Thursday, 16 July 2015
Personal Insolvency (Amendment) Bill 2014: Second Stage
I am very pleased to be before the House today to present this Bill, which provides for important changes to the Personal Insolvency Act 2012 arising from the Government's initiative of 13 May to strengthen support for people in mortgage arrears. The main reform contained in the Bill is the new provision for independent review by the Courts where a proposal for a personal insolvency arrangement, PIA, including arrears on the borrower's home mortgage, has been refused by creditors.
Senators will recall that the PIA is a debt solution provided under the Act for dealing with secured debt such as home mortgages, and that, while respecting the rights of creditors, the PIA provides significant statutory protections for the debtor. These include keeping the debtor in his or her home where reasonably possible, the right to a reasonable standard of living while insolvent, and protection against any unilateral changes to the arrangement. These statutory protections, which were debated at length by the Oireachtas, are not necessarily available to borrowers who enter an informal arrangement with their lenders, or who enter bankruptcy. That is why effective and early access to a PIA, where feasible, is an option of central importance for people struggling with long-term mortgage arrears.
The new court review is a key reform, designed to ensure that fair and sustainable debt restructuring proposals are upheld for borrowers who want to work their way out of debt with a view to keeping their homes. It will protect distressed mortgage holders from any unfair lack of cooperation by their banks, while respecting the legal rights of creditors. In particular, it will ensure a better balance between the interests of secured lenders and the interests of those facing unsustainable mortgages. It will also be accompanied by flanking support and information measures aimed at ensuring that those in serious mortgage debt can access practical help quickly and effectively.
The second important proposal in the Bill is to increase the level of debt which may be included in a debt relief notice, DRN, from the current limit of €20,000 per person to €35,000. Senators will recall that a DRN is a debt solution provided under the Act for an insolvent person who is on a very low income, who does not own a property or any significant assets, and is weighed down by debts which he or she has no prospect of being able to pay. Another amendment removes a possible bar which might prevent a home owner who has entered a mortgage restructure from accessing a PIA if the restructure proves unsustainable.
The third important element in this Bill provides more detailed powers for the Insolvency Service of Ireland, ISI, in respect of promoting awareness and understanding of matters related to personal insolvency and bankruptcy and providing information and analysis of their operation in practice. Other provisions develop the ISI's supervisory powers regarding personal insolvency practitioners, in line with best practice regulatory standards.
Finally, the Bill contains a number of technical amendments of a prudential or clarifying nature, which I will come to later in my remarks.
By way of background to the new court review, I would like to return to the broader context of insolvency policy and its interaction with the wider question of mortgage arrears. Senators will recall that the Statement of Government Priorities 2014-2016 underlined that high levels of personal debt continue to threaten to exclude thousands of individuals and families from the economic recovery. In its report on mortgage arrears last July, the Oireachtas Joint Committee on Finance, Public Expenditure and Reform referred at recommendations 46 and 47 to concerns about the potential costs of personal insolvency solutions, noted "the public refusal of some financial institutions to engage in any write-down of secured debt", contrary to the Government's policy in enacting the insolvency legislation, and recommended that the insolvency legislation be reviewed to mitigate against such a practice.I am pleased to say that the Minister for Justice and Equality, Deputy Fitzgerald was able to respond on the issue of fees and costs by providing for a complete waiver of all fees payable to the insolvency service or the courts in respect of insolvency applications, with effect from last October.
On the issue of engagement by financial institutions, Senators will remember that the Taoiseach, Tánaiste and Minister, Deputy Fitzgerald, met with the insolvency service and with insolvency practitioners in early February this year, and that the Taoiseach spoke publicly after that meeting about the need for banks to cooperate more effectively with the personal insolvency regime. In the Minister, Deputy Fitzgerald's Second Stage speech before the Dáil on this Bill last February, she welcomed the gradual increase in the number of applications for personal insolvency solutions under the Act. She added that she wanted to see a more fundamental change in the overall number of solutions reached under the Personal Insolvency Act.
The ISI statistics for Q2 of 2015 show 384 new personal insolvency arrangement, PIA, applications and 146 concluded PIAs during that quarter, with both rates continuing to increase steadily. However, these numbers remain very small compared with the numbers in serious mortgage arrears. The proportion of PIA proposals approved by creditors is also increasing, and stands at 73% for Q2 of 2015. Nevertheless, there remains persistent evidence that some secured creditors have an acknowledged policy of refusing to consider PIA proposals or wide categories of PIA proposals despite an apparent commercial rationale, and that consequently no proposal is ever made in many cases which would otherwise be considered as suitable. This is a serious concern and the need for the new court review arises against this overall background.
