Charlie McConalogue (Donegal North East, Fianna Fail)

I welcome the opportunity to speak on this Bill and I commend the Minister on introducing it. With the collapse in the housing market and the collapse in economic confidence, the resultant impact on business has led to many people facing exceptionally difficult circumstances in respect of their solvency and the amount of debt owed. Deputy Mitchell O'Connor referred to a number of well-known historical figures, including Abraham Lincoln and Henry Ford, who tried and failed, went bankrupt and came back again. She noted that, in America, it is a badge of honour for someone involved in business to have tried and failed - to have had a business that became insolvent before trying and coming back again. It can arise when someone is trying out a new idea. There is always the risk that it will go wrong. In this country, the debt phenomenon has happened primarily with regard to the housing market. Although businesses will always try and fail, it is unprecedented for a generation to try and fail in getting their lives started, buying homes and making moves not to set up businesses but to set up steady lives for themselves and steady futures.

One of the consequences of the collapse of both the Celtic tiger and the housing market is that we have an entire generation mired in negative equity and facing into a future devoid of hope in terms of their financial position. In that context, the Bill is long overdue. Thousands of people are struggling on a daily basis with an unsustainable burden of debt. The provisions in this Bill will at least offer some clarity as to the options available to them to alleviate their plight. The latest figures illustrate the severity of the problem. Some 116,000 mortgage holders were in serious distress at the end of March 2012, an increase of 8,500 since the previous December. From January to March, a further 95 mortgage holders fell into arrears every day. Meanwhile, some 170 families lost their homes to repossession in the first quarter of the year, an increase of 30% on the figure for 2011. These are the people in the most severe distress, those who are finding it very difficult, if not impossible, to meet their mortgage demands.

What the figures do not reflect are the large numbers who are meeting their mortgage payments but are being put to the pin of their collar to do so. Many people, for example, purchased apartments during the boom and now find themselves in negative equity, often for as much as €200,000. Some of these home owners, being fortunate enough to have a reasonable job, are able to meet their repayments. They cannot, however, move on with their life in terms of purchasing another home which would better meet their changing needs. Unfortunately, the Bill offers little hope for that category of home owner. I accept it is a difficult and complex issue to address. I recently spoke to a person whose one-bedroom apartment, purchased during the boom for €350,000, is now worth no more than €150,000. Although this particular individual is in secure employment and can afford the mortgage repayments, it is soul destroying to be carrying a negative equity burden of €200,000. The prospect of seeing a substantial portion of one's income being eaten up for years to come in paying off one's negative equity is leading many to despair. Home owners in that situation are essentially stuck, often unable to trade down or upgrade their current home. It is little wonder that so many cannot see a viable future for themselves and their families. Instead of a light at the end of the tunnel, they can see only years of paying for a property which will never again be worth what they paid for it and in which they are effectively marooned.

One of the concerns that has been expressed regarding the Bill is that it might present a disincentive to people in a situation where they can afford to meet their mortgage repayments but are facing into ten or 15 years of negative equity to continue shouldering all of that burden. Some home owners, for instance, might look around and consider that if they were not in employment and no longer in a position to meet their mortgage commitments, some of the options set out in the Bill would be available to them. There will inevitably be a certain number of people who no longer see an incentive to work and instead opt to go down one of these pathways. It is difficult not to sympathise with those who are facing a future burdened with a level of debt that inhibits their ability to progress in life in a manner in which they could reasonably have expected to do.

One of the weaknesses of the Bill, as referred to by many speakers, is its failure to provide for an independent system of appeal, particularly in regard to the debt settlement and personal insolvency arrangements. The requirement that the consent of creditors owning at least 65% of the debt is required in order to enter into one of these arrangements will effectively afford a veto to the banks in most cases. The Minister observed that the ultimate court of appeal for people will be the option of bankruptcy, under the new conditions laid out in the Bill. For many, however, that is simply not an option. It is entirely unsatisfactory as an ultimate appeals mechanism.

The provision to reduce the period of discharge for bankruptcy from 12 years to three is very welcome. Coming from a Border area, I am only too familiar with the increasing phenomenon in recent years of people opting to apply for bankruptcy in another jurisdiction in order to avail of a process which is more considerate of the needs of those who find themselves in this situation. Bankruptcy laws which end up leaving people bankrupt for a period of 12 years are totally unsuitable. The new provisions ensure that the penalty for bankruptcy remains sufficiently onerous while also allowing us to deal with people in a more humane way.

The problems we are facing in this area can be traced back to the housing bubble and the failure to take action to address it. This was a failure on the part of society, the political establishment, the business community and the banking system. There is a tendency to simplify what happened by seeking to assign all the blame to one political party and one Government. That is a very simplistic and erroneous analysis of what happened. The reality is that we had a European and global economy that was performing strongly and an Irish economy that was performing much too strongly. Loans were given out by Irish banks to an extent that was simply not sustainable. In fact, at the very peak of the boom, at the very time when restrictions in the opposite direction should have been imposed, there was a move towards the provision of 100% mortgages. We are all wise after the event, but the reality is that there were very few in the world of business, banking or politics calling for an end to this and for a tightening of credit rules. That added extra froth to the situation and extra weight to the problems now facing so many people throughout the country.

The three debt resolution arrangements provided for in the Bill offer reasonable solutions to those in difficulty in accordance with their particular needs. In regard to the relief certificate option, I welcome the fact that MABS will be involved. It is an appropriate body which is doing much fine work under great pressure in terms of resources in trying to deal with the growing workload that has come its way. It is important MABS has the resources and the ability to give that assistance and that we do not place unacceptable pressure on it. In regard to the debt settlement and the personal insolvency arrangements, we must ensure the personal insolvency practitioners, who will act on behalf of the debtor, are properly regulated and that the best possible advice is provided to the person who owes money.

On Committee Stage, I urge the Minister to look at an independent appeals mechanism to arbitrate in situations where the bank and the debtor do not agree. It is unacceptable that the only recourse in situations like that is the court route or the bankruptcy route. It is very important that an independent body, which is able to intervene and impose a binding resolution on the bank and the debtor that is fair and takes into account the particular circumstances, is provided for in the Bill. I do not see why a situation like that should escalate and go straight to the courts resulting in somebody going into bankruptcy.

My party and our spokesperson, Deputy Calleary, will bring forward amendments to try to improve the Bill but I support the broad thrust of it and welcome its introduction.

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