Wednesday 28 September 2016

Banks trying to dilute the existing debtor services

Published 04/10/2015 | 02:30

StepChange's move into this state is funded by €6m in grants from AIB, Bank of Ireland, KBC, Permanent TSB, and Ulster Bank
StepChange's move into this state is funded by €6m in grants from AIB, Bank of Ireland, KBC, Permanent TSB, and Ulster Bank

It is more than a little troubling that banks are funding a British debt-management charity to offer advice to people who are deep in debt.

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StepChange is to start offering telephone and online services here in November. Significantly, it is not opening an office in this country.

Its move into this state is funded by €6m in grants from AIB, Bank of Ireland, KBC, Permanent TSB, and Ulster Bank.

But it is not as if we do not have mechanisms and bodies already in place to help those overwhelmed by their borrowings.

Among the organisations already doing this work are the State's Insolvency Service, and the State-funded Money Advice and Budgeting Service (MABS). Then there is the Free Legal Advice Centres (FLAC), the Irish Mortgage Holders Organisation (IMHO), and the Phoenix Project.

The IMHO gets funding from AIB and KBC to assist customers in arrears to those two banks, but it is not an organisation anyone could accuse of bending to the will of banks.

These groups offer both helpline and face-to-face debt-counselling services.

Given all that, one has to be highly suspicious of the banks supporting StepChange setting up here, when it was an option to give their €6m funding to MABS.

MABS is a fine organisation with offices across the country, and has extensive experience dealing with those in debt and striking deals for them. It has earned the respect of all sides. Its staff are set to attend repossessions hearings in the courts to help those facing the prospects of losing their homes.

And changes to the Insolvency Service are set to make it more debtor friendly. Banks have never warmed to the Insolvency Service, as implicit in it arrangements is writing off debt where people simply can't pay.

So it is hard not to come to the conclusion that the banks inviting StepChange into this market would prefer if debtors are advised by an organisation that does not have a physical presence here.

No disrespect to the people in StepChange, but 'boots on the ground' are needed in this theatre of operations.

The fear is that banks want to control the situation. It is worth nothing that banks tend to favour a questionable solution for those in unsustainable debt - arrears capitalisation.

This involves adding the arrears to the mortgage balance and repaying it all over the remaining life of the loan.

It is an example of taking a problem loan and making it bigger - not exactly a great outcome for debtors.

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