Address to the Association of Compliance Officers in Ireland by Matthew Elderfield, Head of Financial Regulation 15 October 2010 Speech Good evening. It’s my great pleasure to be in Cork for this event. I’m very grateful to University College Cork and the Association of Compliance Officers of Ireland for hosting this event and for providing me with the opportunity to speak to you about our plans at the Central Bank in the area of consumer protection. I hope you will notice I have been careful in the choice of the colour of my tie, so that I might blend in with the Munster fans on what is my first proper visit to Cork.Two weeks ago the Financial Regulator was merged into the Central Bank to create a single organisation, as a new legislative framework for financial services regulation came into force in Ireland. What I want to speak to you about today is the role that consumer protection will play in our new organisation. And in doing so I want to give you a preview of some of the proposals we will be publishing shortly to strengthen our Consumer Protection Code. I have three principal themes I would like to develop this afternoon:First, that consumer protection will be a key priority for the Central Bank.Second, that it is important to be clear about the scope of our consumer protection responsibilities.And third, that we need to look critically at the different stages in the life cycle of a financial product to ensure that consumer protection is strengthened at each step of the process. As I will explain, the industry needs to embrace such change to demonstrate that an approach based on disclosure and suitability is better than one involving product approval and the prohibition of sales commissions.Finally, I would like to say a few words about the difficult subject of mortgage arrears.Consumer Protection as a Continuing Priority The new legislative framework for financial services regulation continues to place consumer protection at the heart of our responsibilities. The Central Bank Reform Act states that one of our functions is the proper and effective regulation of financial services providers and markets while ensuring that the best interests of consumers of financial services are protected. I sometimes hear the argument that too much focus on consumer protection regulation was one of the causes of the financial crisis in Ireland, by crowding out prudential regulation. I don’t buy this analysis and don’t see that one needs to be at the expense of the other. My intention is to ensure that there is a continuing focus on consumer protection and I have set this as one of my top three priorities, along with strengthening the banking system and adopting a more assertive risk-based supervisory approach. While prudential problems are indeed pressing, it is equally clear that consumers continue to struggle in getting treated fairly, as evidenced by the issues we continue to see and the complaints received by the Financial Services Ombudsman. It is, however, important to be clear about the scope of our responsibilities, so that we have clarity around our objectives and that our stakeholders understand what can reasonably be expected from us. For example, the Central Bank is no longer responsible for consumer information. The Financial Regulator had a very successful consumer information function, staffed by a top-notch team, who have now in fact moved to the National Consumer Agency.The Central Bank is also not a consumer price regulator or competition regulator. Or are we? Under the new legislation we no longer have a role in competition matters, but the Central Bank has a particular responsibility regarding approval of bank charges. But we are not responsible for regulating interest rates set by banks for their mortgages, although we are often exhorted to do so, particularly as the banks are going through a period of re-pricing their mortgage book. This is a task I am not keen to add to our responsibilities.Why is that? For a number of reasons. I don’t see a good international precedent for this, for one thing. Also, I think this would present a worrying conflict with our prudential responsibilities. And as a practical matter, I am worried by the prospect of taking on additional tasks when it’s clear that the regulatory infrastructure has struggled to deliver it's existing responsibilities. Adding more to the to do list risks our ability to succeed with what we’ve already got. What then is our consumer protection role? It is multifaceted, ranging from setting standards for the sales process to complaints handling, from advertising to stewardship of client assets. As regulators, compliance officers and industry professionals, we tend to think in terms of blocks of rules and legal obligations, derived from domestic or EU law. The centrepiece of our consumer protection framework in Ireland is the Consumer Protection Code. By the end of the month we will publish our proposals for revisions to this Code which will herald an important strengthening of consumer protection standards in Ireland. We plan to finalise the Code by mid 2011. Our review of the Code, which was originally published in 2007, is overdue and it is time to take account of recent experiences in consumer protection. But rather than provide a section by section preview of the Code, I would instead like