Frances Fitzgerald (Dublin Mid West, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am very pleased to introduce these new measures to the House today and I look forward to hearing the contributions of Deputies. Importantly, the Civil Debt (Procedures) Bill provides for the abolition of imprisonment of debtors and fulfils a commitment made in the programme for Government in this regard. The purpose of the Bill is to provide for the introduction of additional measures to the existing suite of measures currently available for the enforcement of debts. These new court-based options will provide for the enforcement of debt, within specified upper and lower limits, by means of attachment of earnings or deductions from certain social welfare payments where the debtor has the capacity to repay the moneys owed. Consumer debts owed to financial institutions or licensed moneylenders and arising from loans are excluded from the scope of the Bill.

As Deputies will note, the Bill does not apply to recovery by financial institutions of debts arising from money lent to customers. It applies to creditors such as small or sole traders, sub-contractors and other small businesses that have supplied goods and services and provides them with new avenues to get paid what is owed to them by those who can afford to pay. Equally, it applies to debts that fall within the lower and upper limits, respectively, of €500 to €4,000. Subject to a number of important safeguards, which I will outline shortly, it will enhance our legal system for the recovery of debts.

The provisions in the Bill arise from the recommendations made by the Law Reform Commission in its 2010 report entitled Personal Debt Management and Debt Enforcement. That report made a number of recommendations for reform of the existing personal insolvency and debt enforcement regimes. Key elements of the report were implemented through the enactment of the Personal Insolvency Act 2012.

Deputies will be aware that much of the focus of the reforms implemented to date in the area of civil debt has been centred on personal insolvency and those who cannot pay. However, the LRC report also identified the need to reform the existing debt enforcement regime to ensure balance in the creditor-debtor dynamic and recommended the introduction of a number of reforms specifically aimed at improving the current range of court-based options available to creditors in recovering moneys owed to them. These reforms are aimed at debtors who have capacity to pay their debts but fail to do so - the "won't pay" debtors. This would include Irish Water charges and the charges of energy and telecommunications companies. Measures specific to compliance with Irish Water charges and provisions for eligibility and payment of the water conservation grant after 2015 have been addressed separately, as Deputies are aware, by the Minister for the Environment, Community and Local Government in the Environment (Miscellaneous Provisions) Bill 2015.

As I have said on previous occasions, the most desirable outcome is for creditors and debtors to reach an amicable agreement for the settlement of debt. However, in some cases the debtor, who may actually be in a position to pay the debt, simply refuses to engage with the creditor or does not adhere to the agreed repayment schedule to satisfy an outstanding debt. The creditor has little option in such circumstances but to take legal action to seek repayment of the debt.

Many Members of this House will recognise that scenario and will be acutely aware of circumstances across the country where small suppliers of goods and services - often small or sole traders and other small businesses - simply cannot get paid by individuals whom they have supplied even in circumstances where there is little or no doubt but that they can afford to pay. The Bill gives those creditors, in addition to others where the debts are modest ones between €500 and €4,000, two new court-based options in addition to the suite of options already available to secure payment of a debt.

At present, the position is that once a creditor has obtained a judgment order from the court, the judgment can be enforced. The creditor has 12 years from the date of the judgment to look for an enforcement order. However, if the judgment order was issued six or more years earlier, the creditor may have to apply to court for leave to issue execution. Once issued, enforcement orders are generally valid for a year and may then be renewed.

The main ways of enforcing judgments for civil debt are by registration of the judgment first, followed by execution against goods, garnishee order, instalment order or judgment mortgage. For smaller debts instalment orders or execution against goods are the most common methods of enforcement.

Along with the economic reality of serious indebtedness and the need to provide for legislative options for those who are insolvent and bankrupt, it is equally an economic reality that creditors must have options available to them to recover money owed to them, particularly where the debtor has the capacity to repay and will not do so. Those who provide goods and services are entitled to seek repayment from their customers. If this were not the case, businesses would simply not survive. Indeed, many small businesses will have failed because they have not been able to collect money owed to them. However, I am mindful that in introducing new measures in regard to the enforcement of debt, there is a need to protect vulnerable debtors from the aggressive actions of certain creditors. The Civil Debt (Procedures) Bill provides for a number of important safeguards which will ensure that debtors are given adequate protections in this regard. It is important that I outline to the House the safeguards in the Bill.

