responsible credit
Search OK

IRELAND – Reform of Money Advice Services will include investigation into the unacceptable high levels of interest currently being charged by financial institutions and companies on loans to the most vulnerable
Government even more behind single parent families as new statistics show that more than half of new clients are single or single with children. Other statistics include: only 21.2% of the clients have mortgages, and over half of the debt is owed to banks/financial institutions and a further 21.8% owed to credit unions.

(By Finfacts Team, Oct 23 2006)

The Minister for Social Affairs, Séamus Brennan T.D., announced today that he would shortly introduce legislation that will significantly strengthen and streamline the Money Advice and Budgeting Service (MABS) so that it is fully equipped to respond to the growing debt problems being experienced by those in modern 21st century Ireland, particularly by those on social welfare and by low to middle income earners who are in some cases being charged outrageously high interest rates on loans.

MABS, which is this year receiving funding of more than €16million from the Department of Social and Family Affairs, provides a free, confidential and independent service through a network of over 50 offices and 230 staff countrywide for people in debt situations or in danger of sliding into debt.

Brennan also released the first nationally compiled statistics from MABS using a new integrated computer system which shows that the total amount owed by new clients to creditors, based on what their debt was when they first approached the service, so far this year amounts to €64million.

The Minister said: "Over the past 13 years, MABS has developed into a valuable nationwide advice and support service that has assisted thousands of people to regain control of their finances and, in time of need, to gain access to affordable credit. Last year alone almost 27,000 people nationwide used the MABS service, compared with less than 18,000 four years earlier."

"There is now a clear need to establish MABS on a statutory basis with a streamlined national structure and national leadership. As part of reforming MABS I also want to confront the totally unacceptable high levels of interest currently being charged by financial institutions and companies on loans to those who are often most vulnerable in society, particularly those on welfare and on low incomes".

"I have instructed officials in my Department, in drawing up the new legislation, to seek legal advice on how loans at what appears to be outrageous and totally unacceptable rates of up to 39% can be curbed or even banned. In the midst of this era of a surging Celtic Tiger economy we still have an underbelly of serious debt in which those most vulnerable are being charged exorbitant repayment rates on loans because they are considered to be a risk."

"I know this area is currently being investigated by the Combat Poverty Agency and the Financial Regulator and I look forward to also receiving solid, practical proposals from them very soon. MABS was set up to take this country out of the grip of illegal moneylenders and it is not acceptable today that the most vulnerable should now find themselves in the grip of what effectively amounts, in some instances, to legal moneylending".

Brennan said that in order to ensure the best value for the €16million of taxpayers money invested each year in MABS, and to build a coordinated budgeting and advice service that has all the supports needed to meet the demands of modern debt problems, the service needs modernisation and innovation, solidly founded on a modern and streamlined structure, to be geared to meet the rapidly changing face of debt problems in 21st century Ireland.

“I believe that we can use everything that we already have in MABS and build on it to shape and deliver an enhanced service and structure. The challenge for the future is to develop a strategy to prevent over-indebtedness and inform people before they reach crisis point, as well as continuing to meet the needs of those who find themselves in immediate financial difficulties.”

Brennan was speaking when addressing representatives of more than 30 organisations, including voluntary and community groups, in the social welfare area who gathered in Dublin for a Pre-Budget Forum at which they were invited, over several hours, to give their views and make submissions to the Minister and his officials on welfare changes and improvements which they would like to see included in the December Budget.

The MABS statistics are the first compiled using a new integrated computer system designed to gather valuable information from the network of MABS services that will give a more accurate and comprehensive insight into the nature of the growing problems of debt and the stresses it can cause. The new statistics show:
• So far this year a total of 10,075 new clients were seen by MABS. The largest percentages (52%) were in the age group 26-40 years with 31.7% between the ages of 41-65. A gender analysis of the new clients shows that 64.9% were female.

• The status of new clients shows that the highest numbers are single or single with children (both 23.9%), 15.8% are married with children and 10.8% are separated with children.

