Timmy Dooley (Clare, Fianna Fail) | Oireachtas source

Fianna Fáil welcomes the Bill, which seeks to correct and clarify a number of key legislative ambiguities in the Personal Insolvency Act 2012. However, after the Bill has been passed, significant weaknesses will remain with our insolvency laws. Only 1,000 debt solutions have been approved since 2013, comprising 547 alternatives to bankruptcy and 448 bankruptcy cases. This is in stark contrast to the former Minister for Justice and Equality, Alan Shatter's estimation that the Personal Insolvency Act 2012 would, during the first full year of operation, receive more than 21,000 applications for debt resolution. 2014 was the first full year of operation and, as we can see, it has failed to live up to the potential promised by the previous Minister. The insolvency system has failed to deliver on the promise of solving Ireland's personal debt crisis.

We welcome the main purpose of the Bill, which will, finally, clarify the wording of two provisions of the Personal Insolvency Act 2012 which set out the voting requirements for creditors to approve a proposal made on behalf of a debtor for a DSA or a PIA under the Act. We welcome the fact that these amendments remove the possible ambiguity in the language of those provisions, in order to avoid any possible uncertainty or confusion on this point and preserve the intention of the legislation, which is the generally understood and applied interpretation. While the issue relates only to the technical interpretation of a phrase in the creditor voting provisions in sections 73(6) and 110(1) of the Act, it appears to have had a dramatic cooling effect on the potential impact of the legislation. There has been only one successful DSA and no debt relief notices, DRNs, or PIAs. The reason for this total initial failure is that the current wording of the two sections for amendment is generally taken to indicate that approval is required by creditors holding 65% in value of the debt.

This is supported by sections 73(2) and 108(2), which state that the voting rights of a creditor at the creditors' meeting are proportionate to the amount of debt due. Approval by those holding the majority of the debt, as opposed to a simple majority of creditors in number, is the core intention of the legislation. It is possible, however, that the wording could give rise to an alternative interpretation that a majority, over 50%, of creditors by number and a majority by value, 65% of the debt, are required.

Therefore this legislation is very welcome in its clarifying character. However, the Personal Insolvency (Amendment) Bill 2014 can also be seen as yet another missed opportunity to reform our personal insolvency laws. Banks will still have a veto over any debt restructuring proposals and the insolvency regime will still lack an independent authority to review and grant binding personal insolvency resolution proposals. Fianna Fáil believes that any new legislation should ensure there is an appropriate balance of power between financial institutions and borrowers. We also believe that a system of State-funded, and creditor-funded, insolvency practitioners should be created as suggested by the Free Legal Advice Centres in March 2012.

In this regard, we understand that a promised review of the 2012 Act and associated mechanisms is proceeding. We would appreciate if the Minister could clarify this matter as we have been informed that the Department of Justice and Equality has gathered views about the legislation's application. We would be anxious to know where this review is at, what it has found and what further actions will be taken, either through legislation or otherwise following on from it. The Minister might respond to this point in her reply if possible.

As I am sure the Minister is well aware, we still face a huge challenge in the area of personal debt in Ireland. Looking at the area of mortgages we see that the number of people in serious mortgage arrears continues to soar. There are 37,484 owner occupiers more than two years behind in their mortgage payments. This category now constitutes 32% of all accounts in arrears, and 73% of arrears outstanding. These families are at serious risk of repossession. This is a terrible prospect for any family. The social impact of repossession is huge and something which has the potential to seriously damage Irish society and leave a lasting scar on those involved. Data provided by the Central Bank shows that two thirds of those in arrears are in employment indicating that it should in most cases be possible to put in place a payment arrangement that is sustainable.

While we welcome the fact that 109,000 mortgages have been restructured to date, more needs to be done in this area. In fact, statistics show that when mortgages are restructured, payments are generally kept in line with the agreements made. The latest statistics show that 82% are meeting the terms of their new arrangements. However, this should not be interpreted as a measure of sustainability overall, as not all restructuring represents genuine long-term solutions. The most common arrangement, arrears capitalisation, where the arrears are simply added to the overall balance, has a 32% failure rate. This is not surprising given it does not tackle the underlying reason for the mortgage falling behind. Creditors need to be realistic in their approach to individuals who have personal debt problems. There is no benefit in developing a debt solution which only lasts for a year, a month or even a week. In this regard, the failure to establish an independent oversight of debt proposals with an appeals mechanism in this legislation is disappointing. The banks are still in charge even after this Bill becomes law. That is regrettable.