First, the debtor will be offered an opportunity to make representations to the court on his or her behalf before the court may make a decision on the matter. Second, and importantly, in making a decision the court will be required to take into account the debtor's capacity to repay the debt in terms of the amount of the attachment or deduction that would be ordered. The proposals provide that the debtor's circumstances must be assessed by the court deciding on enforceability so the attachment of earnings or deduction from social welfare cannot cause him or her undue hardship or encroach on basic income sustainability to ensure basic living costs can still be met by the debtor. The debtor will be obliged to provide a statement of means to the court which will then be examined by the court in assessing his or her capacity to pay. Where the debtor is not an employee but is on social welfare payments, this statement of means will have attached to it a verification statement from the Department of Social Protection setting out exactly what payments are being made to the debtor and the deductions, if any, already being made from them. The court will be thus in a position to make a fully informed assessment of what the debtor can or cannot afford to pay.

Third, provision is made for variation or termination of the order if the debtor's circumstances change materially.

It is another very important provision. Finally, the court may adjourn proceedings for such period or periods as the court thinks reasonable if it appears to the court that the judgment debtor is likely to be able to pay the debt within a reasonable period.

I have a number of comments on the provisions of the Bill which allow the court to order appropriate deductions from payments to a social welfare recipient in satisfaction of a debt. Affordability is absolutely critical here and will be judged by the court on the basis of accurate information provided to it by the Department of Social Protection. Deductions may be ordered only from net scheme payments. These are payments which are prescribed by the Minister for Social Protection as being suitable for deductions on the basis of their being stable payments to long-term recipients and taking into account any deductions which are already being made. Deductions may be also ordered only from a recipient's personal rate, which is the portion of the person's social welfare payment which does not include payments or elements of payments which might relate to dependants. The Minister for Social Protection will be in a position to designate those benefits to which a deduction order may be applied and it is expected that these would be broadly similar to those from which deductions in respect of local property tax may be deducted at present. It may be that in assessing affordability a court will be in a position to order only very small deductions from the payments of social welfare recipients or indeed in some cases none at all. As I have illustrated, there is a strong set of safeguards in place to ensure balance and fairness in these situations.

Before I move on to the content of the Bill itself, I briefly mention some of the recommendations of the Law Reform Commission, or LRC, which have influenced the development of the policy in relation to the Civil Debt (Procedures) Bill. The relevant LRC report acknowledged the need for creditors to recover their debts, particularly where the debtor has capacity to repay but refuses to engage meaningfully with the creditor. The report also made a number of recommendations for wide-scale reform of the current debt enforcement regime, including the setting up of a debt enforcement office. The Civil Debt (Procedures) Bill does not propose to implement this particular recommendation, rather it focuses on improving the existing court-based enforcement measures. During the LRC consultation process conducted prior to the publication of the report, it was noted that there is general dissatisfaction in relation to the operation of the instalment order procedure, both from the point of view of debtors and creditors. The LRC acknowledged that while the most serious deficiencies in the procedure were remedied by the Enforcement of Court Orders (Amendment) Act 2009, which was introduced on foot of the High Court judgment in McCann v.Judge of Monaghan District Court and Others, some difficulties remained to be addressed and other mechanisms introduced to the existing debt enforcement regime.

Debt enforcement by means of attachment of earnings orders was examined by the LRC and its report noted that in Ireland attachment of earnings orders are mainly used in the enforcement of judgments except in the context of family law where they are used by enforcing court rulings. The LRC received a number of submissions on the subject during the consultation process. The majority of respondents supported the introduction of an attachment of earnings order mechanism. It was noted that future income is often the single most reliable source of funds to satisfy proven debts, particularly in the case of consumer debtors. Potential efficiency was also cited as an argument for the introduction of such a mechanism. As part of the consultation process, the LRC sought views on this issue and found that the introduction of such a measure was widely supported. The LRC also noted that this method is used to enforce judgment debts in a large majority of the systems surveyed in other jurisdictions.

