Question to the Minister for Finance (Mr. Michael Noonan, TD)

To ask the Minister for Finance regarding the regulation of mortgage providers and section 126 of the Consumer Credit Act 1995, where a person cannot get life insurance cover, the options that are available in order for that person to obtain a mortgage for a principal private residence; in such circumstances, the obligations that are in place requiring providers of mortgages to offer a mortgage to such a person; and if he will make a statement on the matter. – Jerry Buttimer

For WRITTEN ANSWER on 28, April, 2015.

REPLY

I am informed by the Central Bank that section 126 of the Consumer Credit Act 1995 (as amended) (the CCA) relates to the requirements on lenders and borrowers in relation to mortgage protection insurance.  Lenders are obliged by virtue of Section 126 of the CCA to ensure that a life assurance policy is in place before making a housing loan, such that, in the event of the death of a borrower before the housing loan has been repaid, a sum equal to the amount of the principal estimated by the mortgage lender to be outstanding in the year in which the death occurs, on the basis that payments have been made by the borrower in accordance with the mortgage, is paid in repayment of the principal.

Section 126(2) of the CCA sets out the circumstances in which a lender may waive the requirement for a borrower to hold mortgage protection insurance, as follows:

(a.) where the house in respect of which the loan is made is, in the mortgage lender’s opinion, not intended for use as the principal residence of the borrower or of his dependants;

(b.) loans to persons who belong to a class of persons which would not be acceptable to an insurer, or which would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally;

(c.) loans to persons who are over 50 years of age at the time the loan is approved; and

(d.) loans to persons who, at the time the loan is made, have otherwise arranged life assurance, providing for payment of a sum, in the event of death, of not less than the sum referred to above.

Where a person falls within category 126(2)(b) and cannot therefore get life assurance cover, the lender is not obliged to ensure that life assurance cover is in place in respect of the housing loan.

However, even where one of the exceptions applies, there is nothing to prevent a lender from requiring that life assurance of the kind referred to in Section 126 of the CCA is put in place as part of its lending conditions. There is no obligation on a lender to provide credit to any borrower; this being a commercial decision of the lender.

Where a consumer is unhappy with the service they have received from a firm which is regulated by the Central Bank, they are entitled to make a complaint.

Subject to the exclusions set out in Central Bank’s (the Code), the Code applies to the regulated activities of regulated entities operating in the State.

Chapter 10 of the Code sets out the procedures and timelines for regulated firms dealing with customer complaints.  In the first instance a customer must submit a complaint to a credit institution.  If the complaint is not resolved to their satisfaction, it can then be escalated to the Financial Services Ombudsman.