Grudge-bearing banks seem prepared to defy all commercial logic
When it comes to being stubborn, banks take some beating. They have been shown to reject State-sanctioned debt deals, and instead force consumers to opt for bankruptcy in four out of 10 cases.
This is despite the banks losing an average €100,000 on each vetoed debt deal.
This means the financially stricken consumer is left with no choice but to have themselves declared bankrupt.
Permanent TSB has emerged as the mainstream bank most likely to veto an insolvency arrangement.
Banks were given veto powers over the deals that are available through the Insolvency Service.
These court-approved deals typically last between five and seven years.
They involve the debtor agreeing to live under strict spending limits, and paying back what they can.
At the end of the term, the banks agree to write off some of the consumer debt.
However, in bankruptcy banks typically get little, as much of the consumer debt is wiped out.
Head of the State's Insolvency Service Lorcan O'Connor says it defies commercial logic that banks are rejecting so many insolvency deals.
He called on the banks to cop on and stop harbouring grudges against people who have defaulted on mortgages and other debts.
The issue is compounded by the fact that people who end up as bankrupts are very likely to lose the family home. Seven out of 10 distressed borrowers who ended up as bankrupts lost the family home.
Many of these had volunteered to surrender the property in advance of bankruptcy.
Banks often make commercially costly decisions to reject insolvency deals because relations have soured between them and the debtor, especially if there has been no engagement for a long time.
They are also fearful of setting a precedent, and sparking a surge of Insolvency Service-approved deals.
That is why the Government is giving strong consideration to putting in place an appeals mechanism to force banks to account for themselves when they turn down debt arrangements, as revealed in this newspaper last month. There is an urgency around this, as banks have threatened 31,000 homeowners with repossession.
If mindsets do not change, the next few months could see thousands of families being forced out of their homes.