Dáil debates
Wednesday, 28 April 2010
Personal Debt
Michael D'Arcy (Wexford, Fine Gael)
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Question 46: To ask the Minister for Finance the progress that has been made in developing a policy to assist persons who are experiencing difficulty in meeting debt repayment. [17146/10]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The renewed programme for Government sets out the Government's commitments to introduce new measures to protect families having difficulties with their mortgage repayments and personal indebtedness under the headings Protecting the Family Home and Helping Those in Debt.
In February of this year, I informed the Government of my proposals regarding expanding the membership of the interdepartmental mortgage arrears group, under the chairmanship of Mr. Hugh Cooney. The terms of reference of the group, which I have approved, reflect the commitments made by the Government both in the renewed programme for Government and in subsequent Government decisions relating to the issues of mortgage arrears and personal debt.
The revamped mortgage arrears and personal debt group has commenced its work and is meeting regularly. I understand that initially the emphasis will be on exploring the feasibility of a range of possible options for improving the level of mortgage support to homeowners in difficulty and will later address the personal debt issue. Proposals will be based on factual information gathered by the group and will take into account the findings of existing reports and mortgage support schemes in operation in other jurisdictions. I expect that these recommendations will be made to me on a rolling basis as the group progresses with its findings and that a final report on this phase of the review will be ready by end June 2010.
The Deputy will be aware of the other supports available to mortgage holders including the code of conduct on mortgage arrears, the mortgage interest subsidy scheme and the services provided by the Money Advice and Budgeting Service, all of which I have spoken extensively about in the House on many occasions.
In addition, the Law Reform Commission's consultation paper on personal debt management and debt enforcement, published in September 2009, contains an extensive list of provisional recommendations for reform of the law on personal debt. I understand the commission is aims to have its final report available by the end of August this year. The group will be taking account of these recommendations as it proceeds to address the personal debt aspects of its terms of reference.
The Enforcement of Court Orders (Amendment) Act 2009, provides that certain safeguards will apply to the provisions under which a court may hear an application or grant an imprisonment order against a debtor who has failed to comply with an instalment order. The Act ensures that the court will not imprison the debtor unless it is satisfied that he has the means to pay and may also postpone the execution of an imprisonment order until such time as it believes just. In addition, the court will inform a debtor of the risk of imprisonment and of his entitlement to apply for legal aid. The Act gives the court a clear power to vary the terms of an order to pay by instalments or alternatively to refer the parties for mediation.
Michael D'Arcy (Wexford, Fine Gael)
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I thank the Minister for the reply but it does not say much about anything. In respect of the code of conduct, is the Minister aware that the banks have already lodged thousands of cases with the courts? They are ready to go and when NAMA is substantially complete they will be able to go after the citizens of the country to ensure the bank figures are okay. However, the people will not be okay. I refer to those who have done it properly, who bought the average semi-detached house, who did not buy a big four-wheel drive or spend a fortune on a holiday. Those who are caught in that demographic profile, who bought at the peak and who did it properly should be given some further support from the State.
Brendan Howlin (Wexford, Labour)
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What is the question, Deputy?
Michael D'Arcy (Wexford, Fine Gael)
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The Minister has ignored questions on this matter. Will he not consider some form or small version of NAMA to ensure relief for the people who have done it properly and who have been fair and correct but who got caught at the wrong time?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy's questions betrays a misunderstanding about NAMA which I had hoped would have been cleared up by now, given Mr. McDonagh's recent presentation to the committee. When someone goes into NAMA, they continue to owe all the money, not part of it. If they are not prepared to pay the money, their assets are taken. This is what NAMA does. If the assets are unviable, apparently they will be bull-dozed in some circumstances. I appreciate this does not arise with a home owner. There is no equation between NAMA and the position of struggling homeowners. We do not propose that an agency should be set up which could in some sense insist they would pay all their money or be put out of their houses. This is not what is proposed.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Realistic measures to ease the burden of the very group mentioned by the Deputy will be proposed by the commission that has been established to examine this issue. I took my first step in that direction in this year's Finance Act, when I ensured that mortgage interest relief was continued for this group beyond the seven-year period. Representatives of the Irish Banking Federation are on the working group. It is very important that arrangements are devised, as mentioned in the programme for Government, for longer repayment terms, interest-only repayments and delays, where appropriate, in repossession proceedings. All of this must be factored in. That is on what the commission is working.
