if we translate this figure of 142,892 into workers and families, you get a picture of the scale of the social and economic problem this represents for the recovery of our country. You also get an insight into the importance of ensuring that borrowers are provided with long term sustainable solutions, with sale or repossession being used only as a last resort.

Even more concerning is that these arrears figures have continued to grow. The end-June figures I have just mentioned are an increase on the figures for end-March. Moreover, the figures I have mentioned do not include mortgages for buy to let, business or unsecured lending.

The Central Bank’s Response

The Central Bank, for its part, has ramped up its engagement with the mortgage lenders on this issue:

  • introducing challenging Mortgage Arrears Resolution Targets for the main banks for offers made and arrangements concluded;
  • carrying out rigorous on-site inspections of lenders’ operational capacity and requiring banks to significantly up-scale their arrears support operations;
  • commissioning independent consumer-based research (which highlights the benefits of early engagement and completion of the Standard Financial Statement (“SFS”)); and
  • embarking on a review of the CCMA to strengthen consumer protections where necessary and to ensure the Code is facilitating the resolution of each mortgage arrears case in a fair, sustainable and transparent way. This review included a public consultation with over 200 submissions received, all of which were reviewed in detail and are responded to in our Feedback Document published with the revised CCMA.

The banks concerned have reported compliance with the first quarterly set of targets (end-June). The Central Bank has now started its process of auditing this return to assess the completeness, accuracy and validity of the reported outcomes against the targets we have set, including sample file reviews.


The CCMA is a key pillar of our strategy for the resolution of mortgage arrears and the protection of borrowers, and the resolution of their cases remains a top priority for the Central Bank. The CCMA provides strong protection for borrowers who engage with their lender and (as part of our recent reforms) greater clarity of process for borrowers and lenders where a lender wishes to classify a borrower as ‘not cooperating’. While its requirements are necessarily detailed (reflecting the complexity of the issues), in many ways the CCMA simply represents good arrears management practice: lenders must first gather information on the borrower’s financial position, review that information against each option available from the lender and seek to agree a long term sustainable solution wherever possible before considering options such as sale or repossession. This is good practice and seeks to ensure that lenders’ capital (much of which has come from the taxpayer) is used wisely.

Step 1: Communication with Borrowers in Arrears

Under the CCMA, lenders are required to make an initial communication with a borrower in arrears to establish why the arrears have occurred. Lenders must also provide borrowers with certain information, including the status of their account, when arrears arise and remain outstanding for 31 days. Engagement must be in accordance with a Board approved communications policy which ensures that communications are proportionate and not excessive. This includes that unnecessarily frequent communications are not made, communications with borrowers are not aggressive, intimidating or harassing, steps are taken to agree future contact and borrowers are given sufficient time to perform actions they commit to before follow-up is initiated. Lenders must give consideration to the action that a borrower has committed to carry out, including whether the borrower may require assistance from a third party in carrying out the action. To avoid unnecessary or inefficient engagement, before a lender makes contact with a borrower the lender must ensure that it has available all the relevant information supplied by the borrower previously. An unsolicited visit is only permitted immediately prior to classifying a borrower as not cooperating when all other attempts at contact have failed.

The classification of a borrower as not cooperating is significant for the borrower and their rights under the CCMA. In particular, a lender is permitted to commence legal proceedings for repossession immediately. In recognition of this, we have introduced a requirement that lenders must first warn the borrower in writing that they may be classified as not cooperating. This warning must specify what steps are required to avoid that classification and give the borrower at least 20 business days to take the action required. Only once this period has expired without these steps being taken, may the lender classify the borrower as not cooperating. Where the lender does so, it must write to the borrower again to notify them that they have been classified as not cooperating and set out key information on their options and next steps, including that legal proceedings can commence immediately and the borrower’s right to appeal the lender’s decision.

Step 2: Financial Information

Central to the operation of the CCMA is the requirement that the lender carries out a full assessment of the borrower’s situation and reviews all their available options for an Alternative Repayment Arrangement (“ARA”). To do this, lenders must provide the borrower with an SFS at the earliest opportunity. It is essential that a borrower complete this form and provide the lender with the necessary information if the borrower is to avail of the protections of the CCMA. The lender can impose a timeline for return of information but it must be fair and reasonable and the lender must offer to assist the borrower with completing the SFS and inform them that they may wish to seek independent advice. Lenders must provide a copy of the completed SFS to the borrower and must pass the completed form to a dedicated Arrears Support Unit (“ASU”), which the Central Bank requires lenders to maintain to handle arrears cases.

Step 3: Assessment

The lender must then assess the borrower’s position based on the SFS in a timely manner and must do so based on the full circumstances of the borrower. This includes taking into account the personal circumstances of the borrower and their overall indebtedness, not just the mortgage loan. The lender may agree to put a temporary arrangement in place while it is assessing the borrower’s financial position where not doing so would further exacerbate a borrower’s position. However, this must be for a limited period only (sufficient to enable the lender to receive and complete a full review of the SFS). It is not a substitute for the goal of the Code: The resolution of arrears cases in a fair and transparent manner.

