Coroner warns financial institutions not to harasss people in debt

                                                                     

I read with interest an article in the Clonmel Nationalist printed last week by South Tipperary’s coroner where he publically warned financial institutions and debt collectors they are breaking the law if they harass a person for debt repayments and has called on them to ensure they have policies in place to prevent their staff harassing under pressure debtors.

Mr Morris has raised the issue in light of the huge increase in the number of suicides in South Tipperary and nationally in the past four years and the fact that some of these suicides were committed by individuals under financial pressure due to the impact of the recession.
There were 18 deaths by suicide in South Tipperary last year, which was double the number of such deaths in the South Riding in 2009.

Mr Morris, who was one of the speakers at a high profile Suicide Awareness meeting in Clonmel last month, said he hadn’t analysed the suicide cases that have come before South Tipperary Coroners’ court in recent years but acknowledged the recession has been a factor in some specific cases.
He believes there is a need to “chip away at the awful ruthless culture” where a “kind of merciless Darwinian approach” is taken to people in financial trouble.
He said he suspects the policies of some financial institutions and debt collection agencies in relation to collecting money owed to them don’t comply with the provisions of the 1997 Non-Fatal Offences Against the Person Act.
He said the manner in which financial institutions communicated with a debtor could be the last straw for a person under severe financial pressure and lead them to entertain suicidal thoughts.
Under Section 10 of the Act, it is an offence to harass a person by persistently communicating with them by any means including by telephone in such a way that it intentionally or recklessly seriously interferes with their peace and privacy or causes alarm, distress or harm.
And Under Section 11 of the Act, a person who makes a demand for payment of a debt is guilty of an offence if the frequency of their demands is calculated to subject the debtor or a member of their family to alarm, distress or humiliation. They are also committing an offence if they falsely represent that failure to pay the debt will result in criminal proceedings or that they are authorised in some official capacity to enforce payment or utter a document falsely representing to be official.

Mr Morris urged financial institutions and debt collectors to have policies in place to ensure their staff don’t harass debtors and breach the law.
He advised people in financial difficulties to invoke the Act if they feel they are being harassed.
“If a person is being harassed by a financial institution or debt collector they can point out to whoever is directly contacting them that he or she is the offender and they are free to make a complaint to the Gardai,” he explained.
Interestingly, Mr Morris recommended to people in financial difficulties to hire an independent mediator with the necessary skills to negotiate with the banks and other creditors on their behalf, and he urged financial institutions, companies and other agencies collecting debts to deal with these third parties in cases where they are engaged rather than dealing with the individual debtor.

I couldn't agree more with Mr Norris as over the past three years our team at GDP Partnership have encountered endless cases whereby the debtors are at a complete loss and really struggling under the duress being applied by institutions in terms of debt recovery,  An observation would be that the solicitor or accountant in many cases who is introduced to assist the case, actually fails to understand the process and policy of the bank therefor is not in a position to bring forward proposals in line with banking policy, resulting in an impasse.

Thankfully, through our team at GDP partnership based in Belfast and Dublin,  where we have invested in a group of highly skilled multi disciplined people who are sympathetic to the borrowers position, have been able to mitigate this problem in some way, however there is so much more work to be done. Indeed there have been a number of cases in the past twenty four months whereby we would have encountered very distressed borrowers who are in a seriously fragile mental state and have lost all hope in the process and challenges they face.  So I think Mr Norris timely airing of the connection with suicide cases and the debt burden in the country can only be a positive development.

There is a saying that in every bad situation there is good come out of it.  Lets hope that some of the mistakes of the past in this financial arena are acknowledged and rectified in the future so we are not talking about the disastrous subject matter of suicide in the same sentence as the debt burden facing Irish society.
  
Author: Conor Devine MRICS
Partner


 

Banks Not Passing Rate Cuts on...!

Earlier this month, the European Central Bank cut interest rates to a record low level. This was the first cut in just over ten months and whilst the new 0.50% rate is as low a rate that has ever been seen in the Eurozone, the ECB also indicated that there was the possibility of further action in the future.

Sounds good, but it gets even better. As well as providing as much liquidity as possible to the banks and helping smaller firms to access credit, Mario Draghi, the ECB president also suggested that they were 'technically ready' to cut their deposit rate from the current 0% into negative territory. This means that they would start charging banks for holding their money overnight encouraging them to lend more money rather than deposit it at the ECB.

