Firm that operates on behalf of vultures forced to alter exit plan

Start Mortgages is transferring the servicing of 11,000 mortgages to Mars Capital.

In the past few weeks it wrote to customers telling them it intends to hand back its licence to the Central Bank here, and drop its insurance cover.

Any move to cease its professional indemnity insurance cover would leave customers in dispute with Start unable to sue it.

But following questioning of Start and the Central Bank of Ireland by the Irish Independent, Start Mortgages has changed tack and now says it is retaining its professional indemnity insurance.

Today's News in 90 seconds - 16th April 2024

Earlier this month the firm had written to is customers saying: “Please note that after the transaction completes, Start intends to cease operating and seek to have its credit servicing licence revoked.

“We would advise you to notify us of any issues or complaints you may have as soon as possible so they can be addressed in a timely manner.”

The letter contained this line, considered odd by experts: “Please note that if our licence is revoked, any claims will not be covered by our professional indemnity insurance.”

This line had also appeared on Start’s website.

Legal sources said that any move by a financial firm to hand back its licence and cancel the professional indemnity insurance for its directors and officers, before a period of time had elapsed, would leave customers who have a dispute with Start no entity or individuals to sue.

One lawyer said: “Consumers usually have six years from the date of cause of action to bring a claim. It looks like Start wants to shut down its business here pronto and not follow normal protocol.”

New rules, labelled the senior executive accountability regime (SEAR), that will hold bosses in regulated financial firms personally responsible for their conduct come in this summer.

However, following a series of questions put to Start and the Central Bank by the Irish Independent, the line about dropping the professional indemnity insurance has now changed on Start’s website.

It now says: “Start will be retaining professional indemnity insurance in order to cover claims that borrowers may make against Start following the revocation of its licence.”

It is understood new letters going out to Start customers will contain this updated line.

Start is licensed and regulated by the Central Bank of Ireland to operate as a retail credit firm. Lone Star has owned Start Mortgages since 2014.

The Central Bank had been asked if it was being negligent in its consumer protection role in allowing Start to leave this market quickly without following the proper protocols.

It insisted that any bank or retail credit firm leaving this market would have to apply to it to have its licence revoked, and ensure all procedures were observed.

Banking sources said this means Start’s officers and directors will have to maintain professional indemnity insurance, and it could be years before the revoking of its licence is accepted.

The Central Bank said: “Regulated firms can apply to the Central Bank for authorisation revocation on a voluntary basis.

“Any application to voluntarily revoke an authorisation is subject to assessment against particular criteria, and must be approved by the Central Bank. Firms applying for a voluntary revocation must ensure that their customers are not negatively affected by the process.”

Asked if it had reprimanded Start for the comments in the letter, the Central Bank said it cannot disclose information on engagements with regulated firms.

But it said: “Start Mortgages DAC remains authorised as a retail credit firm.”

There was no comment from Start in Dublin or its head office in Texas.