Finian McGrath (Dublin North Central, Independent)

I welcome the opportunity to speak on the Bill, which is very detailed and complex legislation. We need to ensure the citizens of the State get a fair hearing, decent legislation, real reform and support for families in crisis as a result of the debt issue. That is what the debate on this legislation needs to be about. It is not a time for sitting on the fence but a time for real legislation that will support people in their hour of need.

I am a member of the Oireachtas Joint Committee on Justice, Defence and Equality, which held hearings in advance of the publication of the legislation. The heads of the Bill were referred to the Oireachtas Joint Committee on Justice, Defence and Equality on 26 January 2012 by the Minister for Justice and Equality. The committee was invited to consider the heads and to respond to the Minister by 1 March. During the debate we received ten written submissions and we also held a public hearing on 5 February. I thank the committee's Chairman, Deputy Stanton, for the magnificent work he and the team did on this legislation. I also thank those who made submissions and appeared before the committee.

We all accept we need to deal with the broader issue of debt. I am interested in the more than 200,000 homeowners; I am not interested greedy people, bankers, developers and others who lost the run of themselves when it came to borrowing during the Celtic tiger. I come from the old-fashioned school that believes that those who borrow something should pay it back or do their best to pay it back and I am sure the majority of people would agree. They are the interests I represent in today's debate.

All those who participated in the hearings would acknowledge that our bankruptcy legislation is outdated and any attempt to address the issue is welcome. The committee recognised that the Bill was one part of a package of measures aimed at tackling the problem of indebtedness, including the recommendations of the recent Keane and Cooney reports. Another issue that came up during the committee's discussions is the human element of this. The committee acknowledged that this is an extremely complex and difficult matter to address in legislation. Irresponsible lending and borrowing have largely contributed to this problem. All members of the all-party committee felt that attributing blame will not address the problem. Behind all the facts and figures are real people who are devastated at the real prospect of losing their homes. That goes to the heart of the legislation.

While I am not a defender in any way of the banks, there is another issue going on behind closed doors that is not trendy to discuss. When people come to my clinics I advise them to try to do a deal to restructure and I often write a letter for them to a bank or building society manager. The majority of them do not seem to need to come back to my clinic. In other words, I get the impression that many side deals are quietly done behind the scenes. People are restructuring their mortgages and deals are being done. I do not know why it never seems to get mentioned in this House and it is not mentioned in the media. I believe that 90% of people, who come to backbench Deputies with problems with banks and building societies relating to mortgages, end up doing some sort of a deal even if it is only paying back €30 or €40 a week. It is common sense to get €50 a week from a family rather than putting them out on the street and trying to sell the house when the market is depressed. I raise this issue because a number of my colleagues seem to be saying the opposite. While I am open to persuasion, that is my experience as a backbench Deputy.

I have to laugh at some of my colleagues in the Labour Party who regularly do their rant about the bank guarantee and have a go at those of us who were around at that fateful time in 2008. I have heard them defending the credit unions - the workers' banks they call them. I remind my friends and colleagues in the Labour Party that one of the biggest lobbyists during the bank guarantee debate in the Dáil at that time was the credit unions. I clearly remember that the credit unions were on our case to ensure their depositors were protected. It was a very complex issue at the time in 2008. People were very worried that Mrs. O'Brien in Donnycarney, who had €30,000 or €40,000 in her little bank account for a rainy day, might lose all her money. People were phoning into Joe Duffy's radio programme and marching on banks. People should have a little more balance when they pontificate after the event. Of course when we all discovered what went on in the banks, I personally voted against much of the legislation at the time. However, during those few days many things were going on in the country and the high moral ground brigade in the Labour Party would want to wise up to that. They just happened to be lucky to call a decision that appeared to be right in the long term.

At the time many people were frightened, many people's businesses were going down the tubes and they had to make a decision. The core issue was that the guarantee was too broad and we all accept that but at the time those bankers lied to their gills to most politicians. I remember banging on the doors of Deputies' offices and asking them what was the story on the guarantee and most of them did not know. They were being fed misinformation by these senior bankers. In terms of history, it is important that be recorded.

