Mortgage Protection Policies

Department of Finance

Mortgage Protection Policies

171. To ask the Minister for Finance if, under legislation, financial institutions such as banks can waive the requirement for a customer to take out mortgage protection insurance in the event of the customer being turned down by three different insurance companies; the process a financial institution must follow if a consumer requests a waiver to mortgage protection insurance in this instance; and if there is an independent complaints procedure in the case of this waiver being denied. [29242/14]

Michael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)

I am advised by the Central Bank that section 126 of the Consumer Credit Act 1995 (as amended) relates to the requirements on lenders and borrowers in relation to mortgage protection insurance. Section 126(2) of the act sets out the circumstances in which a lender may waive the requirement for a borrower to hold mortgage protection insurance.

Section 126 Provides:

(1) Subject to the provisions of this section, a mortgage lender shall arrange, through an insurer or an insurance intermediary, a life assurance policy providing, in the event of the death of a borrower before a housing loan made by the mortgage lender has been repaid, for payment of 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, such sum to be employed in repayment of the principal.

(2) Subsection (1) shall apply to all housing loans except-

(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 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,

(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 in subsection (1).

(3) A person who does not belong to a class referred to in paragraph (b) of subsection (2) shall not be required by virtue of this section to undergo a medical examination as a condition of a policy but nothing in this section shall prevent a person belonging to such a class from being required to undergo a medical examination.

(4) A policy under this section may, in the case of a loan made jointly to two or more borrowers, apply to such of the borrowers as may be designated by the mortgage lender, due regard being had to the wishes of such borrowers.

(5) Where the proceeds of a policy under this section exceed the amount due to the mortgage lender on the loan, any such excess shall be payable to the surviving borrower or to the estate of the deceased borrower as the case may be.

It should also be noted that Chapter 10 of the Central Bank’s 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. Where a complaint is unresolved the consumer may refer the complaint to the Financial Services Ombudsman.