Charles Flanagan (Laois-Offaly, Fine Gael)

It is timely that a Bill dealing with matters of financial debt should come before the House. However, as the Minister has more or less admitted, the legislation before Members is a sticking plaster to get over a problem that has arisen. It is a pity this Bill has been introduced in a manner that is lacking in imagination and is merely designed to circumvent the High Court judgment of 18 June last, rather than as an attempt to address the real and practical problems that debt defaulters face.

I do not intend to detain the House to any great extent as the Seanad had a detailed debate on this matter and I do not wish to be repetitive. However, when this Bill was before the Seanad, my colleague, Senator Eugene Regan, tabled an important amendment that reflects Fine Gael's policy on this matter and to which the Minister referred. Fine Gael considers that an attachment of earnings order would be a far better solution to the debt default problem than a term of imprisonment. I am unsure what purpose imprisoning debt defaulters serves because it is strictly punitive and in no way bestows benefit on the creditor. The person is put into jail and it is most unlikely that his or her personal circumstances can improve while serving a prison sentence. That also is to the detriment of the creditor and when that person emerges, having served a prison sentence, the debt remains due in any event. It is important, and the Minister has more or less said the same thing, that one should be pragmatic about such matters and the objective of the Legislature must be to find a way for the debtor to pay the creditor what is owed, rather than having people serve prison sentences.

In this context, I welcome the proposed new section 6(7)(b) of the 1940 Act, which provides that the court may request the parties to engage in mediation. The Government has indicated that it envisages an increased use of the money advice and budgeting service, MABS, which I welcome. The Minister mentioned his practice as a solicitor and from my experience as a solicitor, I am familiar with the mediation process, particularly in respect of family law, and the family mediation service is doing excellent work. It quietly assists people by helping to reduce the adversarial nature of a dispute and in many circumstances it helps to deliver an outcome that is satisfactory to both parties. Mediation has an extremely important role to play in settling some types of disputes. I wish to see mediation at the heart of resolving disputes about debt.

The current budget of MABS is approximately €18 million. This seems generous and I hope it is adequate to enable MABS to carry out an expanded role, as envisaged by this Bill. Irrespective of this Bill, I hope MABS is assisted by the Government in every way because more and more people are likely to seek the help of MABS for help as job losses continue to mount. It is important that the Government recognises the fundamental importance of an agency like MABS at a time like this and ensures that it is working to capacity.

I refer constituents to MABS, as do other Members, almost on a daily basis. I know the local office is under pressure and I value its work. It should be assisted in every way possible. I see an expanded role for an organisation like MABS in respect of debt resolution disputes.

As anticipated by the Minister, Fine Gael would like to see this Bill amended to provide for an attachment of earnings order, rather than a prison sentence, where difficulties arise in respect of debt defaulting. Attachment of earnings orders are common in the field of family law regarding maintenance provision. Where a spouse fails to pay maintenance as per a court order, an attachment of earnings order can be sought from the court if the person is in employment, on social welfare or on a private pension. The order results in the maintenance amount being deducted at source by the employer or the Department of Social and Family Affairs. If the spouse is self-employed, an enforcement summons can be applied for.

Such orders can be handed down by both the District Court and the Circuit Court. In making a maintenance order, a court can direct that the payment under the order shall be made to the District Court clerk if the court considers that it would be proper to do so. As part of its order the Circuit Court may direct that a maintenance order is payable through the District Court on the basis that the office of the local court is more accessible to a querist. The District Court has a fully computerised payments system for the receipt and transmission of payments received. Payments received are immediately dispatched to the applicant and there is no delay. The system is working well. A fully computerised print out of all payments is available to either party on request. The process is simple, fast and efficient. I do not dispute that it has its flaws but it is a more practical measure.

It is a more imaginative solution than putting people into prison. The prisons are dangerously over-crowded. The Government states that in the first six months of this year only 186 people were imprisoned for debt defaulting. The Minister said this number is small but 186 people is a lot. An alternative to prison for those 186 people would make far more sense.

As my colleague, Senator Regan, pointed out when this Bill was before the Seanad, Ms Justice Mary Laffoy stated, on page 84 of her judgment in the recent McCann case, that as the plaintiffs case illustrated, a statutory procedure for enforcement of debt under which the debtor may be imprisoned, without there being a positive requirement that the court determine if non-payment is due to an inability to pay before making an order for arrest or imprisonment, is not only futile in terms of securing the creditor's remedy, but it imposes unnecessary expense both on the creditor and the State. If the warrant for the imprisonment of the plaintiff had been executed, the plaintiff would spend a month in Mountjoy Prison. The credit union, however, which its counsel described as a not-for-profit co-operative financial service provider governed by the Credit Union Act, would not have received €5,658 or even one cent from the plaintiff. The credit union would have borne the cost of the proceedings for the instalment order and the application for the order for arrest and imprisonment. The State would have borne the cost of two District Court sittings, the execution of the warrant and the accommodation of the plaintiff in Mountjoy Prison for one month. That is the major defect in the Bill. It still does not provide for an attachment of earnings procedure. In that regard, it fails to adhere to the provisions of the High Court judgment.