to look at the issue of consumer protection from a slightly different perspective, by walking through the life cycle of a financial product. In doing so, I hope to provide some insight into what I think the right role is for the Central Bank, to highlight some of the key debates in consumer protection and to explain the most important changes that we will propose in the Code.The Financial Product Life Cycle: Product Design Let me start my review of the product life cycle some considerable distance from any consumers, by peering in to the offices of a firm we might call Old Trafford Insurance. Old Trafford is what we would call the product manufacturer. It does not have a distribution arm, but makes money by developing financial products, which are distributed by other companies and on which it earns a fee. Old Trafford has no interest in developing such a distribution arm – it used to have one in fact, but sold the business off some years ago after the financial intermediary division got embroiled in a nasty mis-selling scandal and got hit by a hefty fine.The team in Old Trafford has been brainstorming all week and has come up with a new product. They think what customers want is a packaged financial product, with a guarantee, which delivers high yields and is based on a diversified underlying portfolio. They propose to call this the Guaranteed Performance Contract. This is designed as an insurance contract, with a lump sum investment up front and then guaranteed payments based on a complex formulae of the performance of a number of underlying equity and bond portfolios, which they believe are diversified. However, Old Trafford isn’t keen to take on the risk of the guarantee itself and makes arrangements with a different firm, let’s call it Fratton Park Insurance, to provide the guarantee. Fratton Park is not as financially strong as Old Trafford but is happy to take the fee involved in providing the guarantee. The team at Old Trafford is now ready to find a distributor to sell their product.Now up to this point in the life cycle, there has been no interaction with customers at all. Ok, Old Trafford has thought about what customers want, but it’s not clear how rigorous this process has been from a consumer protection perspective. Should the regulator get involved at this stage? Traditionally, the answer has been: no. The locus for regulatory responsibility principally arises from the sales process, which involves the distributor or intermediary who contracts with the customer. What responsibility should the manufacturer take on, for example in Old Trafford’s case where it explicitly has avoided any distribution role?Making the product manufacturer directly responsible for the sales process of a distributor or intermediary is problematic. But we do feel that the product manufacturer needs to take on some increased responsibilities and we will be making proposals to this end in the revised Consumer Protection Code. Specifically, we believe that product manufacturers should have a responsibility to consider the types of customers their product would - and would not - be suitable for. We think the product manufacturers should also have stronger obligations regarding the description of their product’s design and risk features, which it provides to the intermediary, to make it easier for intermediaries to know what they’re selling. And we think that product manufacturers should have a responsibility to periodically review the performance of their distribution channels from a consumer protection perspective, checking on compliance performance and tracking whether sales are indeed going to the targeted customer population. We believe that these are proportionate measures to strengthen consumer protection, while stopping short of making product manufacturers liable for mis-selling by their distribution partners.Product Distribution Let us now introduce the product distributor in the life cycle of our Guaranteed Performance Contract. Elland Road Financial Services is a venerable company with a network of retail intermediaries offices across Ireland. Elland Road has seen better days, having suffered through a period of mismanagement under its old chairman, but now is doing a bit better. It is very glad to get the business from Old Trafford and hopes to generate significant commission income from the sales of the product. It is keen to launch a sales campaign quickly. The full product description is sent to all the intermediaries, along with a 2-page glossy brochure that could be left with clients and a 10-page slide pack, explaining the product to the intermediaries. Old Trafford does provide detailed briefings on the product design to Elland Road’s head office staff. The head office staff in turn walks through the slide presentation for the intermediaries at briefings. Two briefings are scheduled, but one was cancelled, so in fact only a quarter of the intermediaries actually attended the one session that took place. Nevertheless, the Elland Road is are ready to start talking to their clients, with what they think is a pretty good understanding of the Guaranteed Performance Contract.What role for regulation at this stage, just before the first customer contact?Well, you’ve probably spotted that Elland Road’s training of the intermediaries was pretty sloppy. There are