Nicky McFadden (Fine Gael)

I move:

That Seanad Éireann,

noting:

that the huge increase in the number of people unemployed, or working shorter weeks, has put enormous financial strain on families in meeting their mortgage repayments and paying other debts, with 14,000 households currently in mortgage arrears according to most recent figures — June 2008 — which are now estimated to have doubled;

the 244% increase in the number of households dependent on mortgage interest supplement since the end of 2007, totalling some 14,100 as at October 2009, and the absence of data on the number of applications and refusals for this support;

that debt collectors and commercial debt advisers operate in an unregulated environment;

the 100% increase in the number of applications for repossession in the High Court between 2007 and 2008, with the High Court hearing about 100 cases every week;

the ESRI estimates that 35,000 households will not be able to repay their mortgages next year and that 200,000 households will face negative equity;

that the new code on mortgage arrears and the IBF-MABS protocol fails to sufficiently protect homeowners;

that the Government has taken no steps to update or reform the current system of debt enforcement, which is ineffective, extremely costly to the taxpayer and wasteful of court, judge and Garda time;

that 276 people were jailed last year for failing to repay their debt, receiving an average sentence of 27 days and serving an average of 20 days;

and recognising:

the recent High Court judgment which found that a person must not be imprisoned if they do not have the money to repay their debt;

the recent publication of the Law Reform Commission's consultation paper on personal debt management and debt enforcement, which recommends radical and fundamental reform of debt enforcement procedures;

calls on the Government to:

establish an alternative dispute resolution system to deal with cases where people are unable to repay debt, which will free valuable court time and support families struggling with debt;

regulate debt collection agencies as proposed by the Fine Gael Credit Financial Institutions (Protection of Debtors) (Amendment) Bill 2008 and draw up legislation to regulate commercial money advisers;

incorporate into NAMA a home owner support scheme to protect families facing repossession of their homes;

expand MABS in a meaningful way to support individuals and families experiencing problems repaying debt, but also to support individuals and families in dealing with debt and managing their finances at an early stage before it spirals into a serious problem.

I welcome the Minister of State. This is a worthwhile motion which is concerned not only with mortgage arrears but also with indebtedness in general. Personal indebtedness has become a serious problem due to the haemorrhaging of jobs that we have seen in the past year. Irresponsible and reckless lending, overpriced mortgages and major falls in disposable income are the contributing factors. Most consumers are adapting by changing the amount they are borrowing, making different lifestyle choices and curtailing excessive use of credit card facilities. However, there are many who are in serious financial difficulty and we must help them. The Government which has bailed out the banks and we, as public representatives, must take responsibility for the people in question.

There are many forms of debt, including utility bills, credit cards, mortgages and car loans, and many find themselves in at least one, if not all, of these forms of debt through no wrongdoing on their part. Salaries have been dramatically cut owing to the pension levy and health levy and many are no longer in receipt of bonuses and overtime payments. These are the people who are told to feel lucky that they have jobs. Many struggled to pay their loans during the good times; therefore, it is almost unimaginable what they must be going through now. Why should people who have worked hard all their lives to provide for their families and never claimed anything from the State and who did not in any way cause this recession feel lucky?

There are many who are no longer in a position to pay fixed-rate mortgages. We should use NAMA to negotiate with the banks to establish a get-out clause in order that people currently facing heavy penalties for changing mortgages — some of up to €11,000 — can change to variable rates. This would allow them to benefit from lower interest rates, resulting in lower monthly repayments. Subprime mortgage lenders appear to have the highest interest rates and also adopt aggressive tactics for the collection of arrears.

Fine Gael is calling on the Government to adopt an alternative system to the current court-centred approach. I wish to be clear that there is a difference between those who will not pay back their debts and those who cannot. I am concerned about the latter group. We must support families and not allow them to feel further isolated and descend into despair. Issuing court orders for debt enforcement is not the correct solution. An alternative system would assess people who need the terms of their repayments changed in order that they may pay in proportion to what they can afford and, ultimately, repay their debts. A person's home is his or her castle and we cannot let the current level of home repossessions continue. There was a 100% increase in the number of applications for repossessions in the High Court between 2007 and 2008. We must set an agenda which we collectively aim to achieve.

Fine Gael believes the Government must establish a new central debt enforcement agency which will immediately take over the running of existing court procedures for debt enforcement. The legislation is outdated and applies to a time when not many borrowed beyond their means and got caught up in greed and mass consumption. I understand people must be prudent in how they borrow and admit that some have overstretched themselves but we cannot see families and little children losing their homes to the banks which we are bailing out to the tune of €54 billion.

The Free Legal Advice Centres, FLAC, and other money advisers say that in their experience, people under pressure from debt do not open registered letters. The prospect of court hearings is so terrifying that they just hope the problem will go away. As we all know, that will not happen. We must bear in mind the type of person about whom we are talking: someone who has worked all of his or her adult life, never signed on the dole and always paid utility bills on time but now finds himself or herself in the formal courts system. This is inhumane.