A review by the Central Bank revealed that lenders are frequently not sufficiently interacting with borrowers who are in the early stages of mortgage arrears. The analysis by the regulator scrutinised the lenders’ practices towards borrowers in financial hardship; in the context of a recent increase in short-term arrears, particularly associated with nonbank lenders or so-called “vulture funds”, known to impose higher interest rates on their loans.
The regulator noted that the Central Bank’s mortgage arrears resolution framework embedded in its code of conduct is well formulated to assist borrowers facing or in financial difficulties. However, it found the quality of customer service wanting, particularly in relation to the unique challenges borrowers in early arrears are currently facing.
The Central Bank particularly pointed out cases involving insufficient follow-ups with borrowers, which did not encourage engagement or took an excessively long time. The understanding demonstrated by the staff about cases was also occasionally lacking, leading to the provision of unclear or inaccurate information to borrowers.
Additionally, the regulatory review unveiled instances where lenders overlooked clear indications of the borrower’s financial hardship. In some cases, lenders neglected to register or correctly handle complaints, or offered little help with preparing standard financial statements needed for addressing arrears.
The Central Bank further highlighted incidents of “excessive contact attempts based on borrower circumstances.” It emphasised that lenders should prioritise addressing the shortcomings that have been identified as well as implement the practical examples of good standards that they had displayed.
“It is crucial for all companies to focus on making these improvements to fulfil their duties of supporting consumers in or at risk of mortgage arrears and to mitigate the risk of these arrears becoming longer term,” said Central Bank’s director of consumer protection, Colm Kincaid.
The Central Bank has received criticism for not sufficiently safeguarding borrowers using nonbank lenders, who have witnessed a massive surge in borrowing costs in recent times.