Over the past year, we have seen a very welcome decline in the number of home mortgages which are in arrears, and particularly in those in short-term arrears. On the other hand, some 38,000 principal dwelling house, PDH, mortgage accounts remain in long-term arrears exceeding 720 days. This substantial group is a source of major concern, as they are likely to be at imminent risk of losing their homes to repossession. The latest Central Bank statistics suggest a slight recent reduction, but we will need to see a very significant fall in these numbers over the coming year.
There has also been a significant increase in the number of mortgages which were formerly in arrears, but which have been restructured by an agreement between the mortgage lender and the borrower. However, a cautionary note also has to be sounded regarding a proportion of these informal mortgage restructures which may not be sustainable, and where the borrower has not been returned to solvency and risks falling back into arrears. There has also been extensive public debate and concern about recent increases in the number of repossession proceedings issued against borrowers' homes. While the number of actual repossessions remains low, it is a core Government priority that repossession of a borrower's home should remain an option of last resort.
Clearly not all insolvent debtors are suitable for a PIA. Each case must be assessed fairly on its own facts. There will be cases in which the borrower does not have the financial capacity - even with mortgage restructuring - to make the necessary level of repayments. Such cases cannot be resolved via personal insolvency legislation, and will need alternative solutions such as expansion of the mortgage to rent scheme.
In tandem with this reform to the Personal Insolvency Act, the Government is co-ordinating intensive work across all relevant Departments and agencies to deliver on the wider elements of the mortgage arrears initiative, including arrangements to deliver assistance and advice through the Money Advice and Budgeting Service, MABS, and the Insolvency Service of Ireland, ISI, in the courts when repossession actions are taking place; enhanced and expanded arrangements for mortgage to rent; and a nationwide information and publicity campaign aimed at assisting those in serious mortgage arrears to engage with their lenders and with the courts where repossession proceedings have been initiated, coupled with an undertaking that, when they do engage, co-ordinated services will be there to assist them. The access and support measures are being implemented across the system at present, and will be in place for September.
I turn now to the specific measures contained in the Bill, first to the new court review contained in section 21. Currently, under the Act, a proposed PIA is voted on by the creditors and must be approved by the necessary majorities of secured and unsecured creditors. If the creditors reject the proposal, there is no provision for a review or appeal. The new court review will change this situation. It applies to a PIA proposal which has been rejected by creditors; and which includes a mortgage on the borrower's home which was in arrears on 1 January 2015 or is a restructure of arrears from before that date. The date of 1 January 2015 is to avoid any negative impact on new mortgage lending. The proposal focuses on home mortgage arrears due to the priority of this particular group, and because the public policy issues arising in this context provide a particularly strong justification for rebalancing the rights of secured creditors.
The personal insolvency practitioner, PIP, who prepared the proposal must confirm there are reasonable grounds for a review and that a majority of one class of creditors has voted for the proposal. This requirement for an element of creditor support reflects the approach used in company examinership, which was already signalled in the Government announcement on 13 May. However, it is not limited to the classes - secured debt, unsecured debt, overall debt - which voted at the creditors' meeting. It is a much lower and more flexible requirement. In the context of a court review, a "class of creditors" is widely defined and may consist of a single creditor, or of more than one creditor with similar interests. This flexible test will facilitate finding a solution which is fair and reasonable for all concerned, as it does in examinership, and the court will ensure that it is applied fairly.
The Bill also provides for a significant exception to the creditor support requirement. In many cases involving a mortgage, the borrower has consolidated his or her debts with a single creditor. In these "sole creditor" cases, if the sole creditor refuses the PIA proposal, the debtor will not have to show any creditor support before seeking a court review. This exception effectively opens up the whole PIA process to a large number of cases where until now, no PIA proposal has even been made as it was felt that the sole creditor would be unlikely to agree to a deal offering statutory protection for the borrower.
