Dáil Éireann debate -
Wednesday, 16 May 2012

Vol. 765 No. 4

Regulation of Debt Management Advisors Bill 2011: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

Deputy Seamus Healy

I welcome the Bill and also the indication from the Government that it will take into consideration the items raised in it when amending the Central Bank (Supervision and Enforcement) Bill currently before the Oireachtas. That is a welcome development.

The debt management industry has flourished in the years since the recession took hold. However, it is completely unregulated. Because it is such a sensitive issue, significant regulation by the Central Bank is required to ensure those who are forced to use these services know that they are above board and that they will not find themselves in an even worse position after using them. A significant number of individuals and organisations providing debt management services were previously in the business of organising mortgages and, in many cases, used dubious methods to ensure mortgage applications were successful, which often resulted in difficulties for borrowers. Now, in providing debt management services, they are getting a second bite of the cherry. This is an industry that needs regulation and it is reasonable to suggest the regulating authority should be the Central Bank and that these debt agencies and advisers should be licensed or authorised.

Another aspect that results in difficulties for those who avail of these services is that there is no indication at the beginning of the fees to be charged for the services provided. Often, people find themselves in further financial difficulties after using debt management advisers. Sometimes advisers ask clients who are not au fait with the procedures to pay by direct debit, with the first number of payments going directly to them as fees. This issue needs to be dealt with.

A related issue, one that is important, is mortgage interest supplement. This scheme needs to be re-examined and the 30 hour work rule should be abolished. It would also be helpful if legal actions were precluded while mortgage interest supplement was being paid and if mortgage payments were interest-only during that period.

I thank other agencies involved in this general area, including the Money Advice and Budgeting Service, MABS, and the credit unions, as well as the Society of St. Vincent de Paul. The Minister should examine the position of the MABS which is under severe pressure and has neither the resources nor the staff to deal with its current workload. I am aware of this from numerous calls to my constituency office, as are other Members of the House. I ask the Minister to consider this issue.

Deputy Tom Fleming

I welcome the Bill and compliment Deputy Michael McGrath and his colleagues on their excellent recommendations. I am sure the Government will agree with the main thrust of what is being presented. According to up-to-date figures, approximately 71,000 mortgage accounts are over 90 days in arrears, while a further 36,000 are the subject of repayment schedules with the banks. These statistics are increasing steadily by the week. In the Bill we need to ensure we have a robust system overseen by the Central Bank and that people can repay debt in a meaningful, representative and humane way.

One report published more than 12 months ago by the European Union and the Council of Europe concluded that a high level of consumer credit was not necessarily an indication of debt problems. The same report attributed the problem of indebtedness to unforeseen events such as unemployment, illness and changes in family circumstances. The problem of repayment capacity is likely to deteriorate for some time as spiralling costs take their toll, including increases in mortgage repayments, fuel costs, child care and utility bills. For example, I have been informed by some constituents who are customers of Electric Ireland that when they were 15 days in arrears, the company hired a UK debt collection company to contact them. This is an extreme action. We urgently need regulation and legislation to protect consumers from actions such as these taken by this company which is pursuing its customers in an aggressive manner. If an instant response is not forthcoming, customers are threatened with disconnection. This is a harsh action, particularly in wintry conditions, when people are left high and dry without a service to their households.

The MABS is the best model for a debt advisory service. It provides assistance which is free, confidential, independent and non-judgmental, and acts in a prompt and efficient manner. It works with its clients by supporting them, drawing up realistic budgets and maximising their incomes. I urge the Government to consider locating additional MABS offices countrywide to the 60 currently operating. In County Kerry there is only one such office which is based in Tralee. Its staff are under pressure, weighed down by continuous demands on its scarce resources. There is an immediate need for at least one more office in the country. I suggest this could be strategically located in Killarney to cater for the southern and eastern parts of the county. I commend the MABS for the fact that there are four offices located in County Donegal, as well as four in Cork city and county. This ensures the public in these expansive counties have good access to services. As County Kerry is of similar size and has similar terrain, I ask the Government to address this deficiency as a matter of urgency.

I welcome the inclusion of the Law Reform Commission's proposals in the Bill. In the debate on residential mortgage debt in this Chamber on 4 May 2011, I advocated that legislation be enacted to adopt some of the excellent recommendations in the commission's report to reform our debt laws radically. Twelve months later, nothing has been done. The most relevant recommendations in the commission's report, which are included in this Bill, are paramount if there is to be a radical overhaul of existing insolvency law, which is better suited to Elizabethan times. There are some excellent recommendations and I hope they will be adopted. I hope the Bill will be passed.

An Leas-Cheann Comhairle

Deputy Heather Humphreys is sharing her time with Deputies Jim Daly, Peter Mathews, Eamonn Maloney, Liam Twomey, Michelle Mulherin and Simon Harris.

Deputy Heather Humphreys

I welcome the opportunity to speak on the Regulation of Debt Management Advisors Bill 2011. I commend Deputy Michael McGrath on introducing it as it provides us with an opportunity to discuss the difficulties many are experiencing with debt management. We are all well aware of the financial difficulties people are encountering. This problem is not unique to any county or area as people are struggling throughout the country. The nature of the collapse, in Ireland in particular, has meant many have been left with unsustainable debt. Prime examples include young couples who bought their homes at the height of the boom and who may have lost their jobs subsequently. They now face the prospect of having to make mortgage repayments they cannot afford on a house in negative equity. These are the people who are in extreme difficulty and who genuinely need help. I welcome that, since taking office, the Government has sought to address the matter. The introduction of the personal insolvency Bill will provide some light at the end of the tunnel in this regard.

Not wanting to talk about one's financial struggles is an inherently Irish trait. Rather than addressing the problem, we ignore it. As the saying goes, one can hide poverty but one cannot hide wealth. People are embarrassed about having to ask for advice on their finances. In some instances, they do not even know who to ask for help. It is when people are most desperate and vulnerable that unprincipled debt management agencies are able to attract them. People need to be made fully aware that they have other options.

