Thomas Byrne (Fianna Fail)

I have listed the flaws in the legislation. I would be grateful if someone more learned than I could find the definition of "mortgage". In the Consumer Credit Act it is defined as a housing loan, and a mortgage is just a document one signs. Perhaps it is somewhere in the social welfare legislation. Mortgage interest is defined but are the terms "mortgage" and "mortgage repayment obligation" defined? Professor Jason Kilborn's point at the Free Legal Advice Centres conference was that borrowers need help. They are dealing with the banks on their own and the banks have no real incentive to help them. It is a fact that under the code of conduct a bank is not obliged to offer an alternative repayment arrangement. In the absence of mortgage interest supplement, it may well be an incentive for the banks to tell the borrower the mortgage is unsustainable and, accordingly, no alternative repayment arrangement will be offered. Again, "alternative repayment arrangement" is defined in the code of conduct as well as separately defined in the legislation.

There is an appeals process for borrowers but there is no reference to it. For example, after this legislation is passed, if I were to apply for mortgage interest supplement and the bank refused to enter into an alternative repayment arrangement under the code of conduct or the legislation, what happens to my supplement? If the alternative repayment arrangement is that my arrears and interest are capitalised, do I have to wait a year for mortgage interest supplement?

The Minister raised the issue of poverty traps. Mortgage interest supplement can become a poverty trap by the length of time that it takes for the supplement to be paid. It really should be a short-term solution and limited rather than postponed. If a supplement recipient informs the bank he or she does not have it anymore, there is a strong incentive on the banks not to deal with him or her. Accordingly, there is a stronger incentive on the bank to claim a mortgage is unsustainable and push the person into the appeals process. The Government promised 100 extra debt advisers who have yet to materialise. Before the Minister puts this measure in place, she must give borrowers the help they need.

The Minister pointed out that Professor Jason Kilborn said there needs to be a realistic coming together of both the lender and the borrower. The only realism that can be brought into that is if the lender has strong help whether from a strong Central Bank or strong Government which does not just ask the banks to do something nice but demands it in legislation. We are not doing that in this section. No onus is being put on the banks; it is entirely on the borrower.

Another objectionable aspect of this section is the Minister requires community welfare officers to become experts on the mortgage arrears resolution process with the banks. The Minister claimed the obligation is to engage. The obligation is not to engage but that the dedicated person, that is a social welfare officer, must be satisfied that the person has engaged with his or her mortgage lender and arising from such engagement has entered into, and where required, is complying with an alternative payment arrangement agreed between that person and his or her mortgage lender. The community welfare officer is now judge, jury and executioner on whether to make the payment. I do not know what training has been provided for community welfare officers on this process. They cannot be expected to know what goes on within banks. It is giving them much more discretion than should be allowed. It is difficult enough for them to know the exact requirements of social welfare law without having to go into what are called statutory codes of conducts - it is statutory in that they are empowered by a statute, but the code of conduct is not a statute.

The definition in the Bill, in section 12, of an alternative repayment arrangement is woolly. According to the definition, it means any arrangement entered into by an applicant for the supplement referred to in subsection (5) in respect of his or her mortgage that incorporates a change in any terms or conditions of the mortgage that applied when the mortgage took effect, and for the purpose of assisting that person to resolve any difficulties he or she may have in meeting his or her mortgage repayment obligations. In other words, this statutory definition of alternative repayment arrangement is different from the code of conduct definition. There will be considerable confusion about this. The welfare officers will have to go back to the statute. The statute requires a change in the terms and conditions when, in fact, the code of conduct prohibits changes in terms and conditions in certain circumstances, particularly in tracker mortgages, and it is supposed to be for the purpose of assisting that person to resolve any difficulties he or she may have in meeting his or her mortgage repayment obligations. The definition includes any practice, referred to in a code of practice - we know the code of practice to which the Minister has referred but the Bill refers to any code of practice - that is specified for the purpose of resolving any difficulties with meeting mortgage repayment obligations.

That definition is very broad and all-encompassing. In some ways it is separate from the definition of alternative repayment arrangement in the code of conduct that we are used to. It will lead to considerable confusion. It will increase poverty traps and will put the borrower in an even more vulnerable position with the banks because he or she is now going in with €100 a week less than he or she had. By definition, if we pass this section, the customers are in a weaker position.

The flip side to that is that the Minister must make some statutory provision before the section comes into effect to enable these debt advisers to be put in place in order to give the vulnerable borrowers a strong arm when they go into the banks.