Bank concerned over debt firm's handling of client cash
THE Central Bank has told hundreds of clients of a debt management company that it is concerned about its handling of their money.
The Irish Independent has learnt that customers of Dublin-based Cornerstone Financial Management were told to contact the gardai if they have concerns about their bills.
Debt management firms target households in financial difficulty, offering to help negotiate deals with their banks.
Cornerstone had 700 customers but has now ceased trading, with its customers moved to another debt manager Money Village.
Debt management or debt advisory firms are not regulated – but the Government has promised to bring in new regulatory rules, as part of Central Bank legislation going through the Dail at the moment.
In a statement issued to this newspaper last night, the Central Bank said: "The Central Bank has reason to be concerned about Cornerstone in relation to its operations and its handling of customers' monies.
"Cornerstone is no longer offering debt management services."
But the chief executive of Cornerstone, Ray Bolger, denied last night there was any issue over the handling of customers' money.
Mr Bolger, who has previously worked for Guinness and PepsiCo, insisted that all accounts were up-to-date and there was no money outstanding that had been taken from consumers to be redirected to creditors to pay bills.
Mr Bolger said a commercial decision had been taken to transfer the client base of Cornerstone to Money Village based in Swords, Co Dublin.
He admitted that his firm had ceased operating and had informed the Central Bank about this. Asked about Central Bank concerns about the handling of customers' money, Mr Bolger insisted that this was not the case.
"All accounts are being reconciled and there are no issues. There is nothing untoward at all and everything is above board."
Debt management companies typically ask debt-ravaged consumers to stop paying their creditors directly, and instead send a set amount to the debt managers, who then pay the banks and other creditors.
They make money by taking a percentage of the monthly amount provided by customers, or charge a set monthly fee.
The Central Bank said its immediate priority was to ensure all Cornerstone customers had been written to and told to contact their lenders to ensure payments on their payments were up to date.
"If customers find that payments made to Cornerstone have not been passed on to creditors and their account is not up to date, they should consider contacting An Garda Siochana," the Central Bank said.
Mr Bolger reacted angrily to this suggestion, and indicated that it was totally uncalled for.
The Central Bank called on creditors to work with Cornerstone's former customers to help resolve the difficulties arising from these circumstances.
There are no rules to give the Central Bank direct powers to regulate debt management companies. Instead, it uses moral persuasion and indirect rules to force firms to safeguard consumer funds.
Investigations by the Central Bank aimed at imposing stricter standards on debt managers have prompted a string of firms to halt their operations.
The action has prompted six of these companies to shut down. Two firms collapsed in the past few months in the wake of the audits, leaving consumers out of pocket – debt management firm Dunne & Maxwell and budgeting service Home Payments Limited.
Central Bank officials wrote to customers of Dunne & Maxwell after it became concerned about how it was handling client funds and told them to suspend all payments to the firm.