Barry Andrews (Dún Laoghaire, Fianna Fail)

I would like to respond on behalf of the Government to Deputy Charles Flanagan's proposed Private Members' Bill. I commend the Deputy on the efforts involved in bringing forward this proposal. The motivation behind the Deputy's proposal is understandable.

Many people have been significantly affected by the difficult economic situation this country is now experiencing. This has manifested itself in difficulties in making repayments for goods and services, for mortgages or in fulfilling contractual obligations. This adverse situation has, for many, occurred very quickly. It could not have been reasonably anticipated when people undertook financial commitments. Clearly, I would join colleagues on both sides of the House in expressing our concern for persons who now find they are experiencing debt-related issues.

We are all very aware of the pressures of modern society and of the fallout from the difficult economic circumstances in which many people now find themselves. This has been exacerbated by what was, by reference to Irish historical circumstances, an extraordinary availability of consumer credit in recent years. Unfortunately, many are now experiencing the down side of over-extending their borrowing arrangements or there has been a change in personal circumstances, such as loss of employment.

The proposal put forward this evening by Deputy Flanagan is an interesting one and is a topic worthy of debate. He has proposed a Central Bank and Financial Services Authority of Ireland (Protection of Debtors) Bill 2009. The stated purpose of the Bill is to provide for the issuing of licenses to conduct debt collection activities. Such persons, companies or organisations seeking to recover a civil or commercial debt would be required to register with the Financial Regulator and be vetted by the Garda Síochána before they can operate in Ireland as a licensee retrieving debt.

The Bill proposes that the Irish Financial Services Regulatory Authority, which is a constituent part of the Central Bank, would regulate debt collection as a financial service. It would establish a regulatory framework in which a debt collection regulator, under the remit of the Financial Regulator, would deal with this service and seek to ensure the transparent and efficient operation of debt collection agencies. It is proposed that a debt collection regulator would issue licences to suitable applicants once they have supplied all the relevant documents including certificate of clearance from the Garda Síochána and a tax clearance certificate from the Revenue Commissioners. A licence would issue on a two-yearly basis. The Bill provides that the regulator may refuse, revoke or suspend a licence at any time. The regulator would be obliged to investigate complaints made by a debtor against a licensee.

However, interestingly, among the criteria for the award of a licence, there is no specific mention of previous convictions of the applicant. The Bill includes a section on offences, some of them regulatory type offences, but would also provide for false representation and harassment. Unfortunately, the Bill as drafted would do little to address the issue it claims it would address.

All functions relating to consumer credit have been the responsibility of the Financial Regulator since 2003. There are two minor exceptions to this, pawnbrokers and credit intermediaries which are the responsibility of the National Consumer Agency. Consumer credit covers the content of consumer credit contracts, the calculation of the APR and information and advertising in connection with consumer credit. The main primary legislation on this matter is the Consumer Credit Act 1995, as amended. In the first instance, my colleague, the Minister for Finance is opposed to providing for a statutory regulator of debt collectors, either on a stand-alone basis or within the Financial Regulator structure. He is of the view that the collection of debts as an activity is not necessarily comprehended in respect of the provision of financial services.

The role of the Financial Regulator is confined to financial services. The functions of the regulator are to help consumers make informed and responsible decisions on their financial affairs in a safe and fair market and to foster sound and solvent financial institutions which give depositors and other consumers of financial products confidence that their deposits and investments are safe. Accordingly, it is not the role of the regulator to regulate the collection of debts arising from commercial or other activities. Assigning a debt regulation function to the Financial Regulator would dilute the core function of the regulator and would have an impact on its resources and expertise. Debt collection is an activity which takes place throughout the country and the enforcement of licensing requirements would need to be carried out at a local level and would result in the regulator having to take on an enhanced role throughout the country and require it to obtain additional expertise in enforcement methods. Deputy Flanagan's proposal would thus require very significant financial and staffing resources for the Financial Regulator and for the Garda Síochána in terms of potential vetting of applicants. In the context of scarce resources available to the Government at this time, this would not represent the best use of such resources.

There is a particularly serious flaw in the approach set out in Deputy Flanagan's proposal. Critically, I can find nowhere in his text an explicit provision that a person or company operating on their own account to collect debts owing to them would be exempt from his proposal. If the Bill were to be enacted, as it is currently drafted, it would require every person and company engaged in a business activity, be it the sale of goods or services, to have to seek licensing as a debt collector, before they could seek to recover moneys owing to them in the normal course of business. This would apply, for example, to the ESB, the local corner shop, the plumber, etc. Is this seriously what the Deputy has in mind, because that would appear to be the main consequence of his proposal? If so, it would appear to be a somewhat bizarre, cumbersome and very bureaucratic approach.

Related to my previous point, the Deputy does not define a "debt collector" in his draft Bill. This is a serious deficiency because we cannot be sure of the scope that is intended.

