Statement regarding the establishment by the Financial Regulator of a Code of Conduct on Mortgage Arrears and a Code of Conduct for Business Lending to Small and Medium Enterprise

I  welcome today’s announcement by the Financial Regulator of the establishment of the Code of Conduct for Mortgage Arrears and the Code of Conduct for Business Lending to Small and Medium Enterprises. Both Codes will be statutory codes and banks will be required to demonstrate compliance.

The Code of Conduct on Mortgage Arrears is particularly important in these difficult times when many householders are facing difficulties in making ends meet and have particular concerns about keeping up their mortgage repayments.

This new mandatory Code builds on the existing voluntary Code of Practice issued by the Irish Banking Federation and incorporates a requirement for the lender to wait at least six months from the time arrears arise before taking legal. The Minister for Finance, Mr. Brian Lenihan, TD noted that Allied Irish Bank and Bank of Ireland had also agreed, as part of the recapitalisation announced on 11 February, not commence court proceedings for repossession of a principal private residence until after 12 months of arrears appearing, where the customer continues to cooperate reasonably and honestly with the bank.

The Minister notes that, despite media speculation about large-scale repossessions statistics do not bear this out, and that mainstream mortgage lenders have been at pains to point out that they will go to great lengths to avoid repossession in arrears cases.

The Minister for Finance also notes that the Government has measures in place to assist those who get into difficulties with their mortgages.

The Mortgage Interest Scheme under the Supplementary Welfare Allowance system provides a safety net for those who need financial support with meeting the interest costs on their mortgage.  Funding for the Scheme has been substantially increased and the Scheme will be reviewed in 2009.

In addition, the Money Advice Budgeting Service (MABS) provides valuable help to those in difficulty.
The Code of Conduct for Business Lending to Small and Medium Enterprises will apply to all regulated banks and building societies. The Minister notes that the code will facilitate access to credit, promote fairness and transparency, and ensure that banks will assist borrowers in meeting their obligations, or otherwise deal with an arrears situation in an orderly and appropriate manner.

The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints. Where a customer gets into difficulty the banks will give the customer reasonable time and seek to agree an approach to resolve problems and to provide appropriate advice.