Friday 19 July 2019

Banks blamed for first fall in applications for debt deals

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Charlie Weston Personal Finance Editor

THERE has been a fall in the number of people applying for official debt deals.

The drop is despite Ireland having one of the largest number of people in long-term mortgage arrears in the eurozone.

Figures from the Personal Insolvency Service show there was a drop of 15pc in new applications for debt deals to it in the last four months of last year.

Fewer than 1,000 people applied to the State service to get some form of court-approved debt arrangement put in place.

This is despite some 32,000 people being more than two years behind on their mortgage payments.

It comes as Permanent TSB is planning to sell 14,000 home mortgages, claiming most of them are in default - even though some are meeting rescheduled payment arrangements.

The Insolvency Service said just 310 heavily indebted people were approved by the courts for some sort of a debt solution in the fourth quarter of last year.

These debt deals include ones that involve mortgage debt, and others that involve non-mortgage borrowings.

But there was a rise in the numbers approved for a debt deal in the last four months of last year, rising almost 100 from the previous quarter.

The majority of the deals were for personal insolvency arrangements, which provide for the restructuring or settlement of mortgage debt up to €3m.

Finance experts said a court challenge to how insolvency deals operate, which the banks have since lost, may have discouraged people from taking cases.

The case could have landed personal insolvency practitioners with the costs if they lost a court challenge to a refusal by a bank to a debt deal.

Banks have continuously challenged the operation of the personal insolvency system, and have been accused of failing to co-operate with it.

There have been just under 6,000 debt arrangements put in place since the Insolvency Service began operating in 2013.

The new figures show there was a 10pc increase in the number of people being declared bankrupt in the last three months of last year to 473.

Head of the Insolvency Service Lorcan O'Connor blamed the banks' challenge on who is liable for the costs in an insolvency appeal for the fall in applications.

There were now some 400 personal insolvency arrangements ready to go, he said. They had been put on hold while the court case was running. Banks lost the case last month.

He said the fall in new applications to the Insolvency Service was the first since it was set up.

Mr O'Connor added that those whose mortgage has been taken over by a vulture fund, and who are in arrears, can best address their problems with a personal insolvency arrangement (PIA).

"For people whose mortgages have been taken over by a vulture fund, a PIA is the best way to address any concerns they have. It has been determined that funds have no option to avoid a PIA if it is approved by the courts," he said.

Banks would be under less pressure to sell large portfolios of bad mortgages had they dealt with distressed borrowers earlier, Mr O'Connor said.

Banks should have tried to resolve more of their non-performing loans through personal insolvency legislation, he said.

His comments came as Permanent TSB said it is going ahead with plans to sell €3.7bn worth of loans.

Irish Independent

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