Frances Fitzgerald (Dublin Mid West, Fine Gael) | Oireachtas source

I am very pleased to introduce the Civil Debt (Procedures) Bill 2015 and look forward to hearing Senators' contributions to it. Importantly, this Bill provides for the abolition of imprisonment of debtors and fulfils a commitment made in the programme for Government in this regard. Contrary to some submissions that have been made, it comprehensively allows for the abolition of the imprisonment of debtors. There was some concern that it had not been dealt with and I introduced an amendment in the Dáil yesterday that made absolutely sure that it was a comprehensive abolition of imprisonment of debtors, so it does fulfil that commitment made in the programme for Government in this regard. The purpose of the Bill is to provide for the introduction of additional measures to the existing suite of measures for the enforcement of debt. It is very important to see this as part of a suite of measures that is available to creditors. These new court-based options will provide for the enforcement of debt, which is a normal part of any economy. It is very much in line with what happens in other countries. It has specified upper and lower limits by means of attachment of earnings or deductions from certain social welfare payments where the debtor has the capacity to repay the moneys owed, which is a very important point. Consumer debts owed to financial institutions or licensed moneylenders and arising from loans are excluded from the scope of the Bill. As Senators will note, the Bill does not apply to recovery by financial institutions of debts arising from money lent to customers. It applies to creditors such as smaller sole traders, subcontractors and other small businesses which have supplied goods and services and provides them with new avenues to get paid what is owed to them by those who can afford to pay. Very strict criteria about affordability are built into the Bill. Equally, it applies only to modest debts which fall within the lower and upper limits respectively of €500 to €4,000.

The provisions in the Bill arise from the recommendations made by the Law Reform Commission, LRC, in its 2010 report entitled "Personal Debt Management and Debt Enforcement". That report made a number of recommendations for reform of the existing personal insolvency and debt enforcement regimes. Key elements of the report were implemented through the enactment of the Personal Insolvency Act 2012. Much of the focus of the reforms implemented to date in the area of civil debt has been centred on personal insolvency and those who cannot pay. Senators will be aware of the Government's announcement in May of a major initiative relating to mortgage arrears in this connection and also of the fact that the Personal Insolvency (Amendment) Bill is currently before this House.

However, the LRC report also identified the need to reform the existing debt enforcement regime to ensure balance - and this is a very balanced Bill - in the creditor-debtor dynamic and recommended the introduction of a number of reforms specifically aimed at improving the current range of court-based options available to creditors in recovering moneys owed to them. These reforms are aimed at debtors who have capacity to pay their debts but fail to do so - the "won't pay" debtors. This would include Irish Water charges and the charges of energy and telecommunications companies. Measures specific to compliance with Irish Water charges and provisions for eligibility and payment of the water conservation grant after 2015 have been addressed separately, as Senators are aware, by the Minister for the Environment, Community and Local Government in the Environment (Miscellaneous Provisions) Bill 2015.

Clearly, the most desirable situation is for creditors and debtors to reach an amicable agreement for settlement of debt. However, in some cases the debtor - who may actually be in a position to pay the debt - simply refuses to engage with the creditor or does not adhere to the agreed repayment schedule to satisfy an outstanding debt. The creditor has little option in such circumstances but to take legal action to secure repayment of the debt. Many Members of this House will recognise that scenario and will be acutely aware of situations across the country where small suppliers of goods and services - often small or sole traders and other small businesses - simply cannot get paid by individuals whom they have supplied even in circumstances where there is little or no doubt but that the individual can afford to pay. This Bill gives those creditors, as well as others where the debts are modest ones falling within the range I have outlined, two new court-based options in addition to the suite of options already available to secure payment of a debt.

At present, the position is that, once a creditor has obtained a judgment order from the court, the judgment can be enforced. The main ways of enforcing judgments for civil debt are by registration of the judgment first followed by execution against goods, garnishee order, instalment order or judgment mortgage. For smaller debts, instalment orders or execution against goods are the most common methods of enforcement. Along with the economic reality of serious indebtedness and the need to provide for legislative options for those who are insolvent and bankrupt, it is equally an economic reality that creditors must have options available to them to recover money owed to them, particularly where the debtor has capacity to repay and will not do so. Those who provide goods and services are entitled to seek repayment from their customers. If this was not the case, businesses would simply not survive. Indeed, many small businesses will have failed because they have not been able to collect money owing to them.

