'People who are getting into difficulty should engage with their lender'

 

INTERVIEW:The banks need to do more to resolve the problem of mortgage arrears, says Minister for Social Protection Joan Burton

AS THE Minister in charge of the social welfare system, Joan Burton says she understands the plight of Irish Timesletter-writer MP Mac Domhnaill from Tralee whose cry from the heart about his financial problems aroused much debate last week.

The unemployed former public servant said in an interview after the letter was published that his children were going hungry because he had so little money for food after using his dole money to meet his monthly mortgage payments.

“In many ways that story represented the fear that stalks an awful lot of Irish families,” the Minister said at her office in Dublin’s city centre yesterday.

“From the details that were given in the interview, I just want to say to the man and his family that I would really ask them to consider going to their local community welfare officer in particular.

“From what I read of the story, I think there are additional benefits that that man and his family may be entitled to. He might also be entitled to help under the mortgage interest supplement scheme.

“The mortgage that was described in The Irish Timeswas €80,000. I think again he should approach his lender because here is an absolute example where, if that family and the lender engage, it should be possible to try and work out some resolution mechanisms for that family, hopefully.”

Mortgage and other forms of personal debt have become a major issue in our social and political life and the Minister fully acknowledges the scale of the problem.

She believes there is an obligation on the banks and other lending institutions to take a more proactive approach.

“The critical thing is that people who are getting into difficulty should engage with their lender but I actually think that the lenders also need to engage with individuals who are in difficulty or who are in danger of becoming in difficulty,” she says.

In the same spirit, she goes on to say that, “I actually would like to see the banks becoming active in reaching out to the citizens who have become embroiled in debt because of the recession, losing their job, losing their business.”

(A spokesman for the Irish Banking Federation says it shares “the Minister’s objective in doing everything to ensure that lenders and borrowers do engage early and constructively on any repayment difficulties”.)

Burton accepts that the Fine Gael-Labour Coalition also has responsibilities in this area: “It is absolutely imperative – and that is why it is given such prominence in the programme for government – that the Government should use all of its resources across a series of departments to help people keep the roof of their family home over their head but secondly also specifically to help people to manage the debt and to really encourage lenders to help people to manage the debt.”

She points out that her own department, “increasingly in recent years, has been assisting people who are in mortgage difficulty and have lost their jobs”.

“We are currently assisting almost 18,000 people and spending, this year, about €70 million on a payment called a mortgage interest supplement.”

The programme for government is committed to examining the possible conversion of the Money Advice and Budgeting Service (Mabs) into a personal debt management agency with quasi-judicial powers to enforce resolution of debt problems. Mabs is under Burton’s remit, and she points out it was “originally established to deal with very poor, indebted people who were largely on social welfare or on very low incomes”.

But this has been changing: “Since the crisis, we have had an influx of people into Mabs who are middle-income people, maybe even with their own businesses, whose debt, much of it, is around mortgage debt, whereas in many cases traditional Mabs clients might in fact have been local authority tenants or people renting rather than buying homes.”

Burton is anxious, therefore, to ensure “that the expansion of Mabs services is not done at the expense of the traditional low-income clients”.

An interdepartmental group, including some of her own officials as well as representation from the Central Bank, is to present a report to the Government at the end of the month on mortgage arrears.

The Minister rejects suggestions that she is at odds with Tánaiste and Labour leader Eamon Gilmore on mortgage arrears: “I have been talking about the issue in more detail but he has been saying exactly the same thing that I have been saying.”

She notes that the Central Bank recently established a deferred interest scheme whereby individuals can negotiate to meet, say, 60 per cent of their mortgage interest payments and postpone the rest.

There has been talk of setting up a “Nama for the citizen” but Burton has never used that term: “I think we need debt resolution mechanisms and we have to deal with every case on a case-by-case basis.”

So would those mechanisms be overseen by an agency? “Well we are already doing that in Mabs to a degree. We have very large resources and staffing resources in the banks – I don’t see why the banks shouldn’t have a structure, that’s well-advertised, for dealing with people who are heavily indebted and deeply in trouble with their mortgages.”

Responding to reports that people are finding it difficult to ascertain their social welfare entitlements, she says: “We have citizens’ information centres right around the country. We have information and help desks in each social welfare office.

“It may take people some time to find the different bits of information but certainly the take-up on all the department’s schemes has expanded absolutely enormously.”

Burton was sharply criticised for her recent comment that social welfare must not become a “lifestyle choice” but she explains that she was referring particularly to young men who can drift into a self-destructive pattern of dependence on social welfare payments. “That lifestyle is not good for them, it’s not good for their families, it’s not good for their personal financial independence and autonomy.”

The Minister adds: “If the State provides reasonable options and alternatives and people don’t respond, well then, for instance, the options are now there to reduce people’s social welfare payment.”