David Stanton (Cork East, Fine Gael)

I am delighted to hear that Deputy McGrath has such a great influence on European macro-economic policy. It is acknowledged that the subject matter of this Bill is complicated. I thank the members of the committee who conducted the hearings and I acknowledge the contributions to the hearings by representatives of civil society, non-governmental organisations and individuals. It was decided this morning that the committee may revisit the Bill before Committee Stage because the work of the committee and the views of others have been taken into account in the Bill as published. The heads of the Bill have been changed as a result and it may be necessary for the committee to seek further views if time permits before the commencement of Committee Stage. I acknowledge the work of the Ministers and the officials in the preparation of this legislation. The Bill contains many provisions which are of interest or which may need to be tweaked, so to speak.

The issue of debt and bankruptcy is not new. In ancient Greece the issue did not exist as such but a debtor was forced into debt slavery in order to work off the debt. A period of five years was the usual period but it could often extend to a lifetime. Genghis Khan ruled that anyone falling into debt three times would face the death penalty but even he allowed individuals to work off a debt. The Old Testament allowed for a sabbatical year every seven years in which all debts were automatically released. Islamic law recognises that insolvent persons must be allowed time to pay off or work through a debt or to come to some other arrangement. In later times debtors were committed to debtors prison. My point is that the issue of debt is not new and it has been dealt with in many ways over the millennia. We are facing it in our own way in these times and we are attempting to deal with it in the modern age.

I refer to the need for an appeals process and this was raised at the committee hearings. There are constitutional issues to do with property rights and these are complex. The Credit Review Office performs a very useful function. It has no regulatory or mandatory powers but its opinion is noted. I ask the Minister to consider a similar agency or even that agency performing an oversight function or providing an appeals mechanism for complainants.

An intermediary function is provided for in the Bill and intermediaries will need to be strictly regulated. The banks will need to have protocols in place which are consistently applied by all the banks otherwise banks could have different procedures and reactions to debtors and to the insolvency arrangements. How will the creditors evaluate proposals from the insolvency practitioners? A consistent approach will be needed. The personal insolvency practitioners need to be aware of the criteria being applied by the banks. There needs to be a transparent flow of information back and forth from all concerned. All debtors must be treated equally. If debtors are in a similar situation and one goes to one bank and is treated in a certain way and the other goes to another bank and is treated in a different way, that is wrong and unfair. Work must done to ensure all the banks operate in an equal and transparent way. Less transparency will lead to more cost, time and so forth.

The approach in this legislation is extremely complicated. The Minister for Justice and Equality has said that nobody has all the wisdom in this regard and that he is open to suggestions and ideas. That has been evident to date and it is extremely welcome. However, it is important that the implementation of this legislation be monitored and reported from the first day. Five years is too long. How that can be done is another matter, but it must be done because if there are issues, mistakes and problems with the legislation, they must be identified and dealt with early.

We must remember that most of the people who will use this framework are already under severe stress. Many Deputies have had people calling to their constituency offices who are under severe stress, emotionally upset, physically drained and losing sleep trying to deal with this problem. Many Members have said this is complicated legislation so we must ensure we make it as easy as possible for people to work with it. It also must be clear how it will work. There is a job for the Government and the agency to be established under the Bill to provide information and to ensure it is simple to understand. At present, however, it is very complex, and the more one digs into the legislation the more complex it seems to get. Work must be done to inform people how the legislation will work. The money advice and budgeting service has been mentioned and I welcome that it will be involved. However, it must be stressed that MABS needs resourcing and training to deal with this issue.

There is a limit for the debt relief notice, DRN, of €20,000. That is too low. It should be raised to €30,000. I am not sure of the implications of that, but the figure of €20,000 is too low. The Free Legal Advice Centres, FLAC, made a submission on the legislation recently in which it stated that only 15% of clients of MABS, in its estimation, will qualify for a DRN, principally because of the maximum limit of €20,000 of qualifying debts before this option would be available. Work will have to be done on that, and we also need to see figures on it. FLAC suggests increasing the figure to €30,000 which would expand significantly the number to whom this might apply. It also suggests other options.

The veto has been mentioned by many contributors to the debate. I understand what is happening in that regard but if the Credit Review Office is involved and another stakeholder is monitoring it, even though that might serve to complicate it, it has been shown to work well elsewhere. Obviously it is important that all voluntary arrangements be tried first. Some people have proposed that a voluntary arrangement would be a fifth tier; there are four tiers provided for in the legislation. Minimum income must be protected. The banks and credit institutions will, understandably, try to get what they can from this arrangement. However, the minimum income must be protected. The Vincentian Partnership for Social Justice has put forward a proposal on how to calculate a minimum income. That calculation must be clear and everybody must know how it is to be done.

