Five main Irish banks consider reviving debts scheme

Ireland’s five main banks are in talks to revive a scheme that seeks to provide resolutions for borrowers who have debts with multiple lenders.

A similar pilot scheme was established by the Central Bank of Ireland in May 2013, but it ended in April of this year when the credit unions pulled out at the end of its trial phase.

The Irish Times has learned that AIB, Bank of Ireland, KBC, Permanent TSB and Ulster Bank have held talks under the auspices of the Banking & Payments Federation Ireland with a view to re-establishing this scheme.

They intend to use StepChange, a UK debt charity, as the third-party operator of the scheme, with cases referred from lenders. StepChange also operated the pilot.

At this stage, other credit institutions, notably credit unions, are not included in the talks but it is understood that the banks would be willing to expand the scope of their scheme to include other groups.

A spokesman for the BPFI confirmed that talks are underway, adding that they are “nearing completion”. He said an announcement was likely in either late January or February.

It is understood that the scheme could be established in the second quarter of next year.

Participating lenders in the pilot included banks, credit unions and a credit card company.

It is believed that the banks were happy with how the pilot scheme operated and are keen to set up a similar process, which they feel can play a useful role in dealing with the high level of debt arrears in Ireland.

Pilot scheme

As part of the Central Bank’s pilot 1,338 cases were identified by lenders as potential cases meeting the selection criteria. Due to exclusion criteria and other issues, 282 borrowers were referred to StepChange for assessment.

Some 144 out of 282 distressed borrowers received proposed solutions to their overall debt situation during the four-month pilot.

Borrowers, who had been reluctant to trust their lender, were found to be willing to find solutions through an independent third party working on their behalf, using an agreed framework.

According to a report by the Central Bank published after the scheme ended, the feedback from participating borrowers and lenders regarding StepChange and its role as an independent intermediary was "extremely positive", in particular its "professionalism and ethos of working in the best interests of borrowers".

The regulator said the initiative showed the advantage of not placing a borrower in the middle of conflicts with multiple lenders.

The Central Bank’s framework dealt with both secured and unsecured debt across multiple lenders. Debtors had to be considered as co-operating with their institution to be included. It devised solutions that ranged from full payment of a mortgage and other debts right up to a personal insolvency arrangement and bankruptcy.