Red tape at Central Bank delays new debt deals
Regulator's move could now delay resolution of bust borrowers' loans
Bust borrowers could run into delays resolving their massive debt problems after a recent move by the Central Bank to hit debt advisers and accountants with more red tape.
Last month, the Central Bank published new rules for debt managers that make it a criminal offence for someone to offer a debt management service unless they are authorised by the Central Bank to do so.
The rules were introduced by the bank to protect consumers following the closure of a number of debt managers in recent years.
Many accountants and personal insolvency practitioners (PIPs), the debt experts authorised to strike deals through the State's new insolvency scheme, the Insolvency Service of Ireland (ISI), have been caught out by the new rules.
PIPs often strike informal debt deals with a bank or creditor on behalf of a debtor. Informal debt deals don't go through the ISI and many debtors prefer these deals because they can avoid being named and shamed.
Under the new Central Bank rules, PIPs who offer informal debt deals may now have to apply to the Central Bank for authorisation as a debt manager, according to a spokeswoman for the bank.
"It is the obligation of each firm to determine the scope of their services in this regard and seek appropriate legal advice if required," added the spokeswoman.
Barristers, solicitors and accountants who offer debt advice may also have to apply to the Central Bank for authorisation.
The extra layer of regulation is leading to "confusion and cost" amongst accountants, according to Aidan Lambe, director of technical policy in Chartered Accountants Ireland (CAI).
"It's duplicative and confusing and it's certainly not helpful for consumers," said Mr Lambe. "This is an issue which is detrimental to the consumer and to the people seeking advice on debt. It's also leading to a double whammy for practitioners.
"Debt advisers are already paying authorisation costs to be regulated as a PIP. Accountants are regulated by the Irish Auditing and Accounting Supervisory Authority (IAASA). Now they're facing possible authorisation costs for debt management."
The rules could also force PIPs, accountants and other professionals to turn debt-ridden customers away – if the professional decides not to get authorised as a debt manager, according to Mr Lambe.
The Sunday Independent understands that some PIPs and accountants believe the extra red tape makes their job unworkable. "We're seeking a meeting with the Central Bank to try to resolve the issue," said Mr Lambe.
Under the new rules, the Central Bank also took steps to prevent debt management firms going bust. The closure of a number of debt managers, including Home Payments Ltd and Dunne & Maxwell, in recent years led to calls for regulation in the sector.
Many customers were left out of pocket when these companies closed.