Friday, 21 October 2011

Mortgage Arrears – the Supervisory Strategy of the Central Bank of Ireland

Matthew Elderfield, Head of Regulation, Central Bank of Ireland – October 14th, 2011

I attended this UCC FSIC (Financial Services Innovation Centre) and ACOI (Association of Compliance Officers in Ireland) sponsored event last week and found the subject matter of Matthew Elderfield's speech entirely relevant not just to the domestic mortgage sector, but pertinent to all utility providers servicing the Irish market in the current climate.

In his introduction, Mr. Elderfield stated “…I would like to focus on the very difficult issue of mortgage arrears which is a top priority for the Central Bank.  I welcome the opportunity today to outline in turn the different elements of our supervisory strategy in this area.  I will also tell you about the new work the Central Bank is undertaking in this area which will involve setting out our expectations on the structures and processes regulated lenders should put in place to handle their arrears……………..”

“The significant increase in arrears over time is clear  – the number of primary dwelling mortgage loans in arrears of more than 90 days past due, increased from 3.3% in September 2009 to 7.2% in June 2011.”

Such is the challenge of past-due payments, some utilities i.e. electricity, gas and telco providers have already recognised they need to proactively engage with their customer base struggling to pay their bills.
This engagement is not a simple task; it requires an expertise in debt arrears management - expertise in both systems and people.  At SouthWestern, because of our knowledge and experience in such a space, we are working with leading companies in the energy, telecoms and mortgage book sectors, helping them to do just that – recognize the early signals of payment difficulties, engage with their customers fairly and transparently, to offer options, e.g. payment plans or in the case of utilities, pay-as-you-go meters.

Only last week, Bord Gáis reported that “1 in ten customers are in arrears of €100 or more on their bills.  However, the number of customers in arrears of 60 days or more is down from 115,000 in May to 103,163 at the end of September. 

Bord Gáis said it has been proactive in managing the issue of bad debt. The rate of disconnections has fallen 33%, from 3,540 between January and August 2010 to 2,393 between January and September 2011.
The company said disconnection is an "absolute last resort" for customers who do not engage with them to agree a repayment plan or a pay as you go meter.

Bord Gáis has agreed 63,000 payment plans with customers already this year compared with 31,500 for the whole of 2010.
It has installed 13,161 pay as you go meters this year against just under 1,000 in the same period last year.”

By deploying an agreed system of debt management, SouthWestern clients are making significant inroads in their overdue accounts numbers while at the same time maintaining the relationship with their customers for the longer term. 

Our ongoing work with existing clients in the utilities and mortgage book space reflects the good supervisory systems that Mr. Elderfield is looking to achieve in the domestic banking sector.

1 comment:

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