Much of the public concern with respect to the operation of debt collectors relates to mortgage debt. There are arrangements in place to deal with this issue. For example, the recapitalisation programme announced in February 2009 includes a new code of conduct for mortgage arrears, which has been issued by the Financial Regulator and came into force on the 27 February 2009. The new code applies to the recovery of debt with respect to the mortgage lending activities to consumers in respect of their principal private residence in the State. It is mandatory for all mortgage lenders registered with the Financial Regulator including so-called "sub-prime lenders". Under the code, where a borrower is in difficulty the lender shall make every reasonable effort to agree an alternative repayment schedule; consideration should be given on a case-by-case basis to alternatives such as deferral of payments, extending the term of the mortgage, changing type of mortgage, or capitalising arrears and interest; and lenders will not commence legal action for repossession until after six months from the time arrears first arise. In addition, as part of their recapitalisation scheme, AIB and Bank of Ireland have agreed not commence court proceedings for repossession of a principal private residence until after 12 months of arrears appearing where the customer continues to co-operate.

It also might be appropriate here to say a few words about court proceedings in cases of mortgage arrears where orders for possession or sale of the mortgaged property are being sought by lending institutions. It has become apparent in recent times that some lending institutions are routinely applying in the High Court for repossession orders which could have been obtained in the Circuit Court. During Committee Stage discussions on the Land and Conveyancing Law Reform Bill 2006 recently, the Minister for Justice, Equality and Law Reform expressed concern that the additional costs and inconvenience of entering a defence in High Court proceedings may have the effect of discouraging borrowers who are in arrears with repayment from defending proceedings. Existing statutory provisions relating to court jurisdiction have been designed to encourage applicants for court orders to apply at the Circuit Court level where appropriate. This is reflected in section 17 of the Courts Act 1981 which provides for the awarding of Circuit Court costs in cases which could have been taken in that court but were taken instead, for whatever reason, in the High Court. From what I have already said, this would appear not to be a sufficient deterrent to commencing repossession proceedings in the High Court and I understand the Minister for Justice, Equality and Law Reform intends to deal with the matter.

Part 10 of the Land and Conveyancing Law Reform Bill 2006 updates the law relating to mortgages, including the obligations, powers and rights of lending institutions. The Minister for Justice, Equality and Law Reform intends to table a Report Stage amendment to that Bill which will, when enacted, require that all repossession or sale proceedings on housing loan mortgages be taken in the Circuit Court. His objective in bringing forward this change is to reduce the costs and inconvenience involved in making a court appearance and, thereby, encourage borrowers who are in arrears to enter a defence in such proceedings.

Section 16 of Deputy Flanagan's Bill refers to an assignment of a debt. A debt cannot be assigned without the prior written consent of the debtor, which consent cannot be unreasonably withheld. It is doubtful as to what real benefit this provides, as anyone receiving the debt would have to hold a licence under the earlier provisions of this Bill. Section 17 goes on to state that licensees must notify the sale, purchase or assignment of a debt to the regulator of debt collectors. Again, if all of the undertakings are licensed under the Bill and presumably conduct themselves with the same standard of behaviour, this provision would appear to be superfluous.

Debt collection and recovery services are a legitimate part of the normal activities of practically any business in dealing with its clients and customers. It is, of course, of particular relevance to the consumer credit industry. Many businesses use the services of debt collection agencies to collect money owed from a credit arrangement.

I am aware that Deputy Flanagan has previously expressed concerns that unscrupulous or criminal elements have or will become involved in debt collection activities. These concerns underline the very laudable intentions motivating the Deputy's proposal. We would all share those concerns. These concerns have been highlighted in recent media reports of alleged intimidation of persons owing money in various circumstances by "criminal" debt collectors. The reports claimed that people have been threatened, intimidated and physically assaulted and that property has been damaged by debt collectors. The name of one notorious person, with gangland connections, has been much mentioned. However, we should be careful about relying on what is to some degree anecdotal or hearsay evidence in this regard.

The alleged intimidation and threatening behaviour of debt collectors, or by any other person, appears to come within the scope of the provisions of the Non-Fatal Offences against the Person Act 1997. I am surprised that the Deputy seeks to create a new offence in section 19 of the Bill of harassment specifically in regard to debt collection because he will no doubt be aware that the 1997 Act already deals with assault, intimidation and demanding money with menaces. Section 11 of that Act provides that it is an offence to demand payment of debts with any criminal aspect, including intimidation or false statements. As the Bill before us makes no reference to this provision, it would create confusion between that criminal law provision and the proposal to regulate debt collection. I emphasise, as I am sure would the Minister for Justice, Equality and Law Reform, that any person who feels that he or she has been threatened or harassed in the context of the recovery of a debt allegedly owed to contact the Garda. It is not lawful for a creditor to seek to recover moneys owed in such a fashion. There are well defined procedures, both judicial and non-judicial, for the recovery of debt.

It might be fanciful to suggest, as Deputy Flanagan seems to do, that persons who employ threatening or abusive techniques or act in an illegal manner would seek to be licensed as debt collectors. I suspect those of a criminal inclination or background would conclude rationally that they would have little or no chance of being licensed. The intended targets of this proposal would thus likely escape its remit.