However, I am mindful that in introducing new measures relating to enforcement of debt that there is a need to protect vulnerable debtors from the aggressive actions of certain creditors. The Civil Debt (Procedures) Bill provides for a number of important safeguards which will ensure that debtors are given adequate protections in this regard. It is important that I outline those safeguards for the information of the House:

First, the debtor will be offered an opportunity to make representations to the court on his or her behalf before the court may make a decision on the matter. We must remember that there will have been many opportunities before the situation ever came before the courts where the debtor had an opportunity to pay the bill. Second, in making a decision, the court will be required to take into account the debtor's capacity to repay the debt in terms of the amount of the attachment or deduction which would be ordered. The proposals provide that the debtor's situation must be assessed by the court deciding on enforceability so that the attachment of earnings or deduction from social welfare cannot cause him or her undue hardship or encroach on basic income sustainability to ensure basic living costs can still be met by the debtor. The debtor will be obliged to provide a statement of means to the court which will then be examined by the court in assessing his or her capacity to pay. Where the debtor is not an employee but is on social welfare payments, this statement of means will have attached to it a verification statement from the Department of Social Protection setting out exactly what payments are being made to the debtor and the deductions, if any, already being made from them.

The court will be thus in a position to make a fully informed assessment of what the debtor can or cannot afford to pay. Yesterday, I introduced an amendment to make sure that the details like PRSI numbers are confidential, which is very important. I have also allowed for variation or termination of the order if the debtor's circumstances change materially. If the income increases or decreases, it is possible to go back to court to allow for a variation that reflects the circumstances. Finally, the court may adjourn proceedings for such period or periods as the court thinks reasonable if it appears to the court that the judgment debtor is likely to be able to pay the debt within a reasonable period. The court can decide that given all of the circumstances, there should be an adjournment to take reasonable considerations into account if the person says they are going to pay the debt. There is a lot of flexibility available to the court to reach the best solution.

I would like also to say a few things about the provisions of the Bill which allow the court to order appropriate deductions from payments to a social welfare recipient in satisfaction of a debt. Affordability is absolutely critical here and will be judged by the court on the basis of accurate information provided by the Department of Social Protection to the court. Deductions may be ordered only from net scheme payments. It does not apply to all payments but only to payments which are prescribed by the Minister for Social Protection as being suitable for deductions on the basis of being stable ones with long-term recipients and taking into account any deductions which are already being made. Deductions may also be ordered only from a recipient's personal rate. This is a very important point when it comes to children and families. They can only be ordered from the portion of the person's social welfare payment which does not include payments or elements of payments which might be in respect of their dependants. At the end of the day, it may be that in assessing affordability, a court will be in a position to order only very small deductions from the payments of social welfare recipients or indeed in some cases none at all and there is a strong set of safeguards in place to ensure balance and fairness in these situations.

I will refer briefly to some of the other recommendations of the LRC which have influenced the development of the policy relating to the Civil Debt (Procedures) Bill. The LRC report acknowledged the need for creditors to recover their debts, particularly where the debtor has capacity to repay and refuses to engage meaningfully with the creditor. The report also made a number of recommendations for wide-scale reform of the current debt enforcement regime, including the setting up of a debt enforcement office. I should mention at this juncture that the Civil Debt (Procedures) Bill does not propose to implement this particular recommendation. Rather, it focuses on improving on the existing court-based enforcement measures.

Debt enforcement by means of attachment of earnings orders was examined by the LRC. Its report noted that in Ireland attachment of earnings orders are mainly used in the enforcement of judgments except in the context of family law where they are used for enforcing court orders.As part of its consultation process, the LRC sought views on this issue and found that the introduction of such a measure was widely supported - it is important to note this. The LRC also noted that this method is used to enforce judgment debts in a large majority of the systems it surveyed in other jurisdictions. We are not doing something that is totally different from what has happened in other jurisdictions in relation to the enforcement of debt. In fact, when it did the consultation, it got wide support and also found that it was happening in other jurisdictions.