regulatory requirements for minimum standards of financial services knowledge across all financial services providers, with particular emphasis on areas dealing with consumers. Regulated firms are required to ensure that individuals who provide advice on or sell retail financial products to consumers are appropriately qualified. As a regulator, this is something that we could normally hope to pick up in an inspection on Minimum Competency requirements – but there are about 5,000 retail intermediaries in Ireland, so we can’t be expected to inspect each one, certainly not before each product launch. Taking tough enforcement action when we see slack practices is a more effective way of providing a deterrent across a wide population of firms, to encourage better practice in the future.What about product approval? Should the financial regulator have a role to review and approve each financial product before it is sold to retail customers to see whether it is safe? The analogy that is drawn here is of product approval for new drugs.The argument against product approval regulation is that it inhibits product innovation, as regulators would be too risk averse to allow a range of new financial instruments to come to the market. The fear is also that regulators would be too bureaucratic and take too long over product approval, adding costs and inefficiencies. While neither argument is particularly flattering about regulators, I find them pretty convincing nonetheless and I think it would be premature to introduce product regulation in Ireland. However, in the absence of product regulation, then the existing mechanisms of consumer protection need to work better and be strengthened accordingly, such as disclosure and suitability, which I will speak about in a second, and we should strengthen the role played by the product manufacturer, as I have just explained.That said, I do think that the Central Bank should devote more attention to monitoring product developments in the financial services industry, to be alert to trends and emerging risks to consumers. Resources permitting, we will therefore build up our capacity to do this. Also, I am proposing that we work with the National Consumer Agency to conduct and publish surveys of financial services product trends, analyse patterns in product sales, comment on new product innovations and discuss potential emerging consumer risks. We should also be prepared to act swiftly if it becomes clear that a product is in fact inherently too risky and that widespread consumer detriment is occurring. This can be done on a firm-by-firm basis through formal directions or restrictions on licenses, but that can be cumbersome and slow. Accordingly, it would be useful to have a broader power to allow prohibition of the sale of particular products, and if necessary retrospective reviews, for those products, which have been identified as inappropriate for sale to consumers. This would seem a reasonable enhancement to our powers that stops some way short of product approval but still provides for stronger consumer protection. Product Suitability Let us return to the product life cycle. Our intermediary appointed by Elland Road has a meeting with Mrs Giles. Now at last the consumer and consumer protection regulation makes an appearance!Mrs Giles is seeking advice about her investment options. The intermediary is obliged to see if the product is suitable for her. This requires a careful assessment of Mrs Giles’ circumstances. EU law and the Consumer Protection Code already have some demanding standards in this area. But this is an area where we often see weaknesses. For example, if Mrs Giles already has significant debts then the intermediary should be considering her ability to pay off her debts as well as meeting any new commitments if she invests. But paying off debts does not generate sales commission for hard-pressed Elland Road, so perhaps this doesn’t get considered.In our proposals for the new Consumer Protection Code, we feel that the suitability assessment needs to be strengthened. We are therefore proposing that before offering a product to a consumer, a regulated entity must gather and record sufficient information from the consumer to enable it to provide a recommendation or a product or service appropriate to that consumer. The level of information gathered should be appropriate to the nature and complexity of the product or service being sought by the consumer. In the case of Mrs Giles, this should include information about her needs and objectives, including the length of time for which she wishes to hold the product and her need for access to the funds, and details of her age, health and attitude to risk. The question of suitability also comes up in the area of mortgages, but is better described as one of affordability. The Consumer Protection Code already has standards in this area: regulated entities must ensure that the mortgage offered is suitable for that consumer. We feel that these standards need to be strengthened and to ensure that their assessment of affordability is rigorous, they must assess the impact on affordability of specified interest rate increases. It will be clearer that self certified mortgages will not be acceptable under the Code. A consumer’s ability to pay higher interest rates at the end of the fixed –rate term