Stephen Donnelly (Wicklow, Independent) | Oireachtas source

Absolutely. I appreciate that but we have to make it worth their while. Therefore in a business-as-usual situation I do not think these are necessarily unreasonable. However, we do know how the banks have been behaving to date. We are all dealing with this in our constituencies. FLAC, New Beginning, MABS and others are dealing with some very objectionable behaviour from the banks. I was dealing with a case late last night where a bank brought in solicitors but did not tell the borrower in advance. They scared the daylights out of her with all sorts of threats. It is going on every day and we are all well aware of it.

As the Minister knows, the purpose of the amendments is not to shorten the time permanently; they are for a time-limited period. This is in the spirit of clearing out household debt. Therefore, while I did not believe the Minister would necessarily accept my amendments, I would like to offer three ways in which the spirit of what I am trying to achieve might be considered. Let us take the case of a lady I met recently in Wicklow town where she bought a house which is now worth about one third of what she paid for it. She became very ill and as a result had to give up her job. She was three years out and is ready to resume work but there is no work available. Meanwhile, the bank is moving to take the property off her. I have looked at the numbers and they are not sustainable. In that situation there is no public good to be served by keeping that lady in a six-year process. We could argue that the bank needs an incentive to make a deal with her but if she is put into a six-year process she is not necessarily going to look for work. She is not going to try to better her own economic situation if she believes that everything she does will be taken by the banks. There are a large number of current unsustainable debts for which the public good is best served by getting people out of that situation as quickly as possible. Between the Minister, Deputy Shatter, and the Minister for Finance, additional pressure can be brought to bear on the banks, many of which we own. We can instruct them to act as we see fit.

I would like to suggest three things for the Minister's consideration. The first is that the settlement period should begin from when the arrears started. I appreciate that there is potentially a moral hazard issue, but that system is used in the UK. I would hate to see a situation whereby the debt becomes unsustainable, somebody goes into arrears and they spend six months trying to work it out with the bank. They then go to the personal insolvency professional and there follows several months of negotiation, and it is a year after the debt becomes unsustainable that the five or six-year period even begins. I would like the Minister to take a look at that - to get the period to start as quickly as possible.

The second point concerns guidance from the Minister and the Government. The legislation contains the phrase "no more than five years" or "no more than six years", so deals of one, two or three years could be done. The Minister and the Government should provide clear guidance to the personal insolvency professionals, courts and banks to the effect that in situations where there is clearly no public good - as per the example I just gave and there are many more - it is the Government's intention that the maximum duration periods would not be used. What I am hoping to achieve in terms of job creation and economic growth, could be achieved through clear direction from the Minister as to the use of the period. There is latitude here for the personal insolvency professionals, courts, debtors and creditors to use whatever period they see fit.

The third point concerns additional income. I note that in the debt relief notice the amount a person can take - as we discussed earlier - is 50% of net income. Therefore, if a person earns €1,000 a month and taxes and levies take €500 of that, they get to keep €250 while giving €250 to the creditor. If deals are done whereby during the five or six-year period somebody has to give up half or more of the net amount to the bank, we are essentially talking about a marginal tax rate of 75%, 80% or 85%. Some 50% goes to the Government, while another 25%, 30% or 35% goes to the bank so one is left with 15% or 20%. It is clear that if we apply what would essentially be a marginal tax rate on new work of 80%, people are not going to work the extra hours. Neither will they go back to college to get extra qualifications in order to increase their income if some 85% of it goes to the Government and the banks.

Those are the three things I would like the Minister to consider. First, arrears should be started as early as possible. Second, clear guidance should be provided that the legislation is setting a maximum of five or six years. We all know the banks will drive it and will throw the most expensive lawyers, analysts and accounts at this to set a precedent at the start. They will want to anchor these things at the maximum amounts. Clear guidance from the Minister on this would be incredibly useful to people with unsustainable mortgages. Third, the Minister should also provide some guidance on leaving the debtor with sufficient additional income during the period, so that it is worth their while upskilling, training, retraining and working hard.

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