Wednesday, 19 May 2021
Personal Insolvency (Amendment) Bill 2020 [Seanad]: Committee and Remaining Stages
I move amendment No. 1:
In page 10, between lines 7 and 8, to insert the following: "Amendment of section 102 of Principal Act
14. Section 102 of the Principal Act is amended in subsection (6)(f) by the insertion of "without the agreement of the secured creditor" after "security".".
The Personal Insolvency Act was introduced to address deficiencies in the law and provide for fair and reasonable settlement of debt without having to resort to bankruptcy, which was then the only solution available in Ireland. In most cases, bankruptcy required the sale of the family home. One of the main objectives of the legislation was to try to create a solution to protect citizens from losing their family homes given the exceptional situations that emerged following the collapse of the banks and the property market, which saw the value of homes fall by more than 50% and the inability of thousands of people to repay huge mortgages taken out during the Celtic tiger years.
As we are very much aware, this process saw the bailout of the banks by Irish taxpayers and the assumption was generally held that the restructuring of mortgaged homes would follow. From very early on, it was clear the banks were resistant to complying with these clearly stated aspects of the Personal Insolvency Act, to such an extent the Government was forced to introduce the Personal Insolvency (Amendment) Act 2015, which provided for an appeals process when banks refused to agree to arrangements constructed by personal insolvency practitioners drawn up within the parameters of the Act. However, the banks continued to challenge these appeals process solutions at great cost to the State. It took several High Court rulings to deem most of these solutions legal and enforceable.
Unfortunately, the High Court stated debt for equity swaps could not be enforced by the courts as the legislation did not allow the courts to do so. As the law stands, the agreement of the banks is required to allow these cases to proceed. The solution in this proposed amendment to section 102(6)(f) is the only realistic one available to older mortgage holders aged over 50 because they do not have the time to avail of other solutions. Our laws should be for the benefit of all citizens irrespective of their age. The main objection of the banks to equity swaps is that they are too complicated to draw up. This is not a valid argument. Swaps do not adversely affect the balance sheets of banks and they certainly do not require a further cost burden to be placed on the Irish taxpayer.
The amendment I propose is very simple and straightforward but, I believe, will allow our courts to force the most needed solution on our banks. I call on the Government to accept the amendment.
I rise to support Deputy Fitzpatrick's amendment, which is very sensible and, as he said, would not result in an impediment or a cost on the taxpayer. This legislation is welcome. The people of Ireland are paying back and their grandchildren will pay back the banks for the savagely expensive bailout they got. The banks are not being fair. There is not a lot of refuge or solace in the courts either, especially for lay litigants forced into a situation in which they have no recourse to finance to pay for lawyers or barristers. I have been there with some lay litigants and they have not got a lot of solace or support. They are up against the might of the bank. I have no truck with people who could pay but do not want to pay. I am talking about people who are trying to keep the roof over their heads, especially if they are getting elderly. Many of them invested in things, maybe foolishly, but that is how it happened. The banks behaved recklessly and they got bailed out. We need supports for the people, including the vulnerable families, to keep the roof over their heads. Many of them are getting sick, both physically and mentally, with the stress and the pressure. It is so daunting to go down to the river and to the Four Courts - when you could go down. Now it is all done on Zoom. As I said, there is no refuge and not much solace in the courts for these people. We have very little robust legislation at all to put manners on the banks, and they need manners put on them because they are not dealing with any sense of respect or fairness with people. They are arrogant. You are trying to deal with things and trying to help and then when you think you have it over the line, the next thing is that the staff change and the case is handed to somebody else. They are playing on the merry-go-round. I do not know what kind of game they are playing, but it is mind games. It is very stressful and is terrorising some people. I support the amendment. I hope the Minister of State will be able to accept it.
I support the intention of the amendment. The idea that secure creditors can block a deal from proceeding is an issue that needs to be dealt with, and I would be interested to hear what the Minister of State has to say about it. If there is an alternative way of dealing with it, that is absolutely fine. I appreciate that what Deputy Fitzpatrick has tabled tries to ensure the best interests of people who are in serious trouble, who have major levels of stress in their lives and who have to go through the indignity of getting through this process. The amendment ensures they can do so without being held to ransom by some lending institution that can just block them and stop them from moving forward. There is a validity to the amendment and I hope that it or some version of it can be accommodated by the Minister of State, if not now then at a later date.