MABS has a long-standing and excellent record of assisting people in difficult financial circumstances. It is important this organisation's experience and skills be used to good effect when progressing the matter of debt management. We must build on the strength of MABS and further expand its excellent service. When I was a credit union manager, I worked closely with MABS and gained first-hand experience of its great work and the respect it enjoys from both clients and creditors. MABS takes an holistic approach to debt management and considers all the issues that need to be addressed.

I ask the Minister to consider appointing a team of debt management advisers to enhance further the skill set and capacity of MABS. These advisers could work under and within the MABS structure and sign up to the operating principles, culture and not-for-profit ethos of the organisation. As part of the MABS structure, they would comprise an independent and impartial resource for people in financial difficulty to call upon. Their role would be to negotiate with the banks on behalf of people in financial difficulty. These advisers would have an accredited qualification to enable them to deal with the more complex and difficult financial circumstances in which many people find themselves. These advisers could be appointed by the Department of Social Protection and funded by the banks. The reason I am recommending they be funded by the banks is that, as we all know, early intervention can often prevent much more serious and costly steps, such as legal action. It would be in the banks' interest to have a mutually agreed solution that is workable and achievable to avoid unnecessary legal action.

There are other private providers of debt management services and it is important they be properly regulated in the interest of those who use them. In this regard, I welcome the objective of this Bill, which is to ensure the effective regulation of the debt management sector. I fully support this and welcome that the Government has included a provision in regard to the regulation of debt management as part of its Central Bank (Supervision and Enforcement) Bill 2011. I commend the Minister on his work to date on this matter and urge him to continue to monitor the problem. People are in distress over their personal finances and we must not allow them to feel isolated or abandoned.

Deputy Jim Daly

Cuirim fáilte roimh deis labhairt ar an ábhar tábhachtach seo. Tá sé an-tábhachtach go ndéanfaimid ár ndícheall gach uile rud a dhéanamh do na daoine i gceist. I welcome very much the opportunity to contribute on this important debate. A very sensible and practical approach has been taken by Deputy Michael McGrath in proposing this Bill. This is usual for the Deputy and I commend him on it. It is fair to say all sides of the House are in agreement on this issue. I am pleased consumers' interests are at the core of the Bill.

As a Member of Parliament in a country with the highest ratio of indebtedness among all the countries in the OECD, I believe it is timely we deal with the massive issue of personal debt. Was it Rahm Emanuel who said one should never waste a good crisis? The debt management companies have reacted to our unfortunate circumstances and they have grown in strength. Unfortunately, their trade has multiplied in recent years. It is all the more important, therefore, that strict and durable regulation be introduced in this area.

The consumers we are seeking to protect in this Bill are the most vulnerable citizens. Those who are forced to go to debt management agencies are at a very low ebb, are very vulnerable and can become victims very easily. These consumers are primarily people who are already failing to manage their own financial portfolios. They go to someone they can trust for professional advice to help them to budget to ensure they always have sufficient funding to pay everyday bills, such as utility bills and mortgage repayments.

Last year, a number of cases arose when organisations such as Home Payments Limited went bust. The small amounts of money people had given in trust to such private firms were effectively stolen from them. Firms that went bust had not got the funds to pay the utility bills on behalf of their customers, thus leaving them with the double whammy of debt. They were really let down by this sector of professional businesses and also by the legislation in place that allowed these types of businesses to go insolvent at an enormous financial costs to their customers.

As Deputy McGrath will be aware, I welcome the fact the Minister has published, for consultation, the heads of legislation to deal with the regulation of debt management. The associated material was published on the Department's website on 24 April this year. It indicates the willingness of the Government to deal with this issue and affords an opportunity to strengthen the existing legislation, which is insufficient.

I wholeheartedly welcome regulation by the Central Bank of this sector of business. It is vital that consumers' interests in cases such as these be regarded as paramount at all times. I would like to see in place a system, such as a bond system akin to that of insurance companies, that would operate at all times within limits, and with adequate protections and funding to cover the costs of unforeseen or negative circumstances that could arise in regard to private firms offering the kinds of services in question to customers.

It is wrong that people who in good faith give their money, sometimes all or most of it, to debt management services in the belief the latter will pay their bills when they should be paid find out not only that their bills are not paid but also that the money they are giving, which can be between €500 and €700 per month, will never be seen again. It ought to be the case that if a firm managing people's money ends up insolvent and must be liquidated, there is an adequate bond or insurance cover in place to protect the consumer at all times. It is vital the consumer be protected. This Bill will largely address that, as will the proposals the Minister has brought to the Government for the regulation of the firms in question. These were published for consultation in April on the Department's website.

Deputy Peter Mathews

I congratulate Deputy Michael McGrath on bringing forward this Bill. I commend him, in particular, because he brings his knowledge, experience and qualifications to bear on an area where the country and its people are hurting to a significant extent.

I was delighted to hear the excellent contributions of Members last night. I stayed in the House for an hour and a half and I must say Deputy Michael McGrath's colleagues in Fianna Fáil, Deputies Calleary, Sean Fleming, Browne and Cowen, made excellent contributions in support of his Bill, as did, from our side, Deputies Tom Hayes and Buttimer and Deputy Ciara Conway of the Labour Party, and also Deputy Pearse Doherty of Sinn Féin. What came out of all of their contributions were the human stories and the hurt, tantamount almost to a nervous breakdown, that people are under such pressure. We heard about gas and electricity being cut off, and then these slick guys coming in and taking advantage, by up-front fees, by sloppy advice and by hijacking the perilous position of their clients. It needed to be addressed straightaway.

On why I support the Bill - I note the Minister for Finance, Deputy Noonan, has the amendments on Committee Stage coming through on the Central Bank (Supervision and Enforcement) Bill 2011 - this is really reaching a crisis point and it deserves the utmost attention and to be dealt with comprehensively, including all aspects of advice, money management, money transmission, probity of those involved in these businesses and the correct operation of companies and partnerships, activities addressed both by Deputy Michael McGrath's Bill and by the amendments to the Central Bank (Supervision and Enforcement) Bill 2011.