Brendan Howlin (Wexford, Labour)
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I am keen to facilitate a number of Deputies.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is in addition to the existing State investment, which takes place through the social welfare mortgage interest subsidy.
Kieran O'Donnell (Limerick East, Fine Gael)
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Does the Minister envisage that the proposals involving a resolution-type scheme, which would enable people to reduce their burden in terms of equity, will be accepted? Many young couples who bought houses at inflated prices during the Celtic tiger years are now in negative equity. Some of them, having lost their jobs, are losing the facility to make repayments through no fault of their own. Will a resolution scheme be included in the proposals to be brought forward by the Minister?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I will certainly ask the group to examine such a scheme. It seems to me that these difficulties are particularly acute for those who purchased in 2005 and 2006. I have drawn the commission's attention to that already.
Joan Burton (Dublin West, Labour)
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I would like to ask the Minister about a proposal that has been consistently advocated by the Labour Party, from way back? We have suggested that a two-year framework be permitted so that people who have difficulties with mortgage debt can work through those difficulties. The banks have consistently refused to permit such a framework - they will allow only a year. Many banks commence legal proceedings almost as soon as mortgages enter into arrears. Will the Minister insist that the financial institutions accept part-payments? A regime of fines and penalties continues to be applied when people fall behind with their mortgage payments in any way. Some institutions will not accept part-payments, which is pushing people over the edge into complete default. That is what we are asking about.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I presume the reference to part-payments relates to sub-prime lenders, rather than to the main banks.
Joan Burton (Dublin West, Labour)
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It relates to a variety of lenders.
Michael D'Arcy (Wexford, Fine Gael)
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It relates to all of them.
Joan Burton (Dublin West, Labour)
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It includes notable lenders like Mr. Fingleton, who was the master in this regard. He went off with €27 million.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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He was a sub-prime lender, as we know.
Joan Burton (Dublin West, Labour)
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He was the master of penalties in his building society.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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If the Deputy has particular details, she should forward them to the Financial Regulator so it can attend to them. As regards the extension of time, after last year's emergency budget I asked that consideration be given to extending the moratorium from six months to 12 months.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Following consultation, the regulator decided it would be possible to extend the moratorium in line with my request. The new limit of 12 months now applies to all regulated lenders and is reflected in the updated code, which came into effect on 17 February last.
Joan Burton (Dublin West, Labour)
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Perhaps it can be extended to two years.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There is a balance to be struck when one is deciding on the amount of time that can be provided immediately.
Arthur Morgan (Louth, Sinn Fein)
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Does the Minister accept that it seems to be the case that almost all of those who find themselves in mortgage arrears would like to reach agreements with the financial institutions involved? I hope any scheme that is proposed will take cognisance of that fact and try to facilitate those involved. In some areas of my constituency, there is a three-month waiting list to meet the Money Advice and Budgeting Service. I appreciate that the Minister is not directly responsible for the service. It is a serious matter for those who find themselves in trouble.
Michael D'Arcy (Wexford, Fine Gael)
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I would like to remind the Minister that placing representatives of the Irish Banking Federation on the oversight committee is like putting a fox in charge of a hen house.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I missed the Deputy's question.
Brendan Howlin (Wexford, Labour)
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I think it was more of a statement.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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His throatiness sometimes brings his voice very low.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I will bring the various submissions that have been made to date to the attention of the committee that has been established to examine this issue. The committee will bring a series of recommendations to me on an ongoing basis.
Michael D'Arcy (Wexford, Fine Gael)
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The Minister should not forget the fox in the hen house.