Dáil debates

Thursday, 12 July 2012

Personal Insolvency Bill 2012: Second Stage (Resumed)

 

1:00 pm

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Kildare South, Fianna Fail)

I should begin by asking the Minister of State, Deputy Perry, to convey to the Minister, Deputy Shatter, and his officials our appreciation for the substantial work in compiling what is inordinately important legislation. Those of us on this side of the House have a responsibility to identify and highlight the inadequacies or the shortcomings of the legislation but none the less we recognise the importance of it and we will do everything in our power to ensure its speedy passage through the House. Likewise, I hope that the Minister will be willing to engage constructively with all the Opposition parties when dealing with the many amendments on Committee Stage.

I compliment Deputy Conaghan on becoming the champion of the engaged and married ladies of Ireland who will be happy to know, having listened to his contribution, that they will not have to rush to the pawn shops with their jewellery in order to help deal with their mortgage situation.

Like all Members, I see at first hand the effects that financial pressure brings to bear on individuals, couples and families in our everyday engagement with them in our constituencies. I live in Kildare, in the heart of the commuter belt where the population of every town and village has mushroomed. Much of that population has come from the Dublin suburbs as young people moved out to avail of cheaper house prices or indeed many older people moved in order to trade up to larger properties or when departing local authority properties and with some substantial investment capital. Many fine housing developments were established and I am happy to report that the ghost estates are not as great a problem in County Kildare as in many other areas.

However, the county has many trophy homes and one could meet people who talked about the number of holidays they could enjoy each year and the number of second homes they had acquired. At that time, 10,000 people in County Kildare were employed in the construction sector but all this has changed. A visit to some of these homes now will see a very different life with food cupboards and fridges very often empty. Mothers and carers very often have to turn to grandparents to borrow from their pensions in order to provide for their children. This Bill is, therefore, very important as it has the capacity to have an impact on the daily lives of people. As I go about my work I do not encounter a palpable sense of expectation that this legislation will do all this, but all of us who understand the importance of the Bill realise it must have the effect of improving the prospects for people who are burdened with debt.

The programme for Government states that the Government intends to fast-track personal bankruptcy reform. There has been a protracted delay in the publication of the legislation, with deadlines moving from April back to June while a Fianna Fáil Private Members' Bill encompassing mortgage debt and based on the LRC's recommendations was ready to go. If this were an era of real political reform, it should have been possible to take that Bill on board and to move it forward.

This Bill aims to amend Ireland's antiquated bankruptcy laws and to considerably shorten the period of bankruptcy and restrictions from the minimum of 12 years to three years. This is welcome. It means Ireland will be in line with our European partners and with developed economies in general. Some of the main proposals in the Bill include a broadly non-judicial insolvency service that will operate separately from the courts. However, there remains a role for the courts, albeit small, but there is a question about the issue of costs and additional waiting times as courts struggle to get through the backlog of cases that will inevitably arise. A simple mechanism, a one-year debt relief certificate, will be put in place for small personal unsecured borrowings of €20,000 and an arrangement lasting for five or six years would cover unsecured borrowings of over €20,000. This is to be welcomed. Mortgage debt will be included in the non-judicial debt agency under a personal insolvency arrangement. However, the process will see people remain within its confines for even longer - a period of six years - than would be the case under a full personal bankruptcy

I refer to the role of personal insolvency practitioners. The Bill does not provide for how these people shall be appointed or what qualifications they must hold. Practitioners will play a central role in the process of reaching and monitoring agreements with the banks. It is paramount that steps must be taken to ensure that those who first negotiated and granted the mortgages to those people who are now in difficulties are not given these new roles. This is a very real prospect because I understand the Department is already swamped with applications for positions in the new agency. Indeed, FLAC and Noeleen Blackwell have also alluded to this issue and to the need for a proper appeal system. I pay tribute to FLAC as being a very articulate and brave advocate on behalf of the many people across the country who are afflicted by personal and mortgage debt. Strong regulation of this central role in the overall process is needed to ensure that people can have full faith in the process and that only fully qualified and skilled individuals are eligible for appointment to the role. The Insolvency Service of Ireland will need to be adequately staffed for the volume of work it will need to undertake.

We are seeing the effects of the volume of work with which MABS must contend. We are all aware in our constituencies of the vital work of MABS. We are conscious of the dedication, commitment and skills of the people who work in that agency. We are also conscious that public engagement with the Department of Social Protection is hampered by the increasing length of waiting times. The State is proving very ineffective in responding to what is very often an urgent need on the part of the public. The Minister of State, Deputy Lynch, will be aware of the difficulties with regard to the issue of medical cards where delays are experienced and the very great delays in the area of the issuing of carer's allowance and carer's benefit. People who are burdened down with debt will expect that this new agency will be in a position to address their problems in a fair, realistic and expeditious timeframe.

