FLAC warns that the distress of Covid may be followed by the stress of consumer over-indebtedness, as the cost of living rises and payment breaks and supports are removed.

3 November 2021

FLAC Pillar to Post - Paper 3

Today Free Legal Advice Centres (FLAC) publishes the third of four papers in the series ‘From Pillar to Post’ which examines issues arising in new and existing consumer debt cases in light of the Covid 19 pandemic.  

 This paper contains detailed analysis of data provided by both the Central Bank of Ireland (CBI) and the Banking and Payments Federation of Ireland (BPFI) on payment breaks provided by lenders to borrowers on family home (or PDH) mortgages and on (unsecured) consumer credit agreements in the course of 2020.   

 According to Free Legal Advice Centres CE, Eilis Barry, 

‘The publication of this paper is very timely. As we emerge from the pandemic, a full resumption of economic activity gets underway and a return to work is envisaged, this is a critical time to reassess the damage that may have been done to households in terms of personal finances and the dangers of over-indebtedness that may result’.    

Ms Barry went on to say   

‘We need more solid data in order to create policies that will protect vulnerable households from further stress following the pandemic. The information provided in the payment break data thus far is limited in detail and is compounded by a failure to update the position of the households affected into 2021’.   

CBI research data suggests that one in ten borrowers sought a payment break on their family home mortgage from the five main retail banks in the first two months of the pandemic. Over half of these breaks involved borrowers who drew down their mortgages between 2004 and 2008, a time when property prices were inflated and when unsustainable multiples of the borrower’s income were lent by banks. This research further suggests that borrowers who borrowed higher multiples of their income (i.e. had a high loan to income ratio) were twice as likely to have a payment break. Critically, these numbers do not include mortgages owned or serviced by credit servicing or retail credit firms, who collect payments on behalf of vulture and other funds and who service significant numbers of mortgages in arrears.   

Some of these borrowers are now between 50 and 60 years old. Many will have a history of arrears and forbearance. These findings are of concern, particularly in light of further recent research from the CBI which suggests that one-quarter of long-term mortgage arrears borrowers over 60 years old who are engaging with their lender have minimal ‘future income generation capacity’. Overall, according to the BPFI, one in nine accounts that availed of a mortgage payment break did not return to full payments by the end of 2020 and these borrowers were said to be ‘receiving other forms of lender support’ indicating that payment difficulties had persisted in these cases.    

Payment breaks on unsecured consumer credit agreements numbered almost 36,000 in 2020 and half of these did not resume full repayments by the end of the year, but returned to ‘payments on an extended term’. No further information is provided of the detail of those extended terms and as this series of papers has already demonstrated, there is a notable absence of detailed data on unsecured debt in difficulty in Ireland generally.   

Commenting on these figures, Paul Joyce, Flac Senior Policy Analyst, and lead author of the papers said,  

“The sudden and significant spike in energy and other costs of living heading into the winter months may leave many consumers vulnerable. The payment break evidence suggests that a number of consumers have suffered an inability to pay both secured and unsecured loans during 2020 and there is little concrete information available on accounts that have encountered further payment problems in 2021.  

With the further phasing out of payment supports in progress, the reality is that for some, financially affected by Covid, difficulties may become more long term than short term, with those marginalised and in more precarious employment more likely to face persistent over-indebtedness”.   

Regardless of the types or levels of debt, FLAC warns that it will simply not be good enough to sit back and wait for any potential damage to intensify.   

Although the impact on households is not likely to be on the scale of that following the Global Financial Crisis, we must learn from past mistakes and ensure that the distress of Covid is not followed by the stress of unresolved over-indebtedness. In order to ensure this, we need speedy and accessible support services for those in difficulty, up-to-date and reliable data, decisive resolution mechanisms, and vigilant and pro-active regulation.”   

Paul Joyce, Flac Senior Policy Analyst.   





