The Central Bank will require a new code for lenders to deal with the inevitable rise in all types of debt, including unsecured debt such as car loans, amid the Covid-19 fallout, one of the country’s leading debt advisers has said.
Paul Joyce, senior policy analyst at the Free Legal Advice Centres, or Flac, said a specific code or legislation is needed that goes beyond mortgage debt and rent to protect households facing debt that will inevitably increase as the Covid-19 jobs fallout deepens, including obligations such as credit cards, HP agreements or PCP agreements on cars, and credit sales agreements.
The existing Central Bank code such as Marps -- the Mortgage Arrears Resolution Process -- was set up following the last financial crisis for secured mortgage debt and will need to be extended for unsecured debt, Mr Joyce said.
He said that personal insolvency legislation has stalled for three years and there appears to be a lack of urgency with little detail about the plans for unsecured debt in the new coalition’s programme for government.
“I can only see an increase in personal indebtedness and I don’t see a plan for that,” Mr Joyce said.
He said that Flac has been getting “a lot of calls” on employment rights, indicating that many people are becoming uncertain about their financial future as they have not been called back to work.
“At the moment there is something of a buffer with the pandemic unemployment payment and the wage-support scheme but people are having a lot of difficulties with workplace issues, layoff issues and return to work and compulsory redundancy and that is a straw in the wind for what is going to happen in the last quarter of the year,” Mr Joyce said.
“I would tend to agree with others when the payment breaks come to an end and when the pandemic unemployment payments are diluted that we will see an increase in new debt cases in both unsecured and secured debt and I wonder what the plan is in that eventuality,” he said.
There will be a significant rise in households falling into arrears when the six-month home loan payment breaks end in the autumn, financial services industry experts told the Irish Examiner last week.
And Mr Joyce said that unsecured debt will be challenging for households in the coming months when the main pandemic unemployment payment of €350 a week is cut or tapered toward the benchmark €203 payment.
There are 345,600 people availing of the pandemic unemployment payment, down 67,300 in the past week, as restrictions were lifted for restaurants, hairdressers, retailers, and some pubs.
The weekly cost of the pandemic unemployment payments has fallen to around €107m from €128m a week earlier, according to the Department of Social Protection figures.
Revenue figures published last week showed there were 405,000 people availing of the main Covid-19 support, the wage-subsidy scheme.
Combined with the people on the live register unemployment count, there are now 971,500 people in receipt of some sort of unemployment payment during the Covid-19 crisis, despite the opening up of large parts of the economy starting in May.