The Personal Insolvency (Amendment) Act 2015 introduced key protections for insolvent homeowners struggling to pay off their arrears. It has allowed them the right to seek a court review if their mortgage lenders or creditors refuse reasonable proposals for personal insolvency arrangements. The success of this Act has gone beyond insolvent individuals struggling to repay the mortgages on their homes to include in some cases farming families who are in financial difficulty with their land. I very much welcome the adaptation of this key legislation by the courts.
A number of months ago I attended a webinar organised by the ICMSA at which a personal insolvency practitioner spoke of how this legislation is being successfully used to protect the farm family from repossession and for appropriate debt settlements to be reached. However, this very useful legislation, which can protect the family home, family farm, farm business and livelihood of a farm family, is only accessible when both the principal primary residence and the family home is included in the debt with the land. We must act to amend this legislation to allow the family farm to be included in the personal insolvency process, regardless of whether the principal primary residence is affected by the debt. If the land alone is used for security for a loan or mortgage, there is a strong case to be made for the personal insolvency process to be extended to include this instance. I ask the Minister of State to take this on board and amend the Personal Insolvency Act to allow access to the personal insolvency process for insolvent individuals who are farm land-indebted and not only in instances in which the family home is also included in the security for the loan. This would open up the protections of the Personal Insolvency Act to even more worthy individuals and families. It would ensure that the family farm is not repossessed and sold off by the banks. It would allow for a debt resolution process that does not mean farmers have to lose their entire livelihoods to settle their debts, which results only in further financial hardships.
Deputy Fitzpatrick's amendment refers to section 102 of the principal Act. Currently, this provision would allow a personal insolvency practitioner to propose that the principal amount outstanding on a mortgage should be reduced by a certain sum if the borrower grants a share of his or her equity in the secure property to the secure creditor. The effect of the Deputy's amendment is to specify that the proposal would be made without the agreement of the secure creditor concerned. I appreciate the Deputy's intentions in making this proposal. I recognise that the potential scope of a debt-for-equity proposal under this section, with or without agreement of the secure creditor concerned, has been the subject of several High Court judgments, including most recently in the Fennell and Kirwan cases. I am not, however, in a position to agree to this amendment and I will explain why.
The proposal to impose a debt-for-equity solution on a secure creditor without its consent raises potential legal issues and potentially constitutional issues and would require careful consideration and detailed legal advice. Imposing debt solutions on secure creditors enters into a very difficult legal territory as there is a risk of impinging on the constitutional rights of those creditors. The personal insolvency legislation and previous amending Bills have been very carefully designed and balanced to take full account of these concerns. To make the change the Deputy proposes could disturb this careful balance and risk opening up the Bill to legal challenges. Above all, the legal uncertainty likely to result from such challenges would be extremely damaging to the situation of homeowners in serious mortgage arrears who are in urgent need of solutions. I know the nature and scope of potential debt-for-equity solutions was raised in stakeholder submissions due to the statutory review of the Personal Insolvency Acts. This issue is receiving detailed consideration in that context. The review, as I mentioned in my introduction, is due to report this summer and the Government legislative programme already includes a further amending Bill consequent on its findings. The general scheme of that Bill will be prepared later this year.
I thank Deputy Fitzpatrick for tabling the amendment. It is a very important amendment and speaks to a very important issue that needs detailed consideration. It will be given detailed consideration under the review, and we have a broader and larger insolvency scheme coming later in the year. I have asked the Department to engage with Deputy Fitzpatrick on his very important proposals and to see if they can be accommodated. When this original legislation was brought forward, it was very radical and very badly needed. Willie Penrose was instrumental and critical in that respect. Some limitations may have been put on it, in that the Government at the time would perhaps have preferred it to have gone a little further, but there were fears about the constitutional rights to property. It has proven to be very robust legislation. We are now probably somewhat more confident about that legislation. Where amendments can be made and the protections expanded, that should be done but, as I said, within the context of the review and a broader discussion and assessment. Those are my comments for Deputy Fitzpatrick. I ask him not to push the amendment at this stage, but the Department will certainly engage with him further.
As the Minister of State said, the solution I am looking for is for people who are 50 and over because everything else in insolvency law helps younger people. I know many people in my area and other areas in the country who are in their 50s and the last thing they want is to lose their homes. It is very important that legislation looks after all citizens, no matter their age. The thing that really annoys me is that the bank says the solution I am looking for is complicated. How do you tell a family who is losing their home that it is complicated? How do you tell the homeless in the streets it is complicated? I feel that my solution is a very simple one. It gives the courts the authority to go ahead and do what they think is best.
