Mortgage arrears strategy needs active oversight to deliver on promise of sustainable results

13 March 2013

Mortgage arrears strategy needs active oversight to deliver on promise of sustainable results

 Legal rights group FLAC (Free Legal Advice Centres) says the litmus test of the latest government plan to make mortgage lenders face up to the arrears crisis will be whether it results in real sustainable solutions for people across the full range of their debt problems, secured and unsecured, and in people having the support they need to negotiate solutions with their creditors.

 "While it should put more pressure on banks to do deals with customers in mortgage trouble, it remains to be seen whether the plan will actually get sustainable results for over-indebted people," said FLAC Director General Noeline Blackwell. She noted that there is no move from the position to date where the banks retain control by deciding each case on a ‘case by case basis’. However she also observed that at least some limits are being put on banks' capacity to act entirely as they wish through the threat of licensing sanctions if they fail to meet their targets.

The plan jointly announced today by Minister for Finance Michael Noonan and Financial Regulator Matthew Elderfield proposes that the Central Bank will set quotas per quarter for long-term solutions for accounts in arrears to be met by each of the major lending institutions. However, the so-called ‘sub-prime’ lenders will not be subject to this regime, nor will local authority lenders.

 FLAC also noted that the scheme is to be monitored and audited by the Central Bank. “Given that the Central Bank has refused to even publish the previous research that it has carried out on consumer satisfaction with banks behaviour, FLAC is concerned to ensure that there is transparency and publication over the outcome of the bank’s oversight,” Ms Blackwell said.

 FLAC Senior Policy Analyst Paul Joyce raised concerns that the proposed solutions be fair as well as swift and workable:

“This must involve the debtor retaining a reasonable standard of living in line with guidelines being developed by the Insolvency Service. In addition, borrowers need help to redress the power imbalance between them and the banks in negotiations. As Minister Noonan said at today’s press conference, people in talks with the banks need support and advice ‘to even up the exchange’.  The current infrastructure for supporting people in debt is inadequate. MABS would need substantial additional resources if it had to meet the increased demand. Further, the accountants' scheme announced last year by Minister Burton and mentioned today is limited to explaining proposals made after negotiations are complete."

 FLAC says this further initiative is welcome, but could prove to be as disappointing to borrowers and authorities as previous ones, unless there is a spirit of active oversight and, if necessary, increased powers to the authorities. In addition, care must be taken to ensure that lenders deal respectfully with borrowers in implementing sustainable solutions.



Editors’ notes:

  1. FLAC (Free Legal Advice Centres) is a human rights organisation which exists to promote equal access to 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 (1890 350 250) 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. FLAC's recent releases on personal debt law reform are available at
  3. The protections contained in the Code of Conduct on Mortgage Arrears are crucial to the negotiations between bank and borrower. All Irish lenders are covered by the Code of Conduct on Mortgage Arrears. FLAC will make submissions to the Central Bank on the changes proposed to the Code in the Consultation Paper CP63 A Review of the Code of Conduct on Mortgage Arrears, March 2013 issued today.
  4. Dept of Finance press release on the issue today:
  5. The Central Bank’s statement: