Speech By Minister Tom Kitt At the Launch of the MABS/IBF Debt Settlement Pilot

Ladies and Gentlemen,

Introduction

It gives me great pleasure to be here this afternoon to officially launch the Pilot Scheme for Alternative Debt Settlement. I would like thank you for your kind invitation and to extend a very warm welcome to all.

Congratulations

This is a practical example of working together in an innovative and imaginative way to reduce the problem of overindebtedness. I wish to congratulate the MABS team, Liam Edwards, National Co-ordinator, Money Advice Co-ordinators Catherine Collins, Dun Laoghaire, Caitríona Ní Charra - Galway, Martin Bolger - Bray and Colin Daly - Coolock Community Law Centre and in particular Paul Joyce, Free Legal Advice Centres who brought his vast knowledge of Debt Settlement legislation in the various European countries to the discussions.

I wish to thank Jim Bardon, Director General, Irish Bankers' Federation and Felix O'Regan, Communications Manager who drew on all his skills to Chair the Working Group, members from the various banks and later members of the Irish Mortgage and Savings Association.

I highly commend all parties for concluding this agreement.

Money Advice and Budgeting Service

The Money Advice and Budgeting Service is an extremely positive development in measures to combat overindebtedness in Ireland in the last decade. When it was first established on a pilot basis in 1992, some creditors may have been apprehensive at third party intervention between them and their customers. This Pilot Debt Settlement Scheme is evidence that this apprehension no longer exists.

I understand that lack of communication can be very frustrating for a creditor when their client defaults on a payment. The consumer, on the other hand, may be suffering an apparently irreversible economic situation, in danger of losing the family home and unable to deal rationally with a multiplicity of creditors. MABS will help to reopen communication and this is now regarded in a positive light and welcomed by the vast majority of creditors. In many instances, creditors will refer a customer to their local Money Advice and Budgeting Service.

A Legislative Framework

The Money Advice and Budgeting Service is well and truly past the pilot stage. My colleague, Dermot Ahern TD, Minister for Social, Community and Family Affairs, has proposed to give formal recognition in legislation to the service and the excellent work it is doing. The Money Advice and Budgeting Service Bill has been published on 8 March 2002.

MABS and Consumer Affairs

My own Department has an ongoing association with the Money Advice and Budgeting Service. The MABS had a substantial influence on the development of the Consumer Credit Act and maintains a close relationship with the Office of the Director of Consumer Affairs.

Pilot Debt Settlement Programme

The Pilot Scheme for Debt Settlement, as an alternative to the costly and time-consuming legal system of debt enforcement, has been agreed as a result of a series of meetings between the Money Advice and Budgeting Service and the Irish Bankers' Federation over the last three years.

It is designed to help debtors, who are in receipt of advice from a creditor that legal action is being considered, to address the problem of their debt and with the assistance of a Money Adviser, to formulate an affordable repayment plan.

An independent Conciliator, Colin Walker a former Rights Commissioner, has been appointed to facilitate agreement between the parties and where necessary determine a debtor's admissibility to the programme. Full disclosure of information by debtors to both creditor and to the Conciliator is an essential feature of the programme.

A Steering Group, representative of all key parties, will be established to oversee the operation of the Pilot.

The Pilot Debt Settlement Programme, has been endorsed by the National Advisory Committee of MABS and the IBF Council.

The lessons learned from this pilot will inform future policy in relation to alternatives to resorting to the Courts in cases of non-payment of consumer debts.

Conclusion

It is encouraging to see that many credit institutions and statutory creditors are represented here today. I would like to avail of this opportunity to thank you for your co-operation with the Money Advice and Budgeting Service to date.

It was a major achievement for the MABS, the Banks and other creditors to reach agreement on this Pilot and the process by which this agreement was reached has also helped to raise awareness of the human side of debt with those working on the frontline in debt recovery in the financial institutions.

I wish you every success in this enterprising scheme. It will be welcomed by overindebted consumers and I'm sure that it will also prove to be productive for creditors.

Thank you.