The LRC also looked at the possibility of making deductions from social welfare payments as a means of debt enforcement but was of the view that this was a policy matter which lay outside the scope of its review. However, the LRC identified a number of principles which it considered to be important in the development of any policy in this area. I have addressed some of these issues by highlighting the protections in the Bill. According to the LRC, the principle of enforcement should be appropriate and proportionate in all cases; decisions on the enforcement of a judgment must be based on an accurate and comprehensive assessment of the debtor's capacity to repay the money owed; and, while the creditor's right to have judgment debts satisfied must be vindicated and respected, there should be safeguards to ensure that the debtor's standard of living is not reduced below a basic level. These principles have been taken well into account in the development of the Bill and I will deal with them in more detail in a few moments.

One of the key recommendations of the LRC in this area is the abolition of imprisonment of debtors. Under existing law, arrest and imprisonment remains a possibility as an enforcement mechanism of last resort, which is clearly not appropriate at this time, in cases where a creditor has proved beyond all reasonable doubt that the judgment debtor has failed to comply with an instalment order due to his or her wilful refusal or culpable neglect. There have long been calls for the legislation provided for in the Bill so that we do not imprison people in these circumstances. At a policy level and within legislation, the Bill does away with the concept of imprisonment for debtors in this situation. The LRC noted that the role of imprisonment in the system for the enforcement of judgments was been considerably curtailed following a change to the law in 2009 arising from the High Court decision in the McCann case. Recourse to imprisonment may now only be had after all other less restrictive enforcement mechanisms have been attempted or found to be inappropriate. However, before the implementation of the Bill, the possibility of imprisonment for non­payment of debt still remains. The LRC also noted that the removal of imprisonment for failure to comply with a judgment debt in ordinary civil proceedings could be without prejudice to the retention of imprisonment in other scenarios such as the enforcement of family maintenance orders.

Due to the extensive consultation process conducted by the LRC and the fact that its report entitled "Personal Debt Management and Debt Enforcement" has been in the public domain for almost five years and its content well known, I have not asked for pre-legislative scrutiny of the Bill. Before turning to outline in more detail the provisions of this Bill, I remind Deputies that what the Government is proposing here is straightforward legislation built from long-standing analysis and recommendations of the LRC to provide two key enhancements for suppliers of goods and services to recover modest debts in the courts. While it will be open to be used by utilities such as energy or telecoms providers or, indeed, Irish Water, it will also be available for use by small businesses and traders around Ireland. It will not be directed at those who cannot pay but rather at those who can pay but choose not to. It will not be directed at anyone unless the court decides that it is within that person's capacity to pay. The Civil Debt (Procedures) Bill seeks to implement further recommendations of the LRC report aimed at enforcement and recovery of debts which could be developed to streamline existing enforcement procedures. The Bill provides that creditors, having first sought a judgment in respect of the debt, may apply to the court for an order enabling either attachment of earnings or deductions from social welfare payments, as appropriate, for the purpose of enforcement of debts to which the legislation will apply. Attachment of earnings would arise where a court orders the debtor's employer to deduct specified sums from the debtor's earnings to pay over to the creditor. Deduction from social welfare payments would arise where the court orders the Department of Social Protection to deduct specified sums from the debtor's social welfare payments to pay over to the creditor. However, these provisions are subject to a number of safeguards for debtors, which I have already outlined in detail, and the court will be required to have regard to the debtor's capacity to repay the amount owed. The debtor will be offered an opportunity to make representations to the court and will have his or her capacity to repay taken into account.

I will now outline the contents of the Bill. Section 1 provides for the definitions used in the Bill. Among the terms defined is "net scheme payments" which is required for the purposes of dealing with deductions from certain social welfare payments.

"Debt" is defined as not including debts arising from the repayment of loans to a debtor made by a bank, credit union, moneylender or credit card debt. The reason for this exclusion is that such debts are based on a loan where credit has been extended to a debtor and risk has been factored into the interest charged on the loan. I am mindful that banks and other financial entities already have a range of mechanisms for recovering unpaid loans. However, it is important to point out that the exclusion in this Bill does not apply to the other enforcement mechanisms already available, nor would it preclude an application under the provisions of this Bill related to non-lending related activity.

