Olwyn Enright (Laois-Offaly, Fine Gael)

I move:

That Dáil Éireann:

noting:

that the processing time of welfare applications, particularly jobseekers supports, is too long with some individuals and families waiting up to 16 weeks for their claim to be processed, and with potential delays of many months in processing appeals;

official HSE figures which show an 85% increase in the number of requests for emergency welfare assistance over the past two years, while the number of community welfare staff has remained unchanged;

the unacceptable delay in recruiting additional staff to deal with the dramatic increase in welfare claims;

the 35% increase in the number of people seeking support from the Money Advice and Budgeting Service (MABS);

that the Legal Aid Board has a function to provide legal advice and representation to people with debt problems;

that there are currently more than 9,616 people in receipt of mortgage interest supplement, an increase of 134% (4,111) over the number in receipt of payment at the end of 2007;

that the new code on mortgage arrears does not sufficiently protect borrowers and fails to include any sanctions for breaches of the code; and

that problems experienced in repaying debt are not limited to mortgage debt, but that the recently unemployed face difficulties repaying a series of debts including: household bills, credit card repayments, car loans, personal loans, hire purchase agreements and so on;

considering:

that 276 people were jailed last year for failing to repay debt, many of which were jailed for failing to repay loans to credit providers, and received an average sentence of 27 days and served an average of 20 days;

that this Government has not taken any steps to update or reform the current system of debt enforcement which is ineffective in collecting debt, is extremely costly to taxpayers and wasteful of Court, Judge and Garda time;

that unlike many other EU countries, Ireland has no system of regulation of debt collectors; and

pending the completion of the Law Reform Commission Report, that there is a need for urgent measures to be taken, as set out below;

calls on the Government to:

immediately increase the number of Community Welfare Officers, Social Welfare and Social Welfare Appeals Office staff by redeploying staff within the HSE and the Department of Social and Family Affairs;

encourage MABS and the Legal Aid Board to co-operate more closely so that they can deal with the surge in people seeking advice and support for debt difficulties;

expand the role of MABS into debt settlement and mortgage renegotiation, which will take less time, is less expensive to the taxpayer and offers a more integrated and effective approach when dealing with consumer debt;

introduce legislation to regulate debt collection and to ensure that debt collectors are registered and vetted; and

review legislation including the Enforcement of Court Orders Acts 1926 and 1940 and the Bankruptcy Act 1988.

I wish to share time with Deputies Noonan, O'Dowd, Ring, Connaughton, Doyle and Joe Carey.

I welcome the opportunity to introduce this motion on behalf of the Fine Gael Party. It is a timely non-contentious motion which seeks to ensure that our social welfare system is responsive to the needs of the people it is supposed to serve and that it is adequately staffed to carry out this function. We are seeking the creation of an alternative dispute resolution system for those who find themselves in debt, together with greater co-operation between the money advice and budgeting service, MABS, and the Legal Aid Board in order that both organisations might deal with the surge of people seeking advice and support with debt difficulty. We are also seeking to have the role of MABS expanded in order that it will be sufficiently resourced to allow it to deal with — through the further training of staff — debt settlement and mortgage negotiation for which, unfortunately, there is a growing need.

Fine Gael is further seeking the introduction of legislation to regulate debt collection and to ensure that debt collectors will be registered and vetted. In addition, legislation such as the enforcement of court orders Acts and the bankruptcy Acts must be reviewed and amended to take account of the current climate.

I am disappointed with, but not surprised by, the Government's amendment to the motion. The amendment displays the typically unimaginative everything-is-all-right, head-in-the-sand approach we have come to expect from the Government. I do not believe anyone will deny that over-indebtedness is a serious problem in the lives of many Irish people, although the amendment prompts me to question whether the Government has any idea of the extent of the problem.

During the past decade, the personal household component of private sector credit has risen to record levels in Ireland and in many other countries. In 2007, the Central Bank and Financial Services Authority of Ireland admitted that the gross indebtedness of the household sector in Ireland — before account is taken of its financial net worth — is high by comparison with that which obtains in other euro area countries. In 1997, personal sector credit as a percentage of disposable income was in the region of 60%. Ten years later, this figure had risen to well over 175%.

Many people have a variety of debts. These include mortgages, personal loans, credit cards, car loans, hire purchase agreements, household debts, store cards, etc. While this was a matter of concern in times of high employment, it is of even greater concern now. The downturn in the economy and the increase in unemployment has placed a massive strain on Irish families. People are losing their jobs, are unable to repay loans to a variety of institutions and are under severe pressure.

The delays in the processing of social welfare applications and the subsequent delays in appeals are adding further to the strain. While families are awaiting the processing of their applications or of appeals, they often find themselves being plunged further into debt, with their mortgage bills unpaid and their electricity, gas and car loans mounting as they struggle to pay for their day-to-day household and living expenses.

