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Press Releases 2010

Commercial Debt Management Services (Press Release 9th February 2010)

            Debt Advice – Free or Commercial? (Printable pdf version )

“People in difficulty with personal debt or at risk of getting into debt should be fully aware of the terms and conditions when engaging the services of commercial debt management services” says MABS, the national Money Advice and Budgeting Service.

MABS is the only free, independent & confidential debt advice and money management service in Ireland and has over 17 years’ experience in assisting people with personal debts both large and small.  MABS works with clients with a very wide range of debts, including: mortgage arrears, credit card debts, utility arrears, moneylender loan difficulties, personal loans with banks and credit unions etc.

MABS has also developed effective working arrangements with all the major creditor organisations in Ireland which reinforce the work we do for our clients.  We also work in cooperation with a wide range of agencies and organisations in the statutory and voluntary sectors that can assist people who are experiencing money problems.

Anyone who is concerned about their situation can get immediate assistance by calling the MABS Helpline, lo call 1890 283438, Monday to Friday 9am to 8pm.  Those who need one-to-one support to deal with their debts can make an appointment to see a Money Adviser in one of over 60 local MABS offices nationwide.

MABS advise that people in difficulty with personal debts (mortgage, credit cards, personal loans, rent and utility arrears etc.), or at risk of getting into debt, should consider all options when seeking debt advice and be fully  aware of the terms and conditions when engaging the services of a commercial debt management service. 

MABS is not affiliated with, or connected to, any commercial debt management service in any way.  Therefore, any commercial debt relief company that references MABS in its promotional material, websites, etc does so without our permission

MABS also advises caution where a company’s advertising mentions very significant write-offs (up to 75%).  In MABS experience, it would be extremely exceptional -if ever- that debtors with personal debts achieve write-offs of this scale.

Commercial debt advice or debt management services in Ireland are not regulated – so if you do decide to use a commercial debt advice or debt management service to assist you with your personal debts, first ask the following questions:

What are the fees for the service and when do I have to pay the fee (is the fee paid up- front, if the fee relates to the size of the debt, what % of the total debt is payable) ?

What exactly will I get for that fee ?

Will you work on and resolve all of my personal debts?

Will I pay a fee even if you cannot assist me to get the solution I want, or a solution that works for me?

Are you connected to any other organisation that sells financial products?

What training/skills do your debt advisers have?

For more information and advice on money management and dealing with debt log on to www.mabs.ie  or phone the MABS Helpline on 1890 283438 or make an appointment with a Money Adviser at your local MABS office (details of all local offices available on the web or from the MABS Helpline).  For information on housing debt log on to www.keepingyourhome.ie

Editorial Note:
The Money Advice and Budgeting Service is a Free, Confidential and independent service for people in debt or at risk of getting into debt. It is funded and supported by the Citizens Information Board. It has 65 offices nationwide staffed by trained money advisers.

For more information contact: Michael Culloty at 087 7978966

Press Releases 2009

12 leading banks subscribe to Protocol

Protocol fully operational on 28 September

The country’s leading 12 credit institutions are subscribing to a new Protocol to help personal customers to manage their debt.  Developed jointly over two years by the Irish Banking Federation (IBF) and the Money Advice and Budgeting Service (MABS), the IBF/MABS Operational Protocol: Working Together to Manage Debt was launched in Dublin today by the Minister for Social and Family Affairs, Mary Hanafin, TD. 
The Protocol will enable IBF creditors and MABS money advisers to work together effectively to help personal customers/clients to address and manage debt problems and, wherever possible, to formulate a mutually-acceptable, affordable and sustainable repayment plan.  It sets out the agreed steps by which creditors and money advisers will work together to try to put such a plan in place and to successfully manage that plan on an ongoing basis.
The Protocol is broken down into two main parts as follows:

* General Principles – which set out the partnership approach to be pursued by creditors and money advisers and the framework for addressing debt problems

* Procedures – which define the general arrangements for good engagement, the five key steps to agreeing a repayment plan and the process for managing an agreed repayment plan.