So we've got record low interest rates and banks being encouraged to lend. It sounds ideal but the benefits are stopping well short of those who need it most. President Michael D. Higgins has said that the banks need to restore trust and confidence, I couldn't agree more. Since 2008 they have largely been the villains of the peace and trust is at an all time low, rather like those interest rates that I started this article with.

The Irish Banks have chosen not to pass on the interest rate cuts. Everyone, rightly questions why? Senior Bank Officials regularly trot out the same rhetoric, 'If we pass it on, it will ultimately cost the tax payer more'. That' s only if they avoid another bailout which in my opinion is unlikely. The standard mantra seems to be the taxpayer pays, the taxpayer pays, the taxpayer................pays. Banking is such an easy game!! For the lucky ones who own a 'tracker' mortgage the banks have no option but to pass the rate on. For all other class of borrower, there is a degree of discretion on behalf of the bank. Rather bizarrely, earlier in the same week that the ECB cut rates, the so-called pillar banks raised them for certain types of borrowers. There is absolutely no way that trust can be restored when this happens, it's quite simply counter intuitive. I also associate the word 'pillar' with an upstanding, contributing member of society. Perhaps there is a better description.

 

Up until recently, mortgage interest rates in Ireland closely tracked movements in the ECB's main refinancing rate. This occurred because of the higher proportion of tracker and variable rate mortgage products in the Irish market which are linked to the ECB's rate. But the banks have been hammering away at you all long before this month, over the past nine months, prior to this rate cut, the average Irish interest rate on outstanding mortgages had already diverged from the ECB's main rate. The ECB's main refinancing rate has remained constant at 0.75%, whilst the applicable Irish rate increased by 14 basis points. Naturally enough this divergence is increased even further by this most recent cut. The domestic banks are clearly breaking from their traditional policy of automatically passing on rate cuts.

 

Why is this happening? Banks traditionally lend long term in the form of mortgages and term loans but borrow short term from their own deposits and the money markets. Quite simply the cost of their borrowings in the short term market have increased following the global financial crisis and as well as losing money on their loan to book values they are also losing money on the difference between the rate they have lent long term and the rates at which they are able to borrow.

 The borrower is taking all the hits and being pushed closer to the edge of despair. The banks had a duty of care when they lent you the money, they have a duty of care throughout the term of the mortgage and they have a duty of care when you are in difficulty and need assistance in solving your difficulties. There has been a certain amount of wilful neglect at each level. We see many borrowers in Ireland who have not made any payment on their mortgage in several years, this is incomprehensible but is a fair indication of how far the situation has deteriorated. Denial on behalf of the bank and the borrower has only made the situation far worse than it needed to be.

There are very few positives to find for the borrower that is being pushed around. The banks most recent methods to address the problem in the Republic of Ireland, split mortgages may solve some of the immediate problems but will present more issues long-term and many of these may be more unmanageable. Those with tracker mortgages remain in a stronger position but should resist any temptation from the banks to change these. In years gone by the borrower has been sold the 'pup' with the like of endowment mortgages, now that the banks are on the wrong end of one of their products, let them sit with it and resist any attempt luring you to change to a variable or fixed rate mortgage.

My own personal view is that this thread is going to run and run and whether you reside in the Republic of Ireland or Northern Ireland you need to watch this space very carefully to see what develops.

Author: Nick Leeson – Principal at GDP Partnership www.gdpni.com

The bottom of the Property Market?

I see in Dublin today news has been released that USA real estate and finance company Kennedy Wilson have secured an high end Investment portfolio of offices for some €305m euros.  This is a significant deal in anybodies world and certainly another one to note down in what some say is a turning point in the property market in Ireland.
An observation over the past 6 months would be that certainly there are a number of high end institutional type investors circling the skies of Ireland eyeing their prey trying to swoop in and pick up what they deem to be excellent value in the form of bricks and mortar investments.  This would lead many to believe that the property market in ROI is maybe at the bottom and trundling along the seabed.  My own view would be that yes there maybe an element of truth in this analysis.

Most transactions that take place in the property market either inspire confidence or a lack of it and I would suggest that the perception of this deal and others like it will certainly add confidence to the market place as a whole.  Lets face it although Ireland came last in the Eurovison song contest at the weekend, we would certainly top the polls globally right now in terms of a market place which is highly fragmented and seriously risky, and rightly so.

The health warning on this would be that all of these deals are being done at huge discounts which ultimately will have a ripple effect across the market place and send shock waves through each of the board rooms of the banks.  However to get any form of stability back into the market place this has to happen so from the property markets perspective I certainly welcome news of Kennedy Wilson's deal.

