Gerald Nash (Louth, Labour)
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I am glad to have this opportunity to raise this issue of the pilot scheme announced last week by the Central Bank last week for dealing with distressed mortgages. No Member would argue that such a scheme is not badly needed. It is, indeed, long overdue. However, one point that galls ordinary people most is not just the appalling behaviour of the banks prior to the crash, but their continued arrogance and tardiness in dealing with the aftermath, having been bailed out by the taxpayer.

However, on the face of it, this scheme would appear to be good news. As always, the devil is in the detail. The scheme has all the hallmarks of having been designed by the banks for the banks, as they have put themselves at the top of the queue to receive the lion's share of whatever debt can be recovered from distressed mortgages.

Michael Kitt (Galway East, Fianna Fail)
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I ask Members to have their conversations outside the House.

Gerald Nash (Louth, Labour)
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Credit unions which have served the ordinary people so well over the years are being pushed back out of sight and out of mind and they will soon be out of pocket. It is immoral that the banks, which contributed hugely to the debt crisis we are in through reckless lending, should receive primary protection while community-based credit unions, which have consistently encouraged responsible saving and lending plans, will be thrown to the wolves along with credit card providers and back street moneylenders. I am not surprised that the Irish League of Credit Unions, ILCU, has rejected this proposal. Under the scheme, banks will receive 90% of available debt repayments while the credit unions will have to scrap it out with other unsecured creditors for the remaining 10%. There is no doubt we need to introduce a robust and fair scheme to deal with distressed mortgage holders but part of that plan must include a facility for mortgage write-downs and write-offs, where required.

The banks have been provided with the funds to do this. They must stop burying their heads in the sand and deal with the reality as we find it as a society. Only then can our entire banking and financial sector start to move forward again. Does the Minister of State agree that the scheme needs to be revisited? Will he communicate that to the Governor of the Central Bank in the interests of all of those who save with credit unions, work for credit unions and value the credit union system? Credit unions have traditionally lent on a prudential basis and behaved responsibly. Credit unions and their members deserve more than what is contained in the pilot proposals.

Brian Hayes (Dublin South West, Fine Gael)
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I thank the Deputy for raising this issue. I have been informed by the Central Bank that this initiative is being implemented to establish, on a test basis, an approach to deal with both secured and unsecured debt. This pilot scheme will take in a sample of approximately 750 cases where borrowers have debts with multiple lenders. To address this scenario, the Central Bank has commenced a process to facilitate a voluntary, co-ordinated approach among lenders to the resolution of multiple debts owed by distressed borrowers. An unsustainable debt position has been reached by many borrowers, which needs to be addressed for the benefit of both borrowers and lenders alike.

The Central Bank envisages that the participants in the pilot framework will be the main retail lending banks and the credit unions that have agreed to participate, as well as certain other unsecured lenders. This pilot framework contains a restructuring waterfall that will be applied to each borrower who agrees to participate to establish the most appropriate modification to put him or her on an affordable repayment path. The framework is expected to commence in June and will operate for three months, after which the results will be assessed to establish the effectiveness of the framework and to determine the appropriate next steps. To be eligible for the framework, a borrower must be co-operating with their lenders, as defined in the code of conduct on mortgage arrears. The framework will apply to borrowers experiencing financial difficulty but who have taken reasonable steps to maximise income and curtail expenditure. It is important to reassure borrowers in difficulty with their mortgage repayments that all existing protections afforded by the Central Bank's consumer protection code and code of conduct on mortgage arrears will continue to apply to participating borrowers.

The Central Bank is encouraging the involvement of all lenders in the process to ensure maximum effectiveness of this learning and information gathering pilot stage and it has a number of lenders engaged to date. The bank has written to all credit unions individually to invite them to participate in the pilot framework. It is confident that the pilot framework will offer outcomes that support borrowers and will allow the Central Bank to test and learn from this approach. It must be borne in mind that a key consideration in a decision to opt out by lenders will be that borrowers from these institutions cannot be part of the pilot framework to restructure their debt and cannot avail of the benefits that could be accessible to the borrower.