In reviewing the proposal, the court will consider whether it allows the borrower to stay in or keep their home if reasonably practicable, and if the costs are not disproportionately large; and whether it gives a reasonable prospect of restoring the borrower to solvency while repaying the creditors to the extent that the borrower's means reasonably allow. The court will also consider whether the proposal is reasonably likely to be one with which the borrower can comply, given the borrower's financial circumstances. If relevant, the court will consider whether the conduct of borrower and lender regarding repayment of the debt in the previous two years is fair and equitable to each class of creditors affected. It will also consider whether the proposal is unfairly prejudicial to any interested party; and whether it has been accepted by a majority of one class of creditors, which may consist of a single creditor or of more than one creditor with similar interests. This is the same flexible test, as has already been explained. Again, this element is not needed if the debtor has only one creditor.
These criteria have been carefully designed to ensure that the review process takes full account of the situation and rights of both the borrower and the creditors, while also taking account of the public interest in restoring insolvent borrowers to solvency, enabling creditors to recover debts to the extent that the debtor's financial situation reasonably allows, and keeping people in their homes where that is reasonably practicable. The new court review will generally be heard by the specialist Circuit Court insolvency judges and will be heard in the High Court only where debts exceed €2.5 million. Delays are not expected. This new review is a major reform which represents a ground-breaking shift from the current position, and will significantly rebalance the position of creditors and debtors to ensure fair and balanced outcomes for both.
Section 12 removes a potential bar to some insolvent borrowers being able to make a PIA proposal. It relates to people formerly in mortgage arrears on their homes who have entered an agreement to restructure their mortgage. Under section 91(1) of the Act, a borrower must co-operate with the mortgage lender under the mortgage arrears resolution process, MARP, approved by the Central Bank. If the borrower does so, but is not able to agree a restructure with the mortgage lender, he or she is then eligible to propose a PIA. The question has arisen, however, as to eligibility where a borrower has co-operated with MARP and has entered a MARP or non-MARP restructure, but the restructure has failed or is unsustainable. It is clearly important that such a borrower can make a PIA proposal, and the amendment clarifies that they may do so if they have tried in good faith to comply with the restructure but remain insolvent.
A debt relief notice, DRN, is a debt settlement measure under the Act limited to an insolvent person whose net disposable income after reasonable living expenses is less than €60 per month, and who has assets of €400 or less excluding basic household goods or tools, and a car worth €2,000 or less. Currently, the person's debts may not exceed €20,000. Section 3 proposes to increase this limit to €35,000 per person. This amount has regard to the experience of MABS, which acts as the PIP equivalent for DRNs under the Act, that the amount of debt held by applicants otherwise eligible for a DRN is commonly up to €35,000.This change will, I believe, open up the debt relief notice solution to a significant number of people who are not able to benefit from other statutory arrangements and whose debts, while relatively small, exceed the current limit.
Section 2 expands the important functions of the insolvency service regarding information, awareness raising and communication in personal insolvency and bankruptcy matters. Sections 23 to 26, inclusive, provide more detailed and effective powers for the insolvency service to supervise the activities of personal insolvency practitioners. The Act already provides powers for the ISI to intervene if there is a complaint or other reason to check for any misconduct or non-compliance by a personal insolvency practitioner with their duties under the Act. This is a reactive power carried out by inspectors whose functions and powers are already provided for in the Act. However, it does not provide in the necessary detail for a proactive supervision power which would allow for routine inspection without any suggestion of misconduct. This is already the best practice standard for equivalent regulatory bodies and the Minister, Deputy Fitzgerald, considers it appropriate, given the important statutory functions of PIPs. The Bill, therefore, provides for the Insolvency Service of Ireland to appoint authorised officers who will carry out the proactive supervision function with the appropriate powers.
On the technical amendments in the Bill, I remind Senators that these clarify the existing rules for creditor voting but that where a personal insolvency arrangement proposal is rejected by creditors, the new court review will now be available. Their first objective is purely prudential and relates to a possible ambiguity identified in the wording of two sections of the Act, specifying the majority of creditors required to approve a debt settlement arrangement or PIA proposal at a creditors' meeting. The intention of the legislation and the interpretation applied by all stakeholders in practice is that such a proposal can be approved by creditors holding a specified majority of the overall debt. However, legal advice raised a possibility that the wording of sections 73 and 110 could be open to an alternative interpretation, that in addition the proposal must also be approved by a majority in number of all creditors, both for a DSA and for a PIA. Such an interpretation was never intended and would make it unnecessarily complicated to secure agreement on proposals. The relevant amendments remove the ambiguity and put the intended meaning beyond doubt. Their second objective is to clarify the detailed procedures which apply where creditors are deciding on a debtor's DSA or PIA proposal. Normally, the decision is taken by a vote at a creditors' meeting, the standard scenario, for which the Act sets out detailed procedures regarding notice, time limits, and so on. However, the Act also provides for two alternative scenarios. Where only one creditor is entitled to vote at a creditors' meeting, in this situation, the creditor may notify its decision without the need to hold a creditors' meeting. Where a creditors' meeting is held but no creditor votes, in this situation, the debtor's proposal is deemed to be accepted by the creditors. The Act does not always specify how the detailed procedures set out for the standard scenario would translate into the two alternative scenarios. The amendments clarify how that would be done.
