The code of conduct on mortgage arrears came into force yesterday but the State’s main lenders remained tight-lipped about how they plan to use it to shape their dealings with borrowers.

The new code outlines how banks must treat borrowers who are in or facing mortgage arrears and it must be implemented by all the State’s lenders before the end of the year.

A limit of three unsolicited contacts a month by a financial institution is now gone and has been replaced by a requirement that lenders ensure communications are "proportionate and not excessive".

Concern

Organisations representing those in arrears have expressed concern that banks will use the changes to harass vulnerable customers.

AIB said it had already reviewed the revised code and “identified the main operational changes that the bank is required to make”.

KBC Ireland said it had not changed its policies in the wake of the code coming into effect but said it was “reviewing our strategy to ensure that we optimise the customer contact channels available to us”.

A Permanent TSB spokesman said he hoped the changes would “result in greater success in establishing that point of contact between the customer and the bank”.

In a statement, Bank of Ireland was only prepared to say it was in the process of "reviewing the new code".

While banks are allowed to make unsolicited visits to the home of a borrower in arrears, the first of such visits are unlikely to take place until the autumn as banks have to follow a clear timeline after other attempts at contact have failed.

Tracker mortgages
Other controversial changes outlined in the code say lenders can now require a borrower to change from a tracker mortgage to another mortgage type.

However, lenders can only move against a borrower’s tracker in strict circumstances when the lender decides none of the alternative repayment options that would allow the borrower to retain a tracker are sustainable.

The Central Bank claimed last week that this provision would mean banks would have to offer significant debt-forgiveness or split mortgages.