Clare Daly (Dublin North, Socialist Party)

There is no doubt that the Bill is long awaited. However, unlike some of the Labour Deputies, I do not think there will be great celebrations about it. The legislation is disappointing and we will be tabling a number of amendments on Committee Stage to try to improve it. It is not the great step forward that many people require and it does not deal with the core issue of mortgage debt. Inevitably, there will have to be a write-down of some of that debt which is unsustainable.

The Bill has three main features, to which other Deputies have alluded. First, it reduces the bankruptcy period from 12 years to three, which is welcome, although the anomaly that still exists with the North of Ireland and Britain may prove to be a problem. Nonetheless, it is a step in the right direction. The second measure deals with the possibility of having unsecured debt of up to €20,000 written off if the person meets certain criteria. That is welcome, although it does cause problems for credit unions. I will deal with the latter point later on. Third, the primary part of the Bill deals with a debt settlement arrangement for secured debt or mortgages of up to €3 million. The key problem here is the retention of a veto for the banks. A creditor who controls 65% of a person's debt will have to agree to engage in the debt resolution process, which is an inherent weakness in the legislation.

The Bill itself is so big, convoluted and complex that it will be inaccessible for many people. It must be seen in the context of the Government's lack of other measures to deal with the overall mortgage crisis against the backdrop of the Keane report. The provisions and guiding principles of that report show the weakness in the Government's approach. The report's primary findings stated that those who can discharge their mortgage obligations must do so. In addition, there is no entitlement to a particular solution and solutions have consequences. Crucially, there are unsustainable situations and unfortunately it is inevitable that people will lose their homes. While acknowledging that this needs to be minimised, I do not think the measures outlined in this Bill actually address the objective of keeping people in the family home, although that objective is in everybody's interest.

The Bill does not deal with the need for debt reduction through a write-down process. In fact, it absolves banks of any responsibility in this situation. The only options facing home owners who are struggling to pay mortgages are an interest-only repayment mechanism, possibly a year's break from payments or a reduction in payments for a period. The authorities are standing over a situation where arrears are increasing, however, and the Bill does not provide a long-term solution. It is delaying the inevitable situation whereby people cannot meet their repayments.

When the Minister, Deputy Shatter, introduced the Bill it contained caveats. He spoke of the Bill incentivising banks and having a better outcome potentially, but there is no compulsion in it so home owners have no safeguards. The legislation hopes that banks will come up with a solution which I do not think is good enough. A constituent of mine wrote to the Minister on foot of his contribution last week when introducing this Bill. She put it well when she wrote:

I am sitting here seething at the audacity of you to suggest that we sell our jewellery and so on to pay the banks. Do you remember that they lent us money that they never had in the first instance? Then they made interest on it and now you want the people of Ireland to pay them again. How do you sleep at night? I invite you to walk in my shoes and travel with me, and learn what it's like to live at the mercy of the present Irish Government paying for the bail-out of the banks.

She goes on to talk about the problems in the economy and the effect that austerity is having. This Bill does not solve the problems of mortgage debt in any way because it leaves the issue and decision making in the hands of the banks. As Deputy McLellan said, 10% of mortgages are over 90 days in arrears. Some 77,630 family homes are in arrears. Some 8% of homes are over 180 days in arrears, and 40% of owner-occupier dwellings are in negative equity. This is an almighty stranglehold on the economy. The total deadweight of that mortgage debt is stifling all aspects of economic recovery. Sadly, the Bill does not address the problem in any way.

This is one measure the Government intends to take to deal with the mortgage crisis. While I have problems with this aspect of the legislation, the other aspects as not too enticing either. The mortgage-to-rent scenario has been outlined but the reality is that it has not seen the light of day. The Department of the Environment, Community and Local Government is currently engaged in a pilot programme with AIB for 20 cases. Some of the subprime lenders, including GE Money and Start, have been approved for 40 cases with voluntary housing associations. Some 60 cases are being dealt with, out of 80,000 houses in arrears, so we are a long way from solving the problem. Even if half of those cases default, which is entirely likely, 60 is nothing. Under the Government's plan it would take hundreds of years to deal with this. We cannot see it separately from what the Government is doing in terms of social policy and the complete lack of investment in the provision of social housing. The objective should be to keep people in the family home but I do not see any way in which that is being done.

Other measures include banks developing a mortgage arrears resolution strategy beyond what existed before. While we are told that the banks have drafted such a strategy, we have not had any information on it. The Central Bank is seeking information about it but has not received any either. We have heard the stated intention that a mortgage advisory agency would be set up and run in co-operation with MABS but there has been no discussion with MABS in that regard. When we are talking about a holistic approach, where this is one of a number of measures, we must examine the other measures as well. However, they have not gone far enough to deal with this overall crisis.

The arrangement to deal with unsecured debt of less than €20,000 - which would primarily be credit card debt and credit union debt - is a welcome addition. However, the criteria are quite limited. We must take into account the submissions made by credit unions which are a different type of financial institution. They are owned by their members and operate on a not-for-profit basis. In fairness, they have made the point that they will be affected by all the measures in this Bill but particularly by the unsecured debt provision.

A high percentage of credit union lending would come within this category. As a result, credit unions will be disproportionately affected. The credit unions make the point that they will also be affected by other provisions and that while they are being made accountable in terms of these arrangements they will have little control over the outcome in that regard. I agree with them that this legislation was drafted from the banks' perspective. As stated, credit unions and their members will not pick up the bill for the mistakes made by the banks in advancing unsustainable property loans. Like all taxpayers, credit union members are paying for the recapitalisation of the banks and they should not be hit on the double through this provision. We need to take into account the special role of credit unions so as not to disproportionately disadvantage them.

I take on board the point made by the credit unions that this Bill, in terms of its impact on financial inclusion, may drive people out of credit unions, who will be reluctant to lend because of the provisions in this Bill in respect of people on social welfare, which assume they do not have the capacity to repay. We must be mindful of this.

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