John Kelly (Labour)

I welcome the Minister of State to the House. I will briefly discuss the steps we should take to address reckless lending and borrowing. Prior to becoming a Senator I was employed as a community welfare officer. I dealt with many of these cases, including one which involved a young man who had borrowed €187,000 from one institution. Having paid his mortgage for a couple of years, he decided, on the basis that money was easily available, to pay off his van loan and three credit card debts and pay €30,000 for his wedding. He went back to another institution and it loaned him €250,000. In his application for this amount, which I have seen, he clearly stated his income from a job in the construction sector was €2,500 per month. He gave no evidence of it and there was no evidence on file; it was all verbal. The repayment for that mortgage over 40 years was €2,600 per month. He subsequently got married and now has children. His wife is not working and he is on social welfare. There is no way this man will ever be able to repay this mortgage.

I blame the institution, although some people could say it is also reckless borrowing. If I make an application for a job, somebody will examine my curriculum vitae and say either "Yes" or "No". The same applies when one seeks to borrow this amount of money. One might be reckless in seeking it but the bank should be responsible and clearly state that one is not able to repay it and refuse the loan. The banks did not do that. Where similar cases to the one I have described arise I propose that the bank be penalised for it. In this case the bank gave the man an extra €63,000, a mortgage of 140%. The banks should be penalised, not the people. The people are not responsible for it, just the banks.

Although the Money Advice and Budgeting Service, MABS, does a great job, it is dealing with the reckless institutions that gave out the money in the first place, and it can only go so far in that regard. I also do not believe the Financial Regulator can deal with this issue. There was talk about establishing a debt management agency. I believe it should be neutral and adjudicate on issues such as this. Where it clearly sees the situation I have described today, the banks should pay the price for it. Abraham Lincoln once said that one should not expect the people who caused the problem to be the ones to fix it, because they would not. We need to establish a separate agency to deal with these situations.