THE banks have been challenged to publicly debate how much they are allowing cash-starved families to live on before agreeing deals on mortgages.
The issue has moved centre stage with one in five mortgages in trouble, while a senior regulator criticised the banks for not doing deals with hopelessly indebted homeowners.
The personal insolvency legislation, set to become law in March, is due to order banks to allow families a reasonable standard of living as part of a mortgage debt writedown agreement. What is "reasonable" has not been defined.
Banks are telling families:
• How much they can spend on teenagers.
• Setting limits on what a family in trouble with a mortgage can spend on health insurance at €166 a month.
• Limiting spending on mobile phones to €65 a month for two adults and two teenagers.
• Families with two adults and two teenagers are being told to restrict entertainment, including parties and Christmas, to €200 a month for everybody.
Some mortgage experts have said it was reasonable of banks to restrict what families unable to meet mortgage repayments can splash out on the likes of mobile phones, health insurance and entertainment.
However, others questioned whether it was right that banks, which had bankrupted the country, should be dictating what families could live on.
David Hall, of the Irish Mortgage Holders Organisation, a not-for-profit group working with heavily indebted families, questioned why banks that had bankrupted the State should be "playing God", when it came to deciding what people could live on before the lender would agree to lowering the monthly repayments.
"It is despicable that banks funded by the State can decide what people can live on. These banks were involved in irresponsible lending," Mr Hall added.
The Irish Banking Federation said banks have guidelines that they use, but said there was a need for the Central Bank and the Government to put guidelines together for all lenders.