Speaking at the launch, IBF Chief Executive, Pat Farrell said:
"Creditors have an important role to play to ensure that, not only do borrowers have the tools and advice they need during these very challenging times, but also to ensure that their door is always open to customers who may find themselves in financial difficulty.”  Pointing to the Protocol’s objective in aiming to deliver a mutually-acceptable, affordable and sustainable repayment plan, he stated: “Herein lies the real significance of this Protocol in its giving priority to seeking workable solutions over legal proceedings and in recognising that, for any repayment plan to work, it must meet these key criteria from the outset.”  And he concluded by saying: “I have no doubt that the partnership spirit and approach that inform all elements of this Protocol will be fully reflected in the way the subscribing creditors and money advisers will make it work for the benefit of their customers and clients.”
Expressing considerable satisfaction with the development of the Protocol and with the fact that all of the country’s leading banks are subscribing to it, Annemarie O’Connor, Business Manager MABS went on to state: “MABS reputation is based on its commitment to clients; it is the only free, independent and confidential service of its kind in Ireland.  This protocol will enhance our capacity to help people address their debt problems and to get back on a sustainable financial footing.”
Launching the Protocol, Minister Mary Hanafin said:
"This new development will be a significant reassurance for people who are, probably for the first time in their lives, experiencing financial difficulties.  Both the IBF and MABS are committed to working positively together to help resolve client debt problems. What everyone wants to see is debt being tackled with a mutually-agreed, affordable and sustainable repayment plan which can avoid the need for any legal action. People seeking advice from MABS can be assured that they will use all their expertise to secure the best possible terms for them in trying to manage the repayment of their debt. I very much welcome this Protocol as a sound, sensible approach for both the industry and their customers.”

The Protocol will, by agreement, become fully operational on 28th September once all the appropriate information materials are in place and the training completed for relevant staff within the subscribing credit institutions and the MABS network. 
Link to a copy of the IBF/MABS Operational Protocol: Working Together to Manage Debt.

Note to Journalists

The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland. 

MABS is the State-funded, national, free confidential and independent service for people in debt or in danger of getting into debt.

The following IBF creditors are subscribing to the Protocol: ACC Bank, AIB Bank, Anglo Irish Bank, Bank of Ireland, Bank of Scotland (Ireland), EBS Building Society, Investec/Nua Homeloans, Irish Nationwide Building Society, KBC Bank Ireland, National Irish Bank, Permanent tsb, Postbank Ireland, MBNA Europe Bank, Ulster Bank.

Further Information:        Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644          
                                     Annmarie O’Connor, Business Manager, MABS, 087 9171012
                                     Geraldine Butler, Press Officer, Dept. of Social & Family Affairs, 087 9483511

April 29th 2009:
Money Advice and Budgeting Service (MABS) Presentation to the Joint Oireachtas Committee on Social and Family Affairs on Levels and Trends in Personal Debt in Irish Society.

Introduction
MABS very much welcomes this opportunity to appear before the Joint Oireachtas Committee on Social and Family Affairs and to contribute to its discussion on levels and trends in personal debt in Irish Society. 
Some of the members of the Joint Oireachtas Committee are perhaps familiar with the founding objectives of the MABS which still shape its activities and ethos today.  Nevertheless, it is worth returning briefly to the origins of the MABS to get a fuller appreciation of how we have witnessed and responded to trends in personal debt in Irish society since our inception in 1992 and, more recently, as evidenced by the trends in data gathered and collated at national level from each of the 52 MABS nationwide.
The 1992 Budget provided a special allocation to establish 5 pilot projects aimed at building new and more comprehensive approaches to combat the problems faced by people who borrow from moneylenders.  The Service has grown and now employs 250 staff nationwide.  The basic aim of the MABS service was to help people who were over indebted to moneylenders, and others who had budgeting problems, to manage their money and gain access to affordable credit.
In addition to the money advice process, (that is, the advice and assistance provided by Money Advisers) core components of the MABS approach in the early years were: the provision of access to affordable credit to MABS clients in times of need and; the MABS Special Account Scheme - a bill paying service operated in partnership between the client, the Money Advice Service and the Credit Union.  A further innovative feature of the MABS, relative to its European counterparts, was its emphasis on community education through the provision of structured programmes on money management and budgeting delivered to key target groups.
While the MABS continues to provide a money advice and budgeting service to low income families and to facilitate access to credit and debt payment for those who could not otherwise avail of these facilities, it has long been evident that the MABS does much more than this to service the needs of its clients.  The landscape has changed; there is now much greater access to credit – albeit there are still those who access credit at a very high cost from sub-prime lenders, legal money lenders and catalogue companies.
I will talk in a moment about changes in the caseload of the MABS including: the increase in client numbers, the amount of debt and the growth of the more complex debt types such as mortgage debt.  However, it is worth stating, that while these are growing trends they have always been apparent in the MABS caseload and, as such, the issues have always been part of the organisation’s remit and within the competence of Money Advice staff.  