The Bill encapsulates some of the headline aspects of what happened in the Home Payments Limited case. Customers were using Home Payments Limited for almost 50 years to help them, supposedly, manage their household budget. Last August they arrived at the premises to read a note on the window informing them it had ceased operating with immediate effect. The company collapsed owing its customers more than €6 million. Twenty-three of its customers were owed more than €10,000. Home Payments Limited had used its customers' funds to invest in ten properties. Comments from customers sum up that situation. A customer was quoted as asking who gave them permission to spend his money on anything other than paying bills. Another customer stated that the directors should be arrested because if somebody gave him money to pay a bill and he did not do it, he would be arrested for sure. It is those typical stories that lead me to support the objectives of this Private Members' Bill.

It is an area that must be tightly regulated. I note the Minister will examine the proposals in Deputy Michael McGrath's Private Members' Bill and will ensure its objectives are taken into account in the proposed Government Committee Stage amendments. I congratulate Deputy Michael McGrath for bringing forward the Bill, particularly because it is the area where he has relevant and qualified experience and expertise.

Deputy Eamonn Maloney

I want to be associated with Deputy Mathews's remarks about supporting in principle Deputy Michael McGrath's Bill.

The business of this Dáil, in its 15 months, unlike any previous Dáil - I am not here that long - is in its nature almost dominated by discussing credit or regulation. It is where we are after four or five years of a fairly depressing collapse.

I suppose, for a country as young as Ireland, people will always refer to legislators and ask why there is not a Bill to do this or legislation to that, but we had never gone through previously what we have gone through. We are in a post-Celtic tiger period. No doubt, Deputy Michael McGrath's amendments will not be the last with which this House will deal because it is fairly new territory.

I will not repeat points that have been made by others, including Deputy Mathews. I have no difficulty whatsoever in principle with the advisers in receipt of remuneration, and the amendments refer that. Most of us have no difficulty with that, provided, of course, as was pointed out, that it is properly regulated and that it is seen to be fair and transparent.

The other point, more dear to my heart and which has been mentioned by others, is the issue of debt management and budgeting. I want to praise the work of MABS, which is a wonderful organisation. It has done great work in the past, particularly for those who would be at the bottom of the social ladder, principally the working class who in many cases would be on or below the industrial wage. In many cases, MABS has been the first port of call for many politicians like myself in guiding constituents to resolve financial problems. I mention MABS for that reason. Whatever about legislation in future and however this Bill turns out at the end, in resolving the issue that Deputy Michael McGrath has raised it is important that MABS plays a central role and that the State recognises, above all, the expertise of MABS and that such expertise is used by the State, especially given that it is taxpayers who fund MABS. I compliment MABS on its work. Perhaps we are not as fulsome in recognising and appreciating the work it has done.

Deputy Simon Harris

I begin, as other Members did, by thanking Deputy Michael McGrath and his party for putting forward this Bill, which is worthy of serious consideration. I am glad the Government is giving it that.

This Bill follows on from work done by Government, which has already been outlined by various Ministers over the course of this debate, on regulating debt advice, budgeting and management through the Central Bank (Supervision and Enforcement) Bill 2011, on which there is ongoing consultation.

Frankly, any member of the public, any hard-pressed taxpayer, any struggling homeowner and families gathered round a kitchen table tonight do not care from which side of the House proposals come on this issue. They want action. The debate over the course of tonight and last night has been very much based on that, taking a bipartisan and proactive approach, and I thank Deputy Michael McGrath for the opportunity to contribute to this debate by his tabling of this Bill.

The Irish people want, need and deserve assurances that any cowboy antics, any attempt by persons to make a quick buck on the backs of the difficulties of others, will not be tolerated. I hope that tonight we further advance sending that strong message out from Parliament.

When we have this discussion about regulating debt it is also important that we have it in the context of the reason we are experiencing such an issue with debt regulation and with people having to go to those who all too often act in a cowboy fashion. It is because of the considerable burden of debt being faced by the Irish people. We have significant conversations in this House about billions of euro - it is all about billions of euro these days - but new figures provided by the Central Bank, which were the subject of coverage by the media yesterday, provide evidence of the significant burden being shouldered by ordinary families in the context of debt.

According to those figures, the average debt for every man, woman and child in this country stands at €41,000. While this is down from €47,400 four years ago, which shows clearly that people are doing their very best to chip away at their debts, it is still remains significantly above the EU average. Irish households now owe debts amounting to €184.5 billion. For every €100 earned in income by Irish people, €200 is owed in debt. The EU average in this regard is €130.

People are experiencing great difficulties. While I support the proposals contained in this Bill and those which are available on the website of the Department of Finance, we must get serious in the context of ensuring the regulations being put in place are enforced. We have a great history of introducing legislation and not enforcing it. The banking crisis and this country's economy going down the Swanee were not the result of a lack of laws on the Statute Book but rather due to a failure to enact the relevant provisions. In addition, the regulators failed to regulate. That is quite an important point.

Deputy Maloney referred to the excellent work being done by MABS, funded through the Citizens Information Service. MABS is overloaded with work at present. As a result, hard-pressed families that would normally go to MABS as a first point of call are, in desperation, resorting to seeking help from those who may not have their best interests at heart and who are more concerned with making money. The Government should do everything possible - I know the Minister of State will share my view in this regard - to support organisations such as MABS in their work.

There is a need to implement the recommendations in the Keane report with regard to assisting families to mediate with banks in respect of mortgage arrears. The mediators who are appointed must have real powers. At our weekly clinics, we all meet people who are trying to negotiate with the banks. Many banks are acting in a responsible, helpful and constructive manner but it is very intimidating for people to be obliged to negotiate with their banks. I refer to people who have never perhaps been in a position whereby they have been obliged to negotiate in respect of their family homes. We must give these individuals the support they require and I encourage the Minister for Finance to fast-track the proposals contained in the Keane report in respect of the appointment of mediators. Such a development would be very welcome.

