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European Regulator confirms banks were not required to charge interest on COVID-19 payment breaks – Pearse Doherty TD

8 July, 2020 - by Pearse Doherty TD

Sinn Féin spokesperson on Finance Pearse Doherty TD has criticised the banks and the Government for loading mortgage-borrowers with additional debt after the European Banking Authority confirmed that banks were not required to charge additional interest on COVID-19 mortgage breaks.

Since the 18th March, nearly 80,000 mortgage-holders impacted by COVID-19 have taken payment breaks which will see additional interest charged by as much as several thousand euro over the lifetime of the loans.

Teachta Doherty said: 

“Yesterday the European regulator confirmed that Irish banks were not required to charge borrowers additional interest on payment breaks taken due to COVID-19.

“In its report on the implementation of COVID-19 payment breaks, the European Banking Authority made clear that the deferral of payments with no interest charged for the period of deferral was allowed, and would not result in loans going into default.

“This has been clear for months, with the Spanish Government introducing legislation as early as March, which banned the charging of interest during COVID-19 mortgage breaks.

“The Government and Irish banks have taken a different approach, with nearly 80,000 mortgage borrowers being charged thousands of euros in additional interest for mortgage breaks they have taken because of the COVID-19 crisis.

"In a meeting held on May 11th between the five retail banks, the Banking and Payments Federation, the Minister for Finance and then Taoiseach Leo Varadkar, a number of banks claimed that the regulator required them to charge interest during these payment breaks.

“This was not true.

“Yesterday at committee the Governor of the Central Bank confirmed that this was not the case.

“Indeed I received correspondence from the Central Bank in June confirming that mortgage breaks without the charging of interest during the break period was allowed under the regulations.

“It is scandalous that the banking sector deliberately misinformed senior Government Ministers regarding a policy choice that will increase the outstanding debt of 80,000 households that have been impacted by the COVID-19 crisis.

“What is more disturbing is that the Minister for Finance was so easily misled by the banks, despite other EU jurisdictions taking action months before to stop the charging of additional interest.

“I have raised this matter with the Government consistently since March, and shared legislation with the Minister for Finance which would prohibit the charging of interest during mortgage payment breaks.

“Despite this, Government and the Minister have failed to act. The result will be additional mortgage debt for tens of thousands of families.”

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