Tom Fleming (Kerry South, Independent)
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54. To ask the Minister for Finance if he will ensure that whatever regime is brought into place that the credit unions are in no way detrimentally affected vis a vis the other lending banks and in the event of the debt management that Money Advice and Budgeting Service with persons for years that have had a geographical and sociological knowledge of borrowers on the ground are given responsibility for assisting borrowers with creditors; and if he will intervene with he Central Bank of Ireland to ensure that this work will mot be given out to any organisation outside the country [24437/13]

Michael Noonan (Limerick City, Fine Gael)
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Many distressed borrowers have multiple debts with different lenders and have to deal with each lender on each debt. This makes it difficult for a borrower and his or her lenders to address the personal debt difficulties on a whole of debt basis. In view of this, at the start of March the Central Bank commenced a process to facilitate the development of a co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers. The aim of the pilot scheme is to achieve sustainable and fair outcomes without the need for the borrower to enter the statutory insolvency process. It is focused on enhancing co-operation between lenders of secured and unsecured debt at an early stage.

The Central Bank has advised that this framework will help those borrowers because the lenders are agreeing to a co-ordinated approach for resolution of all of the borrowers' debts. In addition, many distressed borrowers are not insolvent and therefore will not be eligible for an arrangement under the personal insolvency regime but need to have an appropriate solution in place to deal with their debts. This framework aims to test the feasibility and costs of implementing such solutions for borrowers. The Central Bank has also informed me that the framework has the potential to reduce the costs and time it will take lenders operating on an individual basis to deal with distressed borrowers while also potentially resulting in only the more challenging cases proceeding to the new established personal insolvency regime.

The Central Bank has advised that it has been agreed among the lender participants to use an independent third party service provider as the most appropriate way to engage with borrowers, whose consent to participate will be sought and required to take part in the pilot. I am informed by the Central Bank that discussions are under way to determine the most appropriate provider and that no decision has been made. However, I also understand that an important consideration for the Central Bank in this matter, due to the short timelines involved, is the ability of the provider to provide an effective and efficient service at short notice.

The Central Bank is actively encouraging the involvement of all lenders in the process to ensure maximum effectiveness of this learning and information gathering pilot stage and it is encouraged that a number of lenders have agreed to become engaged. The Central Bank advises that it has written to all credit unions individually to invite them to participate in the pilot framework and it is confident the pilot framework will offer outcomes which support borrowers and will also allow the Central Bank to test and learn from this approach.

It must be borne in mind that a key issue in a decision to opt out by some lenders is that borrowers from these institutions cannot be part of the pilot framework to restructure their debt. For example, if a distressed borrower has multiple debts and one of their lenders is not involved in the pilot scheme, then such borrowers cannot be part of the pilot scheme and cannot avail of the benefits that can accrue from the operation of the framework.

Tom Fleming (Kerry South, Independent)
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Is the Minister aware that his Department, with the Central Bank, is engaged in a deliberate and sustained act of vandalism against the credit union movement across Ireland? In the recent past a number of banks, acting as a type of cartel, announced that they were putting in place a new protocol to deal collectively with unsecured debt, that is, debts that are not mortgages. In doing so, they were effectively giving the two fingers to our new personal debt laws which were designed for debt in general, not just bank debt. It is also important to point out that it was not the credit unions that almost caused the collapse of the State. It is a known fact and will go down in history as such that the banks were the main instigators. It is equally important to point out that it was not the credit unions that cut off credit to tens of thousands of citizens in the State. Again, the banks were the culprits.

While there is a deliberate act of sabotage in play against the credit union movement, there is very little effort to rein in the banks. It appears that the Central Bank is taking the side of the commercial banks. Why does it allow Allied Irish Banks and other banks to raise standard variable interest rates? Permanent TSB is also engaged in this. The increase in the variable rate for mortgages about three weeks ago could probably put mortgage holders further into arrears. Credit unions are being blocked from providing small loans. The Minister should intervene and remove these barriers. I ask him to act immediately. It is a complicated issue, but given his portfolio, he should make a stronger effort on behalf of the people who receive small loans from the credit unions.

Michael Noonan (Limerick City, Fine Gael)
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The Department of Finance and I have a very good relationship with the credit union movement, both at national level and with individual credit unions around the country. The Deputy will recall that when the legislation to restructure the credit union movement was brought before the House, many amendments were suggested by Deputies on behalf of the movement. All issues were resolved by dialogue. Uniquely, the Credit Union Bill passed all Stages in the Dáil and the Seanad without a division. That shows the very good relationship that not only I but also Deputies Michael McGrath, Pearse Doherty and others have with the credit union movement.

In addition, the Government has committed to spend €500 million in restructuring the credit union movement. Where there is impairment, funds will be provided to repair, where necessary. The Central Bank, of which the credit union director is an employee, has decided to carry out a pilot scheme to see if arrangements for the debts of persons with borrowings from a number of sources, including credit unions, can be made informally. To examine how this might best work, the Central Bank is bringing in outside expertise in running the pilot scheme which, of course, like all pilot schemes, will not be set in concrete. Different approaches will be tried and we hope there will be a permanent scheme drawing on the experience of what does and does not work.

There is a particular problem where people are indebted to a number of creditors, especially when somebody has a mortgage with a bank or a building society where the debt is secured and a loan from the credit union where the debt is not secured. How to deal with secured and unsecured debt is the essential ingredient in terms of why the pilot scheme was advanced. I understand discussions are ongoing. I hope the Central Bank in its talks with the credit union movement will secure full participation in the pilot scheme in order that there can be an informal system in parallel with the systems in place under the insolvency legislation.

Tom Fleming (Kerry South, Independent)
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Surely the Minister and Governor of the Central Bank can see the games that banks have been playing. This is not about debt and mortgage arrears but about market shares. The Minister is really rewarding the banks with a bigger share of the market at the expense of the credit union movement. That is the reality.

It is shameful that MABS is being bypassed. There appears to be ongoing negotiations with the UK company with a view to its coming here to engage on behalf of the consumer in respect of the pilot scheme for 750 mortgage holders. Allowing this to happen represents a complete dereliction of duty by the Government. The Central Bank should certainly be taken aside. We must recognise that MABS is a wonderful organisation with experience. It is dealing with mortgage holders. The British company deals mainly with unsecured debt. I ask that the Minister give us a very positive reply on behalf of the people who have given wonderful service to this State and the public. MABS is a State body and it should be given recognition.

Michael Noonan (Limerick City, Fine Gael)
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I have been urged by all sides of the House to come up with solutions to the problem of personal debt. We have spent a lot of time on it and we are now at the point where the system is beginning to work properly. The primary legislation is the insolvency Act. It is just ready to come online but there are circumstances where problems could be resolved better informally. The Central Bank is about putting in place a pilot scheme to determine whether it can resolve informally the debt circumstances of individuals who have borrowed from the banks and other lending institutions, but who also have unsecured borrowings from the credit union movement. It is in the interest of the credit union movement to get back as much as it can of what it has lent. The pilot scheme is intended to work out a fair system in which different lenders will get a proportion of what they have lent returned to them and in which the borrower will be put in a position in which his or her personal debt is sustainable. That is all that is occurring. It is another method of resolving the problem that everyone in the House is aware of.