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

I move amendment No. 6:

In page 13, between lines 19 and 20, to insert the following:“Amendment of section 95 of Principal Act

11.Section 95 of the Principal Act is amended in subsection (5) by the deletion of “section 113(2)” and the substitution of “sections 113(2) and 115A(5),”.”.

I am pleased to propose this group of amendments, which contains at amendment No. 13 the new provision for independent review by the courts where a proposal for a personal insolvency arrangement, including arrears on the borrower’s home mortgage, has been refused by creditors. This follows the Government’s decision on 13 May on increasing support for borrowers in mortgage arrears on their homes and especially for those at risk of repossession. This is a key reform, designed to ensure fair and sustainable debt deals are upheld for struggling borrowers who want to work their way out of debt with a view to keeping their homes. It will protect distressed mortgage holders and will provide a better balance between the interests of banks and of those facing unsustainable mortgages.

Amendment No. 13 contains the substantive provision for review, while amendments Nos. 6, 7 and 10 are consequential amendments. Amendments Nos. 6 and 7 ensure that where a borrower applies for the new court review, he or she will remain protected by the protective certificate - a court order preventing enforcement action or pressure by creditors - pending the determination of the review. Amendment No. 10 refers to the specific procedures for creditor approval that apply when there is only a sole creditor. In that case, no creditor meeting is required and section 10 ensures that where the sole creditor refuses the proposal, the borrower in that situation can also apply for the court review.

Amendment No. 13 sets out the provisions applicable to the review itself. Under the 2012 Act, a proposed personal insolvency arrangement is voted on by the creditors and must be approved by the necessary majorities of secured and unsecured creditors. If the creditors reject the proposal, however, there is no existing provision for a review or appeal. The new court review will change this situation. It will apply to proposed personal insolvency arrangements that have been vetoed by creditors where the debts include a mortgage on the debtor’s home which was in arrears on 1 January 2015.

The objective of the new review is to help people who are in serious mortgage arrears on their family homes, particularly those who are at risk of repossession. Therefore, the review is available to a borrower who was in mortgage arrears on their home on 1 January 2015. It is also available if the borrower was in such arrears before that date, which have been restructured under a MARP or non-MARP restructure, but nevertheless the borrower remains insolvent, which is the point raised by Deputy Mac Lochlainn.

The Government announced last May that its court review mechanism would be based on court examinership. The examinership concept is already tried and tested in the Irish courts and has been found to stand up constitutionally, which is a critical point.

In examinership, the examiner must show some element of creditor support. Equally with this new measure, some element of creditor support is needed. However, this is a much lower and more flexible requirement than the test which currently applies, and it should be feasible in the large majority of cases. Moreover, it is important to note that the Bill also provides for a significant exception to the creditor support requirement. In many cases involving a mortgage, the borrower has consolidated their debts with the bank which is also their mortgage lender. This is a very critical point in terms of who has access to the review. The Bill provides that in these so-called sole creditor cases, if the sole creditor refuses the personal insolvency arrangement, PIA, proposal, the debtor does not have to show any creditor support before seeking a court review. This effectively opens up the whole PIA process to a large number of cases where up to now, no PIA proposal has even been made as it was felt that the sole creditor would never agree to a deal offering statutory protection for the borrower.

Under the existing provisions of the Act, only three classes of creditor can be looked to regarding PIA approval – secured, unsecured and overall debt – and all three of those classes must approve it by majority. In the new court review, as in examinership, the test is different. The personal insolvency practitioner has to show that there is majority support of over 50% from just one class of creditor, not three, and, more important, there is far more flexibility about what constitutes a class. It may be just one creditor or more than one creditor with some commonality of interest among them. It is not limited to the classes of overall, secured or unsecured debt. This flexibility will support finding a solution which is fair and reasonable for all concerned, as it does in examinership, and the court will ensure this test is applied fairly.

I underline that a key advantage of using an examinership approach is that, following extensive deliberation and legal advice, the Government believes this Bill is constitutionally robust in the very difficult legal territory of potentially providing for imposed solutions which could to an extent impinge on the rights of secured lenders. That legal security is vitally important for borrowers in mortgage arrears. In summary, this new review is a major reform which represents a groundbreaking shift from the current position and will significantly re-balance the position of creditors and debtors to ensure fair and balanced outcomes. I commend the amendment to the House.

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