AIB issues warning to almost 6,000 mortgage customers

AIB has warned close to 6,000 of its mortgage customers that it will take legal action against them if they continue to refuse to engage with the bank on their arrears.

AIB chief executive David Duffy yesterday told an Oireachtas finance committee that the letters were sent to 5,984 account holders between April and June of this year threatening legal action, including repossession, if they did not contact the bank.

Mr Duffy said these customers were typically in arrears for between 2½ to three years and had consistently failed to respond to attempts by the bank to engage with them on their debts.

“Unless you engage with us, you will be be subjected to the full legal route,” said Mr Duffy. He said a “significant number” of these customers have since engaged with the bank and begun to make repayments.

Resisted calls
The AIB chief executive resisted calls from a number of TDs and Senators to give a commitment that AIB would not repossess any family homes.

When asked why borrowers shouldn’t simply hand back their keys to the bank and let it deal with the arrears mountain, Mr Duffy replied: “If everyone goes back and throws the keys in, you can kiss AIB goodbye.”

This was a reference to the fact that the financial hit that AIB would suffer would simply be too great for it to survive.

However, Mr Duffy told the committee that AIB has sufficient capital at present and it expects to pass the next rounds of stress tests that are planned for early next year.

He was grilled by Oireachtas members for more than 3½ hours.

AIB was required by the Central Bank of Ireland to provide 20 per cent of its customers with sustainable solutions by the end of June and there was much heated debate when it emerged that the near 6,000 legal letters formed part of this.

'Sustainable solution'
Several members questioned how a threat of legal action could be classified as a "sustainable solution". Mr Duffy argued that this would be a sustainable solution for customers who simply can't afford to repay their debts.

In total, AIB made 8,600 offers to customers in arrears in the second quarter.

The bank said this met the Central Bank’s 20 per cent target, although the regulator has yet to audit these figures.

Mr Duffy reiterated that AIB took a €475 million writedown on arrears in the first half of this year but only €38 million of this related to residential loans. He said 14,000 AIB customers who slipped into arrearsthis year are now back on track.