Banking’s answer to the Keane-FAI detente

It might not be up there with Charlie Haughey's decision to go into coalition with his bitter foe Des O'Malley, or the more recent detente between Roy Keane and FAI chief executive John Delaney, but the Irish Mortgage Holders' Organisation's decision to run a pilot scheme on behalf of AIB for the bank's arrears customers marks a significant turnaround in their relationship.

Over the past few years, David Hall, the public face of the IMHO, has been vocal in his criticism of the various banks, including AIB, in tackling their arrears problem.

Earlier this year he accused AIB boss David Duffy of "spin" in relation to the number of strategic defaulters.

All that was put to one side on Monday as the lobby group announced that it would run a six-month pilot for AIB where it will act as a “facilitator” between the bank and customer.

The scheme will cost about €150,000 and be funded by AIB. It will be free to the customer and Hall stressed that it would act independently of the bank.

It’s a smart PR move by AIB, which is working the angles to try to find a solution to its mortgage debt overhang.

It is now able to present the IMHO as an honest broker to arrears customers who are suspicious of the bank’s motives in the so-called “engagement” process.

Brendan O’Connor, who heads the financial solutions group at AIB, said there are 8,000 to 10,000 customers in arrears who have yet to fill out a standard financial statement, an important early step in assessing a customer’s financial means and trying to design a treatment for them, if one can be found.

These will be the main focus of the pilot.

Dealing with strategic defaulters, or those who are simply too scared to engage because they are afraid of being turfed out of their homes, is a tricky issue for AIB, which is 99.8 per cent owned by the State.

There was uproar recently when it emerged at the Oireachtas finance committee that AIB had sent out sacks full of threatening legal letters to customers who had not engaged over their arrears.
It was designed as a shock tactic to get people to the table but was seized upon
by committee members as a heavy-handed approach to a problem that is gripping
the State.

Getting the IMHO to do some of this dirty work looks like a clever move.

If the pilot proves to be a success,
the IMHO and Hall can bask in the
warm glow of having aided people in restructuring their finances and avoiding unnecessary evictions.

Operating the scheme will be easier said than done, as the Central Bank found out recently when setting up its own pilot to deal with secured and unsecured debt.

Staff have to be trained, systems and protocols put in place, and data protection issues addressed. And then there is the interaction with customers, who always prefer to work at their own pace.

Dealing with those who bank only with AIB should be straightforward enough, but what about those who have arrears with other institutions?

AIB and the IMHO hope to conclude 1,000 restructurings over the six months, which would be no mean feat.

Hall believes this will be a game changer in dealing with the mortgage debt issue. Many in the sector are sceptical.

The proof will be in the pudding.