Central Bank publishes outcome of review of early mortgage arrears supports

• Central Bank review finds the mortgage arrears resolution framework set out in the Code of Conduct on Mortgage Arrears (CCMA) is well positioned to support borrowers in or facing financial difficulty.
• Early engagement by borrowers dealing with financial difficulty continues to lead to solutions being found. However, customer service and supports for borrowers facing early arrears needs to be improved.
• Central Bank also encourages lenders to make greater use of temporary Alternative Repayment Arrangements (ARAs) while assessing individual circumstances.

The Central Bank of Ireland has completed a review of the supports banks, retail credit firms and credit servicing firms provide for borrowers in or facing early arrears.

While solutions are being found for borrowers, the review identified areas for improvement in how firms provide information as well as how they engage and support customers through the mortgage resolution process.

Director of Consumer Protection, Colm Kincaid said: “The Central Bank has carried out this review to ensure the financial system is supporting borrowers in or facing early arrears on their mortgage. It comes as we see an increased number of borrowers falling into early arrears, as increased costs of living impact on borrowers’ finances.

“The review found that where there is engagement between lender and borrower under the Code of Conduct on Mortgage Arrears, solutions are being found to support borrowers. It also found that firms have made improvements to their processes and supports. I encourage any borrower in or facing any financial difficulty to engage with their mortgage provider. They are required to support you and seek a solution that is affordable and aims to keep you in your home. Information on what you can expect from your mortgage provider is available on the Central Bank’s Consumer Hub.

“However, the review also found that the quality of customer service is not yet where it needs to be in the context of the specific challenges for borrowers facing early arrears at this time.  We found instances of late and incomplete information provided by lenders; unclear website information; inadequate follow up with the borrower; lack of assistance in completing paperwork; and failures to recognise where borrowers were experiencing financial difficulties.

“We have set out to the firms we regulate the improvements they need to make. As well as dealing with the deficiencies we identified, we have also called out  examples of good practice we witnessed in firms’ websites; their use of Plain English paperwork and prepaid return envelopes; incentives for borrowers and crucially, staff demonstrating empathy and willingness to accommodate borrowers through particularly difficult situations such as bereavement.

It is critical that firms make these improvements to meet their responsibilities to support consumers in or facing mortgage arrears and avoid the risk of those arrears becoming longer term. This needs to be a priority for all firms.”

The Central Bank has also encouraged firms to make greater use of temporary Alternative Repayment Arrangements (ARAs) to support borrowers where there is a risk that their situation will get worse during the time needed to gather information and assess the situation. The Review found minimal usage of these types of temporary ARAs in the majority of firms, and it was not always clear in firms’ policies what circumstances exactly provide for their use.

Notes to Editor

This Review was undertaken as part of the Central Bank’s ongoing work to ensure regulated financial service providers are supporting consumers of financial services to navigate a changing economic landscape and increased cost of living.

The Review assessed the effectiveness of the borrower journey, with a particular focus on engagement and communications to ensure that firms have the necessary supports, resource and service levels in place to support consumers in, or facing, financial difficulties.

The review showed that where there was engagement between borrower and the firm, solutions are being found. It also identified enhancements firms have made to their processes. However, it also identified a number of key areas for improvement:

• Engagement with borrowers: There were a number of customer service issues identified, which increase risks to customer engagement. Issues identified included instances of the following:
• Inadequate follow up with borrowers which did not progress engagement or took lengthy periods of time;
• Poor staff knowledge or communications which has resulted in unclear or incorrect information being provided to borrowers;
• Failure to recognise clear indications of a borrower’s financial difficulty;
• Failures to record or appropriately address complaints;
• Minimal assistance in completing the Standard Financial Statement; and
• Excessive contact attempts based on borrower circumstances.
• Information provided to borrowers: Issues were identified that heighten the risk of ineffective disclosure. Any information provided to borrowers in letters, website or information booklets must provide all information fully, fairly and clearly to support customer decision making.  There was also evidence of cases of delays in providing information to borrowers or assessing their cases within the firm’s own timelines.
• Temporary Alternative Repayment Arrangements (ARAs): The Central Bank has encouraged firms to make greater use of temporary ARAs to support borrowers where there is a risk that their situation will deteriorate during the time needed to gather information and assess the situation. The Review found minimal usage of these types of temporary ARAs in the majority of firms, and it was not always clear in firms’ policies what circumstances exactly provide for their use.