Michael Conaghan (Dublin South Central, Labour)

I endorse what Deputy Lyons has said and I wish to add some remarks of my own. I welcome the opportunity to speak on this very important legislation. I commend the Minister on his efforts in bringing this Bill before the House and in taking action on the debt crisis which many people in Ireland are currently facing. I welcome the measures proposed in the Bill but I would make a few brief observations with regard to improvements that could be made to it. I hope the Minister will engage constructively with me and all the Deputies who comment on the Bill to ensure that it is as effective as it can be in tackling this crisis. I am confident that when we look back on this most difficult period for our country this legislation will stand out as one of the key measures taken by this Government to improve the lot of our people and to help get the country out of the mess that this Government inherited.

Like every other Deputy, I have been inundated with queries from constituents in despair over personal and mortgage debt and despondent because they see no way out. This is a live issue across Ireland. Years of reckless lending by banks, a property bubble fuelled by speculation, poor regulation and corruption created a situation where over-indebtedness became a norm. The subsequent property crash, and the economic crash that went with it, has had enormous consequences. It has left growing number of families trapped by negative equity in unsuitable accommodation. People who were encouraged to get on the property ladder before it was too late now find themselves unemployed and unable to meet their mortgage payments. Many business owners who invested personally in their companies when times were good have seen demand for their products and services fall off, and have found themselves weighed down by debt. Difficulty in meeting personal obligations has left people paying large bills with credit cards, or worse still going to moneylenders who prey on such people.

The situations I have outlined reflect the anecdotal evidence which every member of this House will have experienced and this anecdotal evidence is backed up by the numbers. The total level of household debt in Ireland is €190 billion with 70% of the debt being accounted for by mortgages. Some 19,000 mortgage holders are currently in receipt of mortgage income supplement from the Department of Social Protection. More than 10% of all residential mortgages - that is more than 70,000 - are now in arrears of 90 days. A further 80,000 homeowners have had their mortgages reconstructed by their lenders because of the difficulties they face.

Before the last general election, the Labour Party recognised the need for intensive action on mortgage debt. It stated that "We are committed to undoing the damage caused by Fianna Fáil's recklessness, beginning with helping homeowners in distress to weather this recession ... Labour believes that the best way to deal with distressed mortgages is to make keeping people in their homes an absolute priority." In developing a programme for Government, Labour's commitment in this area was reinforced. The programme for Government states: "This Government is committed to helping homeowners in distress to weather the recession ... A more radical approach is needed to protect families in fear of losing their home." The legislation before the House today reflects a major step in delivering on these commitments.

I take this opportunity to commend a related action, which has been taken by my ministerial colleague, Deputy Jan O'Sullivan, in her capacity as the Minister of State with responsibility for housing. The proposed mortgage to rent scheme will offer a ray of light for thousands of low income families who find themselves burdened with completely unsustainable mortgages. More important, this scheme will ensure that the family remains in the home. I welcome the work of the Minister of State, Deputy O'Sullivan, in developing this scheme, and in working with the social housing agency, Cluid, to bring this about. She has set ambitious targets but I am confident they will be reached. The Government has budgeted for this scheme to be taken up by 100 families this year and it is estimated that as many as 3,500 families in total could avail of it. I admire the foresight of the Government in allocating the necessary resources for this initiative. This sort of scheme has long been a commitment of the Labour Party and I am delighted that the Minister of State, Deputy O'Sullivan, has been able to deliver on it.

Turning to the items contained in the legislation, it envisages three new non-judicial debt settlement arrangements, namely, debt relief notices for people with low income and assets to write off unsecured debt of up to 20,000; debt settlement arrangements for unsecured debts of €20,000 to €3 million; and personal insolvency arrangements,the key mechanism for people with distressed mortgages, which will allow for agreement to be reached between debtors and both secured and unsecured creditors. In addition to these three formal avenues, I am confident that these measures will encourage creditors to begin engaging fully with struggling customers to reach voluntary agreements. In many instances the banks have been holding off on acting until they see what comes of this legislation. Now that they know what lies ahead, I hope that they will begin to engage constructively with families in distress.

Many critics of this legislation point to the effective veto which banks may have over personal insolvency arrangements and debt settlement arrangements. This is highlighted as a major flaw in the legislation and evidence of the Government putting the banks before the people. This is simplistic reasoning and it misses a major point. While there is no denying that creditors can veto the reaching of a personal insolvency agreement, the new measures taken by the Government will also give the debtor a veto. This comes in the form of the change to the bankruptcy law. We have seen in recent times bankruptcy tourists travelling to the UK to be declared bankrupt there because bankruptcy in Ireland has been so harsh. By reducing the term of bankruptcy from 12 years to three in Ireland, this greatly strengthens the hand of debtors in their dealings with the bank. If a creditor refuses to engage fully and fairly where debts become unsustainable, or refuses to agree a reasonable personal insolvency agreement, then the option now exists for the debtor to file for bankruptcy and, if successful, they can now be relieved of their unsustainable debt within three years. One issue that has been brought to my attention in this regard, however, is the fact the legislation envisages an income attachment order period of five years, which will commence on completion of the bankruptcy period, effectively extending the term of bankruptcy to eight years. I am genuinely concerned that this measure will take away the incentive for individuals to make a second go of it, to try to seek better employment, etc. The programme for Government commits to bringing Ireland "in line with best international standards" in bankruptcy and insolvency legislation, but I do not believe the proposed extended income payments order period squares with this, especially when compared to the UK and other European countries.

Similarly, I am somewhat concerned about the change which has come about in regard to debt relief notices for small, unsecured debts of under €20,000. When the Minister introduced the heads of this Bill earlier this year, debt relief notices were set to expire after a period of one year, allowing the individual to expunge their debt and get on with their lives, but now the draft legislation has extended that period to three years. I would like to hear from the Minister what brought this change about because I suspect it may very well be a result of the input of the banks. With regard to debt relief notices, I would like to address the recent comments made by the Minister, Deputy Shatter, around the paltry allowance which will be made for personal effects, and his statement that individuals would have to sell items such as engagement rings to avail of this measure. When I first heard of this I was appalled. The idea that an individual would have to sell such an important personal item as a wedding or engagement ring to begin making their way out of a debt crisis is completely unacceptable. For a person, already dealing with the personal and emotional anguish and mental health issues that go hand in hand with severe over-indebtedness, to be asked to sell such items of sentimental and symbolic value would finally strip that person of all dignity. I urge the Minister to reconsider and find some way to make an exception.

I would like to refer to the role envisaged for the Money Advice and Budgeting Service, MABS, in these proposed arrangements. I welcome the Minister's confirmation that MABS will have a legally defined role to play in the debt relief notice aspect of the legislation, with an agreement that it will act as an approved intermediary in this regard.

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