Patrick Nulty (Dublin West, Labour)

I welcome the opportunity to contribute on the Bill. I commend the Minister and public servants on their tireless work, particularly given the Bill's level of detail, scope and breadth in dealing with the issue of insolvency. The Bill is a step in the right direction, although it is an insufficient response to the issue of mortgage debt in particular. I might elaborate on these points during my contribution.

I wish to note the context in which the Bill has been introduced, particularly the element of mortgage distress. At the end of last September, 8.1% of private residential mortgage accounts had been in arrears for 90 days or more.

That has since increased and this amounts, in practice, to 62,970 individual accounts. Of those households in arrears over 90 days, almost 40% have been in arrears for a year or more, and the average amount of arrears in the loans is €27,000, compared to an average outstanding balance of just over €200,000. That exemplifies the level of debt that people are experiencing, particularly in families enduring unemployment or a severe drop in income. On top of the arrears of 90 days or more, a significant number of borrowers have restructured loans or delinquent payments of less than 90 days, bringing the total affected to 20% of borrowers in the mortgage market. It is something that is making an impact right across our society.

Arrears tend to be highest with buy-to-let properties and among first-time buyers, as these purchasers took on larger debts owing to the high house prices between 2005 and 2008. It was mentioned in an earlier contribution by Deputy Mitchell O'Connor that our society and economic model is here to stay and the free market will reign forever. I certainly hope that in the years to come, the type of economic model we design and economy we build will be fundamentally different from what we have seen over the past ten years, when banks were able to give out 100% mortgages and there was light-touch regulation. The banking sector could hold the Government to ransom on the night the bank guarantee was approved, and we cannot afford to lose sight of that fact. We need very widespread and fundamental reform to ensure our financial institutions behave responsibly, and if they are not capable of that, the regulator must force them to do so and treat people in arrears and those with debts with dignity and respect.

The main impact of the Bill is the proposal to introduce a State-run insolvency service to operate the new non-judicial insolvency arrangements. It allows for three voluntary debt settlement systems and reduces the period of bankruptcy from 12 to three years, which I welcome. The first voluntary debt settlement proposed is where a debtor has unsecured debts for an amount under €20,000, where there can be a one-year moratorium period during which creditors cannot pursue action against the debtor in respect of the debts covered by the debt relief certificate. This commences on the date of the certificate's registration on the insolvency register and the debtor is restricted from applying for further credit. After the end of the year, if the debtor is still unable to pay off the debt, it is written off, which is a welcome provision.

The second voluntary debt settlement proposal deals with unsecured creditors owed more than €20,000. In this scenario, a debtor can apply for a debt settlement arrangement and creditors would be presented with a possible arrangement indicating how the debt is to be repaid over five years. A percentage of what is owed would be offered to be repaid to creditors, with 65% of creditors having to approve this proposed arrangement. If the arrangement is agreed, it would be registered on the insolvency register.

The third voluntary settlement proposal is a personal insolvency arrangement for secured and unsecured creditors for an amount of €20,000 up to a maximum of €3 million. The personal insolvency trustee would apply to the insolvency service for a protection certificate that would prohibit creditors from pursuing the debtor for 60 days. The trustee would contact the creditor and put forward proposals for how debts would be repaid. Unsecured creditors would be offered an agreed percentage of what they are owed to be repaid over six years. If part of a person's mortgage is in negative equity, this amount could be written off under a personal insolvency arrangement. For a personal insolvency arrangement to be effective, at least 55% of the unsecured creditors and 75% of secured creditors must agree to the arrangement. That gives significant power and scope to banks, which will continue to hold many of the cards in dealing with people in debt.

The Free Legal Advice Centre, FLAC, has welcomed the Bill but there are legitimate concerns about arrangements to allow people stay in the family home, which must be agreed to by creditors. It has been a subject of debate as to whether these proposals are optional and, in my view, they are as the banks do not have any legislative obligation to agree to them. However, it may well be in the commercial interests of banks to come to formal arrangements as this would recover some of the loan, although there is certainly no legal obligation. The reduction in the bankruptcy term from 12 years to three years, with possible extensions up to eight years, gives the banks further incentives to avail of these arrangements, which is positive.

A number of organisations, including FLAC, Threshold, Focus Ireland, New Beginning, the Society of St. Vincent de Paul, Northside Community Law Centre, the Ballymun Community Law Centre, Respond! and numerous academics in the housing area have called for the following principles to be addressed with mortgage arrears. These are over-indebtedness and inability to pay; the need for more detail and data on mortgage arrears; proposals for solutions to multiple debt liabilities in one account; personal insolvency legislation, with the establishment of a debt resolution agency; and debt write-off, with debtors paying to the best of their ability for a limited period before remaining debts are written off. We must consider that closely if we are to lift the weight of debt from our domestic economy. Other principles include access to representation, as debtors must be entitled to have an advocate represent their interests in negotiations to agree processes to contest debt repayments; and minimum incomes, as debtors must be entitled to a minimum income in order to meet basic needs while repaying debts. Many people in debt have families and responsibilities, and in any modern society the protection of a minimum income for daily life and secure access to essentials for a family must be considered.

