Dáil Éireann Debate, Tuesday - 9 July 2013
160. Deputy Finian McGrath asked the Minister for Finance if he will provide an update on the current state of credit unions and the banking issue; and if credit unions are now coming under pressure to bail out the banks. [33082/13]
View answer162. Deputy Finian McGrath asked the Minister for Finance if he shares the concerns of credit unions on debt sharing (details supplied). [33097/13]
View answerI propose to take Questions Nos. 160 and 162 together.
An unsustainable debt position has been reached by many borrowers, which needs to be addressed for the benefit of both borrowers and lenders alike. The Central Bank is facilitating a voluntary co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers.
The Central Bank is now carrying out a pilot exercise, involving banks, credit unions and other lenders, to test an approach to dealing with both secured and unsecured debt in a sample of approximately 750 cases where borrowers have debts with multiple lenders. This pilot framework contains a restructuring waterfall that will be applied to each borrower that agrees to participate, in order to establish the most appropriate modification to put him or her on an affordable repayment path. The pilot will operate for a period of three months, after which the results will be assessed to establish the effectiveness of the framework and to determine the appropriate next steps. It should be emphasised that participation in the pilot is voluntary for both the lender and borrower.
The Central Bank pilot scheme will offer the opportunity for distressed borrowers - including credit union members - to resolve their debts without the need to enter into a formal statutory process. In this respect, it is important that credit union members are not left with a more limited range of options than are available to customers of other financial institutions. It is in this spirit that the Central Bank has written to all credit unions to make them aware of the pilot so that the credit unions can decide whether their participation is in the interests of their members, including members with distressed debts across multiple lenders.
Credit unions have been invited by the Central Bank to nationwide information seminars on the pilot scheme to discuss its objectives and approach. The Irish League of Credit Unions has also been invited to attend at these sessions and provide input into the content of them.
The Central Bank initiatives in the mortgage arrears area, including the pilot framework and the mortgage arrears targets initiative announced last March, is consistent with the overall Government approach to the mortgage arrears problem. In particular, the Government, while significantly modernising Ireland’s bankruptcy and insolvency law and procedures, has also advocated and encouraged borrowers and lenders to address situations of debt difficulty, where possible, on a bilateral and informal basis, and the recent Central Bank initiatives should underpin that process. Taken together, the framework is in place to enable lenders to work with distressed borrowers to reach sustainable solutions for dealing with their personal indebted situations.
The correspondence referred to in the Question also raises an issue regarding the repayment of direct debits. I can clarify in terms of the refund rights available to payers under SEPA, these are laid down in the Payment Services Directive 2009 (the PSD) as transposed by S.I. 383 of 2009, and in the SEPA Direct Debit (SDD) scheme rulebook published by the European Payments Council (the owner of the SDD scheme).
The PSD grants consumers refund rights in three situations - for overcharging, unauthorised debits and incorrect processing. For unauthorised debits and incorrect processing, the payer has a right to an immediate refund as long as they notify their bank as soon as possible, and no later than 13 months after the debit date.
