AIB steps up High Court pursuit of unsecured borrowers

AIB has dramatically stepped up its pursuit of defaulting borrowers and is now by far the most litigious Irish lender when it comes to chasing unpaid debts through the High Court, according to an Irish Times analysis of court records.

In 2016, the State-owned bank issued almost four times as many High Court debt actions against borrowers as its nearest rival, Bank of Ireland. AIB took 40 per cent more cases against its borrowers last year compared with 2015.

The analysis of summary judgment applications – where the bank seeks a fast-track ruling against a borrower without a trial – shows AIB Group filed slightly more than 1,200 such actions in 2016. This compares with about 860 in 2015.

Last year, AIB accounted for almost one in two of all summary judgment applications in the State. As it accelerates the volume of such lawsuits against defaulting and unsecured borrowers, its biggest rival appears to be slowing down. Bank of Ireland, the next most active in the courts, made about 325 summary judgment applications last year, down from about 550 in 2015.

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Aggressive tactic

Summary judgments are an aggressive tactic used by financial institutions against delinquent borrowers. They can give a bank recourse to all income and assets of a borrower, regardless of what was originally pledged as loan security.

The financial downfall in 2014 of former media billionaire Sir Anthony O’Reilly, for example, was sparked by an AIB summary judgment application.

Judges can only give summary judgment orders in cases where the borrower appears to have no arguable defence. Both of the main banks say they only use summary judgment applications as a last resort.

“AIB always seeks a non-legal resolution and consensual debt restructuring with customers and only resorts to legal action where a borrower does not fully engage,” said AIB.

Bank of Ireland said it only sought summary judgments on people which it deemed were capable of paying but with whom “all efforts to agree alternative repayment plans have been exhausted”.

“[We] take summary judgment proceedings in circumstances where the bank determines that the borrower is in a position to repay the money owed via the sale of assets or based on the income of the borrower.”

About 30 per cent of AIB’s summary applications were made by its mortgage arm, suggesting that they were cases where the underlying property may have been sold and the bank was chasing recompense for some of the leftover negative equity. Almost half of Bank of Ireland’s applications were made by its mortgage division.

Vulture funds

After the two pillar banks, the next most active seeker of summary judgments, with 126 applications in 2016, was Cabot Asset Purchases, which is owned by the Nasdaq-listed, distressed debt specialist Encore group.

Cabot bought large tranches of property-related debts from Ulster Bank in 2015 and last year initiated a flood of actions against business owners and well-known investors.

Danske Bank, which has withdrawn from personal and business banking in the Irish market, made 106 summary applications, while Belgian bank KBC made 41.

So-called vulture fund entities linked to US institutions Goldman Sachs and Carval were also prominent, with more than 100 applications between them. Goldman and Carval bought up large tranches of distressed loans from institutions such as IBRC in recent years.

Goldman's Ennis Property Finance and Kenmare Property Finance made about 50 summary applications in 2016, roughly equal to the number made by Carval's Launceston Property Finance and Stapleford Finance.

US group Cerberus, which bought loans from institutions including IBRC and Ulster Bank, made some 13 summary judgment applications in 2016.

FIGURES

AIB Group (includes 377 by AIB’s mortgage arm): 1,200 (number of actions in 2016)

Bank of Ireland Group (includes 157 by its mortgage division): 326

Cabot Asset Purchases (mostly old loans it purchased from Ulster Bank): 126

Danske Bank: 106

KBC: 41

Launceston Property Finance (Carval): 31

Ennis Property Finance (Goldman Sachs): 24

Kenmare Property Finance (Goldman): 22

Stapleford Finance (Carval): 20

Cerberus: 13