Senator Regan proposed a strong amendment to the Bill when it was before the Seanad. It was designed to provide for a procedure whereby an attachment is ordered as a substitute for imprisonment, which is to the benefit of creditors, eliminates the use of imprisonment to force the individual to pay a debt and is more efficient. The proposed amendment provided that where a debtor is liable, by virtue of an instalment order, to pay a debt and costs either in one payment or by instalments, and the debtor fails to make such payment or fails to pay any one or more of such instalments accruing while such an order is in force at the time or times appointed, the creditor may, at any time while such order is in force or within 12 months thereafter, apply to the court for an attachment of income order. That proposed amendment was rejected by the Government for reasons that are less than satisfactory.

Fine Gael's approach to the Bill is more practical, reasoned and based on sound legal principles and precedent. I am disappointed by the narrow-minded view of the Minister. At this late stage I hope the Minister will be more open-minded in the Dáil than he was in the Seanad when dealing with the matter.

I am aware that the Law Reform Commission is due to present a major paper on debt before the end of the year. This Bill shows that the Government is not averse to introducing amending legislation where it sees a need. I am disappointed that we have not dealt with the very real problems in the area of unregulated debt collection. In April of this year, having been approached by several victims of unscrupulous debt collectors and in the face of Government failure to act on the issue, I published a Private Members' Bill to regulate debt collection in this jurisdiction. I was very conscious of the involvement of criminals and eastern European Mafia types involved in debt collection, which has become more prevalent since the economic downturn.

There is a need for urgent action to protect vulnerable debtors from threatening behaviour by some debt collectors. People have come to me who have been threatened by well-known criminals, property has been vandalised and physical assaults have taken place. Many victims told me they were afraid to go to the Garda Síochána because of the nature of the threats against them. It is clear that the State needs to intervene at the root of this problem by ensuring that those engaged in debt collection and their agents are fully licensed. The operation of debt collection in the State must be governed by regulation and licence. A complaints mechanism for debtors treated in an unfair, unjust and intolerable fashion must be provided.

Fine Gael's Bill proposed a system to regulate debt collectors so that they must register with the Financial Regulator and be vetted by the Garda Síochána prior to being allowed to operate. It would be run in much the same way as the private security industry in that it would not involve any great new authority and could be self-financing, which is also important. Ireland has no system to regulate debt collectors unlike most EU countries. As a result, anyone can set up a debt collection agency and there are no rules as to how they should operate. Debts can also be sold on and transferred without the debtor's knowledge. With more people owing more money, debt collection is becoming a more profitable business for some who can operate without having to be under the umbrella of any form of regulation of any description.

Either the Government remains oblivious to this obvious difficulty or it does not care. I encourage the Government to consider over the summer, and prior to our return in the autumn, the plight of debtors who are subjected to threats and violence by debt collectors. We should regularise the industry by ensuring a proper licensing system. This need is pressing and the facts confirm that people are coming under pressure in a way that can be must unsavoury.

I note that the Bill makes provision for legal aid in response to the High Court's concern that no option was open to a court to grant legal aid to a debtor at risk of imprisonment. The Bill proposes that a debtor against whom an imprisonment order may be made will be entitled to apply for legal aid. This brings us to the reality that civil legal aid is very much the poor relation of criminal legal aid. There have been reports of significant delays in obtaining civil legal aid in recent times and I would again state to the Government that it cannot legislate without matching that legislation with appropriate resources.

While pointing to the need for greater resources in the area of civil legal aid, I suggest that there are savings to be made in the area of criminal legal aid. Wealthy gangsters are known to frequently avail of legal aid in the Supreme Court despite apparent wealth. There is a need to tighten up the checks and balances that apply in this context. It is reprehensible that an ordinary citizen cannot obtain legal aid because of inadequate resources being allocated by the State, while a wealthy criminal can rather easily obtain free legal aid in a criminal case. I have not seen too many cases where the Criminal Assets Bureau has taken over the assets of a person convicted of serious crime and reimbursed to the State any criminal legal aid which may have been granted.

The timing of the High Court finding of unconstitutionality in respect of section 6 of the 1940 Act is interesting, given that expert lawyers from the prosecution and defence sides of the profession have been warning the Minister, Deputy Dermot Ahern, that his proposed gangland legislation is unsound from a constitutional point of view.

See this speech in context