Bank shelves multiple debt scheme

The Central Bank’s multiple debt framework scheme will not go ahead following the decision by the credit union sector not to participate in the project.

The Central Bank launched the scheme last May in an effort to reach an agreement between secured and unsecured lenders over an individual borrower who had debts with a number of institutions.

The pilot scheme lasted four months and involved the banks, credit unions, and credit card companies as well as other types of unsecured lenders.

A person familiar with the talks said the failure of the scheme to go ahead lay with the inability of the credit unions and the banks to reach a compromise.

The Central Bank initiative was meant as an alternative to the Insolvency Service of Ireland and was aimed at highly indebted borrowers who could not afford the fees or meet the reasonable standard of living criteria needed for a personal insolvency arrangement.

It is now likely that many of the people who would have been eligible for the Central Bank’s multiple debt framework scheme will have to pursue bankruptcy arrangements.

“The pilot was a difficult but useful undertaking and we believe it highlighted the positive outcomes that are possible when creditors work together to help their mutual customer,” said Central Bank director Fiona Muldoon.

“However it has also demonstrated again the many potential barriers to resolution of individual debtor cases.

“I believe the outcomes from the pilot establish a foundation from which to develop a debtor-led process that could achieve sustainable and fair outcomes without the need for the borrower to always enter the full insolvency process or bankruptcy should they chose not to.

“The Central Bank will continue to be supportive of any such initiatives for over-indebted consumers,” she said.