Bernard Durkan (Kildare North, Fine Gael) | Oireachtas source

Like other speakers, I am glad to have the opportunity to speak about this very important Bill. I was one of the people who had severe reservations about the insolvency legislation introduced a couple of years ago and I was proved right. Since 2008, like everybody else in the House, I have made numerous interventions with lending institutions on behalf of constituents and had a variety of experiences. In some cases, lending institutions were conscious of the need to show compassion, accommodate and try to assist borrowers in their changed circumstances due to the downturn in the economy, unemployment and other factors that detrimentally affected their ability to repay. We were shown by some compassion by some institutions which I do not propose to name. We were also met by indifference and a reluctance on the part of some lending institutions to enter into any revision or arrangement.

Debt resolution has occupied the minds of many in recent years. Debt resolution means different things to different people. To some institutions, it means that borrowers should pay what they owe or get out. To others, including most Members of this House, it means accommodating the borrower, given the new circumstances that prevail, and recognising, in particular, the needs of family home owners and their anxiety to hold onto their homes. We lacked recognised guidelines or statutory arrangements which would be incorporated into any arrangement a borrower might enter into, other than at the discretion of individual lending institutions. Some lending institutions have dragged their feet, procrastinated and waited for negative equity to gradually recede and return them to a position in which they could get their money and force the borrowers out of their homes. This callous attitude should never be accepted or tolerated. Not long ago, the lending institutions offered loans in the full knowledge that the borrowers might not be able to live up to their commitments. Lending and borrowing involve risk for both sides. There are no guarantees because we can never guarantee what will happen in the future.

I ask the Minister to bear in mind the necessity to ensure the restructuring of loans can take place and will be accommodated and supported where it can be done within reason. In some cases, it may not be done. The same lending institutions loaned the money in the first place, knowing what it entailed and they did not seem to wonder how the money would be paid back. I find it very difficult to understand how the same institutions can state they are very sorry but things have changed, that they have regularised their positions and cleaned up their loan accounts.

I reject that. We need to impress upon such lending institutions the need to show a bit of consideration and compassion for the borrowers, given the change in circumstances.

Some lending institutions have adopted rather undesirable tactics in intimidating the borrower into conceding, walking away or robbing another bank to pay them off. They make repeated phone calls, all day, every hour on the hour, in the middle of the night, at 6 a.m. It is an absolute disgrace and should not be tolerated. It has driven many families in this country to the brink. It is not acceptable. Some lenders have been very helpful, tolerant, accommodating and have encouraged the customer to be at ease, saying they would try to help the customer out. I have admitted that from the beginning. Others have not and on one or two occasions have said to the customer and his or her spouse, “In case you have any problems or have not been in a situation like this before, we have paper hankies and glasses of water here, if you are overcome.” It took them a while to realise that stress goes in both directions and they soon found out that it is a two-way process. I reject that kind of attitude, particularly coming in the aftermath of the Celtic tiger when they indicated to all and sundry that they would give them as much money as they wanted, saying there was no need to worry about paying it back that it would come back automatically. We know now what was automatic. It is absolutely necessary to set down rigid guidelines, which I do not think are contained in this legislation, to ensure that lenders in the first instance, or the secondary lenders that we are providing for now, abide by some kind of rules and regulations other than a whim of the lending institution to recover its debts as quickly as possible.

Like everybody else in this House, I have dealt with several unregulated third parties and am conscious that they bought the loan books at a fraction of their value and that the original, primary lenders took a hit. I cannot understand why it would not have been possible for them to accommodate the borrower over a longer period. This is a question of debt resolution. Many institutions have been reluctant to enter into any kind of loan or debt restructuring and they need to focus on that urgently, particularly the unregulated third parties which have purchased loan books. They think they do not have any obligation but what is the morality of a case in which somebody buys a distressed loan of €100,000 or €150,000 and realises that by forcing the sale of the house it will yield €110,000 or €115,000, which is a regular occurrence? I cannot accept the morality of that because it would have been just as easy to enter into an arrangement to restructure the loan over time but that does not meet the requirements or the objectives of the third party loan book purchasers. I ask that particular attention be paid to this aspect of lending and borrowing. In my experience it is possible to restructure most loans because if it was not why was the loan made in the first place? Eight, nine or ten years down the road why is it not possible to restructure what remains in those loans now? There is no reason. The loans were made in certain circumstances.