MABS data
I will concentrate, in the main, on the changes we have seen in the client base of Services over the period Q1 2006 – Q1 2009.  This is the period for which we have comprehensive statistics on the MABS.
An analysis of data for the three years, 2006, 2007 and 2008 and Q1 2009 indicates the following:

The Active Caseload of the MABS grew by 7,079 or 43% in the 3 year period from Q1 2006 to Q1 2009.

This growth in numbers is attributable to the increase in new clients which grew from an annual figure of 11,630 in 2006 to 16,600 end 2008.

In addition, in October 2007, MABS launched a new Helpline which offers assistance to callers Monday to Friday 9am to 8pm and in its first full year of operation took almost 11,000 calls.

The demographic profile of the client base remains relatively stable over time.  In the main MABS clients are social welfare recipients (averaging 63% over time), the majority are female, aged between 26 and 40 and 60% have children.   While, just over half of all MABS clients reside in either private rented or rented local authority accommodation, over the last 3 years we have seen an increase in the number of MABS clients with mortgages.  The latest statistics suggest this is 35% compared with 22% in Q1 2006.  

Debts:  The average amount owed by clients presenting at MABS Services has grown from just over €6,990 in 2006 to €13,700 at end Q1 2009.

The average number of debts per client has declined from 3 in Q1 2006 compared with 2.7 in the same period in 2009

At the end of 2008, 64% of all debts owed by MABS clients were owed to banks or financial institutions – of which 40.5% were personal loans, 33.5% credit card debts, 11.5% mortgage debts, 7.5% overdrafts and 7% hire purchase agreements.

As the Members will understand, people contacting the MABS have multiple debts; not all of which may be a cause of concern for them.  In this context it is worthwhile looking at the primary debt-types people contact the MABS about.
The top 10 debts include:

Personal loans to financial institutions
Utilities
Credit Card
Mortgage
HP loan
Overdraft
Rent
Catalogues
Fines
Sub-Prime loans

It should be noted that these trends are broadly similar to the “debt triggers” for the MABS Helpline, although a significant proportion of callers to the Helpline have more general queries about managing on a reduced income and, generally speaking, callers to the Helpline will call pre–arrear or at a relatively early stage in arrears.
To illustrate the experiences of MABS clients I will provide a little bit more information on the top five of these debt types.

Personal Loans /Credit Cards  

The average debt owed on a personal loan in 2006 was €9,706 compared to just under €13,000 in 2009.  The average credit card debt for MABS clients was just over €8,009 in 2009 – compared with €3,833 in 2006.  Typically such clients also had other debts including other personal loan and credit card debts and/or overdrafts.    

Utilities

It is no surprise that as most MABS clients will have a utility bill – (other, perhaps, than those living with parents) that utility debts feature strongly in the debt count.   The average utility debt has increased from €443 in 2006 to €625 in 2009.   In our experience clients presenting with utility arrears (because they are for the essentials of light and heat) as their principal debt have an ongoing inability to manage income from week to week.    We are working closely with the utility providers to assist clients to avoid disconnection and related costs, and more generally to try to ensure greater consistency of approach in the way in which utility company’s deal with MABS clients.

