Aideen Hayden (Labour) | Oireachtas source

I welcome the Minister. I apologise as I have a bit of a frog in my throat. I compliment the work of some of those who are active in the field of mortgage arrears, in particular, FLAC and MABS, and the work that has been done by the Oireachtas Joint Committee on Finance, Public Expenditure and Reform in its report, one of the recommendations of which was the removal of the bank veto, which has been actioned today in the Bill. I might also recommend to the Minister some of the other proposals in the report which could be usefully introduced in terms of facilitating the resolution of the mortgage arrears situation.

It is widely recognised at the moment that the economy is in recovery and that many people are back in work. Currently, unemployment is below 10%. We probably have the strongest economic growth in the European Union, but we must acknowledge the significant and serious overhang in debt, in particular in mortgage debt and mortgage arrears.

It bears repeating what the Minister said, namely, that we have 38,000 principal dwelling homes in mortgage arrears of longer than 720 days. That is a substantial group which raises significant concern. The Governor of the Central Bank, Patrick Honohan, confirmed to me at a recent meeting that about 50% of those home owners have already had legal proceedings initiated against them. We must not forget that we have almost 40,000 buy-to-let mortgages in arrears as well, and that those mortgages are held over the homes of people who are renting today. One in five families in this country rents.

Mortgage arrears is a very significant issue not just for the people who unfortunately find themselves in the situation, but it is also a block on the recovery of the economy and it stands to lead a significant number of people into homelessness if it is not handled appropriately. On that basis, I welcome the Bill, which makes a number of important changes. The point was well made by Senator Ó Domhnaill that the Insolvency Service of Ireland did not live up to expectations. There are many reasons for that, which we could probably discuss for longer than the time available to us today.

One of the positive amendments of the 2012 Act is that we will expand the information function of the Insolvency Service of Ireland through the collection of statistics, monitoring developments and most important, effective communication. It is most important that the number of people who are in serious distress are assisted. I deal with many cases of mortgage arrears and see people who are in such distress that they are unable to engage in any relationship with a lender or the Insolvency Service of Ireland. It is very important that the communication function of the Insolvency Service of Ireland is enhanced in the way set out in the Bill. By also facilitating research and consultation with stakeholders, further legislation will be forthcoming that will assist in the development of best practice and additional policy developments.

I welcome the increased limit on the debt relief notices from €20,000 to €35,000, as suggested by MABS. That will broaden the number of people on low income who can access and avail of that mode of debt resolution.

The major point in the Bill, which I welcome, is that for the first time the courts will have the power to review the refusal of a personal insolvency arrangement by creditors, and will test whether the refusal was reasonable. There is real value in that to those who are in long-term mortgage arrears and who are at risk of losing their homes. We are all aware, as the Minister alluded to, that there are certain banks in this country that have, in effect, refused to deal in any form of debt write-down whatsoever. In effect, that put this service out of reach of many borrowers.

According to the latest statistics from the Central Bank published in June, 13.8% of mortgage accounts were in arrears by the end of quarter 1 in 2015. While the total figure will decline, the number of mortgages in long-term arrears continues to rise. That is really where the crux of the matter lies. It is the number in long-term arrears that continues to rise. The changes that are being offered by the Bill will be most useful to people struggling to make their mortgage repayments.

The court procedure is a useful means to curb the unlimited veto of creditors standing in the way of debt resolution but it is of concern that we may find only a small number of people who will be able to access it. Many will not qualify for the court review procedure or may be excluded because they will not have the resources to access it. It is very important that this option is available to anybody who wishes to pursue it.

There is no mention in the Bill of supports being made to debtors to assist them in making applications of costs or seeking legal assistance. I note that the Minister said in her speech that in tandem with the reform to the Personal Insolvency Act, the Government is co-ordinating intensive work across all Departments and agencies to deliver on a wider element of mortgage arrears initiatives including arrangements to deliver assistance and advice through MABS and the Insolvency Service of Ireland in the courts when repossession actions are taking place. We must go further than assistance. We must go as far as legal assistance and legal action that will place debtors in this situation on a footing to enable them to challenge a veto.

The 2012 Act requires a debtor who is seeking a personal insolvency arrangement, PIA, to have engaged and co-operated in good faith with the mortgage arrears resolution process, MARP. One issue of concern has always been who determines whether someone has co-operated in good faith with the MARP. It tends to be the lender who decides when someone has co-operated. That is meant to be a safeguard to separate those who genuinely cannot pay from those who will not pay their debts.

However, the requirement needs to be read in the context of the Central Bank’s recent comment on the failure of seven of its regulated authorities to be fully compliant with its expectations on how lenders should engage with the MARP as part of the code of conduct on mortgage arrears. If we are going to hold borrowers to a good faith standard, we must hold lenders to the same standard to restore the power imbalance between the borrower and the lender. This section should be accompanied by means to ensure compliance with the code of conduct on mortgage arrears.

The amendments to the Act show there is a commitment to improving the insolvency procedure for debtors but we must not lose the momentum. More needs to be done in the system. Our mutual colleague’s proposal on the bankruptcy period, which was unanimously approved by the Oireachtas justice committee, is something I would love to have seen enacted by this House before the summer recess.I would like to have seen the proposal from our colleague on the bankruptcy period, which was unanimously approved by the Oireachtas justice committee, pushed through this House before the summer recess. That will put a stop to the gallop of a number of banks which are perfectly happy, in a rising housing market, to pursue people through the courts.

With regard to advice and so forth, the Money Advice and Budgeting Service, MABS, is an excellent organisation but its staff should be upskilled to provide an expert service on a regional basis. That would enable people to do reasonable deals with their banks before they get to the insolvency stage.

I agree wholeheartedly with the sentiment that the mortgage to rent scheme has to be upgraded. Unfortunately, it has proven to be very disappointing in terms of the number of people who have been able to access it.

I have met with the Office of the Financial Services Ombudsman on a number of occasions. The lack of teeth in legislation on the Financial Services Ombudsman, which does not permit the office to look behind arrangements made by insolvent debtors with banks as to whether they are sustainable, is a serious flaw in the current scenario. A review of the legislation on the role of the Financial Services Ombudsman, and what it could achieve if expanded, might help us in resolving a number of mortgage arrears scenarios.