The Irish Banking Federation (IBF) has announced a scheme which it says will help customers struggling with unsecured debt.

Under the protocol, banks will work with customers to prioritise mortgage debt and to restructure any remaining debt. The mortgage payment may be reduced for a period of up to five years, to support a payment to unsecured creditors.

Lenders will discharge the customer from any residual unsecured debt at the expiry of the agreed period of up to five years, provided that the customer has adhered to the terms of their arrangement.

The IBF said the current level of unsecured debt, which includes car loans and credit card debt, that many home loan customers had accumulated was significant and in many cases unmanageable.

IBF spokesman Felix O’Regan said the federation was hopeful “many if not all” of the country’s lenders would adopt the protocol.

“In the broad scheme of things, it’s about keeping a roof over someone’s head,” he said, adding that short-term forbearance options were currently not working. “They don’t give people enough breathing space.”

On Tuesday, the Central Bank of Ireland said Irish banks were still dragging their feet in dealing with mortgage arrears.

While acknowledging that more debt resolution measures were being rolled out by banks, the Central Bank said the level of implementation, through either debt restructuring or loan recovery, was far from adequate. According to the Central Bank’s latest data, 112,916 mortgage accounts with €24.7 billion of debt were in arrears of 90 days or more at the end of September 2012.

“We are concerned that the IBF protocol singularly fails to address the mortgage debt issue,” said Ruth Fanning, spokeswoman for debt relief lobby New Beginning. “We are not aware of any long-term options currently being offered to struggling home-owners apart from short-term forbearance options, such as interest-only or short payment holidays”.

IBF Protocol on Unsecured Debt: Main Points

* The mortgage debt will be prioritised and serviced ahead of other debt.

* To support a payment to unsecured creditors, the mortgage payment may be reduced for a period of up to five years as part of a sustainable long-term treatment.

* Payments made towards all unsecured debt will be apportioned on a pro-rata basis on the balances outstanding.

* The resulting arrangements will be reviewed after 36 months by the mortgage lender, with a view to reflecting a material change in the customer’s circumstances.

* Subscribing creditors will discharge the customer from residual unsecured debt at the expiry of the agreed period of up to five years, provided that the customer has adhered to the terms of their arrangement.