I wish to underline the urgency of those changes in the Bill which arise from the Government's decision of 13 May. We are conscious that many of those in long-term mortgage arrears are increasingly at risk of losing their homes and are often highly stressed by their situation. It is important the court review and the flanking measures I have mentioned are put in place quickly and are fully available by September. Subject to Senators' deliberations, therefore, I hope the Bill will pass all Stages before the summer recess. I look forward to hearing Senators' views on the Bill and I am pleased to commend it to the House.
Gabhaim buíochas leis an Leas-Chathaoirleach as an deis labhairt ar an mBille seo. I welcome and acknowledge the Minister of State. This Bill will bring legal clarity and end the ambiguities in the Personal Insolvency Act 2012. Fianna Fáil welcomes that aspect of this Bill and we will not delay its passage through the House. However, this legislation is nothing short of a missed opportunity for dealing with the tsunami of personal debt, both secured and unsecured, which cripples many families throughout the country.
The 2012 Act and the Insolvency Service of Ireland, have done nothing to deal with the issue of personal debt that cripples this country. For example, only 1,000 debt solutions have been approved since the legislation was initiated in 2013. This number comprises 547 alternatives to bankruptcy and 448 bankruptcy cases. This is in stark contrast to what the then Minister, Deputy Shatter, said in this House when he was overseeing the passage of the legislation. He stated that in the first full year of the legislation's operation, there would be approximately 21,000 applications for debt resolution. What has gone wrong? There has been less than 5% of that level. What has happened? Has the matter been reviewed by the Department of Justice and Equality? Was the then Minister, Deputy Shatter, wrong back then or is it the case that all debts have dramatically disappeared just like in Alice in Wonderland? The reality is that the debts have not disappeared and they remain burdensome for individuals and families throughout the country. The legislation has not worked. Perhaps the Minister of State would clarify now or on Committee Stage what reviews have been carried out by the Department. Why has the legislation failed? Why has there been so little of a take-up by individuals applying for relief or reliefs being granted? Will the Minister of State have a look at the situation and to reply to me next week?
The 2012 Act has done nothing or very little. Personal debt is a massive issue in the country. The Minister of State acknowledged this in his reference to the more than 100,000 cases of mortgage arrears of three months or more. In fact, the number is 117,000 cases of arrears, totalling €8 billion in mortgage finance, with €2.3 billion outstanding. A total of 37,484 people have arrears of two or more years, amounting to €1.8 billion. The Central Statistics Office confirms that Ireland has the highest household indebtedness in the European Union. This is a crisis and it is crippling our country and preventing it from moving forward. The Government is adopting a sticking plaster approach. It is giving the impression that something is being done but, in reality, nothing is being done for the people. The mortgage misery and the personal debt misery continue. There are people who cannot sleep at night. I have met such people, as have other Members.
A personal friend of mine lives in the Minister of State's constituency and he has told me he has contemplated suicide because of the indebtedness he faces. He continues to pay what he can to the bank. The bank is putting so much pressure on this individual that he cannot sleep at night and he is contemplating suicide. It is disgraceful that banks have been given a veto over this legislation. They have been given all the cards, they can call the shots and the Department of Finance and the Government are standing idly by and not protecting the country's citizens. I acknowledge that individuals can go to the courts but very few can afford to go to the courts. The plcs facing examinership and indebtedness can go to the courts but individuals, including the directors of small companies, retail businesses and family hotels, do not have the resources to defend themselves in court. The banks have all the resources, all the skills, as well as the economic wherewithal.They had that prior to the crash when they gave out mortgages to the cohort of people aged between 35 and 60 who now find themselves in negative equity and facing mortgage arrears. They are Ireland's lost generation because they cannot move forward. They are stagnant on a road. They are at crossroads, they cannot go east, west, north or south because they have a major debt hanging over their heads. They are the people who could drive Ireland into economic recovery but they are not being given the opportunity to do that. Many of them are from our generation and they are, effectively, a lost generation to this country.
