According to the Third Report of the ABHAILE Scheme, some 14,319 Personal Insolvency Practitioner (PIP) vouchers were issued between mid-2016 when the Scheme began and December 2019 (p.18). It should be noted here that PIP vouchers are provided per borrower, not per mortgage, and so the number of mortgages involved is less. Of these, 10,073 have been presented for payment. At €500 plus VAT of 21 per cent per voucher, this equates to a value of €6,255,333 redeemed out of a possible €8,892,099.
A breakdown of the outcomes for the 10,073 borrowers who presented their PIP Vouchers for payment (p.22) indicates less than 2 in 5 (39 per cent, n=3,929) have a solution or trial solution in place.
Just 23 per cent were granted a Personal Insolvency Arrangement (PIA) (n=2,357); a further 13 per cent entered into an informal solution with their lender (n=1,336), either an Alternative Payment Arrangement (ARA) or Mortgage to Rent (MTR); and just 2.3 per cent were made bankrupt (n=236).
Of the 41 per cent who were progressing solutions (n=4,130), 2,015 (20 per cent of the total) were in progress to a formal solution (PIA or bankruptcy) and 2,115 were in progress to an informal solution (21 per cent of the total).
The remaining 20 per cent of borrowers who accessed a PIP voucher either surrendered their property or had it repossessed (2 per cent, n=201) or disengaged after advice (18 per cent, n=1,813).
So, for €6.25 million, less than half of all borrowers who presented their PIP voucher for payment (n=4,608, 45.7 per cent) had accessed or were in the process of accessing an insolvency solution. The 3,451 (34 per cent) who accessed or were in progress towards an informal solution could have achieved the same result by accessing MABS’ free money advice supports without the need to access a PIP.
Too Poor for Insolvency
The ABHAILE Scheme as currently constituted is supplementing PIPs in the private sector for an initial consultation. More than one third of borrowers who access these private operators do not go through insolvency processes. Instead, the PIP provides private debt advice services (which is independently regulated by the Central Bank of Ireland, not the Insolvency Service) at a cost of €500 plus VAT per borrower. A debt and money management advice service was already being provided by the State through MABS since 1992 and those who wished to access the services of private debt advisors, this service was and remains available. It makes no sense that the State would also supplement private operators in this area.
The 41 per cent of borrowers who have or are in the process of accessing formal solutions must have sufficient funds within their means to include the payment of ongoing private PIP fees. There are borrowers who do not have these funds. They are too poor to access an insolvency arrangement.
What is needed is a Public PIP Service. A national, State-funded service (which can be operated nationally or regionally) to provide supports to borrowers throughout the formal process. This would also include access to Debt Settlement Arrangements (DSAs - an insolvency arrangement that is available for an insolvent borrower in respect of their unsecured borrowings only. The borrower may have secured debts, such as a mortgage, however this would not be included in the DSA. This type of arrangement can be helpful for borrowers who are overburdened by unsecured debts but who, if they had those under control, could otherwise pay their mortgage) in addition to PIAs and Bankruptcies.
The Public PIP Service could be situated within MABS Regional Structure and consist of an initial 8 FTE PIPs (one per MABS Region) with administrative supports of 4 FTE. This would incur an estimated cost of less than €2 million in year one, being more cost effective, and provide a more holistic service, than the current voucher arrangement.