Debtors need sustained support, not just once-off financial advice

6 September 2012

Legal rights group FLAC (Free Legal Advice Centres) today gave a mixed reaction to the government's launch of a new independent financial advice scheme for distressed mortgage holders, saying it raised many questions.

The scheme, launched by Social Protection Minister Joan Burton TD earlier today, will allow mortgage holders in arrears to receive a free consultation with an accountant, paid for by the banks, on their situation. However, FLAC Director General Noeline Blackwell, expressed serious concerns about how the scheme will operate.

"A consultation with a participating accountant will focus exclusively on the lender's proposal for a long-term solution to a mortgage in distress," said Ms Blackwell. "FLAC is concerned that borrowers may not have had assistance in negotiating this long-term solution, unless obtained through MABS or other personal resources. They will have been facing up to a commercial institution concerned with recovering its money. There is no element of legal advice to people whose position is substantially changing throughout this process. People are being left effectively to take on the might of a commercial institution, that is, the lender by themselves, without reference to the rest of their debt."

"The bottom line is that the information and advice to be offered by the accountant for €250 (plus VAT) is limited: it appears that there will be no legal advice, no recommendation from the accountant on a course of action for the debtor, and no advice on the person's general financial situation."

FLAC Senior Policy Researcher Paul Joyce commented: "While FLAC welcomes any and all measures that will assist people in mortgage crisis, this scheme contains many holes from our perspective. If this scheme is meant to be implementing the Keane Report's 2011 recommendations, it certainly falls far short of what was recommended back then. Where is the initial team of 100 advisors with financial, accounting and legal skills that would liaise with MABS?"

The new arrangement was launched as part of the three-point Mortgage Arrears Information and Advice Service, itself part of the government's four-pronged 'Action Plan on Mortgage Debt'. However, FLAC said the action plan as revealed to date lacks coherence and transparency.

"For example, the Central Bank has initiated a 'Mortgage Arrears Resolution Strategy,' where banks have presented their ideas for dealing with clients in long-term, serious arrears to the government and the Central Bank. These strategies are still only at pilot stage, according to the latest Central Bank information. They are supposed to be up and running by October, but as of September, we still have not seen any of the details." asked Ms Blackwell.

"Where is the joined-up thinking in this action plan on mortgage debt? How does the Code of Conduct on Mortgage Arrears, the Mortgage Arrears Resolution Strategy, the personal insolvency legislation and the various housing schemes knit together?

"FLAC is very concerned that the arrangements being put in place at the moment are piecemeal. The Minister has said that the scheme will be kept under review, with a full review in June 2013. It is important that any measures taken now are seen as steps towards a full solution rather than a full solution in themselves. Debtors need targeted, sustained support and assistance to resolve their difficult and varying financial situations," she concluded.

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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. More information on the above scheme is available on the Department of Social Protection site.
3. FLAC have commented on the Central Bank latest mortgage arrears data for Q2 2012. The CB data is available on the Central Bank site..
4. FLAC has prepared a briefing note on the background to the reform of personal debt and insolvency laws.
5. FLAC have resources on the issue of personal debt and a conference microsite on Legislating for personal insolvency in Ireland: International developments and domestic issues (April 2012)
6. The Keane report of 2011, on the issue of support and advice for borrowers in arrears with their mortgages, may be summarised as follows:
- The group recommends the establishment of a mortgage support and advice function;
- It did not believe that MABS is structured or resourced to provide this service;
- It would be safe to assume that 100 independent advisors would be needed at first;
- The skills required would included financial, accounting and legal;
- The new advisors should operate in three to four regional clusters;
- These clusters should be linked to MABS offices, could legally be a part of MABS but would not have to be, but would have to have a link to the MABS network for referral purposes.