Sandra McLellan (Cork East, Sinn Fein)

Sinn Féin welcomes the publication of the Personal Insolvency Bill 2012. I have no doubt that the people and families who are weighed down by debts that they will never be able to repay will also welcome the Bill and the same can be said of the many NGOs and organisations who work in this area. However, it must be noted that the legislation was long overdue and its delay has only added to the distress experienced by those who are in debt.

Even though the Minister has had ample time to produce comprehensive legislation, the Bill as it stands is disappointing and vague. Therefore, while Sinn Féin welcomes it and views its publication as a beginning of sorts, we regard it as seriously flawed legislation that does little to address the fears and concerns of people who are in debt. When the Bill was published we were to the forefront in stressing the importance of ensuring that the proposed insolvency scheme is independent. We have repeatedly called for a more humane approach to this issue. It should, therefore, come as no surprise that the Bill is a bitter disappointment to us, especially when one considers that it gives the banks power over personal insolvency arrangements for the majority of families in mortgage distress. This makes for bad policy and poor legislation and, more important, it leaves those who may have hoped to avail of this Bill in the tight clutches of the financial institutions. Sinn Féin has called for an independent agency which would be empowered to enforce legally binding settlements on debtors and creditors. The only other option open to people in serious arrears is bankruptcy.

For many people this is a painful and stressful situation, particularly where families and young children are involved. Single mothers and those with mental health problems are particularly vulnerable when they find themselves weighed down by debts which they have no hope of repaying. Evidence from other countries indicates that the main users of consumer bankruptcy and insolvency arrangements are from lower middle income, working class and low income groups. Those who have to deal with additional issues such as divorce, separation or the break up of a long-term relationship are over represented when it comes to personal insolvency, as are women and single parents. Therefore, while Sinn Féin welcomes the reduction of the bankruptcy term from 12 to three years, we are mindful of the fact that people entering bankruptcy will lose all their assets, including their homes. Our party's position is that people should be helped to remain in their homes and that an independent agency should examine on a case-by-case basis how to make mortgage debt sustainable.

We repeatedly criticised the Government for delaying the introduction of personal insolvency legislation. When the Bill was published we stated that the proposed insolvency service must be made independent, that the threshold of debt qualifying for a debt relief certificate needed to be carefully examined and that a more humane approach to bankruptcy was required. What is humane about legislation which allows a person to lose his or her family home? This type of legislation makes no sense in that it puts additional pressure on the State's already stretched resources and on vulnerable people who are just about keeping their heads above water.

We know that debt increases the risk of mental illness and that mental illness increases the risk of getting into debt. Research conducted in other countries indicates that people who are unemployed or on welfare are over represented in the debt relief notice category. I have heard Government commentators describe this Bill as radical but that word must be viewed in the context of the current environment. In this environment of high unemployment and high levels of personal insolvency, any attempt to change the current legal framework on debt and bankruptcy would appear innovative or radical. The reality is somewhat different, however. The test of whether this Bill will make a genuine difference to the situation in which thousands of people find themselves will be its capacity to help those who are struggling in the face of massive debts by empowering them to negotiate solutions without having to pay third party companies. There is no one-size-fits-all approach. A range of measures must be made available to those who are unable to deal with their debts.

We have serious concern about certain provisions in this Bill, including, in particular, the imbalance of power between banks and debtors. Banks are allowed to retain their veto when it comes to debt settlement and personal insolvency arrangements. They will not be legally obliged to accept reasonable applications from customers in arrears. Furthermore, there will be no legal obligation on any bank to accept an application for resolution options from customers in arrears and the absence of a right to appeal a bank's decision potentially leaves debtor with no option but to apply for bankruptcy.

The Free Legal Advice Centres, which have extensive experience in these matters, welcomed the review of the personal insolvency arrangement and the reduction from ten to five years in particular. However, we share their concern that the period is still too long and agree that the reviews should be held annually.

While we acknowledge that the Bill provides a measure of family home protection and addresses the need to maintain debtors in the family home where the mortgage is sustainable, a broader question arises in respect of how the State views property and housing. In this regard, it appears that nothing has changed with this Government. It is business as usual despite everything we now know about past mistakes. Housing is still a commodity and the banks are busy throwing people out of their homes after giving them mortgages they can never repay. The Government is pushing people into substandard rented accommodation because it refuses to acknowledge the State's primary role and obligation in social housing. The State adds injury to insult by acting as if the payment of rent supplement to private landlords is some kind of charity for the poor rather than a subsidy to private landlords and property speculators who made their money during the boom years of the Celtic tiger.

Measures that have been added to the Bill since it was first published include different out of court arrangements before final bankruptcy and provision for automatic discharge from bankruptcy after three years. We are concerned about the fees and costs contained in the debt settlement and arrangements. This will be a very real concern for people considering a personal insolvency practitioner who will, under the Bill as it stands, have the capacity to vouch that a person in debt was unable to come to a voluntary arrangement with their creditor or bank. These are not State practitioners. They are private and thus far unregulated entities and they will not work for free.

FLAC also made the following important point:

It is ironic that the Bill requires six months of co-operation with the mortgage lender under the code of conduct on mortgage arrears - or a similar Central Bank-approved process - before applying for a PIA. Yet the recent changes to the mortgage interest supplement mean that a person must currently prove 12 months of making agreed alternative payment arrangements under the code of conduct before he or she can even apply for the supplement.

There are promising elements in this Bill. However, we are mindful of the fact that there may only be around 30,000 mortgage holders who may avail of the provisions, while approximately 80,000 people are in mortgage arrears of three months or more. Most of them are owner-occupiers rather than buy-to-let property owners. According to reports, the Department has said that only 16,000 people will be able to avail of this during the first year. We must ask ourselves whether that is really adequate. How many people's situations will worsen during that timeframe?

The Government has failed to take the opportunity to loosen the grip that the banks have on people. It would appear that the State still refuses to recognise that creditors and banks should not be the ones setting the agenda on these issues. An independent body must be created that can deal with mortgage arrears and debt resolution.

See this speech in context