Those who are in a difficult position, who are the subject of legal action as a result of their debts and who cannot pay for private legal representation are now approaching the Legal Aid Board. When they do so, they are advised they will be obliged to wait months before legal aid is provided. My constituency has the awful accolade of having the longest waiting list in the country in this regard. These are practical matters with which the State must deal, above and beyond ensuring regulations are enforced. It must see to it the practical tools required are put in place. While I fully welcome the Bill, I feel I must make that point.

The credit union movement has been very supportive in the context of helping families in every community on this island that may not have been able to access credit from other sources and also in respect of dealing with debt in a compassionate manner. It is very important the Government and the House should send out a message to credit unions which are intent on supporting communities and which will work in a compassionate, rather than a commercial, manner to negotiate in respect of people's debts. At the credit union movement's annual conference, the Minister for Finance, Deputy Noonan, indicated credit unions will continue to be supported and stated they occupy a crucial position in Irish society.

Deputy Michael McGrath introduced a Bill to amend the legislation relating to the financial Ombudsman. Again, this was another common-sense measure which received support from all sides of the House. However, a long period elapsed between the financial Ombudsman seeking an extension to his powers and the relevant legislation eventually being introduced in the Dáil. It is 2012 and we are debating a matter in respect of which the Law Reform Commission made recommendations in 2009. There is a need for the political parties, this Parliament and the Government to engage in a discussion about what should be done with the advice we request from experts and independent organisations. Families cannot afford to wait three years for a Government, regardless of its hue, to implement the recommendations contained in particular reports. That is something of which we must be conscious in the context of our work.

I welcome the fact the Government published proposals in respect of debt regulation on the Department of Finance's website. However, there is a need for the Government and the State to consider new ways - through social media or whatever - of promoting the consultation periods that apply in respect of such proposals. How many people are aware the Government's proposals on debt regulation are available on the Department's website? I was not aware they were there until I began researching my contribution to this debate. If we are genuine about consultation, it cannot simply be a matter of lobbing the relevant information onto the Department's website, establishing a consultation period and then saying that when the latter closes, the box has been ticked. If we really want to elicit people's opinions and read details of the type of human stories to which some Deputies have referred, we should consider doing everything possible to promote the concept of consultation. There would be no need to go to extravagant cost, and the new technologies the Government is beginning to embrace would provide an opportunity in this regard.

I again thank Deputy Michael McGrath for tabling this Bill and I appreciate the opportunity to contribute to the debate on it. I look forward to seeing the Government advance the proposals it contains on Committee Stage.

Deputy Michael Healy-Rae

I am sharing time with Deputies McConalogue and Ó Cuív. I thank Deputy Michael McGrath for and compliment him on bringing forward the Bill. I also thank his party for providing me with the opportunity to speak.

This legislation is very important for everyone in Ireland. The area relating to debt management and advice and household budgeting services is entirely unregulated at present and is giving rise to growing concerns. This sector has expanded greatly in recent years as personal debt levels have increased substantially. Many distressed borrowers signed up to seemingly attractive offerings of some providers in this area and subsequently found themselves in further financial trouble and in a less secure position.

It is stated in section 11 of the Bill: "It shall be an offence for a debt management advisor to receive from or hold on behalf of a consumer to whom it is providing debt management advice any monies other than monies paid by the consumer for the provision of debt management advice." If such a provision had been in place, the events to which Deputy Mathews referred and which occurred last year would never have taken place. On radio last summer, people recounted stories about what had happened to them and about how they had been so badly treated by those who were supposed to help them. That really highlighted the situation in which we find ourselves. In the intervening 12 months, the position has become much worse. Deputies, Senators, councillors and everyone else who is trying to help and advise members of the public experiencing difficulties at present is aware of the true extent of the hardships being experienced.

When it gets dark this evening, there are many houses throughout the country in which people will not be able to turn on their lights because they have no electricity. In others, home heating oil tanks are empty. These are the conditions in which people are living in the Ireland of 2012. This is why treating people who are in debt with respect is very important. I do not like tarring everyone with the same brush but I am very angry with some of those who advanced loans and massive mortgages to people and who encouraged them to accrue huge debts. Those to whom I refer are now not being helpful in the context of putting in place a proper framework to allow people to deal with their debts. Instead, they are harassing and haranguing people and that is why there is so much anger. Young couples who were previously doing their best, who each had jobs and who wanted to better themselves and their families were encouraged by the banks and everyone else to get on the train lest they be left behind. They did what they were advised to do and they have been left with massive debts which they are struggling to pay. As a result of this, they have been willing to turn to anyone whom they think would be in a position to help them. Unscrupulous individuals have taken advantage of them and tried to make money out of their misfortune. That is why the work done by Deputy Michael McGrath and several of his colleagues in drafting this Bill is so important. Solid regulation by the Central Bank is of vital importance. People have to be helped and encouraged to work their way out of debt and many will do so if they are given a chance. However, a one-shoe-fits-all solution is impossible to achieve as everyone's personal circumstances are completely different. Having been involved in many such cases, I have seen debt management advisers who are genuine and good at their job help people to get out of their debt problems. However, one has to be willing to do so. Those who gave the money in the first instance also have to be willing and flexible enough to ensure different programmes are put in place and proper advice is given.

There has been much talk about mortgage and personal debt. There is another category which was raised several months ago by the other Deputy McGrath.

Deputy Michael McGrath

Which one - Finian or Mattie?

Deputy Michael Healy-Rae

Mattie. It concerns the repossession of machinery from farmers and contractors. Certain individuals were going into farmers' and contractors' yards in the middle of the night, like a thief, breaking locks, opening machines, loading them up and traipsing out of the yards as quickly as they could. In some cases, in the excitement and frenzy, machines were taken to which there were no debts attached and had to be returned. This issue has to be highlighted. Just because an individual owes an institution money, it does not mean that institution has the right to treat him or her like a criminal. It is not a criminal offence to have tried to better oneself, whether through purchasing a house, an apartment, farm machinery or machinery for hire. Such individuals were only trying to work, make a living for themselves and create employment for others. I do not want to tarnish everyone involved in banking as there are great people working in lending institutions. However, bank managers and bank employees must realise those who owe money must be treated with respect and consideration. They have families and are trying every day to survive. It is incumbent on every Member to make sure they are treated with the respect they deserve.