Mortgages

Money Advisers throughout the country are noting the increasing number of clients presenting with mortgage difficulties.  The number of MABS clients who have a mortgage and are also experiencing a problem with their mortgage is approximately 27% in Q1 2009 by comparison with 22% in Q1 2008 and 18% for Q1 2006.   A small minority have multiple mortgages.  
I have highlighted previously that mortgage debt has always been addressed as an aspect of the Money Advice process, however the average amount of money owed on mortgages has increased significantly and there is a degree of complexity emerging in the work.  This is due to the fact that some clients purchased their homes at the top of the market and may now be trying to meet payments on a much reduced income.  In such cases Mortgage Interest Supplement (MIS) is a vital support.  In addition, in some cases, home equity has been used to secure other loans and once affordable loans are now unmanageable due to changed circumstances.  There are also a small number of complex cases where homes have been purchased based on mortgages from Sub-Prime Lenders, and Money Advisers, looking at the client’s situation in its entirety, believe that the mortgage repayments were never affordable and that loans should not have been granted.  The options in such cases are limited.  
Finally, through our technical support work for the MABS we note an increase in the number of people who want advice on voluntary surrender or “handing back the keys”.  This is a new issue for the MABS and one which has significant consequences for mortgage holders.  While Money Advisers do not provide investment advice we are conducting more research into the issue so that we can provide information on the ramifications of such decisions.  
Hire Purchase Loans
A trend we are noting in our technical work in support of Money Advisers is the increasing number of people who are having difficulty with repaying and want to end their hire purchase agreements – this may be linked to the failure of a small business and a person’s desire to hand back a vehicle they had used for business purposes and that is no longer needed.
Other Observations:
Importance of structure:
One of the key principles of the MABS approach is the distinction we make between priority and secondary debts.  Priority debts are those that have a serious consequence for non-payment attaching to them, for example, failure to make mortgage repayments may put the family home at risk, those failing to pay rent risk eviction, failure to pay utilities may result in their disconnection, failure to pay a fine or a civil debt may result in a prison sentence. 
Often when clients come to the MABS they are in difficulty because they have been neglecting to pay their priority debts – they may have bowed to the source of most pressure – sometimes a persistent debt collection agency or a legal letter and as a result may be prioritising secondary debts.  We know, from feedback we receive, that MABS clients appreciate the structure and the independence of the MABS approach.   In MABS we believe all debts should be repaid, based on ability to repay.  However, it is vitally important that priority debts are serviced first as the negative consequences of default on these debts can often further impair capacity to pay, forcing people into further difficulty and more debt.
Debt Collection Agencies
In this context, and more generally, we are concerned about the practices of some debt collection agencies and have examples of cases where clients have been subjected to hourly phone calls, calls after business hours etc.  This greatly adds to the vulnerability of MABS clients who may have, for example, lost a job or suffered a loss of income through illness or family breakdown and are already making significant adjustments in all aspects of their lives.
Commercial Debt Relief Agencies
A further concern is the recent emergence of commercial debt relief agencies in the Irish market.  While people who can afford such services should have the option of utilising them, it is very important that the charges involved are clearly advertised and that there is some quality assurance in relation to the service and advices offered.  This is particularly important in the case of stressed or otherwise vulnerable customers.

Non-Judicial approach to debt settlement
MABS has long believed that a holistic, non judicial, response is required to address personal indebtedness and has made a submission to the Law Reform Commission on its consultation on Alternative Dispute Resolution and has also met with the Commission in relation to its project on the law of debt enforcement which includes an examination of alternatives to court-based procedures for debt enforcement.  There is strong support within MABS for an “out of court” debt settlement programme which would include a finite period for an agreed debt repayment programme, the freezing/reduction of interest and the write-off of residual debt on successful completion of the programme. 
Prevention
Finally, it should also be noted that in addition to its ongoing community education work with key target groups at local and national levels, such as students, adults at basic education level, people with a learning disability etc., MABS has seen a big increase in the number of organisations making contact with us to request assistance with basic money management and /or managing on a reduced income.  Such groupings include both public and private sector organisations, professional associations, employee representative bodies, and voluntary groupings.  MABS is servicing this demand and is engaged with a wide range of stakeholders to bring its experience and expertise to a wider audience – with the overall aim of preventing overindebtedness.