Bernard Durkan (Kildare North, Fine Gael)

If there is one issue with which every Member of the House should be familiar, it is mortgage arrears and insolvency. Every Deputy has had occasion, especially in the past four or five years, to advise people with mortgage debt who are unable to make repayments. In some cases, the advice we gave was not heeded by the lending institutions or members of the borrowing public.

Some years ago, a report was published which was heavily in favour of promoting the concept of renting and leasing as opposed to the purchase of property. This was the beginning of the end because the emphasis subsequently shifted to property speculation and investment in properties by speculators. The result was significant price inflation in the property market at a time when interest rates had never been lower. Personal indebtedness increased considerably and given that the problem will not go away of its own accord, we must face up to it in one way or another.

In recent weeks, some Deputies have argued for debt to be written off or written down. While I do not know how such an approach would work, what can and would work and should be an essential prerequisite to any debate or discussion is a review of the penalties applied to debts, namely, interest and compound interest. Where such penalties are applied, as they have been by certain institutions, the borrower can never get out of debt and the institution in question can never have its borrowings repaid. In such cases, the debt may double in value every three years. It is common nowadays to meet householders who are in arrears of up to €150,000, depending on the value of their property loan. Many of them will have borrowed the amounts in question on the basis of advice received from financial advisers. These experts, who set up shop in towns and villages throughout the country and gave people the wrong advice, are now re-establishing themselves as debt advisers as they set out to advise people on how to get out of debts they incurred as a result of bad advice they may have received from the same adviser in a different guise.

While the Bill provides a means of addressing a number of issues, we cannot allow further problems to befall unfortunate borrowers. If we do so, we will try for the next 100 years to repay debt we do not understand. I ask the Minister, in any discussions that may take place, to take account of the requirement that lenders recognise that their customers will not survive if penalties and compound interest are imposed on the principal.

The three relevant areas are private mortgages, the business sector and the speculative sector, the latter being the cause of most of our problems. Simplification is required. The Bill is extremely complicated as it sets out to dot every "i" and cross every "t". While I understand what it sets out to achieve, that does not necessarily mean it will meet its objectives. Simplicity is vital for this reason. Certain parameters need to be agreed and set down before experts or practitioners become involved in the process. Borrowers will seek to ascertain how the legislation will affect them and the lending institution will do the same, albeit from a different perspective. If we want to avoid moral hazard, we must be seen to be balanced. We must be able to assist those who are overstretched and unable to meet repayments while recognising the position of those who are able to continue to meet their debts and borrowings. It is only right, proper and fitting that they should not be penalised for what has happened to others, regardless of the circumstances. No one can object to a write-down or removal of penalties or compound interest because it affects no one who has not fallen into that position. Consequently, it is of fundamental importance that this be recognised and examined.

I have dealt with many lending institutions over the past four or five years and they all recognise a problem exists in this regard. Many of them are willing to help and to try new methods. Incidentally, some of them are not, but in general they are. Those institutions that are willing to help are looking forward to this legislation but the system should not be of a nature that is complicated or inaccessible such as, for instance, the legal aid system, which has ground to a halt. A public representative elected by the people who wishes to inquire about when a person might have his or her case taken is told that the public representative cannot get involved and the staff cannot talk to him or her. I sincerely hope the same will not apply in respect of debt resolution. I would find it extremely inhibiting and restrictive were I to contact a financial practitioner or arbitrator only to find out that such individuals could not talk to me because debt resolution was beyond me or above politics or similar kinds of nonsense. Members have heard enough of that in recent years and the country has found itself in an extremely difficult financial position on foot of similar secrecy. Moreover, I defer to no one on this issue. In common with the Acting Chairman, the Minister and many other Members, I have dealt on a one-to-one basis with those who are directly affected and I intend to continue so doing for as long as I am in this House, while being in a position to know the regulations put in place and the agreements entered into are being fairly and honestly applied at all times.

