Creditors, advisers in talks on debt reform

The Money Advice and Budgeting Service (Mabs) and the Irish Banking Federation (IBF) are in talks to establish a new set of protocols for negotiations between creditors and money advisers acting on behalf of borrowers who default on debts.

IBF spokesman Felix O'Regan said it was hoped that the two organisations could agree on a formal framework for out-of-court debt settlement negotiations in the autumn.

The move is part of a campaign to keep debt cases out of a legal system that is seen as inhumane and ineffective in dealing with debt enforcement, particularly for those with multiple debts.

The Government has been criticised for failing to modernise debt legislation, which has resulted in almost 1,000 people serving prison terms between January 2002 and September 2006 for "offences relating to debt".

Under the current system, each individual creditor pursues the borrower through the courts. The District Court judge is usually not aware of the borrower's other debts, which means the instalment orders it imposes are often broken. If the debtor does not attend a hearing to explain why they have defaulted, a committal order is issued, resulting in arrest and imprisonment.

The IBF and Mabs are also planning a full evaluation of a debt settlement pilot scheme that began in 2002, under which 30 borrowers agreed to pay each creditor on a pro-rata basis. Under the scheme, part of their debts were written off and they were guaranteed a realistic minimum income.