Dáil debates

Thursday, 12 July 2012

Personal Insolvency Bill 2012: Second Stage (Resumed)

 

12:00 pm

Photo of Alan FarrellAlan Farrell (Dublin North, Fine Gael)

I thank the Minister of State for his presence and for the opportunity to speak on the Bill. First, I will speak on behalf of my constituents in Dublin North which was one of the fastest growing constituencies during the housing boom. Consequently, it is one of the most affected by negative equity, escalating prices and large unsustainable debt.

As noted by many speakers, it is the ordinary people, who were not looking to make millions or who borrowed irresponsibly, who are in dire need of this legislation in order to get their lives back on track. In Dublin North, people borrowed to buy homes and not investment properties, nor was it greedy or reckless of them to do so. Mortgage rates were low, rents were high and it seemed like the only option. Ordinary people played by the rules which were set by bankers and by a Government that afforded tax incentives to get on the property ladder and reduced tax rates to fuel a false economy. Experts told us, over and over again, that it was in our interest to buy property as soon as we could rather than pay an extra €50,000 if we waited a month or so.

The Bill is not just about mortgages. It is also about personal debt associated with the peak of the boom. I used to drive through my constituency, particularly after my first election to the local authority in 2004, and look at towns like Balbriggan, Swords, Rush, Lusk and Skerries that were being transformed in front of my very eyes. Housing estates sprang up from nowhere and I saw signs outside building sites, as all Members have, advertising homes at, perhaps, €300,000. A month later, another sign would appear saying,"Phase One Sold Out; Phase Two €350,000". That was a common occurrence throughout the country.

We could not buy property fast enough and the banks could not lend us the money fast enough. People queued overnight, bought off plans and signed agreements worth up to half a million euro without even seeing a property. This was not because they were foolish or irresponsible. It was because they did not have much choice in the matter. If they chose to hesitate they paid the price. That was the reality. We signed for our homes in good faith, expecting to pay back every cent. I did it, my neighbours did it, my family members did it, my friends have done it, all with the reassurance that we would have a paycheque at the end of the month in order to meet our mortgage or personal debt payments.

No one is looking for special treatment or to get off easy. Easy is far from how I would describe the fear and uncertainty of being unemployed or without a means to keep a roof over one's head. People have come to me in fear of loan sharks, as Deputy Byrne mentioned. These people have been escorted to cash machines or a post office in order to withdraw money to give to these individuals. People have walked out of their homes, desperate to find a way out of their nightmare. Marriages and partnerships have broken down. People have been abandoned by partners and left without financial support to pay creditors alone and with no one to turn to for help. These are genuine stories of real people who were sold the lie and incentivised to invest with the risk free momentum that was carried through our Government and our banking sector.

According to a UK study the typical age of those who enter the personal insolvency process is between 25 and 44. These are the years in which we raise families and invest in family homes. Such individuals are at the lower end of the salary scale even though 90% of them are in employment. They are the working poor. It is not only the unemployed who face financial difficulties in this new Ireland but also those who find their incomes do not meet their monthly expenditure. I hope this Bill will offer a breathing space or a light at the end of the tunnel to these people, who merely want a normal and safe life with their families.

As a member of the Committee on Justice, Defence and Equality I recognise the challenges that arise in publishing this type of legislation. How do we protect the taxpayer or effectively resource organisations such as the proposed insolvency service when we do not even know the scale of what will be required? How can we reform our bankruptcy law to bring it in line with our European counterparts so as to avoid the risk of continued bankruptcy tourism? Has thought been given to what happens at the end of the three year period of bankruptcy? In the UK, for example, individuals enter a probationary period subsequent to exiting bankruptcy. These are big challenges and the work is only beginning.

We will soon have a non-judicial means by which debtors can enter into negotiations with banks, with equal representation on all sides, by way of an insolvency service. This service needs to be an affordable and I know the Government does not underestimate the cost of the expertise and time needed to support debtors during negotiations. MABS has heretofore had the tough job of meeting these needs. It has done an extraordinary job since the crisis began and I trust it will have a significant presence in the implementation of this legislation. It is trusted on all sides by creditors, the Government and the public. I would also like to commend the Free Legal Advice Centres, representatives of which I invited to the Dáil last week to provide Members with a briefing, on their effective advice on rights and options to people who find themselves in a new and difficult situation. I hope the Minister will continue to work alongside these agencies and heed their expertise as his Department develops a fully functioning facilitation process. During our briefing it was noted that while hire purchase agreements are not entitled to recourse for justice they continue to make up a large part of the credit facilities and products advertised by creditors and retail outlets.

I welcome that the insolvency service will function as an independent body reporting to the Minister. It is vital that it is transparent and accountable by means of registers that provide information to the public and that it advises the Minister on any matter relating to its functions. While I understand the importance of maintaining the independence of this body, I urge the Minister to be vigilant on accountability so that it does not become another agency disengaged from the State. I am curious, for example, to ascertain if the agency will be directly answerable to Members of this House. Often when Deputies table parliamentary questions pertaining to agencies of the State they get the response that the matter is the responsibility of, for example, the HSE. This would be an unacceptable outcome but it can be remedied before the Bill is passed.

This is one of the most comprehensive Bills this House has published to date but, as the Minister is aware, a number of issues remain to be clarified. What will creditors be able to expect from debtors in terms of what is a fair deal and the level of flexibility that should be offered if circumstances change? What compliance procedures will be put in place and how long with it take? Until there is an established code of practice I am not at ease with the establishment of an insolvency service that is fully independent of Government. I do not mistrust the proposals for the insolvency service but have concerns about the unpredictability of the outcome. I note that the Minister has legislated for accountability through the service's director but it would be appropriate to also make him or her answerable to this House.

This will be a complex procedure and every case will be different. While it is the only practical means of approaching a settlement, I am concerned about the potential hazard of discretion. I ask for further clarity on the manner in which the banks will approach these negotiations. Will one individual have final sign-off depending on his or her personal judgement of the situation or will the decision be made by a committee or a faceless review board? How can we guarantee that everyone gets a fair deal, regardless of their banks, socioeconomic backgrounds, genders or circumstances? I hope a code of practice will be established quickly to cover all creditors and oblige organisations to follow a formulaic system of criteria and look to precedents to ensure that a fair and equal approach is afforded to all.

I hope this Bill offers those who are living in fear, and young families in particular, a way out of their current situation and a means to provide a future. As a Government, we have an unprecedented mountain to climb and many of the decisions we make are not easy. This Bill, however, will facilitate significant reforms in our banking sector. It is a shared consequence of the legacy that we have inherited and I commend the Minister and his Department on the serious work that they have done thus far.

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