Failure to regulate debt advice sector astonishing

www.independent.ie/business/personal-finance/failure-to-regulate-debt-advice-sector-astonishing-2116754.html

Personal Finance, Business - Independent.ie

By Charlie Weston

Tuesday March 30 2010

THE failure of Finance Minister Brian Lenihan and the staff in his department to grasp the necessity to regulate those firms offering to advise consumers on how to tackle their debts is little short of astounding. Almost every week a new firm offering commercial debt counselling or debt management opens up. They are responding to the growing debt crisis among consumers. These firms are unlicensed and unregulated. And that is not their fault, as there is no regulatory structure in place for commercial debt advisers. Only two countries in the EU do not regulate debt advice companies -- Greece and Ireland, according to the Law Reform Commission.

In Ireland, there are no legal rules in relation to the sector. Heavily indebted people are extremely vulnerable, so you would think there would be some recognition on the part of the Department of Finance of the need to regulate this sector. Not a bit of it; yet again in the past few days, the department said it had no plans to regulate commercial debt advisers. Some unscrupulous debt advisers are making false claims. For example, claiming they can get up to 75pc of your debts written off. Some firms claim to be operating as charities or non-profit organisations, while others claim to be linked to the Money Advice and Budgeting Service (MABS). Others claim their services are free when they are not. The reality is that some banks will not even deal with debt management/debt advice firms. High charges, especially those calculated as a percentage of the debts, are a major issue. Some commercial debt advisers are designing inappropriate repayment plans. Payments can be made late, or not at all.

Predatory

Some debt advisers have been accused of predatory practices -- by advertising in credit unions and social welfare offices. Some of the more decent operators in the sector have been lobbying the department for regulation. A number of firms have come together to form a new association and draw up a code of conduct. If you, or someone you know, is heavily indebted, then the starting point should be MABS, which is free. Its offices are open five days a week between 9am and 8pm. Its website is www.mabs.ie, or telephone 1890 283 438. Just don't expect the Department of Finance to recognise there is a problem -- when you earn what a minister and senior mandarins earn, then consumer debt is someone else's worry.

- Charlie Weston

Irish Independent

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Banks Statement by the Minister for Finance - 30th March, 2010

www.finance.gov.ie/viewdoc.asp?DocID=6255

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2.6m MILLION MEMBERS TO BENEFIT FROM NEW LENDING LIMITS

www.creditunion.ie/Default.aspx?p=103&n=111&a=334

2.6m MILLION MEMBERS TO BENEFIT FROM NEW LENDING LIMITS
IRISH LEAGUE OF CREDIT UNIONS SECURE NEW DEAL FOR LOAN EXTENSION FOR BORROWERS

At the publication of the Central Bank Bill today the Minister for Finance, Brian Lenihan T.D., announced that the Irish League of Credit Unions (ILCU) has concluded negotiations with the Registrar for Credit Unions which have delivered significant changes to Section 35 of the Credit Union Act 1997 by extending lending limits in order to assist members that are experiencing financial stress and need to reschedule their loans. The attached changed regulations will allow for these circumstances, but will also ensure that the financial position of the credit union is safeguarded and is accompanied by honest, prudent and transparent accounting practices.

Commenting on the announcement, Mark Bailey, President of the ILCU, said “We had a meeting with the Minister for Finance about this issue and he was very anxious to help credit unions help their members. He asked that this issue was resolved between the ILCU and the Registrar of Credit Unions to offer all credit unions and their members more flexibility and clarity on the issue of loan repayment. We are satisfied to have brought about a conclusion to these negotiations as we have been lobbying for this intensely over the past number of months”.

Up until now the limits on lending, contained within the Credit Union Act, are that loans over 5 years are limited to 20% of the credit union’s total loan book. This limit has now been increased to 30% which will allow us to have more flexibility when dealing with our members’ difficulties. Part of our ethos is to help people in difficult times and therefore this is a significant issue for credit unions. These changes will enable credit unions to assist their members in the same prudent and compassionate manner as they have done over the past five decades.

In conclusion, Kieron Brennan, CEO of the ILCU said “Whilst recognising the benefits that this announcement will bring to credit union members and ILCU affiliated credit unions, there are also conditions attached to rescheduling of loans, certain provisioning against bad debts and particular liquidity levels must be maintained. There are also clear definitions of what constitutes a rescheduled loan. All applications must be supported by appropriate fact finding and loans can only be rescheduled in agreement with the member. Regular evaluations of said loans by credit unions will be put in place in order to provide reports to their respective boards. This new arrangement is good for our members and good for credit unions”.

Minister for Finance, Mr Brian Lenihan, TD, announces the extension of longer-term lending limits for Credit Unions

The Minister for Finance, Mr Brian Lenihan, TD, announces the extension of longer-term lending limits for credit unions under Section 35 of the Credit Union Act 1997. The extension requires to be underpinned by primary legislation and so an amendment to Section 35 is provided for in the Central Bank Reform Bill 2010 which the Government published today 30 March.

The initiative addresses, in particular, the need for credit unions to be in a position to facilitate rescheduling of loans. It is accompanied by requirements to ensure that the financial position of credit unions is safeguarded. It is intended to allow credit unions assist members experiencing financial difficulties so that they may continue to make repayments on their loans, albeit smaller ones. In this way, borrowers may continue to manage their personal finances and not break the good habit of making regular repayments.

The amendment to Section 35 of the Credit Union Act 1997 will extend the lending limit for loans over five years from 20% to 30% for all credit unions; empower the Registrar of Credit Unions to impose requirements on credit unions in relation to lending practices; and require credit unions to have appropriate systems in place to monitor compliance with Section 35. The overall initiative includes additional requirements with regard to liquidity, provisioning for rescheduled loans and formal arrangements in relation to the management and reporting of rescheduled loans.

The Minister stated: ‘As Minister for Finance I have supported the development needs of credit unions to ensure they continue to provide for the financial, saving and borrowing needs of the communities they serve. Many credit union members are experiencing difficulty in meeting loan repayments due to unfavourable changes in their financial circumstances in the current economic environment. Increasing the lending limit for credit unions and formalising arrangements in the area of rescheduling of loans will facilitate credit unions in their wish to ease the position of these members. Accompanying requirements with regard to liquidity and provisioning will protect the financial stability of credit unions and ensure that the security of members’ savings is maintained.’