The Government is supportive of efforts to find alternative non-judicial approaches to the resolution of debt problems. Civil debt issues are based on individual circumstances and in most genuine cases would probably lend themselves to some form of mediation or conciliation process. The Government is supportive of alternative non-judicial approaches to the resolution of debt problems. We support and encourage the work of the money advice and budgeting service, MABS, of the Department of Social, Community and Family Affairs. That service's approach, which is based primarily on the willingness of the debtor to attempt to manage his or her situation, offers significant prospects of a successful resolution of the credit problem. The attitude of credit institutions and utility companies has been co-operative in working with MABS on behalf of its clients. MABS provides a crucial service for people who require help and advice in making their way out of serious debt. The Government continues to make significant financial resources available to the service. The approach it adopts offers a better way of achieving a result acceptable to both creditor and debtor.

I understand that District Court judges recognise the work of MABS and in some instances they recommend that people who are before the courts avail of it. However, it is often difficult to persuade persons in debt to engage in the process. Sadly, some people leave their debts until they reach the point, having been the subject of a court process, where imprisonment looms. The willingness of a debtor to manage his or her case is crucial and seeking expert advice is the best way of achieving a successful resolution to the problem of indebtedness. This voluntary approach is preferable to seeking to impose on the State the role of managing a debt collection and recovery process, especially one as cumbersome as that envisaged in the Fine Gael Private Member's Bill. Issues relating to debt come before the courts in many guises, for example, family law maintenance agreements, hire purchase agreements, creditor loans and failures to pay loan repayments to financial institutions, including credit unions. Generally, the courts take the view that where possible disputes are best resolved through mediation between the parties involved, avoiding court intervention unless absolutely necessary. However, we must recognise that circumstances arise, undesirable as they may be, where it is necessary for people to rely on the courts to enforce the terms of a contract. I do not concur with the view that we should legislate to make accessing these rights more difficult because Ireland would be put in a most unfavourable light internationally if our law prevented people from exercising their contractual rights. Deputies will agree these matters must be kept within the rule of law and as far away as possible from criminal elements.

Current legislation in regard to enforcement of court orders is long-standing and upholds contractual rights with specific safeguards. Despite what certain media and other commentators might claim, a person cannot be imprisoned merely on the grounds of inability to fulfil a contractual obligation. Committal orders are granted where a person fails to comply with a court order. The law provides that the judge shall only make a committal order where the debtor shows that the failure to pay was due to his or her wilful refusal or culpable neglect. This provision is intended to ensure that if a debtor is genuinely unable to meet the repayments under an instalment order, steps can be taken to ensure that he or she is not deprived of his or her liberty. Court instalment orders involve a statutory procedure to require the examination of a debtor's means by a court which will then consider fixing a periodic instalment to be paid to discharge the debt, taking into account the income and outgoings of the person concerned. If the person against whom the order is made fails to meet periodic payments, an application may be made for arrest and committal to prison, but this requires a further hearing by the judge under section 18 of the Enforcement of Court Orders Act 1926, as amended by section 6 of the Enforcement of Court Orders Act 1940.

The Law Reform Commission in its report on contempt in 1994 considered that the case for abolition of the sanction of imprisonment had not been established in regard to civil contempt. The commission felt that the powers of the court in this regard were coercive rather than punitive. It is an appropriate remedy only where the desired result cannot be achieved by other means and the defendant's active co-operation is a vital ingredient.

The relevant legislation on court enforcement procedures and personal bankruptcy will be kept under review, although there are no proposals in the current Government legislative programme. We are awaiting the publication by the Law Reform Commission later this year of a consultative report on debt enforcement and securing interests over personal property. This project will include an examination of alternatives to court based procedures to debt enforcement as well as existing court based arrangements, such as the instalment order procedure. It will also examine the attachment of security interests to personal property. As the commission will be consulting with interested parties, it would be unwise to act precipitously in regard to any legislative initiative in advance of the publication of the report.

Only 20% of debtors appear at court hearings. This is unfortunate because they lose a critical opportunity to take part in a significant process. I am not convinced by the argument that if the process in the courts is changed to an alternative form, 100% compliance will somehow ensue. Without the eventual prospect of a court sanction, debtors may believe it is easier to disengage with an alternative process than to comply. There is a responsibility on each person with debt issues to inform him or herself about the legal processes involved. The Courts Service website contains excellent material in this regard. I appreciate, however, that the procedures and documents involved can be legalistic and be difficult to understand.

At this time of pressure on all businesses, we need to be cautious in constructing a vast regulatory edifice which would not achieve its real target while increasing the cost of doing business for legitimate enterprises. This could have a knock-on detrimental effect on employment and business activity. I commend Deputy Flanagan on the humane considerations which underline his proposal. These considerations are shared by all Members of this House. However, the Government has a duty to ensure that legislative proposals are well founded and drafted. Unfortunately, the proposal from the Deputy does not fulfil those criteria.

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