Mabs says some lenders altered debt scheme

The Money Advice and Budgeting Service has said "certain lenders" scheduled to be involved in a Central Bank pilot scheme for distressed borrowers with multiple debts have taken issue with the proposed terms and conditions for the project.

The organisation did not confirm yesterday that it had withdrawn from the scheme, as was reported in the media, and said it was “surprised” at media reports to this effect.

A spokesman for the Central Bank would not comment on the issue, but sources have indicated that the authority is going to look for another entity to take on the role believed set to have been carried out by Mabs.

The three-month scheme is designed to provide a template through which an independent third party will represent distressed borrowers in dealing with multiple lenders. While focusing initially on householders, the scheme could be extended to small businesses and the buy-to-let sector if deemed a success. The scheme is targeted at unsecured debts.

The proposal involves the banks and a number of credit unions, though the Irish League of Credit Unions walked out on talks about the scheme some time ago.

Worthy proposal
A spokesman for Mabs said it had taken part in the competition for the role of third-party service provider to the scheme as it believed it was a worthy proposal of assistance to debtors. Mabs won the competition and was informed of this approximately three weeks ago.

“Mabs was willing to accept the associated terms and conditions as presented. However, on further engagement with panel members, it became apparent that the proposed approach was not acceptable to certain lenders.”

The spokesman would not say what lenders he was referring to, but did say the organisation had a good relationship with the Irish Banking Federation. He said new terms and conditions introduced after the event meant the scheme was "no longer a good fit for us". He said the Mabs proposal, as originally outlined, still stood.

The organisation had hoped working on the scheme would help it maintain its relationship with the banks and further develop its relationship with the credit union movement, he said. It has a protocol for working with the banks, though not with the credit unions.

He said the proposed scheme was better than the situation as it stands and that if people go into the personal insolvency scheme the lenders will get very little, if anything at all.

In May, when the ILCU withdrew from talks with the Central Bank, it said burden-sharing and not “burden shifting” was required to deal with the issue of distressed borrowers.

It said a proposed scheme was aimed at protecting the banks’ capital positions and maximising their income from mortgage interest payments, and did this at the long-term expense of the borrower.