Many of them took out mortgages and other loans during the period 2000 to 2008. They did not foresee the tsunami that was going to happen ahead of the collapse in property prices but the banks should have foreseen it because they had the best brains and skills to foresee what was happening down the road, yet there is no burden-sharing of responsibility in regard to the debt situation. All the debts are being hounded from the debtors, those individuals who took out mortgages, but they only took them out and obtained the credit because the banks were willing to give it at a time when they knew that they should not have been doing that. Any policy in this area has to be impose culpability on the financial institutions but of course that was not convenient for the Government because it wanted to restore the balance sheets of the State funded banks, AIB, Bank of Ireland the other institutions. We see now that every time property prices increase by 20% AIB makes about €20 million across the country on its mortgage book.
The banks say that they are coming back to profitability but they are doing so because property prices are increasing and not because they are trying to obtain lasting restructured solutions that would allow people to stay in their own homes and businesses and work their way out of their debt. People need space and the banks are not willing to give them that. They are hounding people. All the cards are being given to the banks. Notwithstanding what the Minister is trying to achieve with this legislation, and we will not be opposing it, it is a missed opportunity. We need to know why it is not working. Research was carried out by MRBI which showed that people do not want to avail of this service because they do not have the confidence in the Insolvency Service of Ireland, ISI, or in the structures that are in place. There is a need to review this and to re-evaluate it. Something needs to happen quickly because, like the man that I met this week, we will see further fatalities of people who find themselves in a corner, in a dark place, to which they have been hounded by our financial institutions, which were bailed out by the taxpayer. Those institutions and the individuals at the head of them are a disgrace to our Republic as we approach 2016.
I welcome the Minister of State, Deputy Aodhán Ó Ríordáin He is spending more time in the House than some Members at this stage as he is here so often. He is always very insightful when he comes into the House and he is always most welcome. I also welcome Senator Brian Ó Domhnaill, my good colleague and friend, and his contribution. I am sorry to hear about his friend in north County Dublin. Most of us come across situations like that of his friend from time to time and those are the people we need to help and who need to get some solace and satisfaction from the legislation that is being put through the House. I wish the Senator's friend well and I hope things work out for him.
I view this legislation as being an incremental step in the right direction. It is not a panacea to solve all the problems, far from it. At the time of our first attempt at introducing personal insolvency legislation back in 2012, I said that it would most likely have to be amended depending on how the situation evolved with the banks. To a large extent, the Government took a leap of faith in terms of it expectations with respect to the banks, which owe their survival to the Irish people having been bailed out by them, and all the senior management and staff within the banking sector have their jobs as a result of the Irish people. I would have expected more from them, I would have expected some loyalty but banks are slow learners. They are like the bold child at the back of the class, no matter how often you correct them they still do not want to do the right thing.
It is shocking to think that we have to come here and amend the legislation to make sure that there is more co-operation by the financial institutions. That is a great pity. I am not surprised, as I said at the time that the legislation was first introduced that it would most likely have to be amended, depending on how it and the arrangements related to it evolved and whether people would getting solace and satisfaction and have their challenges and difficulties resolved. This legislation is appropriate. It is balanced and reasonable. It will be workable and it deserves this opportunity. I acknowledge Fianna Fail in supporting it, although it has reservations about it, many of which I would share.
Another issue, though possibly not directly related to this legislation, is that of the vulture capitalists who have bought debts, particularly from IBRC. They have set up their own credit control departments. These are primarily American funds and they have retained agents here as their debt collectors who have set up call centres. My understanding is that the people working in these call centres are exceptionally well trained. I spoke to a person recently who was receiving telephone calls from these people and at the end of the discussion they asked if it is okay to call the person on this number. If the person said "No", I am sure it would have sparked another chain of communication but by recording the conversation they are covering themselves by asking at the end of call if it is okay for the person to take the call on this number. They are very personal in terms of some of the information they are trying to take from people. I heard of one example of a person whose family home unfortunately is now owned by one of these vulture capitalists and they contacted members of that person's family to try to come up with a resolution. The debt was €215,000. The person was in a position, through obtaining loans and money from other members of their extended family, to pay €150,000. The person offered €150,000 but was told that the minimum they were settle for was €200,000, a discount of just €15,000 which was less than 10% of the debt. Other legislation will be brought forward to deal with some of these situations but the Government and the people need to keep a very close eye, not only on the banks but on these funds that have taken over the loan books of IBRC. The fact that they have taken over the loan books from IBRC does not in any way remove us from our responsibilities as legislators to ensure that they are not blackguarding Irish citizens.
