Lenders warned to have new arrears code by June 30
LENDERS were warned yesterday by the Central Bank to have new rules for dealing with people in arrears on their mortgages in place by the end of this month.
The revised code of conduct on arrears gives extra protections to homeowners struggling to meet repayments.
Head of consumer protection at the Central Bank Bernard Sheridan told banks they had until June 30 to fully implement the new rules.
"It will be important that lenders fully embrace this new regime to ensure the important protections it affords to customers are working," he said in a speech to Griffith College, Dublin.
He warned that inspections of lenders would be carried out later in the year to ensure the protections were in place.
Some 86,000 people are struggling to repay their mortgages, according to the Central Bank.
Despite this, repossessions remained very low, Mr Sheridan said. Just 140 houses were repossessed in the first three months of the year.
And he revealed that changes to the consumer protection code, which governs how banks and other finance firms treat customers for a range of products, were due to come into force in September.
Mr Sheridan said that these new rules would likely mean more people would be turned down for loans and other products.
The Central Bank is proposing that lenders would have to fully assess a consumer's ability to repay a loan before granting credit.
And finance firms would have to stress test the loan by checking if the consumer could cope with a 2pc rise in interest rates.
"The proposal may seem to be very onerous and consumers may feel the lender is being too intrusive, as the information is quite detailed," Mr Sheridan said.
But the flip side was that consumers would fully understand their financial situation before becoming more indebted.