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Written Answers

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Debt Resolution Pilot Scheme

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Questions\Written Answers\Debt Resolution Pilot Scheme

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Debt Resolution Pilot Scheme

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Senator


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Minister for Finance (Deputy Michael Noonan)

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Minister for Finance (Deputy Michael Noonan)

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Michael Noonan

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Snippet Contents:

The Central Bank has commenced a process to facilitate a voluntary agreement outlining a co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers. An unsustainable debt position has been reached by many borrowers, which needs to be addressed for the benefit of both borrowers and lenders alike. I have been informed by the Central Bank that this initiative is being implemented to establish, on a test basis, an approach to deal with both secured and unsecured debt in a sample of approximately 750 cases where borrowers have debts with multiple lenders. The Central Bank envisage that the participants in the pilot framework will be the main retail lending banks and the credit unions that have agreed to participate, as well as certain other unsecured lenders. This pilot framework contains a restructuring waterfall that will be applied to each borrower that agrees to participate, in order to establish the most appropriate modification to put him or her on an affordable repayment path. The pilot framework is expected to commence in June and will operate for a period of three months, after which the results will be assessed to establish the effectiveness of the framework and to determine the appropriate next steps.
The Central Bank are actively encouraging the involvement of all lenders in the process to ensure maximum effectiveness of this learning and information gathering pilot stage, and are encouraged to have a number of lenders engaged to date. The Central Bank have written to all credit unions individually to invite them to participate in the pilot framework and are confident that the pilot framework will offer outcomes which support borrowers and will allow the Central Bank to test and learn from this approach.
It must be borne in mind that a key issue in a decision to opt out by some lenders is that borrowers from these institutions cannot be part of the pilot framework to restructure their debt. For example, if a distressed borrower has multiple debts and one of their lenders is not involved in the pilot scheme then they cannot be part of the pilot scheme and cannot avail of the benefits.
I am aware of the concerns expressed by the Irish League of Credit Unions regarding the Central Bank initiative and its view that the arrangements under the Personal Insolvency Act should be applied to the resolution of multiple debts owed by distressed borrowers, including credit union members. While that regime is indeed available, the Central Bank pilot scheme will offer the opportunity for distressed borrowers - including credit union members - to resolve their debts without the need to enter into the formal statutory process. In this respect, it is important that credit union members are not left with a more limited range of options than are available to customers of other financial institutions. It is in this spirit that the Central Bank has written to all credit unions to make them aware of the pilot so that the credit unions can decide whether their participation is in the interests of their members, including members with distressed debts across multiple lenders.
Credit unions have been invited by the Central Bank to nationwide information seminars on the pilot scheme to discuss its objectives and approach. The Irish League of Credit Unions has been invited to attend at these sessions and provide input into the content of them. Notwithstanding their official stance on the pilot programme, the Irish League of Credit Unions has played a constructive role in working with the Central Bank and other lenders to address this difficult issue and credit unions continue to have an important role to play in supporting distressed borrowers in resolving their problems.