I will be honest with the Minister of State. I am delighted he said the Department will engage with me. I am overwhelmed by the support I am getting from the Opposition. I was not going to press the amendment but I think I would be doing an injustice to the people I represent in my constituency, the people who work very hard during these crises, were I not to do so.
I know those people should not have gone to the bank and got so much money. However, these banks lend these people substantial amounts of money and I do not know how they ever thought people were going to pay it back.
I will be pressing the amendment.
I commend Deputy Fitzpatrick on tabling the amendment. I awaited with interest the response from the Minister of State. Having worked in government in recent times, I was not a bit surprised. There is an extraordinary caution - I use that word advisedly - regarding anything that tramples on so-called property rights. The Constitution is a permanent shield often against the public good.
The Minister of State made comment, as I did in my Second Stage speech on the Bill, of the work of the former Deputy, Willie Penrose, who championed this legislation. It was ridiculous that people, including some well-known people, were leaving this jurisdiction to live abroad for a year to get bankruptcy abroad because our insolvency law was so difficult. We made very significant progress. The Personal Insolvency Act, which was amended in 2015, has proven to be an extraordinarily valuable tool. All of us have dealt with personal insolvency practitioners, and dealt with people in very difficult situations where their homes were under threat. This legislation has been a shield for them.
It is important that we are not always dependent on the acquiescence of the creditor. I ask the Minister of State to indicate when we will see the more substantial insolvency legislation.
It would do no harm to accept Deputy Fitzpatrick's amendment right now. I know legal advices are always ultra-cautious on these matters. We do not want to dislodge that in any way, particularly when we have a framework that has already been tested in the courts. However, in legislating for the public good I believe we need to push harder against this perceived constitutional difficulty because the property rights are seemingly so defended in our Constitution against the will of the vast majority of our people.
Cathal Berry, John Brady, Martin Browne, Pat Buckley, Seán Canney, Sorca Clarke, Rose Conway-Walsh, Seán Crowe, David Cullinane, Pa Daly, Pearse Doherty, Paul Donnelly, Dessie Ellis, Peter Fitzpatrick, Kathleen Funchion, Thomas Gould, Noel Grealish, Johnny Guirke, Marian Harkin, Brendan Howlin, Martin Kenny, Claire Kerrane, Pádraig Mac Lochlainn, Mattie McGrath, Denise Mitchell, Imelda Munster, Catherine Murphy, Verona Murphy, Johnny Mythen, Denis Naughten, Carol Nolan, Darren O'Rourke, Eoin Ó Broin, Donnchadh Ó Laoghaire, Ruairi Ó Murchú, Aengus Ó Snodaigh, Maurice Quinlivan, Patricia Ryan, Seán Sherlock, Róisín Shortall, Brian Stanley, Pauline Tully, Violet Wynne.
Colm Brophy, James Browne, Richard Bruton, Colm Burke, Peter Burke, Mary Butler, Thomas Byrne, Jackie Cahill, Dara Calleary, Ciarán Cannon, Joe Carey, Jennifer Carroll MacNeill, Jack Chambers, Niall Collins, Patrick Costello, Simon Coveney, Barry Cowen, Michael Creed, Cathal Crowe, Cormac Devlin, Alan Dillon, Stephen Donnelly, Paschal Donohoe, Francis Noel Duffy, Bernard Durkan, Damien English, Alan Farrell, Frank Feighan, Joe Flaherty, Charles Flanagan, Seán Fleming, Brendan Griffin, Simon Harris, Seán Haughey, Martin Heydon, Emer Higgins, Neasa Hourigan, Heather Humphreys, John Lahart, James Lawless, Brian Leddin, Marc MacSharry, Josepha Madigan, Catherine Martin, Steven Matthews, Paul McAuliffe, Charlie McConalogue, Michael McGrath, Joe McHugh, Aindrias Moynihan, Hildegarde Naughton, Malcolm Noonan, Darragh O'Brien, Joe O'Brien, James O'Connor, Willie O'Dea, Kieran O'Donnell, Fergus O'Dowd, Roderic O'Gorman, Christopher O'Sullivan, Pádraig O'Sullivan, Marc Ó Cathasaigh, Éamon Ó Cuív, Anne Rabbitte, Neale Richmond, Michael Ring, Eamon Ryan, Brendan Smith, Niamh Smyth, Ossian Smyth, David Stanton, Robert Troy.