CBI Inspections on the Code of Conduct on Mortgage Arrears
The CBI on 24 June 2015 reported on recent inspections focusing on lender compliance with the Code of Conduct on Mortgage Arrears ("CCMA").
The CBI acknowledged that, in the main, lenders have implemented processes required by the CCMA. Some lenders have gone beyond the minimum requirements of the CCMA. However, the CBI observed a number of weaknesses showing that CCMA is not being fully complied with. These were:
(a) Undue and significant delays in assessing cases in the Mortgage Arrears Resolution Process (i.e. the process by which defaulting borrowers are dealt with by the lender in accordance with the terms of the CCMA).
(b) Poor communications with borrowers particularly with regard to the assessment by lenders' arrears support unit of defaulting borrowers.
(c) Failure to meet CCMA timelines – particularly regarding issuing warnings, the classification of borrowers as "not co-operating" and unsolicited personal visits.
(d) Difficulties in maintaining effective communication where a borrower has appointed a third party.
(e) Additional concerns with regard to practices that the CBI considered went against the letter and spirit of the CCMA, noting that this undermined consumer protection.
Lenders appear to have in place appropriate systems but some do not to follow these systematically or to keep a record of compliance with those procedures.
Issues Arising Post-Inspection
The CBI has issued post inspection letters to each of the seven lenders inspected and has imposed "Risk Mitigation Programmes" where significant failings were found.
For those who were not the subject of inspections, the CBI requires the following specific steps to be taken:
(a) The early flagging of potential issues for borrowers, particularly vulnerable borrowers who are at risk of losing their property upon a default. The CBI requires that lenders confirm by 31 August 2015 that they have addressed this issue.
(b) An overall review of framework processes so that lenders can confirm to the CBI by 30 November 2015 that the lender continues to be in compliance with the CCMA and that there are appropriate review mechanisms in place to ensure that a lender's board of directors are satisfied that the lender delivers fair, timely and transparent outcomes for borrowers in difficulty.
The recent inspections show the CBI's particular focus on the treatment of retail customers in difficulty. Lenders will need to review their existing processes and consider whether the framework is capable of delivering fair, timely and transparent outcomes for borrowers. In addition, lenders need to ensure that their processes are followed systematically and that there is an audit trail of internal compliance so that the firm can demonstrate to the CBI that it has met the requirements of the CCMA.