Have we reached the bottom of the market - I don't think so and my reasoning for this is that there is a fair amount of sorting out to be done in the Irish banks before we hit the bottom of the market.  Sure the housing market in areas of Dublin seems to be strong and the demand for product is good however once you start to leave Dublin you can take your pick from the hundreds of houses that have been on the market for over two years - this trend is continuing and likely to do so in the short to medium term.

From a commercial point of view with one bank in Ireland clearing the decks and all the others deleveraging and shrinking their loan books more product is going to come to the market place in the coming period.  So I believe its slightly premature to call the bottom of the market.

Ultimately Ireland's property market - North and South will start to pull out of this and confidence will come back as the banks strengthen their positions and start to lend again.  However I wouldn't be putting the kettle on for this  to happen anytime in the next couple of years.

Author: Conor Devine MRICS Partner GDP

Debt Write down - Let's get on with it....

 

2013 is moving at a hectic pace and it has to be said that the doom and gloom regarding debt in Ireland hasn’t gone away.  Banks across the island are not in good shape as they struggle to work out how to deal with the massive debt overhang from the glory years and also how they deal with borrowers who are running out of money.  Our practice is currently working in this space trying to find solutions to this problem in both jurisdictions. It is very interesting and more so frustrating to watch the whole process play out BETWEEN Banks and Borrower and indeed Government .

Memo to anyone who is reading this -   Debt is an affordability issue – if you cannot afford to pay a mortgage (s) every month, then you cannot afford to pay.  GDP Partnership is still the only practice in Ireland who is promoting Mediation as a way to sort the debt issues facing most of the country.  We have found that over the last twelve months the banks in Northern Ireland are now becoming more open to this form of solution all be it very slowly.

 In the Republic resolution was at a standstill for the past few years, as the nation waited for the introduction of the miracle Insolvency bill which many of the politicians must believe will sort the whole problem out.  Unfortunately our view is very clear:- The new legislation will not sort the problem out as for one the bank has a veto on the SOLUTION.  This simply will not work and is a missed opportunity for the country as a whole.

We have noticed in the last month or two that banks in the Republic have upped their game regarding dealing with borrowers and calling them in.  There is no coincidence that this new approach is tied in with the pressure the IMF and Irish Central bank have been putting on Irish banks to deal with the debt problems and correct their widely impaired balance sheets.  This is a fundamental problem within the Irish banking sector today.

Former President of USA Bill Clinton said in October 2011 on a visit to the Emerald Isle that “Economically, Ireland will not move on, until there is debt forgiveness” – interesting thought.

This is coming from a man who lives in a country whereby the banking sector deals with debt predominantly by writing it down to a dollar and starting again.  There is a lot to take out of this as my fear is as we are now in the sixth year of this recession which has turned into a depression for many, and unfortunately most banks are continuing with this slow death policy.  We have many clients on our books that very clearly have lost everything in the last few years and in many cases their whole life’s work, and the banks are still saying – we want all our money back, we want more security, we need a better return.  Quite frankly – it’s not going to happen.  People need to remember that everyone restructures their debt and most notably in the past five years Governments and a range of Financial institutions.  Our whole philosophy at GDP partnership is very simple – Why is it so unrealistic or unreasonable for a borrower to do the same thing as banks who have already restructured?  The simple answer is, it’s not.

Ireland is facing one of its worst crises in modern history.  Sure there are some who are taking their money out of the banks and buying property to get a return at low ball sale prices.  However many people are living on the edge or very close to it.  It’s a precarious situation to be in and there is a lot of spin and incorrect PR being printed in publications about green shoots and economic recovery. The facts are simple; there is too much sovereign debt, SME debt and consumer debt in the country.  The banks need to genuinely engage with borrowers and agree to restructure loans in such a way that is fair for all. Banks were a major part of the problem but must be brave enough to become an equally important part of the solution. 

Bankruptcy is not the solution and certainly not the answer albeit many professional organisations seem to be in favour of it – I wonder why that is? The new insolvency law in Ireland is clearly designed to punish people, and considering debt problems occur as a result of a life event, you have to question the mind-set of the people who drafted such legislation – they themselves need a holiday and some time to unwind and clear their own heads I would suggest.

Mediation is the way forward and our practice for one will continue to fly the flag for this type of solution with the hope that the banks be a little bit more open to this type of approach and embrace the opportunity to sort the issues and move on. 

I agree with Bill Clinton and it has been proven in other parts of the world over the last fifty years that debt forgiveness / debt write down or whatever name you want to call it, is what needs to happen sooner rather than later if the country is to start pulling out of this dreadful situation we all find ourselves in.

