Terence Flanagan (Dublin North East, Fine Gael)

I, too, welcome the Bill and thank the Minister and his staff for their hard work on it. This Bill introduces many measures to address the personal insolvency issue in this country. The Government is aware of the difficulties which many people are facing. This legislation, the introduction of which has been a priority for the Government, will replace the outdated current legislation.

Many people and homeowners have been badly affected by the collapse in the property market, leaving them with huge debts, in negative equity and struggling to meet mortgage repayments. It is important that borrowers are given the assistance and support they need to allow them restructure their repayments. They must be assisted in agreeing more realistic payment terms with their banks. It is vital also that the banks are flexible towards borrowers, taking into account the current financial climate and restructuring loans taking into account the person's ability to repay. It is in the interests of the bank and the debtor to establish a realistic payment arrangement to resolve debt issues.

It has been clear for a long time that Ireland's personal insolvency legislation needed to be updated to effectively address the mortgage arrears problem. At the end of March this year, there were 764,138 private residential mortgage accounts in respect of principal dwellings in Ireland valued at €112 billion, with 42,000 mortgage holders more than 12 months behind on repayments. It is imperative that measures are introduced to resolve this crisis. It is important to note that the majority of borrowers continue to meet their mortgage obligations but that help is clearly needed for those who are in distress.

The Bill provides for a number of non-judicial debt settlement processes to deal with the crisis, including a debt relief notice, which will allow for the write-off of qualifying debt of up to €20,000, including credit card debt. This will be subject to a three year supervision period, with the debt being frozen for a year before being written off. Like previous speakers, I welcome the involvement of the Money Advice and Budgeting Service, MABS, in relation to debt relief notices. A debt settlement arrangement whereby the debtor agrees to a multi-year arrangement to pay off an amount of his or her loan and a personal insolvency arrangement in relation to the agreed settlement of secured debt of up to €3 million and unsecured debt over six years are also being introduced.

Under the Bill, the insolvency service of Ireland will be established. This body will liaise with the Department of Social Protection and the Revenue Commissioners to investigate applications and to determine whether people are eligible for debt relief notices and will provide information to the Government and public regarding legislation in this area. I welcome that this Bill amends the Bankruptcy Act 1988 to bring Ireland's insolvency laws into line with those of most other EU countries by way of reducing from 12 to three years the automatic discharge from bankruptcy period, which is more realistic.

Debtors are encouraged to make contact with their banks and to engage in negotiations with them in respect of a repayment plan. Likewise, banks should actively engage with customers experiencing difficulties to discuss the various options open to them. This Bill offers new and more flexible choices to people in debt, providing options to those who are genuinely unable to make repayments. Like other Members, I, too, have been told by my constituents of the difficulties they are experiencing and of their fears of losing their homes. It is crucial that the banks engage in negotiations with customers and try to reach mutually agreeable arrangements with those struggling on a financial basis.

The Government wishes to assist people in getting their lives back on track and to ensure credit is available from the banks on a more consistent basis. As regards, the personal insolvency trustees, it is important the Government appoints appropriate people to this role as they are the people who will provide the mediation in terms of resolving people's debt issues. As I stated, currently 42,000 mortgage holders are more than 12 months behind in their mortgage repayments. The personal insolvency process needs to be sufficiently unattractive to banks to persuade them to resolve the bulk of these arrears cases before they reach that process. One wonders if the mortgage arrears solutions proposed by the banks in the newspapers are sufficient to deal with the current crisis and avoid 42,000 families becoming insolvent.

It is imperative that the role of the personal insolvency trustee is independent of Government, the banks and debtors. It must be seen to be independent, transparent, practical and wholly honest in its dealings. Consumer confidence must be restored. While blanket debt forgiveness is not required, the 100,000 to 200,000 people experiencing debt problems will require long-term agreements to be put in place if they are to meet these debts, thus enabling them to once again plan their lives and become valued productive citizens. The current provision of six-month roll-overs may be insufficient. Every effort will be made to allow people to stay in their homes unless they do not want to do so or the cost of staying in their property is too significant. In recognising the financial difficulties many homeowners have been experiencing, the Government has introduced a number of initiatives to help them, including the mortgage interest relief scheme and the mortgage interest supplement. Some 18,000 people are in receipt of mortgage interest supplement which provides short-term income support to those who are eligible to assist them with their mortgage interest repayments. The Government has set aside €61 million this year for that scheme.

The Government has recently announced the mortgage to rent scheme which will further address the issue. This will provide help to families whose mortgage situation is untenable, enabling them to stay in their homes and pay rent while the ownership of their properties is transferred to an approved housing body. This scheme is expected to prevent 3,500 families from losing their homes.

Some of the critics have argued that the Bill is too favourable towards the banks as mortgage holders are advised to discuss their cases with their banks and negotiate a solution. I have some concerns that if banks fail to engage fully it will leave the debtor in a very precarious position. It is obviously important to monitor the banks in this regard and that the debtors have someone with whom they can raise their cases if they feel the bank is refusing to engage in fair negotiations with them. It is vital that the banks are made to comply with the Bill's guidelines.

I obviously welcome what the Minister for Justice and Equality, Deputy Shatter, told the House on Thursday, 5 July when he highlighted that financial institutions will need to step up and provide their customers with a wider range of financial debt resolution options than is currently on offer. I am also encouraged by the recent statement by the president of the Irish Banking Federation, John Reynolds, in which he stated that all banks have a shared purpose and common ground with Government in seeking to ensure that the greatest possible number of borrowers, who are currently experiencing difficulties with their mortgage repayments, have them restructured and restored to sustainability. Some 200,000 homeowners have some form of debt problem and need long-term agreements to allow them to restructure their debts and regain consumer confidence.

The personal insolvency terms in the Bill are better than, for example, the introduction of an individual voluntary agreement, which many believe would encourage people to live a lifestyle of excess in the knowledge that they could have it all written off through such an arrangement. There has been widespread support for the Bill. The chief executive of AIB, David Duffy, has said he supports the legislation and will ensure his bank meets all its requirements. The Independent Mortgage Advisers Federation has welcomed the Bill, as has Chartered Accountants Ireland.

The Government is very aware of the problems many homeowners are experiencing. It is a priority of Government to help these people and the introduction of the Bill is a welcome step in that regard.

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