This Minister of State has spoken at length and outlined the provisions of the Bill and I am not going to go into those. It is important this Bill is passed and that a clear message goes out from this House that we are all behind it, even though we do have concerns, but we want to see it enacted as quickly as possible in order that people will get some financial satisfaction and, hopefully, ultimately retain their properties.
The Minister of State is very welcome to the House and I am glad to have him here again. I always get concerned when I hear about an item of legislation that we want to rush through and particularly rush through in such a short period of time. I get embarrassed when I hear that but I also get frustrated when I see something taking a long time to get done. I was delighted to hear the Minister of State say "let us get this done and let us get it though because it is urgent".
The Minister of State mentioned that the Taoiseach met the insolvency service in February or March of this year and talked about the need for the banks to co-operate more effectively with the personal insolvency regime. It appears that the banks have not been responding or reacting on that basis. We introduced the Central Bank (Emergency Powers) (Variable Interest Rates) Bill.The Bill was adjourned on Second Stage but the intention was to try to get the banks to move on variable interest rates. The figures provided by the Minister are startling. A total of 38,000 people remain in long-term arrears. While good work is being done by MABS, it is a big challenge for it to be able to achieve anything. I am delighted with what the Minister has done.
There was a time when the personal touch of the bank manager was a factor. He or she knew the individuals and then the computers took over and the personal contact was no longer as important. There are so many good stories of the past and so many bad stories of the present in the banking area.
I wish to refer to the situation with sole creditors. There is no need for a formal meeting of creditors to be convened. Perhaps that is only the case when there is one creditor, but there could be dangers in that regard and I am not enthusiastic about the changes in any respect.
The Minister has explained the situation very well. She has explained what is happening and what she intends to do. Much work has been done by the Minister’s team and her officials. There is an urgent need for something to be done and this is a step forward. I wish the Minister well.
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.
Deir siad sa nGaeilge "Meileann muilte Dé go mall ach meileann siad go mion" agus níl aon dabht faoi ó thaobh an réiteach atá ag an Rialtas seo ar fhadhbanna na morgáistí go bhfuil na muilte ag meilt go mall ach i ndáiríre ó thaobh lucht na baincéireachta de agus an brú atá siadsan ag cur ar lucht na morgáistí, tá siad ag meilt go mion ansin ceart go leor.
Not only have the Irish people had to endure three years of a clearly broken system, we also had another stall of six months from Committee Stage of this Bill. Eventually, we were promised that the bank veto would be removed but, like most promises from this Government, that has not happened. I accept this Bill is an improvement but we are unconvinced that it will do the job.
What we have before us is very much a conditional review of the veto rather than an outright removal. It is also a temporary measure. If I were to fall into arrears today or tomorrow, the banks would still have a veto over any arrangement. This is an improvement, but it does not match the promise people struggling in debt were given.
The Minister will be aware that Sinn Féin will table two amendments on Committee Stage to rectify the main weaknesses in this legislation. It is hoped those amendments can be accepted rather than have us come back here in a couple of months, or years, to rectify the situation once more.
When this Government's obituary is written in the near future, the verdict will be that its abysmal failure to recognise and tackle Ireland's debt crisis was one of its greatest failings. Today, we are dealing with personal and business debt. We are four years into this Government's term, which has been four years of a spiralling mortgage arrears crisis, and only now are we taking half-hearted steps towards challenging the banks' veto.
This is not the first action the Government has taken. In terms of its record, in connivance with the Central Bank, it allowed the banks meet their targets for mortgage arrangements through legal actions. Labour and Fine Gael might be happy to consider repossessing a family home as a sustainable solution, but Sinn Féin certainly is not. The Government watered down the code of conduct on mortgage arrears to favour the banks. As we know from the Central Bank, that was not good enough for the banks, which routinely ignored the code anyway. It removed the legal protection for the family home. This Government sat back and let the banks off the leash, and now we see hundreds of repossession cases taking place across the State.
The number of people in long-term arrears is continuing to rise over three years after this Government came to power. The personal debt crisis is still with us, and nothing substantial has been done to tackle it.
