Banks back new scheme to help customers to control debt

LEADING IRISH banks are backing a new scheme to help customers struggling to control their personal debt.

The plan has been developed over the last two years by the Irish Banking Federation (IBF) and the Money Advice and Budgeting Service (Mabs), the State-funded service which provides free advice for people in debt.

Under the agreed protocol banks will work with Mabs advisers to address customer’s debt problems and provide those having difficulty making repayments with a “mutually-acceptable, affordable and sustainable repayment plan.”

Banks will also suspend legal proceedings against customers who are engaging with Mabs.

There are 12 banks and building societies involved in the scheme, which launches on September 28th, including Bank of Ireland, AIB and Anglo Irish Bank.

The protocol is broken into two parts – general principles and procedures.

The process commences when a customer approaches the Mabs service for assistance.

If required, a Mabs adviser will contact the appropriate bank and submit all relevant information within 20 days, including a proposal to repay the debt.

The bank will then respond within 10 days and a repayment plan that suits both parties can be agreed.

Minister of Social and Family Affairs, Mary Hanafin said the scheme would provide reassurance for people in financial difficulty.

“In a nutshell what this agreement means is that if you engage in a meaningful way to try and repay debt then the financial institutions will not take you to court. If you engage with Mabs the legal route is the last route,” she said.

“During the process the difference between clients who are unable to pay and those who will not pay debts will be assessed.”

IBF chief executive Pat Farrell said: “What we are talking about here is a commitment between lenders and their customers on how to solve problems.

“It is a shared problem and the lender is as committed to work out these issues as the customers are.”

Mr Farrell also said the current legal regime allowing imprisonment for the non-repayment of a debt is outdated and needs to be changed.