We are pleased to have been invited to make a brief presentation on the money advice and budgeting service, MABS, to the committee. For more than 18 years MABS has been the only free, independent and confidential service dedicated to the provision of advice and information to people who are in debt, or at risk of getting into debt, in Ireland. The focus of MABS is on low income families. We have a national network of 53 services providing the face to face service with a total of 235 fully trained staff. We operate a national helpline which provides information and advice and supported self-help to callers who wish to engage directly with their lender. The MABS website is also a useful source of information and advice.
MABS is funded by the Citizens Information Board. We have seen considerable growth in the client base and there are now in excess of 31,000 active MABS clients. The number of new clients grew from just under 15,000 in 2007 to 19,000 in 2008, to almost 23,000 in 2009. More than 6,000 new clients have presented to MABS offices for the year to date. The average amount owed by that group of new clients is €15,500.
There has also been strong growth in the number of callers to the MABS helpline. Almost 25,000 callers were assisted by the helpline in 2009. Perhaps, ironically, that is a positive development as it is important that people who are at risk of getting into debt take action early. We find that helpline callers often get in contact in anticipation of a future financial difficulty. In general, a slightly higher proportion of MABS clients are female, most clients have families and the most significant age cohort is those aged between 26 and 40. In recent times we have seen an increase in the number of clients who are partially or wholly reliant on social welfare, which had averaged at 63% to 65% of the client base, but is now closer to 70%. There has been an increase also in the number of MABS clients who are mortgaged, from 22% in 2007 to over 35% at present. An increasing number of our clients may have been in employment and able to pay their debts six months or a year ago, but now due to the loss of a job, a reduction in working hours, or other losses of income, they can no longer meet their commitments.
In terms of the debt profile of clients there has been an increase in complex, multi-debt cases. The mix often includes personal loans, utility arrears, credit card debts, mortgages and hire-purchase loans. Other high-cost credit types also feature strongly, such as money lender loans, catalogue debts, overdrafts and sub-prime loans. When people first come to MABS they can be highly stressed and are often very vulnerable. Financial difficulties can give rise to ill health, depression and family problems, and that can exacerbate existing difficulties as well as giving rise to wider societal costs. Some of our clients may be afraid to contact their creditors. They might have multiple debts. They do not know who to pay and do not see a way out. Some of our clients are unfamiliar with the social welfare system and do not know what supports are available or how to access supports. MABS staff go through a very detailed and structured process with clients. The process is designed to empower clients to deal with their debts in a sustainable way. We assist clients to budget, prioritise debts, access social welfare and to make a realistic repayment plan. Where necessary, we may negotiate with creditors on the client's behalf and also set up and administer a repayment plan.
Committee members might be aware that we have an operational protocol with Irish Banking Federation members. We take a good practice approach to debt and arrears management based on our experience of what works for clients. There is a structure and a logic to the way we work. Our goal is sustainability. The benefit of the protocol is that there is now growing acceptance of the MABS money advice process across the credit industry. Notwithstanding our work on prevention and protocols, it is fair to say that some of the problems that are now emerging are both highly complex and intractable. That is particularly the case for mortgage debt. We welcome the formation of the expert group on mortgage debt.
Furthermore, MABS has long believed that a holistic out-of-court approach is the only solution for debtors who cannot pay and, as such, we welcome the ongoing work of the Law Reform Commission in this regard. In experience of MABS, the current legal process for dealing with consumer debt is inappropriate for many clients who, due to an unanticipated change of circumstance, simply do not have the capacity to repay what they owe. The legal process is harsh, costly and unproductive for those who cannot pay through no fault of their own.
It is vitally important for individuals, families and society that what may be termed "can't pay" debtors are afforded the opportunity to repay what they can, but also that there is a defined and realistic timeline for debt settlement. The so-called "fresh-start principle" is important so that at some point in the future, people who are currently over-indebted can once again engage and participate as full members of society.
We have already noted that many MABS clients avail of high-cost forms of credit, and we are concerned that in the absence of mainstream alternatives, there could be a growth of high-cost credit forms such as loans from licensed moneylenders and the use of catalogues as a form of credit. While not yet evident in our client statistics, we are concerned that new forms of high-cost credit targeted at people under a lot of pressure to avail of immediate cash could become a feature, as they have in other jurisdictions. These credit types include on-line loans, pay-day loans, so-called log book loans and others.
MABS is always concerned about a possible resurgence of unlicensed moneylending. All of these issues need close monitoring and, where possible, regulation. Other issues which need to be considered for the future are credit-rating mechanisms, universal access to basic banking facilities, access to affordable credit and the regulation of commercial debt advice and debt collection services. I thank the committee members for their time.