We need to keep in mind the basis on which some of the loans were issued in the first instance. As far as I can see no attention was paid to the value of the property. There might have been attention to the ability of the borrower to repay but that is not enough to solve the problem. Where no regard is had to the value of the property if anything happens to the borrower, through illness or whatever, his or her ability to pay goes down. If a value for money assessment of the property had been made in the first place the same sum of money would not and could not have been lent. The local authorities traditionally did that until around 1989. Sadly, that has all changed. It is now possible, as I know from cases I have dealt with, that somebody was awarded a loan without any engineering or structural guarantee or report on the structure of the house and its value. Eight or nine years ago people paid up to €400,000 for a house that was probably worth €80,000 or €90,000. That is appalling. There have been numerous cases of this. To calculate the value of a house one calculates the building cost of a house of the same size, which gives an idea of what the price of the house should be, then add in the price of the site. For example, I saw a house advertised in the media recently, an artisan dwelling in the centre of this city, with two bedrooms, for €800,000. After all the bad experiences we have had, value for money must be brought into the equation at some stage. Guidelines must be introduced urgently. I have never referred a file to any third party, insolvency practitioners or anybody else and sadly I have had to do all the work alone. I have not lost too much ground yet and do not intend to. It now requires a legislative intervention that will give some guidelines within which those agencies, the primary or secondary lender, can operate and that can be made workable for the borrower.

Lending institutions say they have a restructuring product which, if it is examined carefully, the borrower will find it absolutely impossible to accede to. The institution will say that is the only product it has, and it does not do anything else but it had no problem initially in offering the loan to the person concerned in different circumstances when it was reasonable to assume those circumstances could not and would not prevail. I cannot understand how they managed to do it. There is an urgent necessity to introduce guidelines which will ensure that restructuring takes place and that it is done in such a way as to make it possible and feasible from the point of view of the borrower because the borrower bought and borrowed in good faith and it should not all be left to the borrower to determine whether the loan has a sound basis.

Other speakers have mentioned the lending institutions that no longer trade here and have moved off. There are two categories, one of which was particularly aggressive before the downturn. To be fair, it has given some indication of compassion and an intention to work with the borrower to resolve the problem and not push all the responsibility onto the borrower. There are a couple of others that have no such intentions.

Their only response has been to pull the plug and run, having handed over the property to somebody else to extort in terms of any equity that remains therein. It is appallingly callous in the times in which we live that we should be subjected to this type of attitude. That some of these agencies aggressively encroached on the market and having destroyed it walked away is totally unacceptable. I ask that the Minister and the Central Bank bear this in mind when dealing with these issues.

Deputy O'Dowd and others referred to the rates of interest being charged by those now involved in lending to high risk borrowers, which is another issue that needs to be looked at very carefully. There is no reason in the world any agency should be allowed to charge 300%, 400%, or even 180%, interest on loans. In such cases all a financial institution is doing is milking the system for all it is worth and milking the unfortunate borrower, who because he or she is between a rock and a hard place in terms of there being nowhere else for them to go, happens to be in the position of having to borrow from them. I ask that this too be borne in mind. I can assure the Minister of State, Deputy Sherlock, that all Members of the House will have examples of this which they can convey to him. Our job is to regulate, as we are doing in this particular case. This legislation has been long promised and is absolutely necessary. In all the cases with which we have dealt in this House over the past number of years there have been extremes on both sides, including over-borrowing by people, leading to their getting out of their depth financially.

Another trend has emerged in recent times. We have all dealt with cases involving two spouses who entered into borrowing arrangements with lending institutions that were in excess of what they could discharge, following which one of the spouses subsequently left the family home and disappeared into thin air leaving the other spouse, usually a woman with a couple of children, to defend the family home against the financial institution. In such situations, the financial institution does not care about the absconded borrower because he or she is out of the house. Its objective is the person who remains in the house with the children and how it will go about taking the house from them. There are umpteen examples of such cases. I again ask that the Minister of State bear in mind these cases and to try to ensure that in such circumstances the family home is protected in every way possible.

My final point relates to insurance agencies, some of which, having traded here and milked the system for what they could, evaporated into thin air over night or left this jurisdiction while others did everything they could to ensure they did not have to pay out on a mortgage protection policy and so on, resulting in appalling hardship for people the length and breadth of this country. There is a need for careful consideration of this group of people also because, again, what is affected is the family home. The family home is under attack by virtue of circumstances over which the person who remains in the family home has no control. What is required is an effort on behalf of the lending agency to come to their rescue in some way rather than a callous off-hand attitude to the effect that the agency has to live too. I will not comment on that other than to say that while that is true it is important to remain as even handed as possible in these cases. Some of the lending agencies that are slow now to accommodate the borrowers who are in trouble were themselves in trouble a few years ago. Had the Irish taxpayers showed the same contempt for them as they are now proposing to show some borrowers, a number of them would not be around today.

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