Davy research shows banks must change approach to tackling mortgage arrears

17 August 2012

Legal rights group FLAC (Free Legal Advice Centres) today warned that short-term measures from banks are not coping with Ireland's chronic mortgage arrears problem. Reacting to a report issued by Davy Stockbrokers today which states that mortgage arrears levels will sky-rocket unless banks change their approach to dealing with over-indebtedness, FLAC said its contact with people on the ground backed up suggestions made in the Davy Research report.


"Davy's report is another stark indicator of the need to ensure that, even beyond the introduction of a new personal insolvency regime, lenders must be more realistic and reasonable in their proposals around mortgage debt for Irish consumers" said FLAC Director General Noeline Blackwell.


The report authors describe as "limited" the progress made by Irish banks in addressing non-performing loans. They red-flag the current focus of both the government and the banking sector on short-term measures involving loan restructuring and 'advanced forebearance', and stress that a wide range of solutions is going to be needed.
" In FLAC's experience, this focus on short-term interim measures to deal with mortgage debt has indeed worsened the position of Irish consumers. Such measures often only prolong the life of loans that are truly unsustainable. They provide neither certainty nor assistance to consumers, especially those trying to restructure their loans where they are over-indebted. This focus also feeds a trend where lenders are only concerned with their own debt, whereas we see that many consumers are trying to juggle multiple debt," said Ms Blackwell.


" Thus the Davy report's call for wider, more realistic solutions in the long term is not only in the interest of banking recovery. It is also in the interest of consumers," she concluded.




Editors' notes:

1. FLAC (Free Legal Advice Centres) is a human rights organisation which exists to promote equal justice for all. FLAC is an NGO that relies on a combination of statutory funding, contributions from the legal professions and donations from individuals and grant-making foundations to support its work. FLAC offers basic legal information through its telephone information line and free legal advice through its network of 80 volunteer evening advice centres. It also campaigns on a range of issues including personal debt, fairness in social welfare law, public interest law and civil legal aid.

2. The report from Davy's is entitled "Banking recovery requires resolution of mortgage arrears challenge"

3. FLAC has prepared a briefing note on the background to the reform of personal debt and insolvency laws

4. FLAC has resources available on the issue of personal debt and also a conference microsite on Legislating for personal insolvency in Ireland: International developments and domestic issues (April 2012)

5. Minister for Justice Alan Shatter TD launched FLAC's Annual Report for 2011 on 18 June