James Browne (Wexford, Fianna Fail) | Oireachtas source

I thank the Cathaoirleach Gníomhach. It is proposed to take amendments Nos. 1 to 6, inclusive, together. Before I comment on the detail of amendment No. 1, I propose to make a few preliminary remarks about the overall nature and effect of this group of amendments. The Senator’s proposed amendments all refer to section 2 of the Bill which amends section 16 in the principal Act and the criteria for an insolvent debtor to be eligible for a debt relief notice. They appear to be mutually alternative amendments. Each of them maintains the change already proposed by the Minister at section 2 of the Bill, which increases the asset ceiling in section 26(2)(c) of the principal Act from €400 to €1,500. Each of the amendments then proposes to introduce a new change to 26(2)(b) of the Act to the income criteria for a debtor to be eligible for a debt relief notice. That section provides that an insolvent debtor must have a net disposable income calculated in accordance with the rules set out later in that section of €60 or less per month.

Subsection (26)(5) of the Act provides that for this purpose, net disposable income includes any income available to the debtor, including the welfare benefits, other than child benefit, of which he or she is in receipt. The costs are set out in section (26)(5)(c) of the Act, such as reasonable living expenses, income tax and social insurance contributions, which are then deducted in arriving at the net disposable income.

The Senator’s intention in these amendments seems to be that welfare payments be disregarded in calculating whether the debtor’s income is below that €60 per month ceiling. The six different amendments differ quite significantly in scope and I will come back to those points later.

I should say immediately that the senior Minister and the Minister for Social Protection have very serious concerns about each of these six amendments. While they are no doubt proposed with the best of intentions, they are unnecessary. They will create unfair differences between low income groups and are likely to provoke legal challenges to those differences of treatment and give rise to confusion and legal uncertainty.

The Insolvency Service of Ireland and the Money Advice and Budgeting Service, MABS, expressed equally serious reservations when consulted on the proposed amendments. MABS, of course, accounts for the large majority of approved intermediaries who are the specialised financial advisers qualified under the Personal Insolvency Acts to assist debtors in obtaining a debt relief notice. Accordingly, they have very extensive practical experience in this area.

I will explain briefly the nature of those concerns. First, the proposed changes appear unnecessary. The proposed amendments are seeking to make it easier for persons in receipt of social welfare payments to meet the income criteria for a debt relief notice. There is no apparent barrier for social welfare recipients to qualify for a debt relief notice under the current rules. MABS, for example, states that in its experience those who are on social welfare payments and have no other income source will have a net disposable income of less than €60 per month and will qualify on the income criteria under section 26. MABS added that, overall, its experience is that those who are in receipt of social welfare payments are not failing the debt relief notice criteria on the basis of net disposable income. It described the proposed changes as entirely unnecessary.

Second, the proposed changes will create unfair differences between low income groups and are likely to provoke legal challenges, confusion and legal uncertainty. Essentially, the amendments all propose that certain social welfare payments would be disregarded when calculating a person’s income eligibility for a debt relief notice. The result is that if these amendments were adopted, a person in receipt of social welfare payments could qualify for a debt relief notice, where a person with the same level of income but working a part-time, low-paid job could not. That would be inherently unfair and open to legal challenges from individuals not in receipt of social welfare payments. This point was also raised by the Insolvency Service of Ireland and MABS. A debt relief notice is a solution for a person who cannot afford to pay his or her debts. Such people qualify when their income is too low to meet all the payments that they have to meet and the inadequacy of the income is the key factor, not the source of the income.

Third, the proposed amendments risk creating wider problems beyond the issue of access to a debt relief notice. For example, the Insolvency Service of Ireland raised the concern that if social welfare payments are disregarded as income under the Personal Insolvency Acts, this could then act as a deterrent to lenders to extend credit to social welfare recipients. There is a danger that this could cut people off from reputable sources of credit, such as credit unions, and leave them vulnerable to unregulated moneylenders. That, in turn, would run counter to the Government’s personal microcredit initiative on encouraging credit unions to extend small loans to previous non-members who are in receipt of social welfare payments.Given the gravity of these concerns, the Minister strongly opposes each of these amendments and asks the Senator to consider not progressing them.