AIB sues more than twice as many borrowers as Bank of Ireland

AIB has scaled back its use of the hawkish "summary judgment" debt recovery tactic, but remains, by far, the Irish lender most likely to sue its customers in the High Court, according to an analysis of official records by The Irish Times.

AIB applied for debt summary judgments (where a bank seeks an immediate court ruling against a borrower without a trial, gaining recourse to any and all of the borrower’s assets) on 755 occasions in 2017, court records show.

This is 37 per cent down on its peak in 2016, when it was four times as likely as its nearest rival, Bank of Ireland, to seek a summary judgment. It sought 308 summary judgments for unpaid debts against its borrowers last year, down from 326 the previous year.

Danske Bank, which has effectively withdrawn from the Irish market but is working through its legacy loan book, had a near 70 per cent reduction in the volume of its applications for debt summary judgments last year to 33. Belgian bank KBC, meanwhile, trebled its volume of applications to 141.

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After the two pillar banks (AIB and Bank of Ireland), the entity most likely to take a summary judgment action in the Irish courts is Mauritius-based Ecology Support Services (ESS), which in recent years bought a portfolio of loans linked to a tax avoidance scheme used by wealthy British investors, reportedly including several football stars.

ESS filed 265 such actions in the High Court last year, apparently on the basis that the original loans that were integral to the tax avoidance scheme specified Ireland as the relevant jurisdiction.

High Court records reveal that among those who ESS is pursuing in Dublin are Phil Jagielka, the former Everton captain, and Antonio Nunez Tena, who played for Liverpool but now plays in Spain.

Vulture funds

While mainstream banks, with the exception of KBC, are scaling back their use of summary judgments against errant borrowers, the so-called “vulture funds” that bought portfolios of distressed Irish loans during the crash have cranked up their activity.

US group Carval, which bought consumer as well as property loans, filed close to 190 summary claims in 2017 in Dublin, a four-fold increase. Entities associated with Goldman Sachs, meanwhile, made 251 such applications, a six-fold increase. US operator Cabot, which owns mainly old Ulster Bank loans, reduced its level of summary applications by more than half to 55.

Distressed asset funds argue that they have only scaled up their level of court applications so dramatically because they are reaching the most errant borrowers at the bottom of the pile.

Summary judgments are considered an especially aggressive tactic because, once granted, it gives the lender the opportunity to chase assets that were never pledged as security for the original loan. In extreme cases, it is often the first step in bankrupting a borrower.

AIB said it always seeks a consensual agreement with borrowers and only resorts to the High Court “where a borrower does not fully engage”.

Bank of Ireland also said it is a last resort: “Bank of Ireland takes summary judgment proceedings in circumstances where the bank determines that the borrower is in a position to repay the money owed.”