THERE HAS BEEN increased pressure on financial institutions in recent months – and particularly in the last number of weeks – to look at their treatment of customers who are in financial distress.

Lenders have been criticised for failing to adequately communicate with customers who are struggling to pay their mortgages and have been accused of aggressively pursuing people who can no longer afford their full payments.

Last year the country’s main banks also came under fire for a mass overcharging scandal that resulted in some customers losing their homes.

Thousands of people took to the streets for housing protests in 2018 and there was a particular focus at the end of the year on KBC Ireland after an eviction in Roscommon that resulted in violent scenes at the property.

Lenders, particularly after their wrongdoing in relation to the tracker mortgage scandal was exposed, last year pledged to change their ways and to become more consumer-focused.

But experts in the area say they have yet to see this shift in culture as they hear daily from struggling mortgage customers.

‘The truth came out’

Earlier this week KBC Ireland executives met with three independent TDs at Leinster House to discuss how financial institutions deal with people in financial distress, and in particular evictions.

The meeting was arranged after the deputies had occupied one of the bank’s branches in Dublin before Christmas, bring a white coffin inside with them and refusing to leave until an executive agreed to speak with them about evictions. 

Mattie McGrath, Michael Collins and Carol Nolan met with the bank representatives on Wednesday and afterwards McGrath said there was a clear recognition by the bank of the gaps between the theory of good practice and how that is actually delivered in individual cases.

He said it was a “positive step” in addressing some of the challenges in mortgage distress resolution.

This optimistic view is not shared by David Hall, CEO of the Irish Mortgage Holders Organisation, who told TheJournal.ie he believes incidents such as the one in Roscommon may encourage mainstream banks to “outsource” the problem to vulture funds.

Hall said he has seen the behaviour of banks change because “the truth came out” and it became more difficult for them to claim large cohorts of customers were not engaging with them.

But he pointed out that this has not stopped lenders from selling thousands of mortgages – even those belonging to customers who have been sticking to new payment arrangements – to vulture funds last year. 

And contrary to comments by the Taoiseach about the willingness of these funds to enter into restructuring arrangements, Hall, who deals with these entities every day, said they are “rejecting cases that would require small discounts to make them work for mortgage-to-rent”. 

Under this scheme approved housing bodies like iCare can buy the loan and the people living there can remain in the home – not as owners, but as social housing tenants. Their rent is means tested and their local authority contributes to their payments, similar to the Housing Assistance Payment (Hap) scheme. 

Last week Hall tweeted that a repossession order for a family home in Dublin had been given to the sheriff, despite an offer to Start Mortgages from iCare to buy the property to rent to the family as social housing. 

He said in the tweet that he would ask people to protest at the home if necessary but the next day he said the fund had written to say it was willing to call off the eviction to allow for iCare to buy the house. 

The Irish Independent reported that Start disputes suggestions that the threat of a protest was the reason it agreed to hold off on repossession. 

This lady is an example of them not willing to provide a solution or cooperate with one that keeps someone in their home who has been independently verified as vulnerable. This is someone we independently verified as being in an unsustainable situation and the local council also verified that she was eligible for social housing. 

Hall said many people who are in arrears now should not have been given a mortgage by their bank in the firstplace, or should not have approved for such a high level of debt. 

“History will judge this. This is a remarkable country, we seem to have forgotten why we’re here, forgotten the greed and the lack of regulations.”

‘Slow to engage’

Damien Sheridan a solicitor who volunteers his time though the Money Advice and Budgeting Service (Mabs) does not believe there has been any change in attitude from the banks. In fact he said he has seen them moving in more quickly now that the market had picked up.

“Properties have increased in value and therefore there is more equity to be released. There was definitely a stringing along [in recession years] but that’s what I’m seeing now.”

He said as commercial entities, lenders “don’t like bad press” and he believes they have taken stock of the furore over possession proceedings, but he is sceptical about how radical any culture reforms will be. 

In short if you borrow money from a bank and don’t repay the money pursuant the mortgage deed the bank is entitled to repossess the property, and they are in the business of making money.

Sheridan said lenders are also still “rigorously contesting” personal insolvency appeals in court. 

The Insolvency Service of Ireland said it has seen improved engagement with all creditors in the last 12 months and a willingness to use potential solutions such as debt write-off, warehousing, term extensions and mortgage-to-rent. 

“New entrants while initially slow to engage have improved their level of understanding and engagement.”

However the ISI said there is still an issue in terms of the legal process as creditors are using ‘technical’ rather than ‘substantive’ objections to arrangements that are put forward.

“There are a number of legislative proposals put forward by the ISI and supported by all stakeholders that would improve the process,” it said.

In over 90% of personal insolvency arrangements, debtors get to remain in their homes.

‘Cultural transformation’

TheJournal.ie asked all the main lenders what learnings they had taken from the tracker mortgage scandal, what changes they have put in place in relation to the treatment of customers in financial distress and how protests last year impact on its policies.

Ulster Bank said there has “always been a strong focus on culture” and that this “crystallised further” in the last year when it became involved in the foundation of an Irish Banking Culture Board, which aims to rebuild trust in the sector.

The bank said it is committed to acting fairly and finding the best solution for customers in financial distress. It also apologised for failures which led to overcharging in the tracker mortgage scandal – some 5,390 of its customers were impacted – and the length of time it is taking for it to “put this right”.

Bank of Ireland said it has an “extensive programme of cultural transformation activity” underway, which includes supporting the establishment of the banking culture board. It said it has also communicated to all employees in the company four key values; that staff should be “customer focused, accountable, agile and work as one group one team”.

The bank said its approach to the arrears crisis is “working well”, as eight out of ten customers in financial difficulty have been offered a “sustainable solution”. It said it considers repossession to be a last resort. 

AIB said it is also supporting the establishment of the culture board and had submitted an “action plan” to the Central Bank in relation to culture.

A spokesperson said AIB has reduced its non performing exposures and 90% of this reduction has been achieved through “working with customers” to reach “sustainable solutions”. They said some of these involved significant debt write-off. 

The spokesperson also said over 99% of customers impacted by the tracker mortgage scandal have received payment. 

Ulster Bank, Bank of Ireland and AIB did not address the impact, if any, of housing protests in the last year.

Permanent TSB and KBC Ireland did not respond to TheJournal.ie‘s query.