THE DEBTORS ASSOCIATION on Monday published guidelines advising borrowers of their rights and what steps they can take when being squeezed by the banks.

The detailed, step-by-step list of guidelines comes days after the Central Bank released its latest data on non-performing loans (NPLs).

Between January 2014 and end of March of this year, commercial banks restructured NPLs worth €4.9bn, or 19.2 per cent of NPLs in the entire system.

Borrowers, except those falling within the scope of the financial ombudsman laws may, within 14 days of the first bank notice proposing a restructuring plan for their debt, contact the bank and discuss the proposed plan.

Should a borrower reject the plan, or the bank fail to come up with any restructuring scheme, then the debtor is entitled to file an appeal with the lender’s dispute resolution committee. Where the borrower has rejected the bank’s restructuring plan, the committee will investigate whether the plan was suitable for the borrower.

Appeals to banks’ dispute resolution committees must be submitted within one month of receiving the bank’s response to the borrower’s rejection of the restructuring plan, or one month from the date of receipt of the bank’s decision by which the lender refused to deliver a restructuring plan.

Borrowers with outstanding debt up to €350,000 – secured by mortgage – may apply with the financial ombudsman to appoint a mediator, within 14 days of having submitted their financial data to the bank. The whole process – appointment of a mediator, the mediation procedure and the bank’s submission to the borrower of a restructuring proposal, as this arises after the mediation is concluded – may not take more than one month.

A bank may not initiate any legal or arbitration proceedings, nor initiate proceedings to sell a mortgaged property by auction, prior to the completion of a mediation procedure.

For financial disputes up to €170,000, borrowers who have a complaint against a bank – for example, for illegal charges – may submit their complaint in writing to the bank within 15 days of having been appraised of the issue.

The bank notifies the borrower that it has received the complaint within 15 days, and responds to the complaint within three months.

If the bank does not respond within this deadline, or if the borrower is not satisfied with the response, he or she is entitled within four months to submit a complaint to the financial ombudsman with the aim of settling the dispute. The ombudsman’s decision will be binding only where both the lender and the debtor have agreed to this.

Where debts do not exceed €25,000, a borrower may file a request for debt relief, along with a sworn statement, with the government’s insolvency service. This applies to persons with net monthly income of up to €200 and owning assets worth up to €1000 (not including reasonable living expenses). If the insolvency service is satisfied that the applicant meets the criteria set out under the law, it then issues a certified statement and the borrower will be represented in court for the issuing of a debt relief order.

Where a borrower’s total debt is €25,000 and over, the eligible debt is distributed among the various creditors. Once a debt relief order has been issued, the bank may neither continue nor initiate any procedure, legal or otherwise, against a borrower or his/her guarantors, in relation to recouping the eligible debt.

Borrowers who are insolvent – are unable to repay all of their debts – and who have not, for three years prior to filing for a personal repayment scheme – had their debt forgiven by a debt relief order, may appoint an insolvency consultant, who will prepare and submit a personal repayment scheme proposal to the creditors.

Before this proposal is submitted, the borrower files a request with the insolvency service which, if satisfied that all is in order, will issue a protective certificate, to be used in court for issuing a protective order for the borrower’s assets.

The protective order remains in force for 95 days, and while it is in force creditors served with the order may not initiate any legal or court proceedings against the borrower. Next, once the debt validation procedure has been completed, the insolvency consultant calls a meeting of the creditors to examine the proposed personal repayment scheme.

Where creditors have rejected the insolvency consultant’s proposal for a debt repayment scheme, and provided that the borrower’s total debts do not exceed €350,000, the borrower may seek a court order forcing the creditors to accept the scheme. This applies where at least one of the creditors has collateralised the borrower’s primary residence to the tune of up to €300,000, and where the borrower’s other total assets are worth €250,000 and less, and the borrower demonstrably has suffered an income reduction of 25 per cent due to the financial crisis.

When a personal repayment scheme is in force, and where the market value of the mortgage is equal to or greater than the principal’s debt, the guarantor is released of liability. If the value of the mortgage is less than the debt, the guarantor is liable only for the difference between the property value and the balance of the debt.

Creditors may not foreclose on a guarantor’s primary residence as a result of the principal’s failure to meet his or her obligations, unless the guarantor has expressly put up his or her residence as collateral for the debt in question. In addition, a bank may not take any legal action against a guarantor after two years have elapsed since a personal repayment scheme has entered into force.

If the debt relief order or personal repayment scheme does not produce a result, borrowers who are completely unable to repay their debts due to the financial crisis, may apply for a court-issued debt waiver, a bankruptcy discharge or an order suspending for six months foreclosure proceedings on a mortgaged primary residence or business premises.

Borrowers may at any stage, up until receipt of the first foreclosure notice (‘Type IA’), file a lawsuit against a bank in relation to inflated debt balances or unfair terms of contract. Also, within 30 days of receiving the above-mentioned notice, a debtor is entitled to file an appeal with a district court to set aside the notice, provided certain conditions are met.

Within ten days of being served with the ‘Type IB’ foreclosure notice, borrowers may appoint their own property valuer.

Once an auction is underway, the reserve price is fixed at 80 per cent of the property’s market value, and the mortgaged property may not be sold below the reserve price. If no sale takes place, the creditor may continue efforts to sell the property, either via another auction or directly, again at a reserve price of 80 per cent, for a period up to three months after the first auction.

After the three months have elapsed, the reserve price no longer applies. If the bank fails to sell the property within one year of the first auction, it may buy the property at its market value, or put it up for auction or sell it directly at a reserve price of 50 per cent of the updated market value.

Lenders must notify debtors in writing 20 days in advance of the sale of the property.