Conor Devine MRICS is Principal at GDP Partnership Belfast and Dublin

Twitter: @Conor_Devine  @Gdp_Partnership

Green Shoots in The Irish Economy - Really?

Multinational companies who have relocated to the Republic of Ireland for tax purposes without investing in the country are distorting the economic statistics and exaggerating its export led recovery reports the FT in todays publication. An example of the distorted statistics is; in 2012 the official current account surplus was 6.1% of gross national product but that falls to 0.6% when the retained profits of these foreign companies is removed.

This distorted data is leading the Republic of Ireland into a false sense of security as there is less room to increase domestic productivity and demand. The Irish economy’s competitiveness and  ability to service debt is hugely exaggerated in the official figures being released to the public.  Therefore the Irish economy may run into significant head winds when they exit the bailout programme in the near future

 

This flaw in the statistics was discovered when official data on foreign companies was release for the first time to economists outside of Ireland’s Central Statistics Office. It would appear that the establishment in the Republic of Ireland are trying to gloss over the inherent structural problems in the economy by broadcasting that there are green shoots appearing. However this may not be the case

 

One of the main constraints on domestic productivity and demand is a lack of credit, this is preventing any green shoots appearing. Credit is mainly controlled by the Banks which as well all know have massive issues with their loan books. Only when banks address their loan books and deal with both personal and corporate debts will credit flow again and allow the real economy to function. The most efficient and effective way to deal with this debt issue is by mediation, whereby Bank and Borrower work together to achieve a amicable solution. GDP Partnership have pioneered mediation between borrowers and banks and have successfully resolved numerous debt issues to the benefit of both borrower and bank.

We would expect this trend to continue in the next three to five years as the banks start to recognise Mediation with the borrower as the optimum solution to the problem.  In the meantime we recommend you treat data and statistics released by government and other sources, which relates to green shoots for the economy with caution.

Author: Louis Waters ACA Senior Relationship Executive

 

HAS THE PENNY FINALLY DROPPED WITH BANKS?

 

The alarm went off at 5.30am this morning and it was cold and wet out, but no rest for the wicked as I needed to catch the 6.50am train to Dublin to get to our office on Harcourt Street.  The business is going very well in Dublin as we hoped it would and certainly with Nick joining the team; it has added a new dimension to the offering.

As I settle into my chair in a packed train, I flick open the Irish Times and the headline hits me straight between the eyes”Deal may help tackle borrower debt arrears”!  Basically the banks were announcing a pilot scheme whereby they were inviting borrowers to negotiate with them regarding property loans through the platform of mediation.  As I continued to read on, it became very clear that in fact this was an unprecedented article I was reading in terms of the banking crisis in Ireland. 

My first thought was to call the office in Belfast to make sure our GDP Code of Practice manual hadn’t been lifted by one of the banks in the past week or so.  We set our practice up over three years ago, telling people that Mediation was the way to solve the issues between the borrowers and banks.  For a long time, many professionals dismissed the idea with the reason being, banks don’t do deals, you are wasting your time.  We focused early on in the business to get a better understanding of banking policy and also work on our approach in terms of providing solutions to the significant problems out there and how we would present them to the institutions.  Our resolve was never broken throughout the early years of the business, and we stuck to our guns in trying to persuade the banks that it’s much better for all parties to mediate your way through the headwinds as opposed to gridlock and war between both parties. 

Thankfully in the last twelve months in NI our hard work seems to be paying off and we have reached a number of successful conclusions on impaired loan facilities and we feel have made a very positive contribution both to the borrowers position and ultimately the banks position.

My concern for ROI has always been high as there has historically been an obsession to ignore the problem and kick it down the road like the government has done with the sovereign situation.  However what we have seen in the past few months is that the banks in ROI have changed their approach to this issue and are now prepared to tackle the significant challenges out there.  There is no doubt that the pressure being directed at them by the IMF and the Central Bank has made an impact on their polices, which ultimately can only be a good thing.  So when I read the Irish Times this morning my thoughts would be that this new approach has to a be a welcomed development.

What we all need to do as an island is deal with the debt problem and let the country breath again.  We are financially and emotionally bankrupt and we need to identify the problems quicker, work on a solution and take action now – fairly straight forward.

So as I travel back to Belfast this afternoon and reflect on another very busy day in our Dublin office, just maybe the penny has dropped with Banks in Ireland that the idea of attempting to punish people and being confrontational with borrowers is maybe not the best way to deal with this crisis.

 

Author: Conor Devine MRICS  - Principal GDP Partnership