IT has cost Irish taxpayers €63bn to bail out the Irish banks, but rough treatment meted out to borrowers, shabby practice in relation to those with distressed mortgages and a new get-tough policy on repossessions means tens of thousands are sorry that we saved the banks.
Today, in a Sunday Independent special investigation, we reveal just how the banks are dealing with the people who saved their bacon.
As the country faces a crisis, with 300,000 emigrating from these shores and 450,000 without work, we uncover a litany of sharp practice as Financial Ombudsman William Prasifka reveals a growing anger and distrust of the banks among the people who bailed them out.
And there is compelling evidence that the banks are targeting the so-called low-lying fruit – the small and medium-sized enterprises with easily repossessed assets and those whose home is worth more than the mortgage they can't pay.
Today we reveal how the banks are playing fast and loose with the rules when they deal with distressed borrowers, including:
- Not fully complying with rules laid down by the Central Bank's Mortgage Arrears Resolution Process (MARP) – "cherry picking" some guidelines and blatantly ignoring others.
- Trying every trick in the book to get people out of low-cost tracker mortgages. The targeting of tracker mortgages has been a major source of complaint to the office of the Financial Services Ombudsman.
- Targeting 'pension mortgages' – the financial products originally sold to the self-employed, partners or directors who owned more than five per cent of their company as a tax-efficient way of buying a property.
- Not offering distressed mortgage holders a fair way out by giving them all the mortgage debt-resolution options, including "split mortgages".
- Putting unbearable pressure on struggling small businesses, according to Irish Small and Medium Enterprises (ISME).
- Hiring 'drive-by' evaluators to assess properties and businesses – even while the distressed borrower is still in negotiations with lenders. This practice by State-owned AIB was first highlighted by the Sunday Independent last month.
Banks have also been applying growing pressure on those distressed mortgage holders whose family homes are still in positive equity to 'downsize' to cover their arrears.
Writing in today's Sunday Independent, Ross Maguire SC, of New Beginning, says that the new insolvency process could provide a lifeline for those in severe mortgage distress. It could be, he argues, "the reversal in our fortunes we crave".
He writes: "For the first time borrowers can make proposals to their creditors using the services of Personal Insolvency Practitioners (PIPs). Those PIPs will examine in detail the borrowers' financial circumstances and devise a plan with the borrower which returns him or her to solvency. The law mandates that the plan involve every effort to protect the family home and the tools of the borrowers' trade. It cannot be a stop-gap measure – it must be final and conclusive."
Mark Fielding of ISME points to the way the banks have shifted the goalposts in relation to lending to small business in the face of massive pressure on the banks to make as much profit as possible in the next few years.
"They will revert to making their money from hiking interest rates and charges, as we have seen recently in the increases in cash-handling and electronic funds transfer charges," he says.
Fielding believes that the only way that the banks are going to lend to small businesses is if they can get a return that covers their cost of funds and pays them a whopping premium for the risk involved.
"No wonder they need to be brought kicking and screaming to the SME lending table. No wonder the Minister for Finance has had to demand that €8bn extra be loaned to SMEs by both of the bailed-out banks involved over the next year," he adds.
And still the complaints against the banks and other financial institutions go up and up.
In the last six months, complaints against the banks and other financial institutions to the Financial Ombudsman rose by a staggering 27 per cent compared with the same period last year.
Now most of the complaints in relation to banks are from those in mortgage difficulties as well as those who believe the banks have unfairly tried to take away their tracker mortgage.