People in debt get depressed and down and feel the whole world is closing in on them when the threatening letters arrive from the banks. It is no wonder the incidence of suicide is on the increase. Families are being put to the pin of their collars. Young people going to school need to have proper clothing and schoolbooks, yet their parents are struggling. I compliment the Minister of State, Deputy John Perry, on his contribution last night which was positive, as one would expect. I compliment all Members for uniting in this common cause of protecting those in debt who are in vulnerable positions. It is our job to protect and support them, while putting the scoundrels off the road who, like leeches, are trying to make money out of other people's misfortune. The Bill will go a long way towards ensuring we will not have similar occurrences to that outlined by Deputy Peter Mathews involving a company which last year did awful things to genuine people, leaving them in the lurch and taking their money for wrongful purposes.

Deputy Charlie McConalogue

I commend my colleague Deputy Michael McGrath for introducing the Regulation of Debt Management Advisors Bill in Private Members' time. The importance of the issue being addressed in the Bill is reflected in the fact that the Government is willing to incorporate the legislation in a forthcoming Central Bank Bill, which is a worthy approach. It is entirely appropriate when the Opposition comes up with constructive proposals that the Government is willing to take them on board. This could have happened more before now, but it is welcome that in this instance the Government has decided to take this approach.

The Bill addresses an industry that requires regulation and which the Government has not addressed since it took office. Debt management advisers and companies have been operating unregulated and, in some cases, preying on people already in desperate straits. There have been many instances of companies drawing on people's worries and, as a result, making a profit from them. One company, advertising on the Internet, stated it could reduce clients' debts by thousands of euro, even by up to 50%. It was taking money in from people to do this and then simply vanished. The Central Bank advised all of the company's clients to cease all payments but for many, the damage had already been done.

The Bill will ensure those who find themselves in an already difficult position with their debts will not be subject to an unregulated part of the financial sector. Now more than ever, people are desperately seeking advice on how they can turn things around. This is from where the growth of the debt management industry and debt advisers stems. The Debt Management Association of Ireland states all clients in debt must be dealt with in a professional, compassionate and effective manner and helped to become debt free as quickly as possible. Unfortunately, as in many unregulated areas, one sees some good and bad practices. The people, unfortunately, have experienced the bad again with some debt management advisers.

No one can blame the public for being naturally drawn to these offers of financial stability and sound advice. People will not visit the Central Bank's website to check if their adviser has been approved, presuming these companies are already being monitored and regulated, which is not an outlandish presumption. Instead, they are drawn in with false promises and left with more debt, stress and worry. This could have been avoided had more emphasis been placed on the Money Advice and Budgeting Service by the Government while ensuring the excellent service it provided was properly resourced. However, the service has been put under strain. By virtue of the fact that the private debt management advisory sector is unregulated, people have been lured by much more glamorous promises made by private debt management advisers. The reality is that many are suffering in a way they never did in the past. We should ensure there is a well resourced State debt management service available as the first point of contact. Over 1 million people owe money, a figure which, unfortunately, is growing, yet the Minister stated only 30,000 had availed of the services of MABS last year. That is why the Bill states that debt management companies must make the people seeking their advice aware of the services offered by the Money Advice and Budgeting Service.

This Bill ensures debt management advisers will be regulated financially and client funds will no longer be controlled by such companies. Similarly, a client will no longer have to pay up-front a fee for advice or end up further in debt as a result of seeking advice from these companies. The industry has proved it cannot regulate itself, which is unfortunate for those who operate in an ethical manner. Experience tells us that when one is in a sector that handles money, there must be regulation by the State. The need for training within the industry is also vital for its future, and this Bill suggests that a financial adviser qualification be a necessity for those who want to work in the field. Currently, there are few or no entry requirements in becoming a financial adviser, and our measure will ensure that people serving the public offer a service that might, in some way, improve their position. That is why it is so important that the Bill is in front of us.

I mentioned before that a survey in 2011 indicated that over 1.5 million Irish people owe money on an unsecured credit product, such as a credit card or personal loan, with approximately 250,000 in arrears now. Worryingly, approximately 93,000 people were three months or more behind on payments in that survey, which also highlighted the growing debt problem among those who are unemployed, with 40% of unemployed people behind in debt repayments. This is the current scenario facing the country, and it is a poor reflection on us in many ways that it is only now that we are coming to deal with regulating the sector. With a little bit more prior planning and forward thinking, we should have been aware that such regulation was required.

In towns and villages around the country estate agent offices are in many cases being replaced by people offering financial management advice, and that reality will not change in the very near future. Part of the problem stems from the urgent need for the Government to get its head around how it will assist those people with personal debt, credit or mortgage arrears problems. The banking debt has had to be addressed, partly because of pressure from Europe that left us no option, but we have kicked the can of mortgage debt down the road for a period. There are people out there in serious positions, as many cannot pay down debt and others can afford to pay it but are facing a lifetime in a job with the majority of disposable income going to feed a mortgage debt. Poor timing and bad luck would have led to such people taking on that debt.

I commend the Minister of State for accepting this Bill and I urge him to ensure it is progressed quickly within the Government's legislation. It is the least we can do for the people in debt who may require debt advisers in the coming time.

Minister of State at the Department of Finance (Deputy Brian Hayes)

I congratulate, on behalf of the Government, Deputy Michael McGrath and his colleagues on this very positive Private Members' Bill that was introduced last night. I believe it has been accepted on a cross-party basis. The Deputy has made a habit of putting forward Bills that are being accepted by the Government and he is probably more prodigious in producing legislation than we are on this side currently, which is important. It is indicative of the Deputy's very positive approach, rather than the grandstanding seen in others.

