# IBF Protocol on Unsecured Credit Principles



## Brendan Burgess (31 Jan 2013)

[FONT=&quot]PROTOCOL ON UNSECURED CREDIT PRINCIPLES[/FONT]



*[FONT=&quot]T[/FONT]**[FONT=&quot]his protocol is designed to provide further support to keep people in their homes.     These principles are intended to enhance implementation of institutions’ Mortgage Arrears Resolution Strategies (MARS) and their Mortgage Arrears Resolution Processes (MARP) arising under the Code of Conduct on Mortgage Arrears (CCMA), and to assist borrowers in addressing their overall financial difficulty where they have debt with multiple lenders.[/FONT]*


[FONT=&quot]It builds on the view that, with the benefit of MARS and existing solutions, there is a full range of options to help customers remain in their homes on a suitable basis.[/FONT]


[FONT=&quot]Creditors subscribing to the protocol will adhere to the following principles with respect to mortgages secured on customers’ family homes.  The protocol will apply to those customers who are experiencing significant financial difficulty after their income and expenditure has been reviewed, who also have unsecured debt with multiple lenders, who have no identifiable means to materially improve their financial situation and who are co-operating with their mortgage lender.[/FONT]


[FONT=&quot]1.    The mortgage debt will be prioritised and serviced ahead of other debt.[/FONT]

[FONT=&quot]2.    The customer’s consent will be obtained to permit the creditors to liaise with each other in order to arrive at appropriate arrangements.[/FONT]

[FONT=&quot]3.    The customer’s financial position will be fully assessed based on the information provided in the[/FONT] [FONT=&quot]S[/FONT][FONT=&quot]tandard Financial Statement (SFS) obtained through MARP.[/FONT]

[FONT=&quot]4.    A mortgage payment will be made in full where the customer can demonstrate their ability to make a payment to unsecured creditors. To support a payment to unsecured creditors, the mortgage payment may be reduced for a period of up to 5 years as part of a sustainable long term treatment.[/FONT]

[FONT=&quot]5.    Payments made towards all unsecured debt will be apportioned on a pro-rata basis on the balances outstanding.[/FONT]

[FONT=&quot]6.    The resulting arrangements will be reviewed after 36 months by the mortgage lender, with a view to[/FONT] [FONT=&quot]r[/FONT][FONT=&quot]eflecting a material change in the customer’s circumstances.[/FONT]

[FONT=&quot]7.    Subscribing creditors will discharge the customer from residual unsecured debt at the expiry of the agreed period of up to five years provided that the customer has adhered to the terms of their[/FONT]
[FONT=&quot]arrangement i.e.  met  their  agreed  mortgage  and  unsecured repayments, and  any  terms  and conditions of their loan agreements.[/FONT]

[FONT=&quot]8.    Appropriate credit history reporting codes will be agreed with respect to customers availing of arrangements under the protocol.[/FONT]

[FONT=&quot]9.    All parties to any arrangement arising under the protocol are expected to act in good faith.[/FONT]



[FONT=&quot]In order for an institution to subscribe to the protocol they will confirm same to IBF by letter.  In order for an institution to exit the protocol, they will confirm same to IBF by letter, setting out at least one month’s notice in that letter of their withdrawal date from the protocol.  No new cases will be accepted by them under the protocol after the withdrawal date. Existing cases will continue until expiry of the arrangements adhered to under the protocol.[/FONT]


[FONT=&quot]3[/FONT][FONT=&quot]0 January2013[/FONT]


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## Brendan Burgess (31 Jan 2013)

> [FONT=&quot;]7.    Subscribing creditors  will discharge the customer from residual unsecured debt at the expiry  of the agreed period of up to five years provided that the customer has  adhered to the terms of their[/FONT] [FONT=&quot;]arrangement i.e.  met   their  agreed  mortgage  and  unsecured repayments, and  any  terms  and  conditions of their loan agreements.[/FONT]



So this is the good bit.  Mortgage lenders will accept a reduction in the mortgage repayment to allow money to be freed up to pay to unsecured creditors. 

But after 5 years, the unsecured creditors will write off the balance allowing the borrower to resume full repayments to the mortgage lender. 

This would work very well if I had a big AIB mortgage and a big AIB personal loan. I could get the AIB personal loan written off after 5 years. 


[FONT=&quot][/FONT]


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## Brendan Burgess (31 Jan 2013)

> 1.    The mortgage debt will be prioritised and serviced ahead of other debt.



seems to contradict with this


> 4.
> [FONT=&quot;]To support a payment to  unsecured creditors, the mortgage payment may be reduced for a period of  up to 5 years as part of a sustainable long term treatment.[/FONT]






If I have a mortgage with an interest rate of 4.5% and a Credit Card with an interest rate of 18%, I should pay off the credit card first. 

I should only prioritise paying off a cheaper debt, if I am going to get something in return.


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## Brendan Burgess (31 Jan 2013)

I can't see the Credit Unions going for this at all.  

Who agrees the repayment plan?  The borrower? Or the creditors amongst themselves?


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## Brendan Burgess (31 Jan 2013)

From The Examiner



> The banks are hoping that the weight of writing off unsecured debts will  be spread across the whole sector, Mr O’Regan said that there may be an  element of quid pro quo in how the scheme will operate, with banks  agreeing to write off unsecured lending of a borrower who holds a  mortgage with another bank if the second bank writes off one of their  mortgage borrowers unsecured loans.


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## ronron (31 Jan 2013)

Will borrowers be able to get independent advice regarding these proposals? I agree with your views above on the credit unions.


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## Gerry Canning (1 Feb 2013)

ronron:these proposals are practical IF you are a bank, given the mess Banks have in Mortgage area.Anyone who clears non-secured debt in 5 years will have shown a proven repayment capacity and maybe property will increase in value.Also the sweetener for the Banks is that unsecured debt has vanished. Nicely done by the IBF!! Am I missing something here ?


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