Unsustainable mortgages that result in repossessions should lead to appropriate social housing arrangements. That has happened in some cases, which I welcome. For example, we have seen some voluntary housing agencies take on a property, with the incumbent in the home leasing it back. I strongly welcome that process, which should be developed and expanded to ensure nobody must leave a family home where it is not possible to meet mortgage repayments. This is particularly relevant in considering there is, essentially, a crisis in housing need in Ireland, with social housing waiting lists longer than they have ever been and almost 100,000 households on them. Nevertheless, we are failing to provide sufficient social housing options for people, and the provision of social housing by local authorities has ground to a standstill. If people who lose their home have to go on to a waiting list for an allocation, it would be completely irrational, so the idea should be rejected out of hand. The retention of people in the dwelling in which they live should be done with State supports, and people should be kept in their homes, where possible, either while continuing to pay a mortgage or as a tenant where appropriate.

There is a question as to whether this Bill addresses those principles. I believe it does in many respects but debt write-off and the retention of the dwelling are optional components. It would be preferable, from the stressed mortgage payer's perspective, if the independent debt resolution service could impose an agreement on creditors and debtors. That would have further negative consequences for the banks and it may be subject to constitutional change but it must be considered. Appropriate State supports for those who have homes repossessed are not addressed in the Bill but I hope they will be dealt with elsewhere.

The Bill is a welcome step forward in addressing the problem of mortgage arrears but it could go further.

Progressive Deputies should vote in favour of the Bill, but we should also encourage the Government to return to the issue and see how it can be amended and improved, particularly with regard to the independence of the debt resolution process and forcing the banks to engage with people.

The banking sector has criticised the Bill. Criticism that the Bill does not go far enough is valid, rather than the slow and tepid response from some elements in the banking sector in dealing with the issue of debt. It is too soon to tell for certain how successful the insolvency legislation will be in practice. However, it is reasonable to conclude it does not go far enough. The Bill lacks provision for an independent debt resolution service which could make repayment agreements with debt write-downs that are binding on creditors, and also lack provision of a guarantee that people who make every effort to pay back what they can will be protected from eviction or home repossession. These issues need to be addressed as the Bill goes through the Oireachtas.

There are a number of sections of the Bill I have mentioned which require elucidation. Section 61 provides for the full repayment of preferential debts to creditors under debt settlement arrangements unless creditors agree otherwise. This means these debt settlement arrangements may be of no use to thousands of families. Section 62 guarantees the rights of secured creditors, which prevents banks and lending institutions entering into debt settlement arrangements with distressed mortgage holders whose liabilities are far in excess of €20,000. There is no quick-fix solution to balancing the rights of secured creditors and distressed mortgage holders. While the Bill provides some positives for families struggling with debt, it favours the rights of creditors, banks and lending institutions and a better balance must be struck. I call on the Government to introduce provisions for an independent and binding mortgage debt arrears resolution process.

To identify the level of debt and tightened nature of personal and family budgets, on 9 July the Irish League of Credit Unions published a report on the incomes of families and the level of disposable income they have after five years of austerity. A total of 1.8 million households are left with €100 or less each month after bills are paid. Half of bank account holders are unaware of the bank charges they must pay. A total of 54% of current account holders have no idea how much they pay on overdraft charges. Of those with credit cards, 46% do not know the interest rate they are charged. There is a huge information gap between consumers and the financial sector.

On average, Irish consumers owe €1,000 on credit cards and 25% of credit card holders rely on their credit cards to make ends meet at the end of the month, which is a shocking statistic. A total of 40% have borrowed to pay household bills in the past 12 months and 10% use moneylenders. Like other Deputies, I have spoken to people in communities I represent who are to the pin of their collar with regard to their finances. They have no more money to pay and have been bled dry by the disastrous policies being pursued in terms of not taxing wealth or the rich. They cannot take any more and they have told me they have had to borrow from moneylenders at exorbitant interest rates, which is wholly unacceptable. We need to address this issue.

The crippling nature of personal debt is a weight on our economy which needs to be addressed. The Bill takes some steps in this regard which are small but welcome none the less. However, we will need to revisit the issue of mortgage debt because the Bill will not solve it in and of itself. Chronic mortgage arrears and debt exists and the Bill will not cater for those with liabilities of more than €20,000. I welcome the Bill but the Oireachtas will have to return to the issue.

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