Watchdog warns banks over extra charging on top of arrears
Banks should not be charging legal fees or piling interest on unpaid legal bills on top of mortgage arrears, the Central Bank's consumer protection watchdog has warned.
The Central Bank's director of consumer protection Gráinne McEvoy has written to the chairs of all of the country's banks.
She warns them not to charge the legal costs or to seek interest where costs are charged in cases where a borrower is in arrears, but co-operating with their lender.
The letter says banks have an existing obligation under the Code of Conduct on Mortgage Arrears 2013, which restricts the imposition of charges and/or surcharge interest on arrears, unless the borrower has been classed as not co-operating.
Consumer advocate David Hall says the practice of adding legal fees to the debts of those in arrears has been like throwing more water on someone who is drowning.
While he welcomed the move, he said it followed years of campaigning.
"This is a late intervention by the Central Bank as this practice has caused harm to many."
The current situation has seen some customers in arrears paying off legal costs instead of reducing their mortgage debt when they have resumed payments, Mr Hall said.
The Central Bank launched a probe into the practice earlier this year, and said yesterday that it is not in borrowers' best interests to levy such charges prior to the conclusion of repossession cases - when judges themselves make cost awards, or prior to settlement of arrears cases.
The chairs of the boards of all of the country's main banks have now been told to confirm to the regulator by December 20 that a review of the practices in their own institution has taken place - and that appropriate action has been taken in relation to any issues identified "as a matter of priority".