The mortgage to rent process has failed utterly as well. Scandalously, when Sinn Féin proposed restoring the legal protection of the family home in a Bill very similar to what is before us now, the Government opposed it. That was over 15 months ago. How many families have lost their homes since then because of the Labour and Fine Gael backbenchers marching in to vote "No" at that time to something they are supporting today? The Minister might be surprised to learn that the reason given for the Government rejecting that Bill was that the Personal Insolvency Act was strong enough.
I hope the Government can follow through on its promise and remove the banks' veto, not just for some and not just for a while but comprehensively and permanently, by accepting the amendments we will bring forward on Committee Stage.
Tá teip go hiomlán ar an Rialtas seo dul i ngleic leis an ngéarchéim seo ó thaobh lucht na morgáistí. Tá daoine i gcruachas. Tá na céadta daoine ag teacht os comhair na cúirteanna gach mí i ngach contae ar fud na tíre. Tá a gcloiginn sa ngaineamh maidir leis an rud ar fad agus tá siad ag sunny de réir port na mbancanna, mar a bhí an Rialtas a chuaigh roimhe ag déanamh chomh maith céanna. Is mór an náire é ach tá súil agam go dtógfaidh siad ar bord na leasaí a bheas muid ag moladh ar Chéim an Choiste gan moill.
Tá áthas orm bheith anseo le labhairt ar an mBille seo. Táim ag cur fáilte roimh an mBille freisin, maraon le gach duine eile, ach aontaím le go leor atá á rá. Ní aontaím le gach rud atá á rá aige ach aontaím le go leor atá á rá ag an Seanadóir Ó Clochartaigh.
It is four years almost to the day since Senator MacSharry and I brought forward a family home protection Bill. We were told at that time that the Government was about to solve the mortgage crisis. In fairness, Senator Hayden wished us well with the Bill and did not bitterly oppose it, as some other people did; she recognised the problem. Essentially, nothing was done. The Government then introduced the Personal Insolvency Bill the following year. The then Minister, Deputy Shatter, is on the record as stating that there is no bank veto. The Taoiseach stated on the record of the Dáil that there is no bank veto. The Minister for Finance stated on the record of the Dáil that there is no bank veto. They were telling lies because it was as clear as day that there was a bank veto. I identified it in my contribution here in the Seanad in 2012, as did many other colleagues, because it was obvious that the Bill imposed a bank veto.
What hardship, stress and sleepless nights have been endured in the past few years, which could have been resolved if the amendments to the Bill that was put forward in the Dáil were made part of the original legislation? What stress could have been avoided in recent years if the then Minister, Deputy Shatter, the Taoiseach and the Minister for Finance had admitted there was a bank veto? That has been one of the key issues in recent years and the fact that the veto is now effectively gone, although perhaps not entirely, means there is the threat that it will impact on the banks. I believe this will have a major impact, and it is already having a major impact in terms of people dealing with banks in regard to their mortgages that are in arrears. I can see that in the correspondence issuing from banks in recent weeks to those people who are in distress. We had been told there was always a threat of bankruptcy, and that that would bring the banks to the table. That did not work, but if the banks do not have the controlling power, which they had in full in the original legislation, there is an incentive for the banks to do a deal because the person can go before the courts. While concerns have been raised about court costs and legal expenses, I would hope that a way will be found to get these people the relief they need, particularly as the Bill mentions - there was very little mention of it previously - preventing the loss of a home or similar language to that.
This will have a huge impact. So far this month in County Meath, there are 200 cases on the repossession lists. There is only a fraction of that number on the personal insolvency lists. I hope the figure for the personal insolvency lists, which I assume these cases will go on, will greatly increase and that the repossession lists might reduce. They have to reduce. Tens of thousands of people are in serious difficulties with their mortgages. We have to keep them in their family homes for the sake of society.
I make an appeal to the banks, and to the Government. There are many empty houses that probably should be repossessed but nobody seems to know anything about them. They are lying empty. We have all seen them in various areas. Can the banks not do an audit of the houses that are not occupied by families or individuals and target those people? I am talking about somebody who has lost interest in a house, does not live in it and where the garden has become overgrown and so on. Those houses should be taken back, put into the housing supply market and given to families on the housing list or to those who may wish to buy them. That will get the market going again because I do not see the banks adopting a strategic approach to that. They urgently need to do that.
