THE question of fixing mortgage arrears is once more moving centre-stage. It appears both Taoiseach Enda Kenny and Tánaiste Joan Burton are now taking an official interest in the question, moving it from the sole preserve of the minister for finance, the Central Bank, and the banking industry.
From news reports, it seems that the focus will be on more promotion of the state service which administers personal insolvency and perhaps also on increasing the targets for banks, requiring them to resolve more cases.
However, from the perspective of Flac (Free Legal Advice Centres), these proposals miss an important part of the solution: Help for the borrower.
In all the debate and energy expended on this topic over the past years, very little has been done to increase the level of legal and financial support available to people as they seek to restructure their debt or to figure out how to pay it off in a way that keeps the roof over their heads and does not leave them destitute and living a life of misery.
Some non-governmental advocacy groups have sprung up to answer demand. But apart from that, state action to help people to cope, to understand their situation, to structure their debt, to stand up to bullying debt collectors, to present rational arguments while trying to keep a roof over their heads, has been entirely ineffective.
For sure, a very welcome Insolvency Service has been set up. However, this service is for people who are insolvent or who want to become bankrupt. How are people even to know that it is appropriate for their situation if they don’t have access to a trusted adviser?
What if they’re not insolvent, but in deep financial distress? The state-funded Money Advice and Budgeting Service (Mabs) has the trusted advisers, but it has not seen an increase in its resources to match the growth in demand for help post-crisis.
Similarly, the state Legal Aid Board has no particular remit in this area; in Flac, when we refer people to the board to seek civil legal aid, we are very conscious of its long waiting lists and of the many people desperate to get representation, particularly for urgent family law problems.
The only effort made by the State or the financial institutions to help people directly was to set up an information line (now run by Mabs) and a scheme that paid for a consultation with an accountant to explain any bank debt resolution proposal — but only when negotiations were already done and the offer made. This is entirely unacceptable in a climate where lenders have the ultimate — and unchallenged — say on whether they will or won’t offer a debt restructure to a borrower or indeed why they are offering a solution which the borrower cannot understand or in which he or she cannot see any value.
It is even more intolerable when we see that long-term mortgage arrears are not being resolved and questions hanging over the State’s own data gathering, as evidenced in Flac’s recent paper on progress in resolving mortgage arrears. Recognising that people in mortgage debt need sound financial and legal advice to confront and understand their problems and to find solutions, Flac has long proposed that a national network of advisers be available to provide help and advice at a modest fee, funded by the lenders, and administered by MABS and the Legal Aid Board.
This would work alongside existing services from independent bodies such as IMHO, the Phoenix Project and New Beginning. We suggest that this system would allow people currently dealing with chaotic lenders to have basic access to justice at a crucial juncture.
When we first mooted this idea, we thought it would help lenders as well as borrowers; borrowers would know how to make their case and in turn make it easier for banks to respond. We just don’t buy the argument that those who have not yet restructured their loans are just too lazy or too devious.
Unfortunately, it seems the lack of enthusiasm for our proposal, or any better one, indicates that in fact the current chaos suits lenders. They get to do precisely what they like, with regular access to the ears of Government and the Central Bank.
Flac believes that if people had their own advisers, chosen locally, paid modestly, then the evidence would surely emerge on what is really going on with mortgage arrears. But until that happens, the Government can only depend on institutions and lenders to report what is happening on the ground — and this is not necessarily in the interest of ordinary consumers, particularly with repossession a real prospect for many in the absence of other options.