AIB targets homes of ‘a few thousand defaulters’

AIB has taken the first steps towards repossessing homes by issuing a “few thousand” legal letters to what it called strategic defaulters.

Releasing its results for the first half of this year, chief executive David Duffy estimated that strategic defaulters now made up one in five, or 6,000, of all customers in arrears. The bank declined to provide a breakdown of how many customers are in arrears, but according to its accounts, €8.45bn of its €38.8bn Irish mortgage book is classified as impaired.

Mr Duffy described strategic defaulters as customers “who for whatever reason have decided not to pay their mortgage”.

The 20% rate of strategic defaulters emerged when AIB started engaging with distressed customers as part of its effort to meet Central Bank targets on arrears.

He broke down strategic defaulters into two categories: Those who refuse to pay and those who have prioritised other repayments above their mortgages.

He blamed the widely held belief among customers in arrears that if they went down the personal insolvency route, it would be easier than dealing with the banks. And because of the previous code of conduct on mortgage arrears, it was only possible to contact a mortgage arrears customer three times in a month.

However, credit card companies and other loan providers did not have any limit on the number of times they could contact a customer, which made multi-distressed borrowers prioritise these loans over their mortgage payments, he said.

Moreover, the legal prohibition on repossessing homes because of the “Dunne Judgment” also caused customers in arrears to take a strategic decision to either not pay or cut back on payments, he added.

“We had four quarters of declines in the rate of arrears, then in the second quarter of this year the rate of arrears stepped up again.”

He said the threat of legal proceedings and repossessions were necessary to work through the massive mortgage arrears problem.

Prior to the repeal of the Dunne Judgment and a new code of conduct removing the limit on the amount of times banks could contact customers in arrears, the environment was “not hospitable” to banks, he said.

However, Noeline Blackwell, director of the Free Legal Aid Centres, disputed Mr Duffy’s claims.

“All we have is a statement from a bank in trouble trying to recover money and they have come out with this. We don’t know where they came up with it; what criteria they used; or, if the central bank accepted it.

“I think it is really disturbing for people to hear this kind of statement.

“People are under severe pressure and then to hear that they maybe classified as strategic defaulters by the bank does not help.

“It racks up the pressure and it is simply not fair.”