I ask the Minister about the mortgage to rent scheme.What has happened on that? The announcement was made in May and we have this legislation over two months later. As far as I can see, nothing much has changed on the mortgage-to-rent scheme. One can have all the thresholds one wants and all the ways of doing things, but that scheme is stymied due to a lack of cash. It is also stymied by the fact that the banks had control over whether somebody got onto the mortgage-to-rent scheme. Perhaps the Minister of State will tell me something different, but it is not my understanding that the system has been changed. I wonder how many mortgage-to-rent applications have been accelerated or gone through since the announcement, and I suspect none have.
Nuair a bhí mé ag éisteacht leis an Seanadóir Ó Clochartaigh, rith an seanfhocal a bhíodh ann tráth dá raibh, "céard a dhéanfadh mac an chait ach luch a mharú" liom - what would the son of the cat do only kill a mouse. When one is dealing with an amoral system, regulations will always be catching up in relation to such amorality.
On behalf of the Minister, I thank the Members of the House for the useful exchange of views. It is good to hear that there is a recognition on both sides of the House of the necessity for this legislation and that it will improve matters, although I appreciate that some Members are of the opinion that it does not go far enough. The Minister looks forward to further discussing the Bill's various provisions with the Senators over the coming period. It is an important piece of legislation and one which is urgently needed.
The change to eligibility limits for a debt relief notice will bring immediate help to persons with very limited income who are not property owners and who are weighed down by debts and have no prospect of being able to pay. The new provision for a court review will help, in particular, the substantial number of persons who want to pay their mortgage and remain in their homes but who, in reality, are insolvent and are struggling to pay their debts. It offers a new guarantee that a reasonable personal insolvency proposal put forward by such a borrower under the Personal Insolvency Act 2012 will be fairly considered and provides for a refusal by creditors to be reviewed, where appropriate, by the court which will have power to impose the proposal if it finds it is fair and sustainable. The court will decide accordingly to carefully balance the criteria which ensures appropriate protection for the borrower and for the public interest while taking full account of the rights of all parties concerned.
Senator Ó Domhnaill asked why there were so few cases and inadequate responses. The review addresses precisely the two main reasons for the low number of cases which have been identified. First, borrowers do not bring cases because they believe banks have a veto. The new court review addresses that point. Second, those in serious debt do not know where to turn and new independent advice and consistent measures currently being put in place address that difficulty.
In terms of why borrowers are not coming forward, there has been extensive consultation with stakeholders, in particular, organisations assisting those in serious debt, as to the reasons borrowers are not coming forward to take forward the options available. The new framework to assist those in mortgage arrears is designed specifically to respond to the reasons identified in these consultations. I would say that the lack of confidence in the ISI was not cited as a difficulty by those concerned.
I was asked why the Bill makes such a limited range of changes and why not simplify the rules for obtaining a protective certificate. The Bill makes a number of urgent priority changes, in particular, the introduction of the court reviews so that these can be put in place by September. It does not mean that other changes arising from the ongoing review of the legislation will not be made as the question of streamlining procedures for a protective certificate is under consideration in that context which involves complex drafting changes, which cannot be made quickly and, unfortunately, is a continuing process.
In terms of resources for accessing the court review procedure, the Minister is aware of the importance of this question and it is being considered within the ongoing cross-departmental work on a framework for advice and assistance.
Senator Hayden made a number of points in terms of bankruptcy reform. The Minister for Justice and Equality sent a request on 26 May last to the Joint Oireachtas Committee on Justice, Defence and Equality asking that it might consider the substantial issues under public debate regarding bankruptcy policy, including the role of bankruptcy in resolving indebtedness and the possibility of further reducing the bankruptcy period which is currently three years to one year with the hope the committee might be able to revert with its views before the summer recess. The committee sent its report to the Minister last week and she is currently considering its recommendations carefully. However, this is not a question which can feasibly be included in this Bill if the review and assistance measures are to be in place by September.
Senator Hayden made a comment on the conduct of lenders. The Senator may wish to note that the conduct of the lender is expressly included in the new provision on court review in section 21 as a factor which the court can take into account in its review.
A number of the points were well made during the course of the debate. As some Members said, we are taken with the pressures that are placed on families and individuals and the stresses and strains that occupy their minds when this issue comes to their door. Collectively, we are conscious of that and are working hard to alleviate that pressure.
This is a major and important reform. The Minister has indicated it will be accompanied in September by a suite of measures, some of which are being piloted, to ensure that independent advice and support is easily accessible to the distressed borrowers in arrears on home mortgages and to help them engage as early as possible and find the best solutions so that repossession of the borrower's home remains, as always, a last resort.