‘Computers not people’ decide how banks approach arrears

Banks are using computer systems rather than staff working with distressed mortgage holders to make decisions on how to handle clients in arrears, the Oireachtas Finance Committee has heard.

Stephen Curtis, of the Irish Mortgage Holders Organisation, said it was hard to establish consistency regarding how people were dealt with as ultimately decisions were taken by a computer programme, fed information gathered by staff, and nobody else.

“I think all negotiation is with a computer,” he said. “The person who you meet puts the figures into the computer but the computer spits out the answers based on a set of guidelines.”

People Before Profit TD Richard Boyd Barrett said the situation reminded him of a sketch from the comedy series Little Britain, in which a bank official repeatedly tells clients “the computer says no”.

Mr Curtis was responding to Independent TD Stephen Donnelly, who said the Government had “abandoned” distressed mortgage holders.

Mr Donnelly said the Taoiseach had rubbished a suggestion that a repossession took place every day in the State but it was actually more common. “We have a Government that is both in denial and delusional, it seems to me,” he said.

He said quality, consistency and quantity were the three issues at play when handling mortgage arrears and the Government approach appeared most concerned with quantity, with the other issues largely ignored.

The committee met organisations working with distressed mortgage holders to gather information on the topic ahead of hearings with banks, the Insolvency Service of Ireland and the Central Bank. Fianna Fáil TD Michael McGrath said he felt the committee was "chasing shadows" when it last met bank representatives about the issue.

Anna Walsh, of Mabs, said she was concerned about the quality of arrangements reached between banks and customers in arrears. She questioned if standard financial statements, something required by the bank to restructure a client’s debt, were being stress tested to ensure they were manageable moving forward. “I think not,” she added.

Her colleague Carol Dunne said there was no such thing as a standard financial statement, as no two arrears cases were the same.

Noeline Blackwell, of the Free Legal Advice Centres, said it was "quite extraordinary" that she found herself before the committee more than five years after legislators and policy makers started dealing with the mortgage debt crisis. Those in arrears were still struggling to find justice, she said.

Ms Blackwell said it was hard to know if banks were getting sustainable outcomes - pointing to a case where a receiver had been appointed to a near derelict family home.

Her colleague Paul Joyce said the revised Central Bank code on mortgage arrears was to the detriment of consumers as lenders did not have to examine all options available when dealing with a client in arrears but rather those they offered.

Fine Gael TD Kieran O’Donnell expressed concern about an apparent ramping up of “extremely aggressive” behaviour towards mortgage holders by Danske Bank and Bank of Scotland Ireland, who were looking to exit the Irish market.

Mr O’Donnell said homeowners were being put under pressure over minor arrears and the banks were seeking to repossess and write off debt as they wanted to “get the car shiny to sell it on”.

David Hall, of the Irish Mortgage Holders Organisation, said it was "next to impossible" to deal with the two institutions, and Bank of Ireland. Some moves taken by the lenders had been "toxic in the most nasty way", he said, adding that "the only language" such firms understood was legislative and that change needed to be delivered in a clear and firm manner.

Mr Boyd Barrett said he regularly met constituents who feared homelessness because of threats of repossession. He said he asked his local authority about the cost of housing a family in such a scenario and it was €3,200 per month, which he described as a fraction of the cost of the mortgages concerned.

“We’re getting screwed,” he added.

Mr McGrath said, stigma aside, bankruptcy was becoming a more attractive option for some, as the term of discharge had been reduced, but there were concerns about accessing credit afterwards.

Ross Maguire, of New Beginning, said many of those considering entering bankruptcy were in stable employment and would ultimately represent "better credit" on the other side of the process as they were not trying to save a sinking ship.

He said he would like to see a lender provide funds to this cohort at competitive rather than subprime rates.