The family home should be protected in any insolvency arrangement and in making insolvency arrangements, the family home should be handled separately from other properties such as investment properties or holiday homes. That is an important message to get across. We have to prioritise the family home. If one takes a hit on investment properties or holiday homes, that is a different debate, as against protecting the roof over one's head. It was submitted to the committee that considered this measure that currently when a judge hears a repossession case, where the borrower is in default, the judge has no discretion in regard to the granting of an order of repossession in favour of the lender. The submission proposed that judges, in very specific circumstances, have discretion to refuse repossession in order to encourage reasonable and fair behaviour on the part of the lenders. We asked the Minister to examine the possibility of ensuring that such provision is included in the legislation.

With regard to dealing with the debt issue, there was an overall view that if someone gets into financial difficulty they should initially engage in discussions with their creditors with a view to making a manageable arrangement based on his or her individual circumstances. This is a common sense approach and one I would welcome.

On the broader issue of Bill, many people have major concerns about it, which I would share. My colleague, Deputy Shane Ross, has called it a bankers' charter; I will examine his views on this and, if it transpires that is the case, l will take that on board and examine it. People are concerned, they are wary of the bank veto and the debtor supports.

I am strongly interested in the position taken by FLAC with regard to the legislation. It has concerns that the new Bill must prove its effectiveness in the face of huge and urgent societal problems of people being unable to deal with their debts. That means the State must offer a suite of effective solutions that people can understand, negotiate themselves, or with proper supports to guide them where appropriate.

I broadly welcome the Bill, as providing a structure for people to start dealing with the unsustainable debts in a structured manner but there are concerns about it. While the Bill is for those who are unable to pay their debts in full, it will also help people who need a bargaining chip with their creditors. This is the positive side of the legislation. I have concerns about the imbalance of power between the banks and debtors, as the Bill preserves the creditors' veto in respect of the debt settlement arrangement and personal insolvency arrangement options. These are issues I would like discussed and dealt with by way of amendments.

The proposed law as it stands still does not impose a legally binding obligation on lenders to accept reasonable applications from customers in arrears; neither does the Bill provide for a right of debtor's appeal to a creditor's decision in any of its options. These are matters that can tweaked at a later Stage and dealt with by way of amendment.

I remain concerned about four elements of the Government's action on the mortgage debt plan, namely, the new legislation, bank co-operation, debtor information and support, and social housing, which must have monitors and checks built in to ensure that the plan is working for debtors. The Bill has improved the provision for reviewing the effectiveness of the personal insolvency arrangement option, down to five years from ten years proposed in January. However, I would argue that this is still too long. Reviews should be annual and should be applied across all options.

The Bill provides for some measures of family home protection. A personal insolvency practitioner proposing either a debt settlement arrangement or a personal insolvency arrangement must try to ensure that a debtor can maintain the family home unless the mortgage is unsustainable or unsuitable. These are important issues I would like to raise with the Minister in regard to these measures.

The four options I would like to raise comprise three tiers of out of court settlements and a final bankruptcy option through the High Court. The first is the debt relief notice for write-off of qualifying debt up to €20,000, subject to a three year supervision period. The second is the debt settlement arrangement for agreed settlement of unsecured debt over five years. The third is the personal insolvency arrangement for agreed settlement of secured debt up to €3 million - this cap can be waived with the consent of all secured creditors - and unsecured debt, over six years. The fourth is bankruptcy legislation to provide for automatic discharge from bankruptcy after three years, except in cases of non-co-operation or fraud, on which the court officials would adjudicate.

A new insolvency service will certify or determine applications for the debt relief notice and will certify applications for the debt settlement arrangement or personal insolvency arrangement, and these will be ratified by the Circuit Court or High Court. The personal insolvency practitioners will make proposals on behalf of debtors in the debt settlement arrangement and personal insolvency arrangement and must act impartially. These are the issues involved and we must ensure they are dealt with. I stress that the key issue is to ensure that the 200,000 people who are in genuine need must be protected. Within that figure there are those who will not pay and those who cannot pay. I do not want to see people trying to pull smart one on the State or on the taxpayers of this country and people who have the resources not making an effort to pay their debt.

