Pestering sub-prime lenders face stiff penalties
Lenders who act in this fashion against customers who have fallen into arrears will face serious penalties, including multi-million euro fines, under measures announced by the Financial Regulator.
Following a trawl of financial institutions last year, Financial Regulator Matthew Elderfield said his office found serious “regulatory concerns”.
The industry watchdog said a significant number of unnamed institutions offering sub-prime mortgages were in breach of existing consumer protection law.
And while a number of different sanctions are open to the regulator, he said fines of up to €5 million for a firm repeatedly offending and €500,000 for an individual lender could be imposed.
Central Bank figures show more than 28,000 homeowners are three months behind in their mortgage payments, with 19,000 of these 180 days or more late in paying. A large number of these involve sub-prime mortgages, which, while accounting for just 2% of the Irish market, are involved in 41% of all court-ordered repossessions.
The regulator’s investigation found that the majority of banks and building societies are acting fairly.
However, Mr Elderfield warned that sub-prime lenders are harassing customers who have fallen into arrears by:
* Repeatedly contacting them via phone, text, email and letter.
* Appearing at their homes or place of work without consent.
* Charging customers higher costs than other lenders for such correspondence.
“There is a high level of contact with consumers in arrears, the frequency of application of charges to consumers in arrears and the early commencement of legal action on repossession,” Mr Elderfield warned.
The regulator added that this includes “arrears management fees/surchage interest fees and charges for letters issued in relation to arrears”.
Under the Consumer Protection Code and Consumer Credit Act, 1995, lenders are obliged to ensure contact with customers who have fallen into arrears is fair and balanced, and “undue pressure” is not exerted.
This includes “a duty not to harass or intimidate the consumer”, the regulator noted.
In addition, the legislation also notes a mortgage lender cannot visit or contact a customer or family members without their consent.
A regulator spokesperson said failure to comply with the legislation can result in various sanctions ranging from a direction to immediately stop harassing a customer to heavy fines.
As a result of the mortgage harassment revelations, a further nationwide investigation is due to take place over the coming months.
The Irish Banking Federation (IBF) said “mainstream” institutions are committed to resolving any issues where customers are being unfairly pressurised.
The National Consumer Agency said it was very supportive of the regulator in protecting consumers in a very vulnerable situation.
* Any consumer seeking information on arrears will find it on the NCA website itsyourmoney.ie or by calling 1890 432 432