By having this legislation before the House, pressure is being put on the Government to bring forward the necessary amendments to the legislation currently in the consultation process, the Central Bank (Supervision and Enforcement) Bill. The logical question to be asked by Deputy McGrath and his colleagues is where stand the amendments and when will we see and proceed with the legislation. My understanding is that the consultation process is due to be completed by the end of this month, and we will have to take account of that process before proceeding to the drafting of necessary amendments following the advice of the Attorney General. I also take the point made by Deputy Harris that there is a responsibility on us to ensure that the widest possible consultation occurs so people with a view can express it.

I will turn to some of the issues raised last night and this evening. During the debate, the Money Advice and Budgeting Service, MABS, was mentioned on a number of occasions. The Government is aware of the sterling work carried out by this national, confidential and free service. My colleague, the Minister for Social Protection, Deputy Joan Burton, has indicated she is fully satisfied that MABS has sufficient resources to assist and support its clients. I am informed, based on the latest information available, that at the end of February 2012, the average waiting time from first point of contact to first appointment with a money adviser in MABS was approximately three and a half weeks. It is important to note that during the waiting period clients are assessed and those in need of immediate assistance are given a priority appointment; others are provided with assisted self-help to ensure they have taken steps to assess their situation and, if appropriate, they are supported to take "holding action" with their creditors.

It was mentioned in the debate that there is no law with regard to debt management companies. However, I confirm again to the House that some debt management firms which process payments on behalf of clients are subject to regulation under the EU Payment Services Directive, which was transposed into Irish law. Under that directive, any firm which provides payment services, as defined by the legislation, requires authorisation to trade from the Central Bank.

Deputies on both sides referred to the appalling scenario facing so many of our people in mortgage debt, and I had the opportunity to address the Seanad yesterday on that issue. I assure the House of the firm resolve on the Government's part to take whatever action is required to deal with the issue and bring forward a suite of options for people in a distressed position. The House is aware that the Taoiseach recently formed a new Cabinet sub-committee to deal with the matter, which highlights the prioritisation afforded to the issue at the heart of the Government. The House is also aware of the Keane report recommendations, which the Government accepts, and I understand by the end of this month the various banks - in daily communication with the Department of Finance and the Central Bank - will bring their plans to fruition. It is anticipated that in the second half of this year, substantial new proposals from the banks will be put to the market that will provide options for people, particularly with regard to writing down or rescheduling debt and giving choice through the likes of negative equity or shared loans, for example.

The issue of advisers, dealt with in a recommendation of the Keane report, is being actively considered by the Government, and the Minister for Social Protection is working on a scheme that she will make announcements about very shortly. It will deal with how such advisers will be used. The key issue is that the banks have been recapitalised and there is frustration on both sides of the House because of the need for the banks to get on with the task of restructuring people's debts. We have seen some signs of positive action to date but it is not half enough in my view. We require an independent middle man or woman to examine the proposals from borrowers and lenders before coming to a considered, independent view on a sensible way forward. At the moment, borrowers have virtually no power. They can appeal to an appeals committee within the bank but that committee does not have the imprimatur of a State agency or adviser to come up with a fair and independent assessment as a third party. We must get to that point because this is an area of expertise that must be regulated in a way that will give confidence to everyone involved in it.

I am advised there is a provision in the Central Bank (Supervision and Enforcement) Act 2011 to make regulations about giving information regarding costs and associated charges relating to financial services. The consumer protection code, which was revised with effect from January, also has provisions relating to the disclosure of fees. On enactment of the proposed legislation, the Central Bank will have the power to make regulations, in consultation with the Minister for Finance, regarding the new provisions that relate to debt advice and debt management companies. This will include information regarding charges and other costs.

I sincerely congratulate Deputy Michael McGrath. His initiative will rightly put pressure on us to bring consultation on this matter to a conclusion and to produce the necessary amendments that will embrace all the objectives he has set out in this Bill. By having this Bill before the House, the onus has been placed on the Government to get on with drafting the amendments. The Government is sometimes frustrated in what it can achieve in the timeframe we all want, but the legislative initiative taken by Deputy McGrath has helped us to bring this matter to a conclusion and I congratulate him on that.

Deputy Éamon Ó Cuív

I welcome the positive attitude of the Minister of State to the Bill and the recognition there is a problem to be solved. This issue shows the ingenuity of people in creating niches for themselves but there is now an urgent need to regulate the sector.

As a former Minister for Social Protection, I acknowledge the fantastic work done by MABS. MABS was doing this work for years, long before there was a debt crisis. Its workload, however, has increased hugely since the downturn. Whereas a lot of the debate centres on mortgage debt, if people only had a mortgage debt problem, it would be black and white and would not be difficult to resolve. The reality is, however, that most people have every kind of debt when they are in trouble. When they start to run into trouble with the mortgage, they start to hold back on utility bills and other bills. They put off taxing the car for a month or two and, in most cases, there is a raft of other loans, some taken out to repay other loans and some to buy goods. There are credit card debts and myriad other borrowings. In many cases, if all the loans were stacked up together and the mortgage provider took them on, a sustainable repayment pattern might be possible.

One thing I notice when talking to people with financial difficulties is that it is often illuminating to write down a list of all the people owed money, the capital amount outstanding and the weekly or monthly repayment. Sometimes, huge repayments on quite small loans are the cause of the problems. It is important, therefore, we assist people to resolve these issues. MABS, because it works through this with people, has done incredible work.

Most people's reaction to debt is to act like a hedgehog. We all have a tendency to curl up into a ball, put up the spikes and hope the problem will go away. We know what happens to the hedgehog when a car comes; it simply drives over the spikes. People who are not sleeping at night because of debts often feel better if someone simply goes through the figures with them and explains that there are protections in law for them. What happens in law if they do not repay an unsecured creditor? It is not the end of the world. A person cannot be ordered by a court to pay what he does not have. Even if we could get people to that phase of interaction with someone reputable, it would be huge step forward in rationalising the problem and would prevent hopelessness and even suicide. Much of it is due to fear because they never rationalised the worst case scenario. Such a scenario dealt with in a rational way is a lot better than the more horrendous ideas they are contemplating. Collectively we have a huge job to encourage people to talk to someone about debt.