must be assessed. Now what if a customer was recently bereaved and a month ago his doctor advised him that he had the early signs of Alzheimer’s. Does this make any difference in terms of the consumer protection duties owed by Elland Road? We believe it should. We are therefore proposing a category of vulnerable consumer in the Code, to whom financial services companies owe a different standard of treatment, and will be consulting around how broadly to draw that definition.We believe that our proposals concerning vulnerable consumers are an important strengthening of the Code and will ensure better protection for those members of society who are least able to look after their own financial interests.This is also where a suitability assessment for the target market by the product manufacturer, Old Trafford, would have been useful. If Old Trafford had given explicit guidance to the Elland Road sales force that this product was unsuitable for vulnerable customers or customers with a low risk appetite, as identified during the suitability assessment, then a problem might have been avoided. But in this case, Mrs Giles says she’s interested to invest in the Guaranteed Performance Contract. So at this point in our product life cycle Mrs Giles is about to be given a lot to read…Product Disclosure Here we are introduced to another important element of consumer protection in the product life cycle, that of product disclosure. The theory is that the consumer is provided with sufficient information about the product in question to make an informed decision. But we all know the problem with product disclosure: it’s all that small print! The small print can be daunting to read and difficult to understand, and therefore is often ignored. And much of the time the fine print is there to protect the seller of the product, as a shield against future complaints or litigation. “I’m sorry but you can’t claim flood insurance if you live in a flood plain, we explained that in paragraph 134.” Or, “I’m sorry you can’t claim on payment protection insurance if you are self-employed, it was very clearly stated in footnote 72.”A lot of the current consumer protection framework rests on product disclosure, perhaps more than is realistic. We think that product disclosure needs to be improved. The Consumer Protection Code already has standards on disclosure that require regulated entities to make full disclosure of all relevant material information to consumers. But it’s clear that these don’t always deliver disclosure that works for consumers by being easily comprehensible. So, in our consultation paper we are proposing that we go further. Before offering a product to a consumer, a regulated entity must provide information about the main features of the product to the consumer, including where relevant, the nature and extent of the risks inherent in the product and the level, nature and limitations of any guarantee attaching to the product and the name of the guarantor. In the case of an investment product, we prescribe the information that must be disclosed to consumers. For example - the consumer should be told how secure their capital is, and, the potential effects of volatility in price, fluctuations in interest rates and /or movements in exchange rates on the value of their investment. We are also considering whether we should require key facts disclosure for a wider range of types of product. These are short form, plain English disclosures of some of the most pertinent facts that should inform the decision to purchase a product. We’ve already introduced them for tracker bonds but should we require them for other products? Or are key facts not enough? One possibility, but no more than that, is some sort of traffic light system of risk disclosure for financial products, perhaps around key product design characteristics such as whether capital is at risk, the strength of guarantees, extent of leverage and riskiness of underlying assets. But there are complications in any such approach: would the categorisation provided by firms be consistent enough to be useful for consumers, for example? Nevertheless, we would welcome input as to the adequacy of current disclosure arrangements and ideas to strengthen disclosure.One specific proposal in the revised Code is to accept that written disclosure has it's limits and that much of the sales process is a verbal one, and that this verbal interaction needs better protection for the consumer. Accordingly, we are proposing that where there is verbal interaction with a consumer to assist the consumer in understanding the product or service on offer, a regulated entity must keep a record of the detail of such verbal interaction. How is the disclosure process going with Mrs Giles? Well she’s certainly read the glossy 2-page brochure. This makes reference to Old Trafford as having a leading role with the development of the Guaranteed Performance Contract and that there is a diversified investment strategy. That’s very reassuring to Mrs Giles, because she’s heard of Old Trafford, whom she understands is strong and she knows that diversification is a good thing. But it's only in the fine detail of the product description that explains that it is Fratton Park who has guaranteed the product not Old Trafford and the section explaining the so called diversification