Blog – David McCarthy – Galway Talks, 27/06/2013

galway-bayfmIssue:  New code of conduct on mortgage arrears provides little comfort to borrowers.

Comment:  The Central Bank announced a new code of conduct for banks in relation to how they deal with customers respective mortgage arrears.

It is obvious from the changes that have taken place, that this could be described as the “Banks Charter” as opposed to protection for the consumer.  There are a number of issues in this code that I would be particularly concerned about, namely:-

  • Restriction on a bank to 3 contacts per month with a customer has been lifted.  As a result an institution can contact a borrower as many times as they like as long as it does not fall into the category of “harassment”.  There is no definition as to what is considered harassment.  Furthermore, bank representatives now have the freedom to visit a person in their home, as long as written notification is given to them in advance.
  • Probably the most significant change is the reduction in the period of time that a bank is required to adhere to before they seek repossession.  This is reduced from 1 year to 3 months for those currently in arrears and to 8 months for new cases.
  • Where a bank can show that a revised repayment arrangement is to the “advantage” to the borrower then they have the power to withdraw customer’s tracker rate.  The Central Bank have emphasized that lenders will have to show that they met this condition before removing the rate.

I find it hard to see how there is any good news in this revised code as it diminishes the protection for consumers.  It would appear that the institutions have had far too much input into these revised arrangements.  When you take these new regulations in conjunction with the veto the banks have under the Personal Insolvency Bill then it is clear to see which party is in the stronger position.

In summary, once again banks have won out on an issue of considerable importance to so many people and the “poor old consumer” is left feeling more vulnerable than ever.

Question:  I see some banks are always advertising that they provide a financial review.  I’ve always been concerned is this truly independent?

Answer:  In very simple terms there is nothing independent about these reviews.  Banks are using it as a “tool” to sell their products and in my opinion, does not constitute being described as a financial review.

Question:  I understand that there were some changes to EU Regulations in the last 24 hours, concerning how they deal with banks which collapse.  I am concerned that this will affect the security of my deposits?

Answer:  The announcement by the EU, which will take some time to put in place, relates to how banks are dealt with in the event of the collapse.  This is the extreme scenario situation and is only part of the major revamp of banking regulations throughout the EU.  It is the intention by the EU, to have banking union throughout the member states, which will tightly regulate how banks are capitalized and operate so as to ensure that collapses, do not occur.

For depositors, there is no need for concern as the deposit protection scheme will continue and I also believe that tighter regulation should ensure that future collapses do not occur.