Shatter will ‘swiftly intervene’ if it’s not working
Under the process, which will be in operation by the end of June, banks will not be compelled to enter into mediated arrangements with distressed mortgage holders. And they will have a final veto on any agreement with borrowers.
However, Mr Shatter said that in the preparation of the rules he had meetings with the banks and was given assurances they would engage with the process.
“We expect them to do what they have said they are going to do and to properly and fully and constructively engage with people who are in debt difficulties.”
There was a strong “economic logic” for banks to engage with the process he said, because not doing so could result in their debtor declaring bankruptcy and “walking away”, in which case they might not recover as much as they would have under an agreed resolution.
The system will be voluntary, and agreed by banks, he said because “if you have it compelled — under the constitutional system there is only one body that can compel it and that would be the courts”.
He said if this was the case, banks would be taking debtors to court at great expense.
Without the insolvency arrangements, there would be just two options for dealing with people in mortgage distress, he said — either they pay their arrears or the banks repossess.
“This is designed to try and ensure that the number of possible repossessions are very limited, the number of possible bankruptcies are very limited,” he said.
Banks are already telling customers what money they can maintain for living standards under current arrangements for negotiating repayments. However, Mr Shatter said “these guidelines are a defensive shield to ensure that creditors cannot force individuals into a position that they do not have funds that allow a reasonable standard of living”.
“We will be keeping a watching brief. I, as minister, will be keeping a watching brief on the approach taken by the banks... I intend that the operation of this act will be subject to ongoing review and I will swiftly intervene, with amending legislation, to make additional provision or to correct any difficulties that arise from operational experience.”
The director of the Insolvency Service, Lorcan O’Connor, said the rules were about “striking the appropriate balance”.
Sinn Féin’s Pearse Doherty said the guidelines were a bankers’ solution to people’s problems, condemning to live for years hand to mouth because the banks had been so irresponsible with lending and so unresponsive to reasonable restructurings.
