Central Bank plan to help families in debt 'a failure'
JUST one in 10 indebted families chosen for a Central Bank-initiated scheme to have their debts restructured by lenders actually ended up with a deal.
The attempt by the Central Bank to come up with a new scheme to deal with all the borrowings of overstretched households has had to be abandoned after credit unions refused to get involved.
Director of the Irish Mortgage Holders Organisation David Hall described the Central Bank's multi-debt management framework as a "spectacular failure". "Here is the regulator for the banks and the credit unions – the Central Bank – having failed spectacularly to arrange a framework for working out the debts of households that are in over their heads," he said.
Despite the low numbers who got offers to have their mortgage and other loans restructured, the Central Bank said that the 13-month pilot project had value.
It said that it had produced valuable lessons for banks, credit unions and the Central Bank.
The initiative was championed by Central Bank director Fiona Muldoon, who said: "The pilot was a difficult but useful undertaking.
"However, it has also demonstrated again the many potential barriers to resolution of individual debtor cases."
Of 1,330 debt cases selected to be included in the pilot project, just 144 families were offered a deal by the administrators of the restructuring initiative, British debt charity StepChange.
A document issued by the Central Bank did not state if the offers were accepted, or outline what was involved in the debt-reduction offers.
The plan has now had to be abandoned after three different credit union bodies pulled out, fearing that banks would make sure mortgage payments were paid, leaving little for unsecured creditors like credit unions.
A memo sent out by two of the credit union bodies, seen by the Irish Independent, said the proposed process lacked clarity.
"The proposal vests inappropriate control in the banks; it lacks fairness and it lacks transparency," the memo sent out by the Credit Union Managers' Association and the Credit Union Development Association to credit unions said.