Contact curb on creditors 'to increase non-payment'
MOVES by the Central Bank to beef up rules to protect consumers will force more people into arrears, banks and credit card companies have claimed.
The lenders are concerned at a proposed rule restricting them to just three contacts a month with a consumer who gets into arrears on a credit card or a loan, the Irish Independent has learned.
Credit card provider MBNA has stridently opposed the move to limit finance companies to just three unsolicited contacts a month. The card provider told the Central Bank that tying its hands on contacts with consumers would:
•Increase the overall level of arrears, along with the interest and fees owned by card holders.
•Push up the number of customers going into default.
•Create a surge in complaints.
•Increase the likelihood of irresponsible customers failing to deal with their debts.
The sooner the card provider was able to contact the consumer to resolve the issue the less likely the debts were to spiral even higher, it argued.
The card provider admitted in its submission that when someone has a serious arrears problem it needs to talk to them about "settlements and reduced payments programmes".
MBNA was reacting to a second round of consultations on plans by the Central Bank to update the statutory rule book on how consumers are to be treated, called the Consumer Protection Code.
The Irish Banking Federation said the proposed rule on just three contacts with a consumer a month would not work where lenders were trying to deal with debts other than mortgages.
Some credit card companies contact people in arrears up to 10 times a day.
Harassing people is seen by card providers as the best way to force people to repay as debts are not secured by an asset.