The provisions regarding the bank veto and the lack of an independent arbitrator is a grave concern. The Bill provides that 65% of creditors will be required to agree to the personal insolvency arrangement empowering banks to block agreements if they see fit. Incredibly, there is no scope for appeal, which gives the banks a stronger position in the bargaining process. It amazes me that within these proposals there is an absence of any independent authority to provide a sensible and fair solution where a person finds themselves in serious debt and is unable to come to an agreement with his or her creditors. This situation is going to occur frequently, where banks will expect those in serious debt to make major changes in their standard of living that may prove unacceptable and unfeasible to these people.

Deputy Conaghan spoke, quite correctly, about women being forced to sell their engagement rings. We have all heard of engagements with banks where the weekly shopping basket has been the topic of discussion. The essentials of life which a parent must provide should not be the subject of negotiation with banks. I doubt that many people facing financial crises of the type being discussed here are eating caviare for dinner or going to any other great excesses. There are no apparent terms and conditions that can be applied or no definition of what is to be reasonably expected of those in debt and no remit for appeal or further dialogue if talks break down.

The issue of the bank's veto is also significant when measured against the performance of the pillar banks in respect of the €3 billion provided to each of them to support the small and medium enterprise, SME, sector. If this insolvency legislation is to work, the banks will have to demonstrate a great deal more good faith, willingness and proactivity than they have done in the case of lending to the business sector and given what the public has experienced and witnessed in the banking sector in recent years, people have very little reason to be optimistic that this will happen. There is a need for the Government to play hardball. There is a view across the country that while this legislation was being worked on, with the best of intentions, the banking lobby was very effective and achieved this level of veto or excessive influence over the potential outcomes.

Fianna Fáil's policy is significantly different. We have brought forward two new Bills, the family home Bill and the regulation of debt management advisers Bill, and a series of additional initiatives to overhaul personal insolvency law and make it extraordinarily difficult for lenders to remove people from their homes. Our Bill empowers a Money Advice & Budgeting Service, MABS, style agency to move in and arbitrate on such issues. I agree with colleagues on the Government side who say the very last thing that should happen is that families should be removed from a house which, more likely than not, will not be capable of being sold on the open market. Such people will be forced into a situation where, unless they have fully surrendered their title to the house, they will be unable to go on a local authority waiting list and, therefore, not be in a position to avail of the rent supplement.

People are faced with inordinate difficulties. In fact, people who come forward to surrender the keys of their houses are experiencing difficulty because in many instances they are told by their local authorities that they are not eligible to go on a housing waiting list. How much better it would be if such people could arrive at some level of agreement with the lending agency, whereby a rent of some description would be paid to that agency. In fairness, however, and having been critical of the banks, I acknowledge that Allied Irish Banks has been quite positive and constructive in its engagement with some of the voluntary housing agencies, where real efforts are being made to arrange circumstances in which people can remain in their homes.

The proposals Fianna Fáil has brought forward offer an independent arbitration role, thus reducing the influence and power of banks in the overall process. This would ensure that those struggling at present will not have to suffer any further due to unrealistic pressures placed on them by the banks. In that context, I hope the Government, in the course of its engagement with the banks, will talk to them about the training given to banking personnel who are dealing in a direct, person-to-person capacity with people who are over-burdened with debt. Such people are living through a period of inordinate stress and pressure in their lives. Other Members in their contributions on this issue have mentioned the incidence of suicide. Too frequently we meet people who are suffering severe mental distress due to the pressure of indebtedness. It behoves the banks and the lending agencies, who were so flaithulach in the distribution of the money in the first instance, to ensure the people who engage with hard pressed members of the public have the type of training that will equip them to deal with particularly sensitive circumstances.

Fianna Fáil published a Bill in October 2011 to establish a debt settlement and mortgage resolution office to provide an independent, non-judicial debt settlement system for persons struggling with personal debt and those in difficulties with their mortgage. This Bill was specifically based upon the recommendations of the Law Reform Commission's report from December 2010. I believe this approach would provide a more clear and transparent system of dealing with the issue of debt and allow all parties involved to have confidence in the process without becoming disillusioned.

Personal debt is a major problem for the economy. As a recent IMF study found, household debt restructuring programmes help economic growth by removing the unsustainable burden from the shoulders of consumers. This proposed solution does not achieve that ambitious aim. Directly dealing with the crucial problem of mortgage debt with a mechanism for an independent arbitrator is an essential part of our policy and forms the core of the Bill we brought forward. That is not apparent in this legislation and that is regrettable. A functioning market economy needs an effective legal route to clear insolvency issues and allow people to move on from unsustainable debts.

In summary, while this Bill is welcome, it is somewhat under-ambitious and gives too much power to the banks. However, I appreciate having the opportunity to address this issue. I wish the Government well in the early implementation of the legislation and I hope our misgivings about it prove unfounded and that it does work to alleviate the unbearable pressures under which many people are labouring.

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