Debt Management in Ireland

Transcription

1 Debt Management in Ireland Consumer Background Pre-Arrears example Banking crisis for debt collection. Resource. Tactics. Cowboy s vs Indians. Shock. Linear vs Holistic. Send them to MABS 1

2 Consumer Debt Crisis? Mortgage Debt Personal Debt 147bn 30bn Negative Equity Households 349,000 Of which First Timers 125,000 Empty Houses 300,000 Main Causes of Debt Living beyond means Reduction in household income Relationship breakdown Poor money management Illness Loss of employment Business failure No savings Poor family communication No bonus Credit card overuse source: Google 2008; Insolvency Service 2007; Bankrate.com

3 Consumer Debt Crisis? Declining Household income Joblessness Negative Equity Mortgage interest rates Debt funding % of household income 3

4 Consumer Debt Crisis? Banking costs? Economic costs? Social costs? Psychological costs? MABS Helpline Q Q Q Q Q Helpline Calls Cost per case is high. Cost to taxpayer is 20m approx per annum. Under resourced. Wrong outlet for banks/creditors 4

5 Consumer Debt Crisis? Official Gov/Bank Response : Forebearance on repossession activity. FR Code of conduct for mortgage lenders. Problem spans across many Departments. Law reform commission consultation paper. Banks Response Pre- Arrears: Secured Banks willing to Negotiation on PDH and RIPS. RIPS - only where there is difficulty on cashflow. Understand that short term solutions are necessary. Will not facilitate lifestyle credit. However this is not marketed!!!. 5

6 Banks Response Arrears -Secured New code of conduct. can t pay, won t pay principle. Communicate early and establish agreement. If third payment missed, formal demand can be issued. 6 months breathing space from time of arrears. NB: Does not apply to property investors. Debt Collection A form of corporal punishment Current banking practice, get there first. Unsecured vs Secured. Sell debt on!! No Debt relief or forgiveness!!!. 6

7 Legal stages 1 - Demand Letter 2 - Issuing Legal proceedings. 3 - Enforcement A. - European Enforcement order. Stage 1. Demand Letter Typical letter Includes: Co vs Defendant Amount of debt. Recovery of amount plus interest (8% as per the courts act 1981). Threat of judgement, sheriff etc etc. Letters can be aggressive or soft, depending on debt collector. 7

8 Stage 2. Issue Legal summons District court - up to 6,348 Circuit court - up to 38,092. High Court - over 38,092. Typical Legal Fee s and charges. Obtaining Judgement in undefended cases. Will depend on debt amount.normally a %. Obtaining Judgement in defended cases.normally an hourly charge. Councel fees. Stage 2 Fee s Cont d Enforcement of Judgements Sheriff Publication of Judgement Application of instalment order. Committal proceedings. Registration of Judgement Mortgage. 8

9 Our legal system is draconian 2008 In UK there was 150,000 personal insolvencies. Including 67,000 bankruptcy s and 39,000 IVA s. Discharge is 3 yrs, vs 12 in Ireland. Here there was 12 bankruptcy s Foreign Consumer Debt Crisis? US experience loan defaults rise when Negative Equity Drop in income Rise in unemployment Reverses when people regain employment 9

10 Other Foreign Jurisdictions UK Bankruptcy, IVA, Debt management. Australia Bankruptcy, PIA, Debt management. Rehabilitate/re-educate= debt forgiveness. Codes, Guidelines, Ethics, Standards. Debt Stats (UK) 10.3 m in the UK state their debts are unmanageable. Average person sees up to 53% of personal income, taken up in debt repayments. 28% of household population have taken out a consolidation loan. 8.4 million continue to build up debt. Average household debt ( 9485). Average interest rate on CC = 17%. 10

11 Social/Psycological factors of consumer Indebtedness We can no longer borrow our way out of Debt, we must budget our way out of debt. Factors in Financial Stress Fear of not paying bills Demand to Pay Frustration at situation Can t handle uncertainty Loss of confidence Lack of concentration Feelings of unworthiness Collapse in self belief Poor decision making Loneliness Grief for old lifestyle 11

12 Reasons to Repay Debts Restore pride Cut emotional stress Regain loss of credit Stop being hassled by Creditors Prevent relationship breakdown Improved health What is Debt Management? Is a flexible informal arrangement Full financial fact find assessing income, expenditure & assets Identifies whether client is in financial difficulty Protects priority expenditure home, living expenses etc. Negotiates reduced affordable payments with creditors Collects funds on creditors behalf Client has one affordable monthly payment to DMC Disperses funds on clients behalf Creditor receives regular financial reviews 12

13 Stop : Put the brakes on Money management and assessment. Re educate. Long term solutions to managing money. Personal Feedback Report Self, Money, Planning Competency Evaluation Intervention & Development 13

14 Net Effect = Stress reduction Need to understand and prioritise Debt. Secured/Unsecured, Short/long term. Need to prioritise Risk. Need to prioritise cost base. Need to consider Lifestyle changes. Self Help Debt Management Site Audio & Visual Coaching Programme 14

15 Financial advice Solution to consumer debt. Client for life, If you help them in the bad times, they will come back to you in the good times. We must regulate personal Insolvency and bankruptcy. Questions Call Eugene on Or mail 15