Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the opportunity of contributing to this debate on the Personal Insolvency Bill 2012. People generally will welcome that the Bill has been published and we have something concrete to work on.

Generally, the shape of the Bill is quite good but there are a number of issues that will have to be dealt with and teased out on Committee Stage. I am sure that will be a theme from both sides of the House, from Government backbenchers and members of the Opposition, on Second Stage. Like all major legislation, it needs improvement and refining as it goes through the House. I hope there will be a considerable amount of time available for Second Stage, Committee Stage and Report and Final Stages in terms of detailed amendments because it is major legislation which one would expect will be with us for many years to come.

The key headline issue of concern is the issue of a veto which could be used by the banks. The banks and some pragmatists have a different view on that. Definitely, there is an issue that the banks must give their consent. The other side of the coin is that the borrower must give his consent. Therefore, the borrower has a veto as well. We must look at it equally from both sides but we need to refine that particular issue in the wording.

The question of regulation of the practitioners is an important area. We do not want a situation whereby those who were formerly working either in or closely with the financial services sector end up earning in this area, given that they would have advised the other side of the house in previous years and helped to contribute to the problem. That said, it is important that the practitioners have knowledge of the area and are able to stand up and mediate between a person and the bank.

At present, the problem is that the banks have a strong hand. Most customers are afraid to go into their banks. They are in debt and are receiving these letters. They are in difficulty where one or other of the household has lost their job, and they are afraid. They are crying, they are on Valium, and they are not sleeping. The prospect of going in to the bank manager is akin to that of a child being brought to the dentist; they would do anything to avoid it. In saying so, I mean no disrespect.

It goes back to the basic problem. Those young couples who took out the loans relied on the banks. The banks, who were established in the country for 100 years or more, should have had the expertise and people relied on them. We now know they should not have relied on them but people cannot be blamed for relying on institutions that were operating here for many years. It is important that there be a fair balance between the borrower and the lender in these situations because that balance has not existed up to now.

I want to refer to a few aspects of the Bill. The Minister will have done that to an extent but it is important we outline the factual position of what is in the Bill because we all get caught up in the nitty-gritty of particular aspects, and when one asks somebody at the end of the debate what the Bill is all about, nobody has a proper objective view of the overall scheme.

The Oireachtas Library and Research Service was helpful in providing an information note on this. The three schemes involved in the Bill are voluntary, both for the lender and the bank. Both must agree to this. There is the debt settlement notice, the debt settlement arrangement and personal insolvency arrangement.

The major issue is that the law on the judicial process of bankruptcy is also being changed. The key reform is to reduce the period of bankruptcy from 12 to three years and to increase the minimum level of debt required to €20,000 before a person can go that way. That is an important issue because across the water, in England, the period is one year. Many are already saying it should be down to one year. Being declared a bankrupt is not an issue for some, but many have a bit of their own pride and do not want to be adjudicated a bankrupt. The issue of it being three years versus one year is an issue that will come up time and time again, and there will be amendments on that on Committee Stage.

I have come from the Committee of Public Accounts where we were dealing with NAMA. I asked whether this legislation will affect that agency's ability to collect debt because some of the debtors might opt for this three year bankruptcy arrangement as compared with the 12 year arrangement now applying. NAMA took a pragmatic view. I think the chief executive was more optimistic than pragmatic. He stated he did not think it would affect NAMA. However, he made it clear that there is a misconception here that one can be declared a bankrupt in England for a year and it is all over. It is not. There is a period of probation after the year of bankruptcy in England - I am not sure whether he said it is three or six years. He made clear, first, that if there is not full and honest disclosure in that hearing, there is a 12 year sentence of imprisonment in England. What is more, in managing one's way out of that process, one is under the watchful eye of the service concerned. I would say there are a number of years where such a person would be on probation after coming out of the process and it is not over, done and dusted, in one year. It is important that one would fully understand that. The proposed insolvency service will be a new State body. The Government informs us daily it will reduce the number of quangos but then decides to establish a new one every other day. It may be that a new insolvency service is necessary. Alternatively, its functions could be incorporated into the Office of the Financial Ombudsman. The Government says one thing about quangos but does the opposite, as in this case. I ask the Minister to address this issue. While I do not object to the provision of an insolvency service, it will become another self-perpetuating agency.

The need for an insolvency service may decline in the decades ahead. Representatives of Allied Irish Banks, in which the State has a 99% stake, provided briefings to the political parties recently. They informed the members of my party of the bank's view that the mortgage market is changing utterly. The AIB spokesman argued that Ireland will become like continental countries, with most people renting and fewer people purchasing homes. He pointed out that young people have observed the damage done to their parents by purchasing a home with a large mortgage. A 20 year old who sees such damage will not wish to take the mortgage route in future. According to AIB, the property crash, insolvency, mortgage debt and negative equity will fundamentally change the approach to purchasing property and homes. I am not saying the spokesman was right or wrong but it is the business of banks to find out how their customers are behaving.

At the same meeting, the AIB spokesperson indicated that while the bank is advancing mortgages - not enough of them in our view - its mortgage book has declined because the value of repayments exceeds the value of new mortgages. This decline in the mortgage business will continue, he said. His comments, whether they prove to be right or wrong, are certainly noteworthy. I hope the generation of people who have been caught up in the current problems will be able to see light at the end of the tunnel. It is to be hoped the legislation, with some improvements, will help in this regard.

The fact that the arrangements provided for in the Bill must be entered into voluntarily by both sides has been missed by some people. The debt relief notice is a straightforward mechanism which may be used for amounts of less than €20,000. The approval of the insolvency service and Circuit Court will be required for a debt relief notice to proceed. We can make a great deal or very little out of the involvement of the Circuit Court. Some people have argued that personal insolvency arrangements should be dealt with in a non-judicial fashion. I hope no one will go before the court without first having secured an agreement. If there is mutual agreement between the parties, the Circuit Court's role will be essentially to rubber-stamp the debt relief notices.

Agreements should not be revisited or disentangled subsequently in the courts. If it transpires that judges open up cases or allow people to revise agreements at the last moment, thus making the procedures of the court an issue, the role of the courts will have to be reassessed. While no one likes going before the courts, court approval for an agreement will provide a degree of certainty and official recognition. While I accept that the Circuit Court is the appropriate court for dealing with debt relief notices given the sums involved, it should be noted that some Circuit Courts only sit every three or four months. I hope a mechanism will be found to enable people to go before the Circuit Court without incurring the costs normally associated with court appearances, for example, barristers' fees. If the Minister sees the legal profession coming, my party will support any steps he may take to change the legislation. We do not want any savings made through write-offs and so forth to go into the pockets of the legal profession.

The debt settlement agreement is provided for larger amounts in excess of €20,000. The approval of the Circuit Court will also be required for such an agreement and a five year moratorium will apply.

I am pleased the legislation has come before the House. My party will table a number of amendments on Committee and Report Stages and I hope the Minister will be amenable to accepting them.

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