Law 'blocks' borrowers from securing debt deals
THOUSANDS of bust borrowers are being denied deals because personal insolvency practitioners are not regulated to hammer out informal arrangements with banks.
Personal insolvency practitioners (PIPs) are regulated by the Insolvency Service of Ireland.
But they are only regulated to carry out formal deals such as personal insolvency arrangements and debt settlement arrangements. These have to be approved by the courts and the terms are set out in law.
When banks veto one of these deals the majority of PIPs are not then able to negotiate an informal deal on the debtor's behalf with the banks, according to chairman of the Association of Personal Insolvency Practitioners, Tom Kennedy.
He said PIPs need to get separate regulatory approval from the Central Bank if they want to do informal deals, or ones not approved by the courts.
Firms or PIPs negotiating informal deals are classed as debt managers.
Rules introduced before Christmas make it a criminal offence for someone to offer a debt management service unless authorised by the Central Bank to do so.
The rules were introduced to protect consumers following the closure of a number of debt management firms.
Mr Kennedy said getting approval to operate as a debt manager was hugely onerous.
Professional indemnity insurance of €1.2m was required, staff have to be trained to a high level, and fees have to be paid to the Central Bank.