strategy is very confusing indeed!Commission Mrs Giles is ready to sign up and pay across her money, so, what about the issue of sales commission? It has been argued that sales commission provides an incentive for mis-selling and should be banned. Other jurisdictions are actively exploring this but we are not proposing such a step in our revision to the Code. It is something we have debated internally, but we fear that if commissions were banned then an exclusively fee-based market would deter consumers from getting financial advice. However, we do believe that there should be greater disclosure around commissions and we will be proposing the extension of commission disclosure requirements in the revised Code.Complaints We now come to the point in our story of this particular product life cycle where things go horribly wrong. In difficult market conditions it has become clear that the diversified investment strategy underlying the Guaranteed Performance Contract wasn’t quite what it seemed: the various bond and equity portfolios were uncorrelated in normal market conditions, but at times of extreme stress they have all faced a significant loss in value at the same time. The ability to pay out under the contract has been severely compromised and as a result the guarantee has kicked in for Fratton Park Insurance. Unfortunately, Fratton Park is having problems of it's own, as you will recall it wasn’t nearly as financially strong as Old Trafford, and is unable to honour it's commitments on the guarantee. Here in Ireland, there are all of a sudden a lot of complaints about this product to Elland Road Financial Services. Mrs Giles is out of a lot of money and is having problems making ends meet.We already have a framework in place where the responsibility of the firm does not stop at the point of sale. Firms have obligations, for example, to maintain client assets safely. And we have a framework requiring proper handling of customer complaints. Firms must have in place adequate systems and controls to handle consumer complaints effectively, on an individual basis. And where customers are not satisfied with how they have been handled then they have the right to refer the matter to the Financial Services Ombudsman.We are not proposing specific changes in the Code regarding complaints handling, but this is still an area where we want to make sure that firms treat customers fairly. Complaints functions should be properly resourced and firms should deal with each complaint on an individual basis, on the merits of each case. We are working with the Financial Services Ombudsman in order to get key information about how firms are dealing with complaints. If a firm’s judgment about a complaint is being regularly overturned by the Ombudsman, then that says something about the effectiveness of the complaint handling process. In this respect, I endorse the suggestion made by the Ombudsman to bring in the publication of league tables on complaints handling performance by financial services firms.Improving Consumer Protection CultureWe are now pretty much at the end of our product life cycle. The changes which I have previewed here today will strengthen consumer protection at a number of crucial points in the consumer’s interaction with the financial services provider, by imposing new requirements on product manufacturers, adding special protection for vulnerable consumers, strengthening suitability standards, adding protections around the sales process and suggesting ways of improving commission and product disclosure. If the financial services industry embraces the need for these changes, then the level of protection afforded to consumers can be strengthened without adopting more direct approaches of regulation, such a product approval or prohibition of sales commission.We are determined that firms take the standards of the Code seriously and we will use our enforcement tools vigorously through the application of administrative sanctions. Indeed, part of our overall strategy is to place greater emphasis on the use of enforcement as a strong deterrent. We will be publishing a paper on our enforcement strategy at the end of this year and are building up our capacity in this area. Part of the redrafting of the Code will be designed to facilitate enforcement, by making some provisions more explicit as rules, rather than principles: this is a conscious design choice. In the meantime, as the process of revising the Code progresses, we have made it clear that we will use our enforcement powers in the area of overcharging. Here we have written to firms to set a clear deadline for how quickly they need to resolve over-charging problems and have made it clear that enforcement proceedings are an option if they do not act swiftly. This is in fact also an area of revision to the Code, where we will be setting out time limits for firms to address overcharging errors.Some enforcement cases in the consumer protection area will come from the results of our own investigative work. But we also welcome information from employees at firms who see a practice that they find dishonest or illegal and wish to whistle blow. And we welcome information from consumers themselves. We are not responsible for handling customer complaints, as these must be directed first to the firm and then, if not handled