The intermediaries must be trusted by both the banks and the debtors. That means serious regulation. It also means that bankruptcy as a concept should be spoken about. At present, there is a stigma attached to bankruptcy in Ireland, and many people do not want to go that route due to that stigma. If that stigma were removed in some way or made less undesirable, it could mean that people would be less fearful of it. It has been said that credit institutions quite often refuse what might be seen to be a reasonable offer, but if the option is bankruptcy and people were prepared to take that route, the institutions might think again about it. That is the thrust of the Minister's thinking but there is a concern that people might not opt for bankruptcy and instead take an offer that might be quite severe for them, just to avoid bankruptcy and the stigma attached to it. There is work to be done to get that right as well. The other issue is that people often seek help very late in the day. MABS tell us that constantly. Again, it is because of the stigma, embarrassment and so forth. We must encourage people to seek help as early as possible.

As I said previously, we must evaluate this process as we proceed. Not only must we know how it is working but we also need to know the socio-demographic characteristics of those using the legislation. We need to know who is using this and many other statistics in this area because, at present, we do not really know what is happening.

The Minister might also reflect on the issue of the insolvency trustees. How are they to be paid, who will pay them and how much will they be paid? There is a risk of establishing an army of people who will be involved in this. They need to be regulated and controlled, and we must consider how that will be done.

There are some people who have decided their mortgages are untenable, and I realise this involves more than just mortgages, and they have decided to hand over their houses to the banks. That leaves them with a debt. I call on the Minister of State with responsibility for housing, in particular, to ensure the local authorities respond quickly to this. I have encountered a number of cases where people have given up their houses but even though the Government has decided they can go on the housing list, it is not happening in some cases. There is huge resistance to it. Instead of the local authorities and the housing officers asking how they can help these people, they are hunting them away in some instances. There must be clarity about this. If people give up their houses because they are no longer able to maintain the mortgage payments, they must be taken on by the local authorities. The local authority should at least allow them to be put on the housing list because they would then qualify for the rent supplement. Otherwise, such people will be homeless. A number of us have come across such situations. Those people must also deal with the now unsecured debt, which is the overhand of the mortgage.

Moral hazard has been mentioned, but write-downs occur in the commercial sector all the time. It works quite well there. With regard to the debt settlement arrangement, DSA, a State-funded public insolvency area must be created here. Perhaps some MABS advisers could be seconded to it. In Norway and France the creditors can appeal to courts; there is an appeal system in both places. This area is complex and people must overcome many hurdles. Initially people who are already under stress must locate a personal insolvency practitioner, PIP, who will go through their affairs and prepare statements. They must show that they are insolvent. The PIP must apply to the insolvency service and there are reviews involved, but no timelines for them. The creditors can appeal the granting of a certificate to a court if they wish. If the certificate is applied for, the PIP must notify the creditors. Values must be estimated and, at that stage, a meeting of the creditors is called. There is a great deal of bureaucracy and procedures involved, which could deter people. We must streamline that and, initially, make it very clear. As I stated, there is a danger that if people fear bankruptcy, they might agree to an unworkable payment process. We must bear this in mind.

I would like the Bill to do more for those who recognise they have unsustainable mortgages and who agree with their banks that they should give up their homes. While the arrangement is that they can pay as much as they want for up to five years, they can do that now anyway. Alternatively, they could go to England for a year and return almost completely debt free. Many people in this position who have no business or debt arising from investment properties lost their incomes due to the downturn and have engaged fully with their banks to try to work their way out of debt. Their homes are in serious negative equity and they have totally unsustainable mortgages. The Bill should specifically recognise circumstances where debt is associated primarily with the family home and the individual concerned wants to remain in the home. This is covered in the Bill but more needs to be done.

The legislation is complicated and there is a lot of work to be done on it yet. I am worried that people may be deterred by its complication. We need to be very clear so people can use the service proposed. The personal insolvency trustees will need to be subject to strong regulation. While I know an appeal system will not work, a review system should be contemplated. Perhaps the Credit Review Office, which is working quite well in other areas, should be considered in this regard.

There ought to be protocols in the financial institutions so it will be very clear how they are working and so there will be clarity and transparency in both directions. With such protocols, people will be treated consistently and fairly. The insolvency practitioners should know how the system works so they will know what people are getting into. These measures should be reviewed from day one. Since the proposals are so new and complex, a wait of five years is far too long.

We await Committee Stage with keen anticipation. It will be challenging. Before the Minister for Justice and Equality, Deputy Shatter, joined us, I stated that the committee may, if there is time, invite further submissions on the Bill, which has changed considerably since the heads were introduced and since we first examined it.

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