Notes to Editor  

  1. Pillar to Post Paper 3 is available to read or download in full at 
  1. Significant statistics from Pillar To Post Paper 3:   
  • Analysis from the CBI and the BPFI shows that one in ten family home mortgage (or principal dwelling house) accounts sought a payment break in the first two months of the pandemic and that there was a total of almost 74,000 such payment breaks in total in 2020. Approximately half of these were ‘initial’ breaks of three months only and half involved ‘extended’ breaks of up to six months. These figures do not include housing loans owned or serviced by credit servicing or retail credit firms, who collect payments on behalf of vulture and other funds.    
  • There were almost 36,000 breaks on consumer credit accounts in 2020 but no further breakdown is provided of the types of loans involved. About two in every three of these were ‘initial’ breaks and one in three were ‘extended’   
  • By the end of 2020, all but 2,000 family home mortgage and 1,200 consumer credit payment breaks respectively had come to end.   
  • The significant majority of family home mortgage accounts had returned to full payments by the end of 2020. However, over 11% were receiving ‘other forms of lender support’ and over 4% were paying on an extended term   
  • In terms of the consumer credit cases, half of the accounts (49%) resumed payments on ‘an extended term’ also indicating ongoing payment difficulties. However, no further information is provided on the detail of those extended terms.   
  • The payment break data to date only reports the position at the end of 2020, with no updates in 2021 on the ongoing position of accounts that sought payment breaks in 2020 or updates on accounts that may have sought a payment break for the first time in 2021.  
  • There is no analysis in any of these data of the consumer’s understanding of payment breaks and their ramifications, the reasons for availing of them or discontinuing them and, from what we can see, no consumers were spoken to in the course of these research pieces.   
  • The CBI notes that 4,305 Standard Financial Statements (SFS) were submitted by the five main retail banks in the period 27 March 2020 to 31 December 2020 and these resulted in a forbearance decision. These provide a more detailed profile of the financial position of borrowers in mortgage distress and all the borrowers concerned had engaged with their lenders to seek assistance in the form of a restructure.   


      3. Overview of Pillar to Post series of papers:     

·         Paper One - Setting the Context: A critical examination of data relating to consumer debt, welfare, labour market and the economy    

o    The first paper sets the context for the discussion that is required by providing an overview of data on consumer debt at the point that Covid hit and by monitoring subsequent developments over the past 15 months, up to the announcement of the phasing out of the PUP payment.    

o    Pillar to Post Paper 1 is available to read or download at   

·         Paper Two - Ten years and Counting: Conclusions from a decade of attempting to resolve family home mortgage arrears in Ireland    

o    The second paper examines in considerable detail how attempts to resolve the mortgage arrears problem over the past decade have been, at best, partially successful and how an array of initiatives introduced at various stages have lacked coherency, from which many lessons can be learned.    

o    Pillar to Post Paper 2 is available to read or download at     

·         Paper Three - Assessing current research data on the payment breaks on credit agreements offered by credit institutions as a result of the Covid 19 pandemic    

o    The third paper, being launched today, examines the extent of payment breaks on loan agreements offered by a range of credit providers to consumers during the course of 2020 and what this indicates in terms of future indebtedness.    

·         Paper Four - A review of the Debt Resolution Mechanisms and the Support Services: With final recommendations for reform.     

  • The fourth paper will examine in detail the current infrastructure to assist borrowers to resolve over-indebtedness and will close by making final recommendations for reform.      


      4. About FLAC - Free Legal Advice Centres   

FLAC is an Irish human rights organisation, which exists to promote equal access to justice. As an NGO, FLAC 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). Free legal advice is available from volunteer lawyers through a countrywide network of advice clinics (these clinics are currently conducted over the phone) – more at  FLAC provides legal representation in a small number of cases in the public interest. FLAC provides legal advice directly to members of both the Roma Community and The Irish Traveller Community via specialist legal clinics. FLAC engages in policy work in areas of law that most impact on disadvantaged groups and including consumer credit, personal debt, and fairness in social welfare law, public interest law and civil legal aid. It operates the public interest law project PILA.