Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Many distressed borrowers have multiple debts with different lenders and have to deal with each lender on each debt. This makes it difficult for a borrower and his or her lenders to address the personal debt difficulties on a whole of debt basis. In view of this, at the start of March the Central Bank commenced a process to facilitate the development of a co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers. The aim of the pilot scheme is to achieve sustainable and fair outcomes without the need for the borrower to enter the statutory insolvency process. It is focused on enhancing co-operation between lenders of secured and unsecured debt at an early stage.

The Central Bank has advised that this framework will help those borrowers because the lenders are agreeing to a co-ordinated approach for resolution of all of the borrowers' debts. In addition, many distressed borrowers are not insolvent and therefore will not be eligible for an arrangement under the personal insolvency regime but need to have an appropriate solution in place to deal with their debts. This framework aims to test the feasibility and costs of implementing such solutions for borrowers. The Central Bank has also informed me that the framework has the potential to reduce the costs and time it will take lenders operating on an individual basis to deal with distressed borrowers while also potentially resulting in only the more challenging cases proceeding to the new established personal insolvency regime.

The Central Bank has advised that it has been agreed among the lender participants to use an independent third party service provider as the most appropriate way to engage with borrowers, whose consent to participate will be sought and required to take part in the pilot. I am informed by the Central Bank that discussions are under way to determine the most appropriate provider and that no decision has been made. However, I also understand that an important consideration for the Central Bank in this matter, due to the short timelines involved, is the ability of the provider to provide an effective and efficient service at short notice.

The Central Bank is actively encouraging the involvement of all lenders in the process to ensure maximum effectiveness of this learning and information gathering pilot stage and it is encouraged that a number of lenders have agreed to become engaged. The Central Bank advises that it has written to all credit unions individually to invite them to participate in the pilot framework and it is confident the pilot framework will offer outcomes which support borrowers and will also allow the Central Bank to test and learn from this approach.

It must be borne in mind that a key issue in a decision to opt out by some lenders is that borrowers from these institutions cannot be part of the pilot framework to restructure their debt. For example, if a distressed borrower has multiple debts and one of their lenders is not involved in the pilot scheme, then such borrowers cannot be part of the pilot scheme and cannot avail of the benefits that can accrue from the operation of the framework.

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