I have other observations I would make on the Bill. The creditor threshold on debtor proposals under the debt settlement arrangement and personal insolvency arrangement is 65%, which constitutes a veto. However, it may be less attractive for creditors to reject out-of-court proposals, as the alternative may be a three-year bankruptcy where the creditor may receive less money. In bankruptcy, an income payments order may be made at any time during the bankruptcy and the order can last up to five years. Fees and costs may be high for the debt settlement arrangement and particularly the personal insolvency arrangement options, as in the latter the insolvency practitioner will have to monitor the arrangement for some time. Interestingly, a personal insolvency practitioner will have to be able to vouch that the debtor has been unable to come to a voluntary arrangement with creditors before being able to apply for reliefs under the Bill. This gives an indication of how money advice structures and-or loan modification arrangements will fit in with the new options, in that debtors must first seek to settle debts outside the remit of the new legislative options.

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 personal insolvency arrangement. Yet the recent changes to 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. A new provision here is that while secured debt is not part of a debt settlement arrangement, in practice, the insolvency practitioner must try to ensure in the arrangement that the debtor can maintain the family home, unless it is an unsustainable or unsuitable mortgage.

The provision for review of the personal insolvency arrangement after five years is still too long. It is worth noting that the €3 million cap on secured debts under the personal insolvency arrangement can be waived with agreement from all creditors which may be useful for creditors looking for an out-of-court solution to higher debts. Also, a person looking for relief under any of the three options set out in the Bill must be resident in Ireland now or have been living or having a business here for some part of the previous year. This will be welcome news for people who have emigrated recently and who have debts at home. While a minimum protected income is referred to in the Bill there are no regulations as yet to provide the detail. For bankruptcy, the applicant's debts must exceed his or her assets by at least €20,000. These are important points in regard to this legislation.

This is complex legislation and many people are concerned about it because the debt management systems proposed to be established are also convoluted and complex. A citizen will need a heavyweight of professional expertise to understand or access them. Therefore, at this stage people are relying on the spin of politicians or people involved in the financial services industry.

While the banks still retain a veto it is a meaningless and toothless effort if no action is taken on this issue. I refer to other guidelines such as split mortgages and the selling and renting back of a home but in these cases the mortgage holders will still owe the bank. These issues can be dealt with by the tabling of amendments on Committee Stage.

A significant concern is the question of the minimum protected income which any debtor applicant should be permitted to retain free from debt distribution. The committee hearings were told that it is not clear in the Bill what would be a reasonable standard of living and this uncertainty could affect the effectiveness of the Bill. It was also suggested that a certain level of savings should be allowed to debtors to deal with emergencies. I am conscious that there may be individuals who will attempt to pull stunts or smart ones but I agree that debtors should be allowed retain a certain level of savings. The committee was told that in contrast to interest-only payments which leave debts standing still, every payment should cover the capital, the current interests, the arrears and any interest on arrears, mortgage protection insurance and buildings insurance. This would ensure that every debtor would gain something from all payments. Interest-only payments serve only to sustain the profits of the financial institution in question without helping the position of the debtor. It would seem that debtors and their families will be asked to consign their income to the creditors for five to seven years. These issues were raised at the committee hearings and they could form the basis for amendments on Committee Stage.

The provision of a clawback in the event of an uplift following a successful personal insolvency arrangement was a point raised at the committee hearings so that if the value of the property increased in the future the debtor would be required to repay some of this value to the secured creditor. Another possible consideration is that after a period of five years the clawback would abate incrementally by 5% over a period of 20 years. The committee stressed that the clawback should not act as a disincentive to persons seeking career advancement and that an appeals body would be involved in the decision.

The Bill provides for the reform of personal insolvency law and will introduce debt relief, debt settlement and personal insolvency arrangements for secured debt up to €3 million. It will provide help to those in mortgage debt and it is part of the overall economic package. As well as dealing with the debt issue we must also deal with the issue of the national finances and economic growth. The balance must be correctly struck between dealing with debt and reduction in expenditure and encouraging economic growth.

Those who six months ago disagreed with the policies advocated by the Independent Deputies are now coming around to the reality. We were one of the first groups in the House to hammer home the point that the debt issue must be dealt in tandem with the issue of economic growth. Many Members had a go at us for voting "No" in the referendum but we put debt and growth on the agenda and the French followed our example. The Minister should take note that we strengthened his hand when he went to Europe. It was a team effort and we delivered.

I thank the Leas-Cheann Comhairle for the opportunity to speak on the Bill.

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