Mabs pulls out of pilot scheme to help debtors

A plan designed by the Central Bank to help overstretched borrowers with multiple loans has been thrown into temporary disarray by the unexpected withdrawal of the Money Advice and Budgeting Service (Mabs) from the scheme.

Following a competition between three bidders, Mabs, in conjunction with IT services company OSG, was to take a key role in a three-month pilot programme to try out the proposed scheme.

However, having won the competition and having responded in writing to the Central Bank two weeks ago in positive terms, the agency wrote to the Central Bank again last week, saying it would not be taking the role.

It is understood the Central Bank does not know the reason for the volte-face and is very surprised. A spokesman would not comment yesterday and calls to a spokesman for Mabs were not returned.

Failed bidders
It is understood the Central Bank will now approach the two failed bidders for the role offered to Mabs.

If they are interested, it is envisaged the pilot will go ahead, perhaps as soon as next month. It will be focused on households but the scheme, if deemed successful, could be extended to include businesses and owners of buy-to-let properties.

Mabs had been selected to act as an experienced, independent representative for debtors in their dealings with multiple lenders.

'Waterfall' process
Banks and credit unions involved will be asked to process debtors' situations using a "waterfall" process, whereby each debtor, if not in a position to manage their loans based on a particular solution, falls to the solution below them on the waterfall.

The final step is where it is decided that the debtor should declare bankruptcy.

The three-month pilot is being spearheaded by Fiona Muldoon, the Central Bank's director of credit institutions and insurance provision.

It has encountered difficulties due to lenders’ concern about how they will be dealt with by the system, and the Irish League of Credit Unions walked out of talks.

The pilot scheme will seek to agree arrangements with 750 borrowers to restructure their debts. The debtors are not technically insolvent but have debts with multiple lenders. It is designed to provide a sustainable outcome for borrowers and would see repayments made to various lenders to reflect their credit exposure and level of loan security.