It's early evening and Amy Murphy, a young bank worker, is talking through a headset to a customer who's missed last month's mortgage payment. The conversation is polite, but assertive. The customer has explained that his cheque for tax relief at source for his mortgage was delayed.
She advises him of his options – noting that a missed payment could affect his credit rating. They agree a new payment for the overdue mortgage – and for the following month’s payment.
“The majority of calls we deal with here are at an early stage,” Murphy explains, after the call has ended. “It was good we called him – as it didn’t seem like he was interested in calling us about it. In the end, he was more than happy to give us the information.”
There’s little time to wait around. He’s just one of 60 customers she’s due to deal with over the course of the day. Amy is one small part of the “arrears support unit” at KBC bank. It has about 35 staff working the phones in shift from 9am to 9pm. In all, the bank has some 200 staff involved in collecting outstanding payments from customers.
The arrears support unit alone makes in the region of 40,000 calls a month, and receives some 15,000. Around the open-plan office in this first floor of KBC's Dublin headquarters are colour-coded bar charts and graphs that show the performance of each employee in recovering arrears. On one wall is the image of a rocket hurtling to Mars, whizzing past various numbers. The figures represent the number of serious debtors the team hopes to get on its long-term mortgage arrears resolution strategy (Mars) plan, a move the Central Bank has forced all lenders to do.
On another is a poster: “Effective listening + questioning/challenging = results.” Right now, It’s approaching peak time for the arrears support unit. Mornings are best for customers contacting the bank, generally between 9am and 9.30am, as people arrive at work or open their post. But evening time is best for reaching customers, generally between 5.30 and 7.30, as most people tend to pick up the phone then.
AIB operation
Over at AIB's sprawling headquarters in Ballsbridge, the scale of the operation is greater still. Here, between 1,200 and 1,300 employees are spread across the building, with the same aim: ensuring customers keep up repayments and don't fall further behind on their debts. They are dealing with some 45,000 accounts that are in arrears, ranging from anything between €5,000 to €50 million.
A computer automatically dials the numbers of customers in arrears as members of the collection team wait for an answer. In addition, staff at the bank’s 200 branches engage with the customers if they require follow-up attention. It’s a similar story at Permanent TSB’s headquarters in Dublin.
The arrears collectors are divided into teams who compete against each other for who can collect the most in a given day. A monitor shows everyone how much has been collected, compared to the daily overall target.
None of this existed a few years ago. It was a different era when banks dispensed lavish loans for frenzied property developments and accumulated eye-watering profits. The odd loan – in relative terms – went bad, but it was nothing to worry about. Giving the money away is one thing; getting it back is another. Now, banks are in the process of transforming themselves from being money lenders to debt collectors.
The stakes are high. Almost 100,000 homeowners are in some form of arrears, with debts worth about €25 billion. That’s not counting unsecured debt for credit cards and smaller loans. Despite the scale of the problem, it’s only now that banks are being forced to face up to the full scale of the challenge ahead. Until now, the most struggling borrowers could hope for were short-term fixes such as interest-only payments for three or six months.
New legislation
This has left them in a twilight world, with no realistic chance of being able to move on. They may all be about to change. Now, a combination of new insolvency legislation and directives from the Central Bank are putting more permanent solutions into sharper focus.
In recent weeks the Central Bank set six of the State’s main mortgage lenders targets to offer borrowers “sustainable” restructured loan arrangements. These banks have until the end of the year to offer debt solutions to half of people in arrears. Banks that do not meet the targets will be penalised.
Debt resolution and insolvency arrangements due to come into force midway through this year could also help force the banks into action. They will be overseen by the new Insolvency Service of Ireland. For the seriously indebted, insolvency may offer a seductive escape route from debt. After five or six years, a debtor could emerge from a personal insolvency arrangement, living at home and with much of their debt written off.
Banks will hold a veto on all insolvency arrangements. But a debtor can always threaten the nuclear option of bankruptcy – to be reduced from 12 to three years – later this year.
New energy
Brendan O'Connor, AIB's head of financial solutions, acknowledges the banks – including his own – have not acted quickly or enough in tackling the problem of homeowners in serious debt. But he says there's a new energy about working out potential longer-term solutions that work for both debtors and creditors.
“The longer-term restructuring will happen, but like any deal, there’s a bargain that needs to be struck on both sides. It’s not in our interests for someone to feel like they’ve gotten a very raw deal, because chances are it’s not sustainable in the longer term... our job is to figure out a deal that is better than insolvency.” By way of example, he says that month alone AIB sent out 1,400 letters to customers offering split mortgages, which allows a debtor to park some of their debt at 0 per cent interest.
At KBC Bank, executive director Christine Moran says it has been working on long-term solutions for customers for a long time. While she says it fully respects the right of any customer to enter the personal insolvency process, she says the bank feels it is engaging constructively with the vast majority of customer as things stand. "We don't see a reason why a customer would need to go elsewhere," she says. "Our customers are very important to us. We've invested hugely in the area of arrears management to get the majority of them into a soft performing status."
Hard days of reckoning
Much of the language used by the banks surrounding the collection of debt resolution can sound soft and fuzzy. They talk of support units and outreach teams. But there are some hard days of reckoning for some who have refused to engage with banks. Bank officials privately talk about a small proportion of strategic defaulters who they are aware of: some who have simply abandoned their properties, or have rented out their indebted properties and are parking the rental income elsewhere.
Repossessions
Repossessions, in these cases, are a certainty. But most say they do not envisage taking a family home off anyone who had made a meaningful attempt to engage with them. But there are also heartbreaking stories of people mired in debt who see no way out, regardless of all the talk of new deals and insolvency arrangements.
David Hall of the Irish Mortgage Holders Organisation advocacy group in Dublin has met many of them. He worries that the despite all the solutions being offered, many still may not see a way out. "Five years into the crisis and latest figures show there have been 52 split mortgages offered, six trade-down mortgages and eight mortgage-to-rent arrangement," says Hall. "That's 66 arrangements out of more than 100,000 people who are in trouble."
Back at KBC bank, the slow-grinding work of collecting debt continues. Here, amid the din of chatter, missing a phonecall is a mortal sin. It could be a chance to get a customer to repay some of their debt, or agree a repayment plan.
A constantly updated graph on the wall shows the the number of calls missed. It’s only a handful so far today. Over in the far side of the room, where the more difficult cases of debt are dealt with, it is quieter. Here, the team deals with cases that can involve anything from illness to death. It’s a reminder that resolving the country’s personal debt problems will be complex, time-consuming and anything but easy.