It was noted that future income, of course, is often the single most reliable source of funds to satisfy proven debts, particularly in the case of consumer debtors. Potential efficiency was also cited as an argument for the introduction of such a mechanism. The LRC also looked at the possibility of making deductions from social welfare payments as a means of debt enforcement but was of the view that this was a policy matter, which we are now addressing, which lay outside the scope of its review. However, it did identify a number of principles which it considered to be important in the development of any policy in this area. I have addressed them to a degree already, but I will summarise them. The principle of enforcement should be appropriate and proportionate in all cases and decisions on the enforcement of a judgment must be based on an accurate and comprehensive assessment of the debtor's capacity to repay the money owed and, while recognising the creditor's right to have their judgment debt satisfied, must be vindicated and respected. There should be safeguards to ensure that the debtor's standard of living is not reduced below a basic level. So all of these principles have been taken into consideration in the development of the Bill and I thank the officials from the Department of Justice, who have put such a huge amount of work into this legislation, and the office of the Attorney General, which has given very detailed advice on it.

One of the key recommendations of the LRC in this area is the abolition of imprisonment of debtors. Under existing law, arrest and imprisonment remains a possibility as an enforcement mechanism of last resort in cases where a creditor has proved beyond all reasonable doubt that the judgment debtor has failed to comply with an instalment order due to his or her wilful refusal or culpable neglect. The commission also noted that the removal of imprisonment for failure to comply with a judgment debt in ordinary civil proceedings could be without prejudice to the retention of imprisonment in other scenarios such as the enforcement of family maintenance orders.

Before outlining in more detail the provisions of this Bill, may I remind Senators that what the Government proposes here is a straightforward piece of legislation built from longstanding analysis and recommendations of the LRC, which provides two key enhancements for suppliers of goods and services to recover modest debts in the courts. Yes, it will be open to be used by utilities such as energy or telecoms, or Irish Water, but it will also be available for use by small businesses and traders around Ireland. It will not be directed at those who cannot pay, but those who can pay but choose not to, and it will not be directed at anyone unless the court decides that it is within their capacity to pay.

I will turn now to some of the detail of the Bill. Section 1 is the definition of the Bill. Among the terms defined is net scheme payments. That is obviously necessary in order to deal with the issues I have mentioned on social welfare payments and the exclusion of the banks, credit institutions, money lenders, credit card debt - they are all excluded. There are some other standard provisions there. Section 6 deals with the amounts that I have discussed - the €500, but no greater than €4,000. There is a section dealing with that provision which I mentioned that the court can allow for an adjournment if there seems to be a reasonable chance of the debt being settled. Section 9 deals with the attachment orders I have outlined and section 10 empowers the court to make an attachment of earnings orders. Of course, key to that is the debtor having an opportunity to make representations before the decision is made and the court cannot make an attachment of earnings order unless it is satisfied that the judgment debtor is a person to whom earnings fall to be paid and that due regard has been given to his or her particular circumstances, including, of course, financial circumstances.

The other sections go into detail on the powers of the court. For example, section 14 empowers the court, on application by the employer concerned, the judgment debtor or the judgment creditor, to rule on whether certain types of payments are earnings for the purpose of an attachment of earnings order in force. Issues will arise about particular payments and particular employments as to whether these constitute earnings and we have allowed for a section to empower the court to make a judgment on that. There are detailed sections on deductions from social welfare. We also look at the compliance issues.

Section 18 provides that the Minister for Social Protection shall not make deductions which would have the effect of reducing the net scheme payments below the basic social welfare rate. The other sections outline the various points that I have made on how the Bill will work. Section 23 provides for a number of penalties in respect of false or misleading statements or contraventions of the Act and the prescription by the Minister of Social Protection as to which social welfare payments come within the scope of the Bill. That is under section 24.

I will conclude by saying, and I think Senators will agree, there is a need for a balanced approach to civil debt to ensure the protection of creditor rights by making available a range of legal mechanisms which compel payment by "won't pay" debtors who knowingly refuse to pay their obligations. Therefore, it is important that any legislative initiatives in this area support and protect those who simply cannot pay their debts while dealing appropriately with those who have the capacity to pay but simply refuse to do so. I believe that the Civil Debt (Procedures) Bill strikes that balance in regard to the enforcement of modest debts owed to providers of goods and services through attachment of earnings or deductions from social welfare payments. I look forward to hearing Senators' views during the progress of the Bill through the Seanad.