MABS has done a great job. When I would ask the service about average debt levels, many of those it was dealing with had relatively small amounts of debt, with the average being around €30,000. Many people imagine those going to MABS have debts of €150,000, but many of those using the service did not have huge debts in an absolute sense but had impossible repayments. There is a major difference between the total amount of the debt and the repayment.

It is fair to say that with the problem being so widespread, there will be people who do this professionally. In some cases, those who were giving out the money as brokers have turned around and are advising how to repay the money. Many of us would be aware of people coming in to talk about debts but only telling half the story. One of our human attributes must be to get them to tell us everything, to give us all the information and for them not to be afraid we will be shocked about what they say. They must be convinced that many people are in the same boat, no one will look down on them for getting into financial problems and there are people who want to help them. There is a job to be done and there is a role to be played by those who do this professionally, but this is an area that requires professionalism and needs people who are properly qualified to do the job and who understand the legal avenues and processes involved. These people must understand the human dynamics of this and be qualified to do the job.

We are talking about people's money so the industry must be regulated, which is what this Bill sets out to do. It also sets out to ensure that the highest of standards are maintained, that one cannot go into the job unless one is capable of doing it and that there are some objective standards laid out in law in respect of what is required to take up work in the profession. There are few professions one can take up nowadays without having some qualifications or proof of one's capability to do the job. We need clear standards laid down to do the job. There must be supervision of these standards to ensure those involved continue to adhere to the highest of standards. That is both important and urgent.

In his speech the Minister of State referred to advisers handling people's money rather than simply making arrangements. There is a case to be made for an adviser not handling money or, if they do so, at least there should be a bonded system with client accounts and so on. In the past, there have been incidents in various professions. Temptation is a terrible thing for the human. We know what has occurred in certain cases when certain people got their hands on other people's money. Certain people might have had their own troubles and then misused other people's money in a professional capacity. If we take the view that other people's money can be handled we should be careful and include considerable safeguards, including bonding, to ensure that people's money is secure.

My colleague, Deputy McGrath, has done a good service to the country by bringing forward the Bill and the Minister of State has recognised this. This matter must be dealt with urgently. I realise there are delays in the system. The Minister of State is becoming more aware of them. When one is on this side of the House it is easy to take the view that the legislation should pop out fast. I have often said that one can get 90% of the way quite fast. One can do it in approximately six months. The final 10%, however, can take several years because of going over and back to the Office of the Parliamentary Counsel and the Office of the Attorney General since many questions arise at that stage. We must also accept the need to do things well but we should not allow the desire to cover every angle that could arise in the next 20 years to hold back urgent legislation into the distant future. It is not a case of including anything that is wrong but perhaps we will not cover every subject first time around. The process should involve the inclusion of the essentials quickly. We should see it as a child sees a Lego set. We can keep adding to it as long as whatever we have done is sound. However, we should not allow the add-ons to delay the legislation interminably.

I realise and accept that it is difficult to prepare legislation on this side of the House that will pass the Office of the Parliamentary Counsel. The office will always have queries and questions and I accept the good faith of the Government in this regard. It is an inevitable part of the system that those responsible will go through the legislation and point out what they deem to be flaws in the way it is drawn up. That is fair enough. Anyway, it is important that we see this as something we can do for people and to protect people. People are in enough trouble without being charged vast fees for bad advice and without their fears being further exploited by unscrupulous people.

I suggest to those working in the industry in a private capacity and who are doing a good job that this legislation is equally important for them. They need to be able to put it to their clients that they are accredited, approved, that they have the necessary qualifications, that they are supervised and, therefore, that the client can trust that what the adviser is suggesting can be achieved and that the adviser is qualified and capable of realising it. I have no doubt that the legitimate people in this business will welcome the speedy enactment of legislation to protect them.

Molaim an Bille seo. Bille thar a bheith tábhachtach atá ann. Tá tábhacht faoi leith ag baint leis do dhaoine atá ag fulaingt go mór i measc an phobail agus tá súil agam nach fada go bhfeicfimid na leasuithe a luaigh an tAire ag teacht faoi bhráid an Oireachtais.

Deputy Michael McGrath

At the outset I thank every Member who made a contribution to the debate either last night or tonight. I was not in the House last night. The Minister of State will note that I was at a public meeting on the referendum in Dunleer, County Louth, organised by Fianna Fáil. The meeting went well. The majority of Fianna Fáil supporters will be voting "Yes" on polling day.

I have read the transcripts of contributions from Deputies on all sides of the House. All the contributions have been constructive and positive and this is to be warmly welcomed. This is the template we should follow wherever possible when dealing with issues in the public interest.

I thank Deputy Sean Fleming for moving the Bill and for setting out a comprehensive Second Stage speech. I wish to put on record that the Bill was drafted by Senator Thomas Byrne. He has done an outstanding job in preparing the Bill. We first published the Bill in June of last year but we did not get it formally moved in the House until last September. It has been around for some time but we are pleased to have the opportunity to debate it on Second Stage in the House.

I welcome the fact the Government is embracing the principles of this Bill and I realise people are working on the Government side on amendments to the Central Bank (Supervision and Enforcement) Bill. I also realise the Government is keen to enact that legislation as quickly as possible to ensure this sector will be regulated. I urge the Government and the supporting officials to read the Bill carefully and closely. I further urge them not to be afraid to take as much from it as possible. A considerable amount of work went in to the drafting. The definitions are carefully thought through and they may be of benefit to the Government when it drafts the necessary amendments to the Central Bank (Supervision and Enforcement) Bill. The Government should feel free to take from this Bill what it wishes in order to enact the provisions as quickly as possible.