• As regards income, the majority of clients are on social welfare payments (52%) the highest being 17.8% in receipt of One Parent Family Payment and 13.1% in receipt of Unemployment Assistance/Unemployment Benefit (now Jobseekers). In addition, 30.2% of clients are in receipt of wages. By far the highest percentage, 71.2%, had no second income coming in to the household.

• Clients mostly live in rented accommodation, with 27.9% in private rented accommodation and 23.7% in rented local authority accommodation. People with mortgages make up 21.2% of the clients.

• The majority of people – 25.2% - come to MABS of their own volition with 15.5% being referred by a friend and 10.8% referred by the Health Service Executive/Community Welfare Officers.

• The MABS themselves deal with 73.3% of clients. Others are referred on to people such as accountants, legal advisors, social workers, etc.

• The total amount owed by new clients, to creditors, based on the debt they had when they first came to the MABS during the course of this year, amounted to €64,417,496 with 52.8% of that amount owing to banks/financial institutions and 21.8% owed to credit unions. Monies owing to utilities bills account for 4.3% of debt with debt collection agencies being owed 2.1% and moneylenders/catalogues owed 2.6% of the total amount due to creditors.

Seamus Brennan told the Pre-Budget Forum that he is committed to maintaining the momentum on reforms that directly tackle child poverty, pensioner poverty, inadequate incomes for lone parents, recognition of the valued role of carers in society and tapered and innovative measures that ensure that that talents and contribution of all in society are fully recognised and rewarded through involvement in employment, training and education opportunities.


Against the background of robust economic growth and the boom in the housing market (an economy that some say is overly dependent on the construction sector), there continues to be an accompanying sharp rise in the ratio of personal sector debt to personal disposable income. The low interest rate environment, strong job creation and positive developments in real income have all supported this rise in debt. In a country where the aspiration to home ownership is the norm, the steady growth in the stream of aggregate income has, over time, encouraged a multiple of borrowing relative to income. The marked uptrend in the debt ratio looks set to be maintained in the years ahead. The ratio is forecast to reach 160% in 2006 and exceed 185% by 2008. The vast bulk of personal debt is secured by property. Hence, the risks in relation to growing personal sector indebtedness are very much linked to the prospects for the housing market, where a soft landing is expected. There has also been a very sharp rise in household assets. At end 2006, the outstanding level of residential mortgage debt will be equivalent to around 17% of the value of the housing stock, which is expected to be around €700 billion.

According to new figures from the ESB's customer supply sector, the department's monthly debt levels have increased by 40pc in the past two years. The ESB said that in the two years the average value of customers' arrears has grown from €180 to almost €250. According to a spokesperson for the ESB, two years ago about 62pc, or 1.7m, domestic customers paid their bills within the agreed credit term of 14 days. Today, however, that figure has dropped to between 20pc and 52pc of domestic customers. He added that paying ESB bills is no longer the first priority for the consumer with Irish people clearing up their mortgage debt before any other household bills.
Another challenge for the ESB is the fact that the company does not insist on structured direct debit payments for its bills, unlike some other service providers. According to NCB Stockbroker's weekly economic commentary non-mortgage debt is currently growing at over 32pc, compared with just over 7pc three years ago. The broker said that €16bn, or 7pc, of total lending was probably unsecured personal debt, while €2.3bn was credit card debt. While credit card debt was up 18pc in the year to June 2006, credit card usage per holder is probably increasing. According to NCB this would lead to growth in credit outstanding, even if all holders cleared their debt each month,
According to the Central Bank's most recent 'Financial Stability Report for 2005', the overall level of indebtedness, and in particular the speed at which it is rising, is a matter for concern. The report stated that all things being equal, an increasing level of indebtedness results in an increasing aggregate repayment burden on the private sector.

ID: 38811
Author(s): iff
Publication date: 23/10/06

Created: 24/10/06. Last changed: 24/10/06.
Information concerning property and copy right of the content will be given by the Institut For Financial Services (IFF) on demand. A lack of explicit information on this web site does not imply any right for free usage of any content.