The results of the Personal Insolvency Survey provide a good insight into people’s perceptions of the new insolvency process. Information and trust are basic requirements for any system to work and it seems that both the banks and government are failing in this regard regarding the new personal Insolvency processes becoming available to people shortly.
The survey has given a clear indication that there is a significant information gap about the insolvency process. 79% of people surveyed said there was not enough clear information on the insolvency process. This reflects the fact that though there has been patchy media coverage and specifically very little comprehensive explanation of not only the process of insolvency but the specific outcomes for people. Banks have insisted that each case is different and needs to be dealt with individually. This is in fact incorrect. Most insolvency cases are the same involving home and buy to let mortgage difficulties which need significant write down. There may or may not be additional unsecured loans which have to be dealt with as well. That type of case will account for over 95% of cases.
Also another information gap has been the total lack of any updated information from the Insolvency Service of Ireland. Since its launch in April their web site has not had one single update! This is not very comforting for the thousands of people waiting on the opening of the service.
Family Home Protection
The corner stone of the Personal Insolvency Arrangement is the protection of the family home and over 54% of the people surveyed were not aware of the protection for the family home. This is a major information gap which needs to be filled without delay. This is information the lenders will not wish to publicise but which needs to be given in order for people to understand properly their options.
Trust is an issue for both government and banks on the implementation of the insolvency process. 88% of people indicated they did not trust the banks to engage with the process. A shocking reflection on people’s current experiences with the banks who say they are engages and it is people who are not! The banks have a long task ahead of them if they are to convince people to enter into voluntary arrangements with them as they are currently advertising.
There has been a significant out cry about the public register with good reason but the results in our survey surprised me. My experience has been that most people are not too worried about the register as they consider it part of the pain they are taking for their part in not being able to pay their way. However, over 71% of people have indicated that they would be deterred from the insolvency process because of the existence of a public register.
To get over this issue I think the ISI should introduce a charge of €50 for accessing the register which will ensure only people who need to access the information will do so.
High loan repayment levels
The survey showed that over 71% of peoples mortgage repayments were over 35% of their net monthly income. This reflects the fact that people are still very much over borrowed and not being able to partake in the normal activities of an economy because they are paying too much in loan repayments. This is a very worrying fact since there are large numbers of people on interest only loans as well as very low trackers. If interest rates begin to rise and interest only periods end there will be more trouble ahead for both lenders and borrowers.