I am aware of the concerns expressed by the ILCU regarding the Central Bank initiative and its view that the arrangements under the Personal Insolvency Act should be applied to the resolution of multiple debts owed by distressed borrowers, including credit union members. While that regime will be available, the Central Bank pilot scheme will offer the opportunity for distressed borrowers, including participating credit union members, to resolve their debts without the need to enter into the formal statutory insolvency process. In this respect, it is important that, where possible, credit union members should not be left with a more limited range of options than that available to customers of other financial institutions. It is in this spirit that the Central Bank has written to all credit unions to make them aware of the pilot framework in order that the credit unions can decide whether participation is in the interests of their members, including those with distressed debts across multiple lenders. Credit unions have been invited by the Central Bank to nationwide information seminars on the pilot scheme to discuss its objectives and approach. The ILCU has been invited to attend at these sessions and to provide input. Notwithstanding its official stance on the pilot programme, the ILCU has played a constructive role in working with the Central Bank and other lenders to address this difficult issue and credit unions continue to have an important role to play in supporting distressed borrowers in resolving their problems.

The Central Bank initiatives in the mortgage arrears area, in particular the mortgage arrears targets initiative announced last March, and the recent announcement regarding the framework pilot on the development of a co-ordinated, holistic and voluntary approach by secured and unsecured lenders, is consistent with the overall approach of Government to deal with the mortgage arrears problem. In particular, the Government, while significantly modernising Ireland's bankruptcy and insolvency law and procedures, has also advocated and encouraged borrowers and lenders to address debt difficulties, where possible, on a bilateral and informal basis, and the recent Central Bank initiatives should underpin that process. Taken together, the framework is in place to enable banks to work with distressed homeowners to reach sustainable solutions for dealing with their personal indebtedness.

Gerald Nash (Louth, Labour)
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I thank the Minister of State for his comprehensive reply. The pilot framework will be initiated in June and I wish this process well. It forms part of the Government's holistic approach to dealing with personal indebtedness and mortgage arrears, in particular, which have bedevilled the country for too long. The Government is trying to take a coherent, co-ordinated and comprehensive approach to addressing the problems experienced by too many people to ensure they can again become economic actors. It is also welcome that the initiative is being tested in advance of the full roll-out of the personal insolvency service. The approach needs to be holistic and it needs to take in as many institutions operating in the economy as possible and practicable. It has been my experience, and I am sure that of most Members who are familiar with the work of credit unions, that they have actively engaged on a bilateral basis with individuals and families in distress. I am hopeful that a number of concerns expressed on a formal basis by the ILCU can be addressed by the Central Bank and the Department of Finance, if necessary, because it is important that we recognise their fundamental role in our economy, that they are important economic actors in our communities and that people have a deep attachment to the credit union movement.

It has often been described as the people's bank. It is an institution which during the years has been available, from a lending and savings point of view, to many thousands of people who have not had access to the main high street banks to the extent they might have. I know the Minister of State is very conscious of the issues I have raised and hope some of the concerns of the Irish League of Credit Unions can be addressed through this process and that it may be in a position to formally engage in this process shortly, if these concerns can be addressed.

Brian Hayes (Dublin South West, Fine Gael)
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I very much welcome the Deputy's remarks. We are all in a new space since the passage of the personal insolvency legislation and the setting of very clear targets by the Government in March in terms of making progress. Both of us would agree that we need to make progress and this is one arm of the progress agenda which is being rolled out by the Central Bank. As the Deputy rightly pointed out, this is a pilot scheme which I hope will involve 750 cases. In any kind of pilot scheme we are learning and road-testing something, I hope as part of a wider scheme which needs to be rolled out for people in mortgage distress. This case is unique in that it is dealing with people with secured and unsecured debt. That is the kind of catch-all holistic approach, to which the Deputy referred, that we want to see.

On behalf of the Minister for Finance, I reiterate what the Deputy said. We want to see the Irish League of Credit Unions involved and that is the position of the Central Bank also. I hope some of the league's misgivings about the scheme thus far can be removed by way of discussions and participation. We need to learn from it as to how the scheme can be applied in a more exacting way to its requirements and customers who are crucial to a resolution of this issue. It might be useful if the contents of this debate and the very positive initiative the Deputy took in raising this issue were transmitted to the Central Bank and I will ensure that happens. It will, therefore, be aware of the Deputy's remarks and mine and those of the Department of Finance and of the need for constructive engagement with the Irish League of Credit Unions in order that there will be a positive outcome from this pilot scheme and that we can roll out a more far-reaching scheme into the future.