to the customers satisfaction, to the Ombudsman. But we do welcome contact from consumers to say what sorts of poor practices they are seeing in the firms we supervise, so that we build up a better picture of industry practice. We therefore think it is important that customers understand their rights under our regulatory framework. Under the Consumer Protection Code firms must provide their customers with written terms of business. We are now proposing that in this terms of business document, a regulated firm must disclose to a consumer that the firm is subject to the provisions of the Code which offers protections to consumers and that the full Code is available for consumers to read on the Central Bank website. In addition, following the review of the Code, we will publish on our website a consumer friendly summary of the measures in place to protect consumers of financial services. Mortgage ArrearsIn addition to revisions to the Consumer Protection Code, important changes are also underway in the area of mortgage arrears, which is another significant consumer priority. The Expert Group on Mortgage Arrears, of which I am a member, published it's interim recommendations at the start of the summer and is due to issue further final recommendations at the start of November. The most recent data shows a continuing rise in the number of borrowers who are in arrears for 90 days or more, with more than 36,000 cases of arrears equalling 4.6% of all accounts. This is a source of concern and it’s clear that these numbers will continue to get worse before they get better, because it will take time before economic recovery translates into higher levels of employment and therefore better ability to pay off mortgage debt. On the positive side, the data shows that repossession levels are still extremely low. For example, there were 11 repossessions per 100,000 mortgages in the second quarter of the year here compared with 82 repossessions per 100,000 mortgages in the UK over the same period. This shows that a lot of lenders are working with borrowers to reschedule mortgages to avoid repossession. Last month we published the findings from a recent series of inspections across five mortgage lenders which found good levels of compliance with the specific provisions examined in the current statutory code. Our inspections confirmed that the mortgage lenders inspected complied with the moratorium on legal action as required by our Code of Conduct on Mortgage Arrears. It was also evident that the mortgage lenders inspected were willing to work with consumers to assist them in addressing their mortgage arrears problems. Lenders were also found to be willing to enter into alternative mortgage repayment arrangements with consumers over various time periods.But we know that the data published by the Central Bank does not tell the full story in that it does not capture the large number of borrowers who have rescheduled their loans. One of the interim recommendations of the Expert Group is that we should require reporting of the number of rescheduled loans as well as those in arrears. That is something we will do.In June the Expert Group made 41 recommendations. All lenders will be required to implement a Mortgage Arrears Resolution Process to ensure better communication with customers, standardise documentation, impose an obligation to assess which customers are at risk of arrears and ensure more consistency and transparency in their approach to arrears cases. At the Central Bank we have swiftly published a consultation paper to implement these changes through the statutory mortgage arrears code. As a result, the Code proposes that legal action will not be possible against borrowers who have reached a forbearance or rescheduling agreement with their lender. Also in these circumstances customers cannot be required to change from an existing tracker mortgage to another type of mortgage. This consultation paper and the responses can be viewed on our website. The interim recommendations also delivered relief to borrowers in arrears by recommending that arrears charges and penalty interest be banned. At the Central Bank we are currently engaging with the various lenders regarding the process of removing these charges. These reforms will help improve the position of borrowers in arrears and make it easier for them to reach agreement on a forbearance or rescheduling plan to keep them in their home. This has been a key focus of the work of the group: to create a framework that seeks to keep as many people in their home as possible even if they are in arrears. In many, if not most cases, the best solution will be some form of loan rescheduling or forbearance. Can more be done beyond rescheduling and forbearance? On the Expert Group we have considered this issue very carefully and have closely examined the schemes in place overseas designed to assist borrowers. This is a hugely difficult subject. It is right to feel compassion for the homeowners who are stuck in arrears and understandable that some wish to go beyond rescheduling of debt to consider some sort of debt forgiveness. However, on the other hand, the cost of any support will need to be borne by the taxpayer or by the banks and therefore, in many cases, effectively the taxpayer as well. This raises questions of fairness for taxpayers who