Ivana Bacik (Independent) | Oireachtas source

I welcome the Minister to the House. I welcome this Bill which, as the Minister said, is long overdue as a reform of personal insolvency law. As he also said, it is a complex Bill. I thank him for his very comprehensive outline of the detailed provisions of the Bill which is very helpful to have on the record of the House. It is also helpful to have the history of the Bill on the record of the House. It is required under the terms of the EU-IMF-ECB programme and it is also a key commitment in the programme for Government. I refer also the report of the Law Reform Commission on personal debt management and debt enforcement. It has long been accepted that our bankruptcy laws were due for an overhaul. The Bill reflects this desire and also deals with much more general arrangements other than bankruptcy for dealing with the very great problem of personal indebtedness. We are all cognisant of the serious problem and the great heartbreak and distress that this problem is causing to individuals, to families and to households in all parts of the country. This Bill is part of the package of measures required to deal with this serious social and personal problem.

As part of the history of the Bill and the detailed process involved in its drafting, the Joint Committee on Justice, Equality and Defence, held hearings last February. We produced a report which the Minister has taken into account in the drafting of the Bill. I am pleased to note that some issues are reflected in the Bill, although I note some issues are not. FLAC included those issues in its recent and very helpful comments on the Bill. The concerns expressed by FLAC are framed in a constructive manner in that it welcomes the Bill but it expresses some concern. I will return to those concerns shortly.

It was helpful that the Minister set out that there will be a three-tier, non-judicial debt resolution process beginning with the debt relief notices for the more minor debts - albeit still significant sums involved of up to ¤20,000. The debt settlement arrangements will deal with unsecured debt over a five-year period. The personal insolvency arrangement will enable the agreed settlement of secured debt up to ¤3 million. I wish to make a point about the levels of debt under each of those three tiers and which were dealt with in the joint committee report. We heard from various groups, in particular, from groups representing debtors, that the thresholds provided were generally too low. We recommended that the limit of ¤20,000 for debt relief certificates might be raised to ¤50,000 and that the limit for the personal insolvency arrangement should be raised to ¤10 million. I note that FLAC in its recent report has suggested an increase in the threshold of the debt relief notices to ¤30,000. I ask if the Minister envisages any change in those thresholds. I say this in the knowledge that since the joint committee issued its report, there has been quite a strong critique made of raising the limit for the personal insolvency arrangement, that a sum currently allowed for of ¤3 million is sufficiently high.

I was quite persuaded by that, even though it is at odds with what we recommended as a joint committee. However, the point was made forcefully that the ¤3 million limit more than covers the vast majority of people with personal debt arising from a mortgage on a family home and to raise the threshold for the personal insolvency arrangements any higher would mean dealing with people who had borrowed large amounts to take out loans on investment property. That should not be the purpose of this legislation. As the Minister said, it should not be about rewarding irresponsible lending or borrowing and we also made this point in our submission. I accept, therefore, a fine balance must be struck in this regard. I am satisfied now with the threshold for the personal insolvency arrangements, despite the submissions made to the joint committee.

However, I wonder about the threshold of ¤20,000 for debt relief notices. That is low, given people have run up significant debts on credit cards and so on for their households and this could be acknowledged. The joint committee raised a critical issue in any debate on insolvency, which is that the family home should be handled separately from investment properties or holiday homes and should be protected in an insolvency arrangement. Irresponsible lending should not undermine the reality that people are devastated at the prospect of losing their homes and that is causing distress. We emphasised this point in the justice committee report.

We also emphasised the appeals issue raised in the FLAC submission. I acknowledge the Minister stated bankruptcy is the ultimate appeal mechanism for debtors and we all accept that but concerns were raised with us by groups such as FLAC and New Beginning that there were insufficient mechanisms in the Bill to deal with creditors resistant to making arrangements. I am glad the Minister stated the legislation will have to be refined if the financial institutions refuse to co-operate or engage with these mechanisms. The Bill requires lenders to engage properly with customers. The architecture of the legislation will place more pressure on them, which is welcome. Everyone commenting on it has welcomed that but, as the Minister acknowledged, the approach to debt resolution will have to be refined if financial institutions refuse to engage.

I am glad personal insolvency practitioners, PIPs, will be regulated by the new insolvency service and new proposals will be brought forward on Committee Stage to provide for this. They have a key role in ensuring the legislation operates effectively. A new Part V will contain provisions for regulatory and oversight procedures. What mechanisms will be used to ensure regulation of these practitioners? FLAC is concerned that the current proposed structure will fail to attract sufficiently qualified PIPs and, therefore, may make the cost of arrangements prohibitive. This is interesting because I did not think there would be a difficulty attracting PIPs. Has the Minister a view on that?

He stated the personal insolvency arrangement is without precedent but there are precedents that resemble it. We heard about the models in Norway, Greece and elsewhere at the joint committee hearings but we are adopting a different model and whether it is effective depends in large measure on the mechanisms in place such as PIPs, which is why the regulatory and oversight provisions are critical.

It is helpful that the Minister has given us an estimate of the numbers who may apply for debt relief notices and debt settlement and personal insolvency arrangements. Clearly, at this stage we cannot be sure how many people are likely to apply but there were only 30 bankruptcy adjudications in 2011, partly because of the hugely cumbersome procedure currently in place. During the joint committee hearings, we heard a great deal about bankruptcy tourism, about which the Minister is conscious, where people travel to other jurisdictions to avail of more lenient bankruptcy regimes. We had a comprehensive debate in the House on the Civil Law (Miscellaneous Provisions) Bill 2011 on the bankruptcy law and I recall Senator Quinn making a forceful point about not making bankruptcy laws too lenient. The one-year timeframe in Britain, for example, may be too low a threshold. Three years may well strike the correct balance. The joint committee expressed concern that the timeframe in the Bill was too long, given an additional period is envisaged beyond the three years prescribed. We suggested the overall effective period should be five years rather than the current proposal of eight years.

I am concerned that FLAC is suggesting the three-tier procedure will be overly cumbersome. I am not sure, as I am hopeful that a better perspective on it is it is more targeted at different levels and type of debt. As the Minister said, there are many individual scenarios and a one-size-fits-all approach may not work. We all very much welcome the Bill and the new models for dealing with the huge problem of personal indebtedness. I look forward to working with the Minister to improve the legislation as it progresses through the House.