Wednesday 17 January 2018

New watchdog to put pressure on banks that veto debt deals

Tánaiste Joan Burton
Tánaiste Joan Burton
Niall O'Connor

Niall O'Connor

THE Government is close to finalising proposals for the establishment of a new watchdog which will be tasked with limiting the ability of banks to veto personal insolvency deals.

The watchdog body, which may be set up within the Personal Insolvency Service, is due to be unveiled after Easter as part of the Government's plans to resolve the mortgage crisis.

Cabinet ministers are adamant that deals with stricken householders are being unnecessarily vetoed by some of the mainstream banks.

Senior government figures, including Taoiseach Enda Kenny, Tánaiste Joan Burton and Finance Minister Michael Noonan, have been briefed in detail on a number of cases whereby banks have abandoned negotiations without a solution.

The new watchdog may be set up independently or else within the structures of the Personal Insolvency Service. It will be given powers which force banks to justify in detail their decision to "pull out" of talks with mortgage holders.

And the watchdog will also examine the manner in which negotiations take place in a bid to determine whether the interaction can be improved from the customer's point of view.

Fine Gael sources say the measures due to be unveiled when the Dáil resumes, will place significant emphasis on addressing cases whereby mortgage holders are in arrears of 720 days or more.

"There has to be incentives for these people to engage. We need to make engagement a top priority when it comes to this category," said a Fine Gael minister.

Speaking to the Irish Independent, Ms Burton hit out at the manner in which banks are engaging with customers in arrears.

"The banks have to come to the table . . . Taxpayers in Ireland, they (the banks) know, we know, have given them huge amounts of capital funds at the huge personal sacrifice of people all over the country in terms of the bailout," Ms Burton said.

"They need to do deals. We don't want people with huge parts of their 30s and 40s taken up with mortgage distress," she added.

The plan aimed at tackling the mortgage crisis is also expected to contain proposals to reduce the bankruptcy period.

Although Fine Gael ministers have voiced concern over whether the move is necessary, Ms Burton told the Irish Independent that reducing the maximum term from three years to one "makes sense".

The proposal was made by Labour backbencher Willie Penrose and has unanimous support within the party.

In her strongest comments yet on the issue, the Labour Party leader said she "sees no reason" why the bankruptcy term in Ireland would not be brought in line with the one year maximum term in the UK and the North.

"Yes I do think it makes sense, both for business reasons and for people in mortgage difficulty, to review the insolvency service of Ireland, including reviewing the bankruptcy period from three years to one year, for the reasons of the current difficulties that people have," the Dublin West TD said.

"But also, because the period in the North is one year, the period in the UK is one year. We have enough experience of what's happened in the UK and the North, in relation to commercial bankruptcy, now the mortgage crisis is somewhat different.

Mr Noonan last week appeared to suggest that lowering the bankruptcy term should be pushed backing pending a review. He said "persons who enter bankruptcy lose their homes more than people who do not".

But party sources said while they don't believe the move would have a major economic benefit, for political reasons, they are likely to accept a reduction of some kind.

Irish Independent

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