Special mention must be made of those lending institutions that have withdrawn from the Irish market. A number of banking interests that set up shop in this country eight, nine or ten years ago were extremely predatory, did a great deal of damage to this economy and contributed hugely to debt. However, they then withdrew from the marketplace to safe havens offshore. They accept very little responsibility, have entertained very little by way of submissions and do not wish to listen to any option other than to cut their losses and leave. Those entities were given licences to operate here and my point is applicable to anyone who was given such a licence to operate in the banking sector in Ireland under whatever circumstances and regardless of whether the rules were applied, which is a job for the institutions. The point is the public of this country should not be penalised forever because of their activities or because of the lack of action by regulators or people in authority at the time. This should be borne in mind, particularly in the context of the legislation under discussion.

In addition, I wish to make the point that the family home is sacrosanct as far as mortgage debt is concerned. It is of critical importance that there be put in place a clear and unequivocal statement to the effect that everything that can be done will be done to ensure the borrower is able to hold onto his or her household. It is not that such people wish to circumvent the system or to gain or profit by it, which they cannot do in any event, but that they entered into their debts in good faith at a time when they were advised by many financial advisers to take that route. Although some of us were advising something completely different, that is the way it was. Consequently, it is of huge importance to be able to explain to members of the public who find themselves in this position that they were not responsible for all the problems and, in many cases, they were not responsible for any of them.

It should be borne in mind among the lending institutions, advisory services and those involved in encouraging people to go into debt that now is the time from which the burden must be shared equally. I make this point in the knowledge that whenever I have suggested to banks or lending institutions that they might write off compound interest or penalties, they have been prepared to listen. However, they also have been quick to respond that their bondholders might not agree or would have difficulty. My response to that is quite simple: the bondholders, the lending institutions and the public, unfortunately, are in this together. Each of the aforementioned component bodies must carry some share of responsibility and no one can walk away from it. Borrowers cannot walk away having decided they cannot afford to or do not wish to pay and therefore will not pay, because on what basis was the loan then extended in the first place?

By the same token, it is not acceptable for a lending institution to tell borrowers that in order to satisfy the institution, they must pay, penalties will be imposed and the debt will be extracted over a longer period with greater penalties and more interest piled on of a compound nature. It will not be acceptable; one must ask under what circumstances do such lending institutions expect the rules were made for them and them alone. It does not work that way. Business, enterprise and marketplaces do not work that way. Moreover, it should never have been thought that it would work in that fashion, any more than the concept of upward-only rental leases, to which Members have referred previously. I do not know from where the latter idea emerged and, as I have stated previously, I cannot understand how it has come to be accepted as being within the realms of the Constitution. It was and is a major contributory factor to undermining the entire sovereignty of the State.

I wish to make another point with regard to insolvency, and I acknowledge this Bill breaks new ground in this respect. The activities of some banks are forcing small businesses in particular into insolvency and ultimately into bankruptcy by virtue of the slow withdrawal of working capital. This has been done by imposing various penalties, replacing overdrafts with term loans and gradually tightening the noose on the business sector. This is not creating an improvement but is exacerbating what is already a serious problem, and it neither will nor can work. While I particularly wish to mention the issue of offences, I wish to refer to the person appointed as an authorised intermediary or personal insolvency practitioner. Deputy Kirk mentioned this issue a few minutes ago and other Members have great concerns in this regard. I also have concerns because of the cost to the borrower. In the case of a borrower who already is in financial difficulty, I fail to discern the benefit of the exercise if it requires further debt to extricate that borrower from such a position. We are in a particularly serious position and in such circumstances, borrowers may find themselves between a rock and a hard place. In other words, they may be obliged to incur further debt to pay the practitioner, whoever that may be, only to end up being obliged to have debt resolution applied to the costs and fees arising from that visit to the practitioner. Consequently, this issue must be examined carefully and some upper limits must be placed on the possible cost involved. One should avoid a scenario in the near future in which the public respond to this legislation by saying it was a good idea but its costs were excessive.

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