Dáil Éireann Debate, Thursday - 16 May 2013
110. Deputy Heather Humphreys asked the Minister for Finance if he will confirm recent reports that the Central Bank is considering using a British debt charity to assist with the restructuring of debt for those in financial difficulty; if the Central Bank of Ireland has given due consideration to using the excellent service provided by Money Advice and Budgeting Service in this regard; and if he will make a statement on the matter. [23565/13]
View answerThe Central Bank has announced its intention to operate a pilot scheme for the restructuring of secured and unsecured distressed consumer debt across multiple lenders. The aim of the pilot framework is to achieve sustainable and fair outcomes without the need for the borrower to enter the full insolvency process. It is focused on enhancing cooperation between lenders of secured and unsecured debt in order to resolve distressed debt at an early stage.
The framework produced by the Central Bank establishes a series of principles to be applied in debt restructuring solutions for borrowers. In particular it outlines a ‘Resolution Waterfall’ which sets out a series of debt affordability scenarios. Treatments will be applied to the borrower’s debts in order to establish the most appropriate, affordable modification that sets the borrower on a sustainable footing for the remaining period of the loans.
The framework will be implemented on a pilot basis by participating lenders using a representative sample of 750 borrowers who are experiencing significant financial difficulty repaying the mortgage on the family home and who have other unsecured debt. The pilot scheme will run for three months from the end of June and will conclude with a thorough review of all results to evaluate the effectiveness of the framework in dealing with such cases and to determine next steps.
The Central Bank has advised that it has been agreed among the lender participants to use an independent third party service provider as the most appropriate way to engage with borrowers, whose consent to participate will be sought. I am informed by the Central Bank that discussions are underway to determine the most appropriate provider and that no decision has yet been made. However I understand that an important consideration for the Central Bank, due to the short timelines involved, is the ability of the provider to provide an effective and efficient service at short notice.
To be eligible for the Framework, a borrower must be co-operating with his lenders, as defined in the Code of Conduct on Mortgage Arrears (CCMA). It will apply to borrowers experiencing financial difficulty but who have taken reasonable steps to maximise income and curtail expenditure. All existing protections afforded by the Central Bank’s Consumer Protection Code and the CCMA will continue to apply to participating borrowers. The Framework will not include borrowers with buy-to-let or business related debts.
Question No. 111 answered with Question No. 107.