Step 4: Resolution

The CCMA requires the lender to explore all options for ARAs offered by that lender and document its consideration of each option. Where an ARA is offered, the revised CCMA places additional obligations on the lender to detail the reasons why the offer made is considered to be appropriate and sustainable for the borrower, as well as demonstrating the advantages and any disadvantages or potential disadvantages by reference to the borrower’s individual circumstances. The offer must also advise the borrower to take appropriate legal and/or financial advice and set out the frequency with which the ARA will be reviewed as well as other details listed in the Code. A borrower may request a review of their ARA at any time and lenders must carry out a review in any event at intervals that are appropriate to the type and duration of the arrangement, including at least 30 days in advance of the ARA coming to an end or when a borrower ceases to adhere to the ARA.

Where no offer is made by the lender at the end of the assessment, the lender must inform the borrower of the reasons why and provide the borrower with information on other options such as voluntary surrender, trading down or mortgage to rent. This notification must also make the borrower aware of their option to consult with a Personal Insolvency Practitioner (“PIP”) under the Personal Insolvency Act 2012 and the importance of obtaining independent advice. However, while we require this notification at this important stage of the process, it should be noted that a borrower can of course consult a PIP or seek independent advice at any stage. A notification of this type is also required to be sent to a borrower who declines an ARA offered by their lender.

Tracker Mortgages in Arrears

As part of our review, we considered carefully whether there are any circumstances which would merit a lender offering a borrower in arrears an arrangement which changed from their existing tracker rate. We concluded that there may be exceptional cases where this could arise and where such an offer may prevent a borrower from losing their home. The revised CCMA therefore allows a lender to offer a borrower an ARA which requires the borrower to change from an existing tracker mortgage to another rate only as a last resort where:

  • all other options which would retain the tracker rate are unsustainable,
  • the arrangement offered is affordable for the borrower, and
  • the arrangement is a long-term sustainable option which is consistent with Central Bank policy on sustainability.
Reflecting the importance placed on tracker rates by consumers, we have requested any lender seeking to avail of this new provision to engage with the Central Bank before doing so.


The CCMA requires lenders to establish an internal Appeals Board so that borrowers can appeal an offer of an ARA or a decision of the lender not to offer an ARA. A borrower can now also appeal a classification as ‘not cooperating’. This right of appeal is against the substance of the decision the lender has made and, as such, represents a key protection for borrowers under the Code. It is in addition to the borrower’s right to complain about the process itself at any stage (including a complaint about the appeals process) and, if dissatisfied, to bring that complaint to the Financial Services Ombudsman.

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. This would include 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. Finally, lenders must undertake an analysis of patterns of appeals on a regular basis and escalate this analysis right up to senior management.

Repossession Proceedings

As legal practitioners you have a particular role to play in cases where lenders decide to commence legal proceedings for repossession against borrowers in arrears. Under the CCMA, outside of cases of fraud or breach of contract other than the existence of arrears, a lender may only commence legal proceedings where every reasonable effort has been made to agree an alternative arrangement and either:

(a) the borrower has been classified as not-cooperating (including having been given their 20 business day warning as described above), or

(b) in the case of a cooperating borrower, the expiration of the later of (i) eight months since their arrears first arose or (ii) three months from the date the lender issues a final letter to the borrower stating that no offer will be made or acknowledging that the borrower has declined an offer made by the lender.

There is an understandable focus on this provision of the Code from all quarters, relating as it does to the taking of legal proceedings for the repossession of the family home. Some have commented that the CCMA’s protections against repossession slow down resolution. However, this approach of exhausting all options before taking legal proceedings is again a representation of good debt recovery practice and especially so given the cost of legal proceedings for all concerned. This includes the cost to the State and society at large of having our Courts clogged up with unnecessary litigation, given the scale of this problem. The Central Bank also has a concern to ensure that costly capital is used wisely. Where solutions can be found that provide a return for the lender over time while keeping the borrower in their family home on a sustainable basis, this is to be preferred over litigation and we expect lenders to work tirelessly to get such solutions in place. For cooperating borrowers where no such solution can be found, it is only proper that they be given a reasonable period in which to consider their options, including sale of the property or entry into the personal insolvency framework.


The resolution of arrears remains one of the biggest challenges we all face. In the CCMA, the Central Bank has prescribed the framework by which regulated entities must engage with consumers in arrears on their primary residence. It reflects best practice in arrears management and steers the course between the rights and responsibilities of both parties in a way that is fair, transparent and focused on long term solutions. These rules have not been imposed lightly and follow extensive consultation with the public, consumer representatives, industry bodies, the Minister for Finance, the European Central Bank, the European Commission and the International Monetary Fund. They have the approval of the Central Bank’s governing body, the Central Bank Commission, and it is the legal responsibility of regulated entities to comply with them.

The Central Bank is actively regulating this area. But this problem affects us all, and all parties in the process must play their part. This includes each of you as legal advisers and representatives. Whether you act for the lender or the borrower, it is your responsibility also to see that the CCMA framework is applied properly and that mortgage arrears cases are resolved in a manner that gets it right for consumers. This requires us all to challenge non-compliance and to hold each other to the highest standards in this complex and important task.