Timmy Dooley (Clare, Fianna Fail)
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72. To ask the Minister for Finance the implications for the Central Bank of Ireland's pilot scheme debt resolution scheme of indications from credit unions that they will not participate; and if he will make a statement on the matter. [23918/13]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank has commenced a process to facilitate a voluntary agreement outlining a co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers. An unsustainable debt position has been reached by many borrowers, which needs to be addressed for the benefit of both borrowers and lenders alike. I have been informed by the Central Bank that this initiative is being implemented to establish, on a test basis, an approach to deal with both secured and unsecured debt in a sample of approximately 750 cases where borrowers have debts with multiple lenders. The Central Bank envisage that the participants in the pilot framework will be the main retail lending banks and the credit unions that have agreed to participate, as well as certain other unsecured lenders. This pilot framework contains a restructuring waterfall that will be applied to each borrower that agrees to participate, in order to establish the most appropriate modification to put him or her on an affordable repayment path. The pilot framework is expected to commence in June and will operate for a period of three months, after which the results will be assessed to establish the effectiveness of the framework and to determine the appropriate next steps.

The Central Bank are actively encouraging the involvement of all lenders in the process to ensure maximum effectiveness of this learning and information gathering pilot stage, and are encouraged to have a number of lenders engaged to date. The Central Bank have written to all credit unions individually to invite them to participate in the pilot framework and are confident that the pilot framework will offer outcomes which support borrowers and will 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 they cannot be part of the pilot scheme and cannot avail of the benefits.

I am aware of the concerns expressed by the Irish League of Credit Unions regarding the Central Bank initiative and its view that the arrangements under the Personal Insolvency Act should be applied to the resolution of multiple debts owed by distressed borrowers, including credit union members. While that regime is indeed available, the Central Bank pilot scheme will offer the opportunity for distressed borrowers - including credit union members - to resolve their debts without the need to enter into the formal statutory process. In this respect, it is important that credit union members are not left with a more limited range of options than are available to customers of other financial institutions. It is in this spirit that the Central Bank has written to all credit unions to make them aware of the pilot so that the credit unions can decide whether their participation is in the interests of their members, including members with distressed debts across multiple lenders.

Credit unions have been invited by the Central Bank to nationwide information seminars on the pilot scheme to discuss its objectives and approach. The Irish League of Credit Unions has been invited to attend at these sessions and provide input into the content of them. Notwithstanding their official stance on the pilot programme, the Irish League of Credit Unions has played a constructive role in working with the Central Bank and other lenders to address this difficult issue and credit unions continue to have an important role to play in supporting distressed borrowers in resolving their problems.

Seán Fleming (Laois-Offaly, Fianna Fail)
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73. To ask the Minister for Finance his views on whether the proliferation of recent announcements on debt resolution is causing confusion amongst borrowers and may actually impede; and if he will make a statement on the matter. [23920/13]

Sandra McLellan (Cork East, Sinn Fein)
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93. To ask the Minister for Finance his views on the Central Bank of Ireland’s pilot scheme for consumer multi-debt restructuring launched on 8 May 2013. [23956/13]

Pearse Doherty (Donegal South West, Sinn Fein)
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142. To ask the Minister for Finance the consultation that took place with his Department by the Central Bank of Ireland before the launch of the pilot scheme for consumer multi-debt restructuring on 8 May 2013. [24130/13]

Pearse Doherty (Donegal South West, Sinn Fein)
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203. To ask the Minister for Finance the consultation that took place between his Department and the Central Bank of Ireland before the launch of the pilot scheme for consumer multi-debt restructuring on 8 May 2013. [24108/13]

Pearse Doherty (Donegal South West, Sinn Fein)
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204. To ask the Minister for Finance if there is a legislative basis by which unsecured creditors can be forced to accept write-downs in outstanding debt under the Central Bank of Ireland pilot scheme for consumer multi-debt restructuring. [24109/13]

Pearse Doherty (Donegal South West, Sinn Fein)
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205. To ask the Minister for Finance the names of creditor companies that have signed up to the Central Bank of Ireland pilot scheme for consumer multi-debt restructuring; and if he will outline the impact the reported rejection of the scheme by the Irish League of Credit Unions will have on the scheme. [24110/13]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 73, 93, 142 and 203 to 205, inclusive, together.

The Deputies will be aware that the Central Bank has commenced a process to facilitate a voluntary agreement outlining a co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers. While the framework was an initiative of the Central Bank, the Central Bank informed the Mortgage Arrears Steering Group of the progress on its discussions with lenders on the Central Bank’s intention to introduce such a scheme.

Many distressed borrowers have multiple debts with different lenders and have to deal with each lender on each debt. The Central Bank has advised that this framework can help those borrowers because the lenders are agreeing to a coordinated 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 do 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 framework also 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 challenged cases proceeding to the new established personal insolvency regime. The Central Bank has also advised that there is no legislative basis by which unsecured creditors can be forced to accept write-downs in outstanding debt under the Central Bank’s voluntary framework. Nevertheless, as a result of the Central Bank’s initiative, a number of secured and unsecured lenders have agreed a burden sharing framework and will now, with the Central Bank’s oversight, participate in the development and operation of this Framework on a test or pilot basis.

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 that 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.

All existing protections afforded by the Central Bank’s Consumer Protection Code and Code of Conduct on Mortgage Arrears (CCMA) will continue to apply to participating borrowers. The framework will not include borrowers with buy-to-let or business related debts. It is envisaged that the Pilot will start in June and run for approximately 3 months after which the results will be assessed to establish the effectiveness of the framework and to determine the appropriate next steps.

The recent Central Bank initiatives in the mortgage arrears area, in particular the Mortgage Arrears targets initiative announced last March and the more recent framework pilot on the development of a coordinated, holistic and voluntary approach by secured and unsecured lenders, is consistent with the overall whole of Government approach to deal with the mortgage arrears problem. In particular, the Government, while significantly modernising Ireland’s bankruptcy and insolvency law and procedures, has also advocated and encouraged borrowers and lenders to address situations of debt difficulty, where possible, on a bilateral and informal basis, and the recent Central Bank initiatives should underpin that process.

Recent announcements by Government such as the launch of the Insolvency Service of Ireland (ISI) are important steps in the overall framework to deal with mortgage arrears. Borrowers seeking specific information on support available can contact the ISI’s helpline for information on insolvency matters or can seek advice from the general mortgage arrears information service for general mortgage arrears queries.