Friday 17 November 2017

UK debt charity called in to do deals for distressed borrowers

Fiona Muldoon failed to get lenders to agree on a common approach
Fiona Muldoon failed to get lenders to agree on a common approach

Charlie Weston Personal Finance Editor

THE Central Bank is to bring in a British debt charity to hammer out debt deals for people with borrowings that they cannot handle, it has emerged.

The move comes after the Money Advice and Budgeting Service (MABS) pulled out of what is known as the multi-debt pilot scheme.

Regulators have appointed the UK's StepChange debt charity to co-ordinate the project.

The move is part of a pilot plan to get banks, credit unions and credit card issuers to agree to ease the repayments for those with multiple debts.

About 750 people are to be part of the trial, which was announced by the Central Bank's Fiona Muldoon (pictured) after she failed to get lenders to agree on a common approach to restructuring debts for those in trouble.

The priority would be the repayment of the mortgage over other debts. Eight different approaches, from adjusting interest rates to restructuring mortgage repayments, will apply depending how over-indebted the householder is.

MABS pulled out claiming that some of the lenders, believed to be credit unions, wanted to change the original terms of the pilot scheme.

It is also understood that MABS became uncomfortable, fearing it would be perceived as collecting debts on behalf of the banks.

StepChange will now be in direct contact with distressed borrowers and set up a new payments plan.

The pilot project has been beset with problems. The Irish League of Credit Unions pulled out of the scheme, fearing that its member unions would be forced to write off credit union loans.

This is because priority will be given to paying off mortgage debt.

If the pilot scheme works out it will be used as a template for debt deals across the system, including the new Insolvency Service.

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