It must be remembered that one third of the cost of houses in recent years went on taxation. For many individuals and couples, one third of the mortgages they are struggling to pay off went directly to the Exchequer. Many of these people's homes are no longer worth what they paid for them and they are struggling to pay off loans they took out during a building bubble from which they obtained no benefit. If a house is repossessed by the State, these people will be obliged to seek rent supplement and to return to their local authority housing lists.

There are currently more than 9,600 people in receipt of mortgage interest supplement. This represents an increase of 134% on the figure that obtained at the end of 2007. The Government is in the process of reviewing the mortgage interest supplement. However, I am unclear as to what is the aim of this review and I am gravely concerned that — like many previous reviews — it is designed to make the supplement more difficult rather than easier to obtain. There are a number of serious difficulties regarding the way in which the scheme operates at present. Claimants are not eligible for mortgage interest supplement if their mortgages are considered to be too expensive. However, there seems to be huge discretion across the country with regard to what is "too expensive". This raises questions in respect of the uniformity of the system. In addition, the scheme ignores the fact that a mortgage may have been affordable when the person who took it out was in employment. If a mortgage is granted on the basis of two incomes and one income is lost through unemployment, illness or disability, the household will still not be eligible for mortgage interest supplement because there is still one income coming in. That people have mortgage arrears seems to be irrelevant when this criterion is put into operation.

There are also extreme difficulties for people who were self-employed but who are now unemployed, particularly in the context of producing up-to-date accounts and the fact that the previous year's accounts are generally taken into consideration. There are many people who were working last year and who had steady incomes but who literally do not have an income at present. These individuals find it extremely difficult to access the supplement. Unbelievably, there is a lack of valid data. As the Minister previously admitted, the Department of Family and Social Affairs does not collect figures regarding the number of people who want to apply for mortgage interest supplement. It is, therefore, extremely difficult to judge the fairness of the system.

Why does the Department not collect such data? I am aware from speaking to a number of community welfare officers that they retain this information. What kind of system allows us to pay a supplement to some and refuse it to others? Why is it not possible to examine the objective criteria that are being used to decide who is paid and who is refused? The system must be changed. I urge the Minister to obtain the data to which I refer from community welfare officers and to make it available in order that we might discuss people's real needs in an informed way.

There is also a lack of awareness regarding the existence of the supplement, which is a matter of some surprise. It is as if the Department hopes people will not become aware of the supplement in order that it will not be obliged to pay it. This matter must be addressed because it is giving rise to real difficulties for some people.

Perhaps one of the biggest scandals in the banking sector in recent years was the length to which financial institutions and sub-prime lenders would go to encourage and induce people into consolidating all their loans into a single mortgage. Needless to say this seemed an extremely attractive proposition at the time, particularly when people had a number of debts with various institutions in respect of which different repayment dates applied. These individuals received letters or saw advertisements suggesting that they "consolidate it all into one simple mortgage". Matters have not proven to be so simple. Many people who consolidated their debts are being particularly badly hit if they find it difficult to meet their payments because the mortgage interest supplement is paid only in respect of the portion of the mortgage that relates directly to the purchase of their dwelling house.

Poor Government regulation over the past 12 years allowed lenders to operate as they pleased and to actively encourage people into this position. Those making the type of commitments to which I refer would have been unaware of the criteria relating to the mortgage interest supplement and would certainly never have expected to find themselves in their current position. These people must be given the benefit of the doubt. We should, by all means, ensure that the regulations will be in place from now on and we should make people aware of that. However, it does not make sense to provide people with support only in respect of the portion of the mortgage that relates to the house. If the lender calls in the loan and repossesses the house, the proportions involved will be irrelevant.

Repossession orders sought by banks and mortgage lenders soared by more than 100% last year. Figures compiled by the Court Service show that in 2008 some 758 new applications for repossession orders were brought before the High Court. The figure for the previous year was 347. The increase in the figure for repossessions is the largest recorded by the courts and it points to aggressive tactics deployed by some lenders to recover their debts. The Master of the High Court, Mr. Edmond Honohan, recently warned that an avalanche of home repossession cases is anticipated. He stated that the number of such cases is increasing weekly, with an emerging ratio of approximately 80:20 between sub-prime lenders and mainstream banks. Mr. Honohan expects an avalanche because few of the cases that have appeared to date relate to recent job losses. In all cases before him since last October, the mortgage arrears were already in excess of nine months when proceedings were initiated. It is estimated that there are approximately 15,000 sub-prime mortgage holders in Ireland and it is feared that many of them are in difficulty.

The Government must act to protect all struggling home owners. While the recent code in respect of mortgage arrears is welcome, provision has not been made in respect of breaches of that code. In addition, the code has little or no impact on sub-prime lenders. The Government must address this matter immediately. The dismissive amendment to the motion effectively informs people that their difficulties are a matter for them and their financial institution and will only serve to isolate them further and escalate the problems they face.

The majority of people want to repay their loans. However, the downturn in the economy and the increase in unemployment means that many are finding it increasingly difficult to repay their debts. In dealing with individual cases, I have been struck by people's determination to find a way through their current difficulties. There is a strong desire on their part to find alternative employment in order that they can recommence paying their mortgages as soon as possible. These are people who entered into mortgage agreements in order to purchase homes for their families. They did what was considered the right and sensible thing. Many purchased houses at hugely inflated rates and are now finding it impossible to make ends meet.

