Bob's Blog

14 October, 2011 – Matthew Elderfield delivered what was hailed a landmark speech in UCC in relation to mortgage arrears. Banks were still treating consumers unfairly, and with that “we added to our consumer protection arsenal by launching a new code of conduct setting out how regulated lenders must deal with consumers who were in arrears with their mortgage repayments”.

It is certainly not a new phenomenon that banks have ripped off consumers; this is an age old problem. However, when borrowers are staring down the barrel of the foreclosure gun, they rely on, and are entitled to, some level of support from lenders to keep themselves afloat. Elderfield estimates that only one-tenth of those households in negative equity are actually in deep arrears. If these figures are accurate, then lenders should come to realise that by rescheduling debt should only be a short term measure for the majority of these households.

Providing a breathing space

Under the same heading in his speech delivered in UCC, Elderfield acknowledged that neither the Central Bank nor the government has the power to set standard variable rates. However, pushing more borrowers into arrears is self-defeating, “adding to the mortgage arrears problem and ultimately costing more in terms of capital”. Just three weeks later, National Irish Bank announced plans to increase their standard variable rate mortgage by 1%.

Crossroads

Mr Elderfield’s speech was welcomed in many quarters. For once, the Regulator signalled his intent to ‘put-it-up’ to lenders. No more Mr Nice Guy! Sadly, the majority of lenders simply shrugged off his rhetoric, and at this point in time, Ulster Bank, Bank of Ireland, Start Mortgages, AIB and EBS all ignoring to pass on the 0.25% ECB decrease from last week.

“If the banks continue to act in a way which is so damaging to customers and which appears to take advantage of the current dysfunctional competitive environment, it seems they are courting the risk of a public policy response involving powers to impose direct restrictions on their rate setting capacity by the competition or financial regulatory authorities”

-          Matthew Elderfield, UCC, October 14^th, 2011.

I am calling on Mr Elderfield to take immediate action by imposing a responsible public policy response. He is on record and I expect a follow up response within days. Anything short of his commitment above will immediately denigrate his authority and call into question his role as Financial Regulator.