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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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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:

I propose to take Questions Nos. 73, 93, 142 and 203 to 205, inclusive, together.
The Deputies will be aware that 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. While the framework was an initiative of the Central Bank, the Central Bank informed the Mortgage Arrears Steering Group of the progress on its discussions with lenders on the Central Bank’s intention to introduce such a scheme.
Many distressed borrowers have multiple debts with different lenders and have to deal with each lender on each debt. The Central Bank has advised that this framework can help those borrowers because the lenders are agreeing to a coordinated approach for resolution of all of the borrowers’ debts. In addition, many distressed borrowers are not insolvent and therefore will not be eligible for an arrangement under the personal insolvency regime, but do need to have an appropriate solution in place to deal with their debts. This framework aims to test the feasibility and costs of implementing such solutions for borrowers. The framework also has the potential to reduce the costs and time it will take lenders operating on an individual basis to deal with distressed borrowers, while also potentially resulting in only the more challenged cases proceeding to the new established personal insolvency regime. The Central Bank has also advised that there is no legislative basis by which unsecured creditors can be forced to accept write-downs in outstanding debt under the Central Bank’s voluntary framework. Nevertheless, as a result of the Central Bank’s initiative, a number of secured and unsecured lenders have agreed a burden sharing framework and will now, with the Central Bank’s oversight, participate in the development and operation of this Framework on a test or pilot basis.
The Central Bank is actively encouraging the involvement of all lenders in the process to ensure maximum effectiveness of this learning and information gathering pilot stage, and it is encouraged that a number of lenders have agreed to become engaged. The Central Bank advises that it has written to all credit unions individually to invite them to participate in the pilot framework and it is confident that the pilot framework will offer outcomes which support borrowers and will also 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 such borrowers cannot be part of the pilot scheme and cannot avail of the benefits that can accrue from the operation of the framework.
All existing protections afforded by the Central Bank’s Consumer Protection Code and Code of Conduct on Mortgage Arrears (CCMA) will continue to apply to participating borrowers. The framework will not include borrowers with buy-to-let or business related debts. It is envisaged that the Pilot will start in June and run for approximately 3 months after which the results will be assessed to establish the effectiveness of the framework and to determine the appropriate next steps.
The recent Central Bank initiatives in the mortgage arrears area, in particular the Mortgage Arrears targets initiative announced last March and the more recent framework pilot on the development of a coordinated, holistic and voluntary approach by secured and unsecured lenders, is consistent with the overall whole of Government approach to deal with the mortgage arrears problem. In particular, the Government, while significantly modernising Ireland’s bankruptcy and insolvency law and procedures, has also advocated and encouraged borrowers and lenders to address situations of debt difficulty, where possible, on a bilateral and informal basis, and the recent Central Bank initiatives should underpin that process.
Recent announcements by Government such as the launch of the Insolvency Service of Ireland (ISI) are important steps in the overall framework to deal with mortgage arrears. Borrowers seeking specific information on support available can contact the ISI’s helpline for information on insolvency matters or can seek advice from the general mortgage arrears information service for general mortgage arrears queries.