Our changing economic environment brings into focus the current system of debt enforcement in Ireland and makes me question what we achieve by dragging an impoverished person under pressure from a debtor through an intimidating, costly and ineffective legal process. I accept that there must be a constitutional right of recourse to the courts. However, this is not the place from which we should start. Ours is one of the last governments in Europe to accept that fact.

Our debt enforcement legislation was last updated in the 1940s and has little or no relevance to the society in which we live. Most debt enforcement procedures take place at District Court level and assess the capacity of the debtor to pay. However, the way judgments are enforced is outdated. Many believe that the open court procedure — whereby people are exposed to members of their communities and the press in their local courts — is a natural deterrent. If a debtor does not file a defence, there will be no hearing and judgment for the amount claimed will be given in his or her absence when the solicitor for the creditor files the correct papers.

According to the Free Legal Advice Centre, FLAC, only some 20% of debtors appear at hearings. As a result, judgments are made in their absence and in the absence of up-to-date financial information. The repayment schedules that are decided are, therefore, often at a level which debtors cannot afford. In many instances, a debtor will be unaware that a judgment has been made against him or her. It is important to point out that many creditors are also unhappy with the system as it currently operates.

Last year alone, 276 people were imprisoned for failure to pay debt. The average sentence received was 27 days and the average sentence served was 20 days. Where is the financial logic for such a system? The person comes out of prison still owing the debt. They still have no means of repaying it. The creditor still does not receive the money and yet we have paid the courts system, judges, gardaí, prison officers, legal fees and whatever else. There is no economic sense to this system.

The overall cost to the State of over-indebtedness is hard to quantify but it is time for a complete overhaul. We must also bear in mind how innocent parties suffer. Chronic debt and imprisonment for failure to pay debts will have consequences for partners, children and relatives of the debtor who find themselves struggling further while their partner, father or relative is imprisoned, with the debt still hanging over the family.

I appreciate that there are those who could repay their debt and choose not to, but a real distinction must be made between those who cannot pay and those who will not pay. Money advisers will say that this becomes very clear in most cases, and those who will not pay should be subject to the full rigors of the law.

Is the Government and the Minister satisfied with the existing system and do they intend to take any action to relieve families suffering from debt? The existing system is archaic and there is common agreement among all stakeholders that it does not serve the interests of the creditor, debtor or taxpayer.

There are actions that can be taken immediately to address the situation. First, we should simplify documentation. Too many people under pressure from debt do not open registered letters and if they do, they panic at the prospect of court hearings and documents that are unintelligible to them. No explanatory information is included to explain the consequence of the legal proceedings in plain, understandable language. No contact numbers for MABS, the Legal Aid Board or FLAC, which the debtors could contact for assistance, are included. Effectively, people just see the long hand of the law reaching through their front door and try to bury their head in the sand.

It is not clearly explained to people that the creditor may also apply for legal costs or that interest may be claimed, increasing the debt substantially. A covering letter accompanying the summons will suggest that the debtor contact their solicitor for advice. Many cannot afford that and individuals can wait months for civil legal aid, depending on where they live. The system must be changed to ensure the legal jargon is removed. People receiving the documents should be able to understand clearly what they mean and the consequences of them. They should also be advised as to where they can turn for help. We must move also to regulate debt collectors, an issue Deputy Flanagan will expand on tomorrow.

We must examine a means of having an alternative dispute resolution system. We must review legislation. The legislation dealing with this area was introduced at a time when borrowing money was extremely rare. The process must be amended to deal with debt in a more effective way.

The Government must create an alternative dispute resolution system to help with debt settlement and mortgage renegotiation. MABS is an extremely useful service but its function is somewhat limited in that it is not equipped to engage or negotiate directly with lenders, although it has done some good pilot work in this area.

The approach to debt enforcement through this system will take less time, prove to be less expensive to the taxpayer and will be a more integrated and effective approach when dealing with consumer debt. Most stakeholders, except the Government, agree with that. The Irish Banking Federation supports calls by FLAC and MABS for an overhaul of the system.

I will deal briefly with the Government's response to the huge increase in the numbers of people seeking jobseeker's assistance. At best the response is inadequate. Every Member in this House has received complaints about the length of queues in social welfare offices. Restricted opening hours together with shortages in staff have resulted in serious queues. Community welfare officers have seen an 85% increase in the number of requests for emergency assistance in the past two years.

Last December, after much pressure, the Minister eventually announced the provision of 115 additional staff. The response was too little too late, and it is not clear if all of those have taken up their positions. She may tell us that tonight. It must be borne in mind that staff being deployed do not necessarily have the skills in this area. They have to be trained, which takes considerable time. We are expecting a continuously growing number of people in receipt of unemployment benefit in the immediate future. The Minister must act now to ensure sufficient numbers of staff are trained to cope with that.

See this speech in context