Central Bank has a ‘conflict of interest’ protecting mortgage holders in arrears

Watchdog ‘unable to balance role with financial firms and mortgage holders’, says Irish Mortgage Holders’ Organisation

Surging interest rates and cost-of-living pressures are pushing more mortgage holders into missing home-loan payments, the Central Bank said.

Experts said this is particularly the case for those trapped with vulture funds, where interest rates being charged are double those being imposed by banks, with families whose loans are owned by vultures unable to opt for fixed rates.

David Hall of the Irish Mortgage Holders’ Organisation said the Central Bank was unable to reconcile its roles as a prudential regulator of financial firms and its role in protecting consumers.

Mr Hall said credit servicing firms that act for vultures were “not fit for purpose” when customers were struggling to meet their repayments.

His comments came after banks, non-bank lenders and firms that service mortgage accounts on behalf of vulture funds were warned by the Central Bank about their poor handling of homeowner arrears cases.

A letter has been sent to the bosses of all mortgage firms by the regulator amid concern about surging interest rates pushing more families into ­missing payments.

Customer service and supports for borrowers facing early arrears need to be improved, the Central Bank told the chief executives.

The review of early mortgage arrears supports concluded that firms had:

• Unclear website information

• Inadequate follow-up with borrowers

• A lack of assistance in completing paperwork

• Are failing to recognise where ­borrowers are experiencing financial difficulties

Director of consumer protection at the Central Bank Colm Kincaid said the review was carried out as his office can “see an increased number of borrowers falling into early arrears”.

Mr Kincaid said the review found firms have improved their processes and supports. But it also found the “quality of customer service is not yet where it needs to be in the context of the specific challenges for borrowers facing early arrears at this time”.

The letter to mortgage firm bosses warned that surging interest rates and inflation were stretching household budgets, pushing up arrears levels.

The latest arrears figures, for the year up to last December, showed that 40pc of home mortgage accounts in arrears were held by banks, while 60pc were held by firms operating for vulture funds.

Close to 700 additional mortgage accounts went into early arrears in the final four months of last year compared with the previous quarter.

Mr Hall said: “This review clearly shows significant inefficiencies within the various lenders in dealing with those in mortgage arrears.

“This has been clear to those of us dealing with vultures particularly. It is clear they are not fit for purpose and this report confirms that.”

He said the Central Bank has a conflict of interest in carrying out its dual functions as a regulator and in protecting consumers.

This leads to it prioritising prudential regulation at the expense of consumer protection, said Mr Hall.

He added that “the elephant in the room is the restrictions vultures have on doing debt deals” as the funding arrangements they have in place do not allow them to forgive debt.

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