Derville Rowland, the director-general at the Central Bank, has issued a strong warning to bank chiefs to ensure they don’t revert to penalising customers when the Covid-19 payment breaks end on mortgages and other loans.
When the economic crisis broke with almost 1.3 million people needing some sort of Government payment to make ends meet, the banks offered customers payment breaks on their loans for an initial three months, which was subsequently extended to six months.
Lenders are offering that any missed payments will be rolled up and capitalised into the loan to be paid off at a later stage.
Financial experts have warned, however, that at the end of the six months breaks the country could face something of a repeat of the mortgage arrears crisis of the last recession of a decade ago when a significant number of Irish households fell into debt and were unable to meet their loan repayments and lost their homes.
Ms Derville yesterday issue a stern reminder to the lenders that they must tell borrowers in good time about the implications of the payment breaks and what will happen if they are still in financial hardship and unable to resume repayments.
“Lenders must be clear with customers on how payment breaks work and ensure all consumer protection obligations are met in full,” Ms Derville said.
She said that the Central Bank expects lenders to offer forbearance for the customers who face difficulty and pledge that “the Covid crisis will not change Central Bank’s focus on holding regulated firms and the people who run them accountable”.
“While we have certainly had to re-prioritise in light of Covid, one thing that will not change is our focus on holding regulated firms and the people who run them accountable where there are serious or significant breaches of regulatory requirements and standards,” she said.
"We expect lenders to engage with borrowers well in advance of the expiry of the payment break to support customers, and our existing arrears handling frameworks, including the statutory Code of Conduct on Mortgage Arrears, will apply in the normal manner," Ms Rowland said.
"They require all lenders to engage sympathetically and positively with the customers, with the objective at all times of supporting them through this time," she said.