Sections 2, 3 and 5 are standard provisions. Section 4 deals with the fact that this legislation will be dealt with within the District Court. Section 6 provides that a creditor, having first obtained a judgment against a debtor in respect of a debt, may make the application needed to the court for the attachment of earnings order or a deduction where a debt is not less than €500 but no greater than €4,000. The requirements relating to the information to be provided to the court by the judgment debtor on his or her financial circumstances are set out in section 7. I have already given quite a bit of detail about that section and the role of the employer or Department, as well as the need for absolutely accurate information in the debtor position being provided to the court. All the mechanisms are there to ensure the decision is made on the basis of accurate information.

I have touched on section 8 as well, which allows for the adjournment of the court proceedings for such period or periods as the court believes reasonable if it appears to the court that the judgment debtor is likely to be able to pay the debt within a reasonable period. If the person who owes the money is making a case, they can put that to the court, which has the option of an adjournment. Section 9 provides that an attachment of earnings order and a deduction from social welfare payments order cannot be in effect concurrently in respect of the same judgment debt. In section 10 we make it clear that the court can make an order directing the employer of the judgment debtor to make deductions from the debtor's earnings and to pay the sums deducted to the creditor in accordance with the terms of the court order. The section also provides that the court can give the judgment debtor an opportunity to make representations. In addition, it provides that in specifying the amount of deductions to be made, the court shall have regard to the "normal deduction rate", which is the rate which the court considers reasonable that the earnings to which the order should be applied in satisfying the debt and the "protected earnings rate", which is the rate below which the debtor's earnings should not be reduced, having regard to the needs of the judgment debtor and his or her particular circumstances. The court shall not make an attachment of earnings order unless it is satisfied that the judgment debtor is a person to whom earnings fall to be paid and that regard has been given to his or her particular circumstances, including financial circumstances.

Section 11 deals with attachment of earnings and section 12 deals with compliance with an attachment order. Section 13 deals with the details of the notification to the employer. Section 14 empowers the court, on application by the employer concerned, the judgment debtor or the judgment creditor to rule on whether certain types of payments are earnings for the purpose of an attachment of earnings order in force. That gives the kind of flexibility that would be needed where somebody would want to make a case on earnings and payments that should be taken into account. The provisions which are to apply in relation to debtors who are in the service of the State or local authorities are set out in section 15. Section 16 deals with the arrangements that apply for deductions from social welfare payments and the details applying to the Minister for Social Protection. The scope of the payments that come within the Bill will be decided by the Minister for Social Protection. The method of service of the deduction from payments orders from a Minister are set out in section 17.

Section 18 deals with compliance with a deduction from payments order and describes how it would be implemented. Section 20 allows the court to vary an attachment of earnings order or a deduction from payments order, and I have already spoken about that. Section 21 goes into more detail about the attachment of earnings. Section 24 provides for a number of penalties in respect of false or misleading statements and section 25 provides for the repeals of Parts I and IV of the Debtors Act (Ireland) 1872. These repeals effectively remove the sanction of imprisonment of debtors from the Statute Book. I should mention here that I will be introducing amendments on Committee Stage that seek to amend the imprisonment provisions of the Enforcement of Court Orders Acts. Section 27 is a standard provision regarding the commencement of the Act.

I am sure that Deputies will agree that there is a need for a balanced approach to civil debt to ensure the protection of creditor rights by making available a range of legal mechanisms that compel payment by "won't pay" debtors who knowingly refuse to pay their obligations. Therefore it is important that any legislative initiatives in this area should support and protect those who simply cannot pay their debts while dealing appropriately with those who have capacity to pay but simply refuse to do so. The Civil Debt (Procedures) Bill provides that balance in the enforcement of debts owed to providers of goods and services through attachment of earnings or deductions from social welfare payments and I look forward to the Deputies' comments on the Bill. I commend the Bill to the House.

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