Central Bank slaps lenders' wrists over mortgage policy during Covid

The Central Bank has warned lenders to better communicate any changes to their mortgage application processes brought about by the pandemic.

The Central Bank has dealt mortgage lenders a slap on the wrist by warning them to improve their communication with customers over any changes to their loan application processes prompted by the impact of the Covid-19 pandemic.

The regulator said it had become aware, through its supervisory work, that lenders had changed their mortgage application processes due to Covid uncertainty; leading — in some cases — to additional credit checks of applicants before the drawdown of the mortgage.

In an open letter to the CEOs of the main banks, the Central Bank’s head of consumer protection supervision Helena Mitchell said some lenders haven’t sufficiently considered the impact of such changes on mortgage customers and haven’t communicated with them in a “proactive and consumer-centric” way.

The warning comes less than a week after the Central Bank was openly criticised for a perceived failure to punish financial services firms for regulatory breaches and for a lack of enforcement of the consumer protection code.

"Mortgage lenders must make clear to customers that where there has been any material change to the customer’s circumstances prior to the drawdown of funds, the loan offer may subsequently be withdrawn, paused or varied. At a minimum, this communication must be included in the loan offer letter," Ms Mitchell said.

Ms Mitchell has asked each lender to confirm, by December 4, that they have reviewed their policies to establish whether or not they are in line with the regulator’s expectations. If their mortgage application policies fall short, the lenders must confirm that they have taken appropriate action to fix them.

Separately, the Central Bank said it will complete, by the end of next month, an interim report on its investigation into whether differential pricing — where different prices are charged to different customers for the same product — has negatively impacted Irish motor and home insurance customers.

It said enhanced technology has increased the potential for more sophisticated forms of differential pricing.

Last week, a Central Bank spokesperson said the regulator continues to hold firms and individuals accountable where there are serious breaches of standards and regulatory requirements.