61
Chapter 2: The role of Central Bank Codes in protecting consumers of financial services
between the parties or that non-compliance alters the lender’s rights.
2.6.4.2 Summary The Code of Conduct on Mortgage Arrears and Consumer Protection Code are documents created by the Central Bank of Ireland and sanctions may be imposed on lenders who do not apply and adhere to their rules.162 They do not, however, have the status of legislation and neither do they provide for any type of relief for the borrower in arrears or consumer, apart from incomplete appeals processes. The uncertain legal status of these Codes is reinforced both by the guidance and clarifications provided by the Central Bank regarding some of their terms and by its respective revisions of them.163 Clearly, if these were pieces of primary or secondary legislation, it would be the role of the courts to clarify or interpret their provisions, and not their author.164 Equally, it would be the Executive and the Houses of the Oireachtas that would initiate and complete legislative amendments to them. Ms Justice Laffoy held in the Fitzell case that non-adherence by the lender with the CCMA should preclude that lender from obtaining an order for possession, and this would in FLAC’s view appear to be the most equitable approach and the morally correct one; what is the point in having a MARP process if it cannot be challenged when lenders refuse to abide by it? Mr Justice Hogan followed the decision in Fitzell in the Duff case but clearly had misgivings in doing so, particularly in terms of his remarks concerning the constitutional ramifications of allowing a non-statutory code to be afforded legislative status. It would appear that the only case where the status of the CPC was specifically considered involved an emphatic rejection by Mr Justice Birmingham of the question of its admissibility. It appears therefore that the judiciary are at something of a stalemate on this issue at a particularly sensitive and important time, particularly in terms of the Code of Conduct on Mortgage Arrears, when it is clear that repossession actions
are on the increase,165 facilitated by the passing of the Land and Conveyancing Law Reform Act 2013 that effectively overturned what has become known as the ‘Dunne judgment’.166 Thus, it is unfortunate that Mr Justice Hogan was unable to state the question of the legal status and admissibility of the Code to the Supreme Court in Dunphy because the Code had not been pleaded at the original hearing in the Circuit Court. Clarity from the Supreme Court would have provided a definitive answer to both lenders and borrowers as to the real value of the CCMA to borrowers, faced with potential repossession but unhappy about lender compliance. Nonetheless, it is our conclusion that there is far too much doubt as to whether Central Bank codes are in fact admissible in legal proceedings, despite the High Court decisions in the Fitzell and Duff cases, and we argue that this situation should be and might easily be remedied. Take, for example, an analogous Code in the employment law area, the Code of Practice on Grievance and Disciplinary Procedures at Work issued by the Labour Relations Commission (LRC).167 This code is frequently cited in unfair dismissal cases in the Employment Appeals Tribunal (EAT). Section 42 (1) of the Industrial Relations Act 1990 provides that the “Commission shall prepare and draft codes of practice concerning industrial relations for submission to the Minister, either on its own initiative or at the request of the Minister”. Subsection (2) provides that before submitting such codes to the Minister, the Commission “shall seek and consider the views of organisations representative of employers and workers”. Subsection (3) states that “where the Minister receives a draft code of practice from the Commission, he may by order declare that the code, scheduled to the order, shall be a code of practice for the purposes of the Act”. Critically, subsection (4) of this Code provides that “in any proceedings before a court, the Labour Court, the Commission (LRC itself ), the Employment Appeals
162. First there must be a concern that there has been a ‘Prescribed Contravention’ (such as an alleged breach of a Central Bank code). The Central Bank may then commence ‘an Examination’ to establish whether there are reasonable grounds for a suspicion that a regulated financial service provider and/or a person concerned in the management of a regulated financial service is committing or has committed a prescribed contravention’. The entity then gets an opportunity to respond prior to the possible commencement of an Inquiry. At any time before the conclusion of an Inquiry, a Settlement agreement may be reached and the terms of these are generally available on the Bank’s website. If following an Inquiry an Administrative Sanction is imposed, that decision may be appealed by the entity to a body called the Financial Services Appeals Tribunal. 163. A further concern is that the terms of the Code itself have not been amended in any way to reflect these clarifications, and the clarification that has been provided (by way of a guidance document which is somewhat hidden within the contents of the Central Bank’s website) has been primarily issued for the benefit of providers. 164. In December 2012, following on from the two clarifications to the financial services industry, the Central Bank published an extensive guidance document (consisting of 24 pages, amounting to nearly a third of the size of the Code itself) clarifying some of its key provisions. The 2012 Code had been published after extensive consultation; however, it now appears that as a result of lobbying from the financial service industry, some protections for the consumer have been diluted (see discussion above in relation to contacts under both the CPC and the CCMA). 165. According to the report of the Expert Group on Repossessions, 1830 new legal proceedings to enforce the security on private dwelling houses were brought in Quarter Three of 2013 (page 23). 166. Start Mortgages & Others v Gunn & Others [2011] IEHC 275, unreported, High Court, Dunne J., 25/7/2011. 167. SI 146/2000.