are not in debt and, at a time of immense budgetary pressure, affordability for government finances. There is also the risk that any scheme would create perverse incentives and in fact make the arrears problem worse by encouraging some borrowers to stop making payments.Our survey of international schemes by the Expert Group has found, in fact, that no jurisdiction simply provides for debt forgiveness for customers in arrears. In the United States there are schemes which provide reductions in interest payments or, exceptionally, principal that is owed. However, it should be noted that the entry criteria are strict, the government provides very large subsidies to the banks to take part, and any debt forgiveness is in fact still at the discretion of the lender. Crucially, the US mortgage market is also fundamentally different in structure to that in Ireland, as lending is on a non recourse basis. Here in Ireland, like in the United Kingdom, mortgage lending is on a recourse basis, which means the borrower is personally responsible for the full debt regardless of the value of the property upon sale. In the UK there is a scheme comparable to what is already in place in Ireland through Mortgage Interest Supplement, and there are other initiatives providing more long term housing supports as distinct from debt forgiveness schemes. There is also provision for debt for equity schemes, although take up is limited and it is hard to see how this would be effective in a market with widespread negative equity. But there is no debt forgiveness scheme in the context of mortgage arrears.Another of our conclusions is that some mortgages are simply unsustainable for some borrowers. The amount of debt is simply too great to make it realistic to work through the problem for some borrowers, even with forbearance and rescheduling improved. We heard this not just from the financial institutions who gave evidence to us, but from consumer groups and government agencies. The difficult message from everyone was that in some cases it is better to look at the alternatives such as selling the house, voluntary surrender or accessing social housing. There are two important conclusions that flow from this. First, this may result in an increased demand for social housing support at a time when housing need is already high and rising, and, the level of resources available is under greater pressure than ever. Second, where voluntary surrender does occur, borrowers are likely to face a shortfall as a result of the sale of the house and therefore a continuing debt. The issue of a debt burden arising from a mortgage shortfall situation is being considered by the Group. Being weighed down by such a debt for more than a decade and bogged down in legal proceedings makes no sense. I believed that reform of our bankruptcy laws and procedures is necessary, overdue and now urgent. In it's Revised Programme for Government in October 2009, the Government said this reform was a priority. The imminent final report of the Law Reform Commission on Personal Debt Management and Debt Enforcement is expected to lay the foundations for the redesign of the personal insolvency process including the development of a non-judicial debt settlement system. Reform of the current bankruptcy regime could, for example, allow borrowers to earn a fresh start by discharging their debt over a reasonable period of time.I regret to say there is no easy solution to the difficulties faced by families and others who are in arrears with their mortgages. But, against the background of a difficult economic and budgetary environment, the reforms that are being developed by Expert Group will help to deliver a better process of resolving arrears, immediate relief from penalty charges, pragmatic arrangements to help borrowers stay in their home and appropriate assistance to those borrowers who have unsustainable mortgages. My message to borrowers who are in arrears - or think they are at risk of going into arrears - is to contact their bank as soon as possible. Tackling the problem early on and seeking to agree a rescheduling arrangement is the best approach. There is a consumer protection framework to help you through that process. And that framework is being strengthened.Conclusion I fear that my story involving the Old Trafford Insurance that keeps it's distance from the products it designs, the hapless Elland Road Financial Services that doesn’t quite understand the products it sells and the financially weak Fratton Park whose guarantee disappears in times of stress is not too far removed from what we see in the financial services industry from time to time. The story of our customer, Mrs Giles, will be familiar to many of the thousands of customers who lodge complaints with the Financial Services Ombudsman. Standing still with our consumer protection agenda is therefore not an option, despite the pressing demands of prudential banking regulation. In the new Central Bank we are determined to keep consumer protection a top priority and to reinforce the framework governing the various ways financial firms interact with consumers by strengthening our Code of Consumer Protection. We are also determined to drive forward changes to improve the way banks deal with their customers in mortgage arrears. Thank you for your hospitable welcome to Cork.