Banks shout loudest as Mabs tries to clear the debt mountain

Outside Storm Rachel is making its presence felt in the seaside town of Bray on a cold Thursday in January. Inside the local Money Advice and Budgeting Service (Mabs) office, it’s a more peaceful environment, as the storms of the financial crisis show signs of easing.

Times have moved on from the "frantic" days following the economic collapse, when the waiting list for some Mabs outlets was as long as 20 weeks. But this doesn't mean that the problems people are facing have gone away.

For co-ordinator Deirdre Rice, who has spent 17 years working as a money adviser in Bray, the problems faced can be summed up as a combination of "inappropriate spending, inappropriate lending" during the boom. She cites the example of a 50-year old woman who is in trouble with her mortgage – the mortgage was guaranteed by her now 84-year old father who was 72 at the time of the loan.

Mabs is the State’s money advice service, helping the indebted get back on their feet at 65 locations nationwide. In Bray, Mabs employs five staff and is housed in a welcoming Georgian building off Eglinton Road. After all, it’s a big step for many people to cross the threshold.

Pride, shame and denial are some of the emotions felt by those who seek out Mabs, but it promises a “no judgment” approach. Ostensibly, the role of a Mabs money adviser is to provide free, independent, confidential advice to help people become financially independent in the long term. Negotiating on a client’s behalf with their creditors is a key part of this.

Stressful

The office can be an emotional place and there are tissues on every desk in Bray. “Sometimes we’re the very first person they can let it out to. Sometimes they break down, and they can be so professional at the beginning of the interview,” says money adviser

Martin Bolger

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For the advisers themselves, it’s not always an easy job. “It is stressful but it gives you great satisfaction if you can help,” says Rice, noting staff will promptly refer a client to a professional counsellor or their GP if appropriate.

One of the first steps a Mabs adviser will take will be to assess the scale of the problem a person faces. But it’s not always straightforward, with the advisers noting that sometimes they will almost have an arrangement in place, only to be told the client forgot another debt. In other cases an individual may not be fully informed about their financial situation, a situation that can often arise in couples.

"They may not have discussed issues between them, and so we're the first people to hear the full story," says adviser Fiona Cleary.

"A common issue may be a civil summons in a mortgage, but that could be for six months down the road, and we might realise that the most pressing problem is disconnection of ESB or gas," says Bolger.

Typically, the “louder the creditor shouts” the more likely it is that they will be repaid. And who’s shouting loudest at the moment? “The banks,” says Rice.

Although it has been very much a case of “kicking things down the road” over the past few years, recent months have seen a spurt in mortgage arrears cases making the courts.

If a case does go to court, Bolger says the "odds are stacked in favour of the banks", as the debtor typically has no legal representation. It's not an area Mabs can assist with and while the Legal Aid Board does offer free legal aid, it can be difficult to access.

Moreover, there are fears that rising property prices in the Bray area mean that banks are more prone to push people to sell their property – particularly if there is equity in it – rather than restructure the loan.

Dealing with the banks is an emotional experience. “A lot of people are quite hurt,” says Rice. “They say ‘but I always paid my mortgage and I banked with them for years’.”

The reality for those that haven’t paid their mortgage for two years is that it may be unsustainable “and sooner or later they will have to face that”.

Insolvency arrangements

Since the advent of new insolvency arrangements and a revised bankruptcy regime, options for relief for the indebted have grown, although there are grumblings about the effectiveness and relatively low numbers availing of the schemes.

Last Wednesday, for example, the Insolvency Service of Ireland disclosed the cost of bankruptcy had fallen from €1,400 to €270. Bolger promptly wrote letters to four clients telling them they should now consider this option.

For those with unsecured debt and no mortgage, opting for a debt relief notice (DRN) is a way out. However the staff ruefully note that the limit of €20,000 is too low for many customers.

Nonetheless it’s a good option for some, and last year the Bray office succeeded in getting DRNs for 18 clients out of a total of 251 nationally.

But not everyone wants a debt write-down. “I have a client who owes a debt to a funeral home for their mother. It could be written off but they don’t want that,” says Bolger.

“It’s about pride,” says Rice.