THE NEW mortgage arrears code issued by the Financial Regulator has been criticised by the Free Legal Advice Centres (Flac), which says it does not sufficiently protect borrowers.
Flac described the code of conduct on mortgage arrears, which will come into effect on February 27th, as “deeply disappointing”.
It said the code failed to deal with a number of important aspects of mortgage arrears, including the sanctions that may be imposed for breaches of the code, or the legal costs that a lender may recover.
As originally drafted, the code provided for an accumulation of six months’ arrears before court proceedings could be issued, said Flac director general Noeline Blackwell.
“The new and final version reduces that protection, such that a lender may start proceedings six months after any arrears at all, without requiring that the full six months must be owing,” she said.
Ms Blackwell also criticised the language in the code as vague and ambiguous, making it difficult to enforce: “The code gives guidance to lenders, urging them to deal sympathetically with borrowers in difficulty, but allows a number of escape routes for lenders who wish to short-circuit the code.”
In December, the group, which provides free legal advice centres around the country, criticised the Government and the regulator for underestimating the extent of the mortgage arrears problem.
“The Government states that it is fully committed to protecting those at risk but will rely upon the industry to police itself through its voluntary code on mortgage arrears.”
On the figures produced by both the Government and the Financial Regulator, the legal rights body noted that only the number of repossessions by court order is quoted, not the number of applications for repossession.
“It is no secret that subprime lenders in particular have flooded the High Court with applications for repossession over the past 12 months . . . How many of these applications have resulted in the sale or loss of the family home prior to any order being granted?” Ms Blackwell asked.
The Money Advice and Budgeting Service (Mabs) welcomed the new code, saying it strengthens the need for stronger communication between the lender and debtor.
A spokesman for the service said: “We feel people in difficulty with their mortgage can use the new code to their advantage if they contact the lender early.”