One theme running through all the contributions in recent evenings has been the human experience and the fact that this is all about people. There are people in every constituency in the country who are in awful financial situations. Last week a couple came to me with personal unsecured debts of more than €80,000. They have a mortgage of more than €300,000, their debts total approximately €400,000 and the household income is approximately €30,000. There are so many relevant issues that must be dealt with. MABS is involved and is trying to help them. Even after teasing out and working through all the issues, there will be legacy problems for these people and they fully accept this.

The issue we have highlighted through this Bill is only one part of a multifaceted approach that will be necessary to solve the overall problem of personal indebtedness to the greatest possible extent. The personal insolvency Bill that the Government is due to publish next month is of critical importance in this regard. I welcome the comments of the Taoiseach on the Order of Business today. He said he hoped that legislation could be enacted in the early autumn. That may be ambitious but it is what we should aim for. Thousands of people will need to avail of a non-judicial debt settlement system. It is needed urgently and I hope the Government prioritises it and brings it forward as quickly as possible.

As several speakers pointed out last night, there are legitimate providers in the industry we have highlighted and there is a role for debt advice in Ireland. While MABS provides an excellent service and it is appropriate that clients of debt advisory firms should be aware of the service it offers, other service providers can play a role in meeting the needs of distressed borrowers. Some customers may consider they need the ongoing hands-on support a debt adviser can offer and, in some cases, by keeping a client out of court the debt adviser may offer a cheaper overall solution for the consumer. However, the debt advisory firms which are playing by the rules and following best practice - it should be acknowledged that there are some such firms - are being put at a disadvantage by rogue operators within the industry which has mushroomed, as Deputy Michael Healy-Rae stated, following the economic collapse. This created an opportunity for the sector to develop and it has done so, creating major problems and issues for the consumers of its services in the process.

A number of United Kingdom companies are offering services in Ireland, despite not having a presence in the country, and have little understanding of the market here and the needs of Irish customers. This highlights how vulnerable and exposed consumers are when they avail of the services provided by firms in this industry.

In preparing the Bill and for the debate we spoke to the more reputable providers in the debt advice and debt management sector and they wanted regulation. They support the need for regulation and set up the Debt Management Association of Ireland, the establishment of which was welcomed by the Irish Banking Federation. The association has highlighted some of the key areas and has its own code of practice dealing with matters such as training; marketing; advertising; the information to be provided for customers; contract terms; customer accounts and so forth. However, in general, self-regulation is not sufficient and the entire sector must be brought under the supervision of the Central Bank.

I acknowledge the point made by the Minister that some firms which are administering payments are governed by existing legislation, but many others are not. It was only following the collapse of Home Payments Limited in August last year that the Central Bank conducted a study of the area and found many firms which should have been regulated and subject to authorisation by it were operating without such authorisation. They will now be brought under its umbrella.

The case of Home Payments Limited has been well documented in this debate, but there are others. Dunne & Maxwell, trading as yourmoney.ie., had been operating for seven years, promising on its website that it could reduce people’s debt by 50%. In January, in an unprecedented initiative, the Central Bank wrote to hundreds of customers of Dunne & Maxwell to strongly recommend that they suspend all payments to it immediately. The letter was unusual in its directness. It informed people that they should consider contacting the Garda if bill payments to be made on their behalf by the company were not up to date. The company disappeared overnight. This proves that when the shadow of regulation falls on many of these firms, they do not stand up to scrutiny and fold up their tent. For the customers concerned, it may have been the best outcome and may well have prevented some of them being burned in the way the customers of Home Payments Limited had been burned.

Deputy Eamon Ó Cuív has rightly raised the issue of the qualifications of those who can legitimately provide this service in the new regulatory environment which will be created as a result of the Central Bank Bill. We support the need for those involved to have proper professional financial qualifications because they are being entrusted with people's money and giving advice to individuals who may not have the wherewithal or skills to deal with their financial problems. The least these customers deserve to know is that such advisers are appropriately qualified and competent to do the job they are being taken on to do.

The issue of fees was well vented in the debate on both evenings and a number of examples were given. I learned about a case today in which a customer had paid €1,800 in fees alone in the first three months of engagement with a debt management firm. That is an example of the abuse taking place in the absence of regulation. Therefore, we need to see such regulation as quickly as possible. In the Bill we are calling for a code of practice to be published by the Central Bank within a defined period after the Bill is enacted.

The Minister of State, Deputy John Perry, set out last night a comprehensive response on behalf of the Government and rightly divided the sector into three broad areas. The first encompasses firms which are not administering payments but providing debt management advice. The Central Bank estimates that there are 30 to 40 such firms. The second category includes budgeting firms which administer payments on clients' behalf. Apparently, there are only two or three such firms remaining. The third category includes debt management firms which offer to negotiate with a client's creditors to secure a write-down or a better deal. They, too, can administer payments. It is estimated that there are about 20 such firms. Approximately 60 firms have been identified as being in the marketplace providing services.

In the context of the Personal Insolvency Bill due before us shortly, it is all the more important that regulation is introduced in this sector because far from that Bill sounding the death knell for the industry, it will give it an enormous fillip because it will present an opportunity to guide vulnerable consumers through the new insolvency regime and advertise the potential outcomes in an effort to attract new customers. The Government should ensure, therefore, that the sector is strictly regulated in advance of the Personal Insolvency Bill being enacted in the coming months.

I welcome the positive approach adopted by the Government to this legislation. From the perspective of Fianna Fáil, it does not matter which Bill leads to the outcome we all want to secure - the regulation of those providing services for consumers in this industry. It is all about protecting consumers. What we have done in this debate is use the opportunity afforded by Private Members' time to put the spotlight on an issue that is unquestionably and indisputably of concern to a growing number of people. If the problem is not addressed, it will affect many thousands more in the years ahead. That is the reason we have used Private Members' time to put the spotlight on this issue and pressure on the Government to complete the process it has started. It is welcome that it has been started. I will bring the expertise we have gained in conducting research and our preparation of the Bill to bear when it comes to discussing Committee Stage amendments to the Central Bank Bill.

Question put and agreed to.