As I have previously pointed out, the current insolvency legislation has not delivered tangible benefits. Just 448 people have gone through the insolvency system and been successful in their bankruptcy proceedings. The Government is cagey about publishing data on how many cases relate to mortgage debt but we know only a fraction of these dealt with secured debts.

Another significant challenge arises from the fact that 31% of local authority mortgages are in arrears, nearly three times the rate of arrears in the private sector. Only 50 mortgage to rent proposals have been concluded to date, with approved housing bodies. This is another area which must be addressed as it has a fundamental impact on social housing policy in Ireland.

Some of the problems I have outlined may be addressed by the technical Bill being discussed here today. Nonetheless, I put it that the Government remains stuck in a mode of thinking whereby the banks should be allowed to dictate the pace and nature of any restructuring arrangements put in place. We believe this is a flawed approach and one which fundamentally undermines Ireland's insolvency laws and in particular those relating to mortgage arrears. We are not asking for a free-for-all where any proposals would be accepted. That would not help address this problem either.

We have, however, brought forward a number of ideas which should be considered to address the challenges currently faced by those facing significant debt problems surrounding their mortgages or otherwise. Some of our proposals include our Family Home Mortgage Settlement Arrangement Bill 2014 which would adapt the under-utilised infrastructure of the personal insolvency regime to allow for a restructuring arrangement solely in respect of the family home. This would be available to people who had exhausted the mortgage arrears resolution process and for whom the banks had not provided a meaningful resolution proposal. The process would be handled by a personal insolvency practitioner and the outcome would be binding on the parties. In parallel we would set up a system of State and creditor funded insolvency practitioners. These would take on cases where the debtor's payment capacity is so impaired that existing personal insolvency practitioners are unwilling or unable to do so. It is bizarre that someone who is struggling with debt to the extent of seeking a resolution under the personal insolvency legislation has to spend more money seeking the advice of personal insolvency practitioners. While we welcome the fact that some court fees have been reduced until the end of 2015, the Minister should consider extending these reduced fees indefinitely.

Fianna Fáil has also proposed that a zero interest rate would apply to the warehoused portion of all split mortgage products offered to customers in arrears. In our view this makes logical sense as it reduces the overall burden on the individual concerned as it removes the ticking time bomb of continually increasing interest on an already unaffordable aspect of the mortgage. Finally, we have also proposed an overhaul of the mortgage to rent scheme with an increase in the maximum current market value of houses eligible for participation in the scheme and more realistic income guidelines. In addition I am aware of quite a few cases where the provisions set out in the mortgage to rent scheme can be applied only where the accommodation needs are suitable. I accept that but unless the property is in negative equity it is not considered suitable. That is unfortunate because in many instances homeowners are prepared to hand over that additional equity to the State or to the arrangement being put in place. I would have thought that resolved the issue for many. Would the Minister and the Minister for Environment, Community and Local Government review that provision? If somebody is prepared to relinquish any expectation for the portion of the house in which he or she retains a value, regardless of whether it is in negative equity, although it would not be, something could be done in that respect.

As I am sure the Minister is aware, Fianna Fáil published a Bill in October 2011 to establish a debt settlement and mortgage resolution office and provide an independent, non-judicial debt settlement system for persons struggling with personal debt and those in difficulties with their mortgage. This Bill was specifically based on the recommendations of the Law Reform Commission's report from December 2010. This still holds value today.

Our Bill set out a debt settlement arrangement which involved a comprehensive assessment of the person's financial affairs and a personal insolvency trustee making a proposal to the person's creditors. Where 60% of the person's creditors in value approve the proposal to restructure the person's debts over a maximum period of five years, the proposal then becomes binding on all creditors. Importantly, our Bill allowed a borrower to apply to the office for a mortgage resolution order in respect of the family home. Following a thorough process involving the borrower and the financial institution, the office has the power to impose a binding mortgage relief order to restructure the mortgage. Sadly, no such provision exists in current legislation.

This legislation, while welcome, does not go far enough. The Government has failed to show the imagination required to seriously tackle the huge personal debt crisis currently being experienced by many Irish citizens who want to be given the opportunity to tackle their debts. This Bill is a lost opportunity. The failure to comprehensively address the imbalance between the banks and those in debt will result, as many commentators have predicted, in a two-tier recovery. Those saddled with debts incurred over the past ten years or longer may not see much hope in what this Bill holds out for them.

I hope the Minister will recognise the issues I have raised and seek to address them on Committee Stage. A more independent approach to debt relief, whereby the banks would not hold all the cards and which provides for an appeal to an independent resolution office, would go some way towards further address of this crisis. Now is the time to act on this. Now is the time for leadership. People who are sunk by the challenges they face in indebtedness can no longer wait for another day.

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