Personal Insolvency Bill 2012: Second Stage (Resumed)

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

Deputy Michael Healy-Rae

I appreciate the opportunity to speak on this very important Bill and I thank the Technical Group for allowing me some of their speaking time to talk on the matter.

The reform of our insolvency laws is long overdue. When we look back on the way we have dealt with debt and people who are in a state of crisis we can see that it was very much a requirement for new legislation to be brought before the House.

Broadly speaking, I welcome the efforts of the Government, and I thank and compliment the Minister and the people working in the Department for the work they have done. I would not say that the Bill goes far enough. I can see inadequacies in the Bill and problems that may arise with it but at least a serious effort is being made at reform and change. This legislation should have been brought before the House by the previous Government and it should have been brought here earlier in the term of this Government but I welcome it.

The change in the bankruptcy period from 12 years to three years is most welcome. Unfortunately, many good business people run into financial difficulties and must declare bankruptcy. They always say it is a very good man or woman who goes down and comes back up again, and everybody in business realises only too well, especially those with a small business or those struggling to keep people in employment, that they can run into difficulties. It is welcome that such people will be given a second chance but we must ensure that the people who are owed money are offered every protection possible as many small businesses are going under because they are unable to collect money that is properly owed to them.

The extent of the crisis in Ireland is frightening. In terms of people's personal finances, I have always stated that the most important financial institution in Ireland is Mom's purse because everything depends on what is in Mom's purse on a Monday, Wednesday, Friday or Sunday. If Mom's purse was okay, everything in Ireland was okay but, unfortunately, in recent years the amount of money going into Mom's purse every week has been growing smaller and smaller, and that is the most important financial institution in the country.

What young people are going through at present is frightening and it is affecting their physical and mental health. In that regard I want to thank and compliment the different agencies, including MABS and the Citizens' Information offices, which do untold good work in helping people with their finances. There are MABS offices throughout the country. In my role as a member of the Citizens' Information Board I was glad to be one of the first people to suggest that we should have a new MABS office in the town of Killarney because its growing population and those of the surrounding villages and parishes more than entitled it to have an office of its own. I welcome the work that has been done to bring that to reality.

I take this opportunity to compliment charitable associations such as the Society of St. Vincent de Paul, which is doing untold work in the background in providing vital assistance. When families are in debt and have difficulty getting social welfare there is an interim period in which they do not have money to put food on the kitchen table. Those are the cases that I see first-hand. I do not want to mention the different towns but I compliment the Society of St. Vincent de Paul and other such organisations for the excellent work they do every day in the towns in my constituency in both south Kerry and north Kerry. Their volunteers give freely of their time either by fund-raising or by distributing fuel, helping people with groceries or helping them to pay for ESB bills on which they have fallen behind. Their work is to be appreciated by every one of us.

I said at the outset that I have problems with the Bill. I am worried that some people may be left behind. Will our banking and other financial institutions deal fairly with the people who, to be honest, in many cases they led up the garden path, so to speak? We must be clear about that. Young people went into their banks looking for, say, €150,000 and were persuaded to leave with €200,000 or €250,000. They were told it was okay to bundle other loans, be they car loans, loans to carry out renovation works or anything else. They were even told they could include money to be used to go on holiday in their bundled loan. That was ridiculous, irresponsible and out-of-control banking, yet these are the people dealing with the customers who are put to the pin of their collar and facing desperate circumstances every day of the week in trying to repay these massive debts. That is the reason I am fearful that the banking institutions will have a veto when dealing with people. Will they be as fair and lenient in dealing with their customers now as they were when they were over-generous in giving out the money in the first instance?

We all have our own horror stories of individual cases of people being led up a merry path by those working in the banking institutions. I do not want to tar everybody with the same brush because very fine people work behind the counters of banks every day but, unfortunately, they are facing the brunt of it in terms of actions taken not by them but by their bosses and people higher up along the chain. In some cases the clerks and other people dealing with the customers on a daily basis are being wrongly blamed for the reckless banking by some of our banks and some of the people working in them.

I was not happy with comments made last week by the Minister, who told people they would have to sell their bits and pieces of jewellery and so on. It was not helpful to tell people that they should sell off items such as their wedding rings. That was not a sensible or prudent thing for a Minister to state. I say that having already complimented him on the work involved in preparing the Bill and going as far as he has. However, that was not a prudent thing for a Minister to say. People are in such dire straits that they want sensible talk from Government and helpful suggestions, not to hear such nonsense.

To return to the bones of the Bill, I again compliment those who ensured the Dáil would sit later than usual to process the Bill before the recess. If the Bill is to be helpful there must not be undue delay with it. I thank and compliment FLAC, the free legal advice centres, and Chartered Accountants Ireland who have raised concerns about the fact that there is no outline of a code of conduct audit or disciplinary processes. They have stated that the Oireachtas must address each of those concerns during the legislative process with the Select Committee on Justice and Equality in the vanguard.

I compliment FLAC on its helpful comments and on the initial submission it made that was very well put together and most helpful and informative. I wish to pay particular attention to one aspect of its submission, namely, that it expects MABS to continue to be very busy in terms of the core work it carries out, being the first point of repair for indebted people. It stated that MABS must be properly resourced to carry out the vitally important work of income maximisation and negotiation of affordable repayment of creditors. I welcome the fact that it made this important point. FLAC also went on to say that the extent to which MABS will be involved in proposing plans under the legislation remains to be seen but, regardless, MABS and other groups working for and on behalf of indebted people will play a critical role in helping people to understand and evaluate their options. In the context of the latter point I am concerned at how the banks and other lending institutions will deal with the cases of individual customers and will direct them to the appropriate services. Given the complexity of the legislation, FLAC states that it is also evident that comprehensive legal advice will be necessary before debtors commit themselves to availing of their potential options.

The Bill states that a period of three years will be required before a person can be released from a state of bankruptcy rather than the previous 12 years. Since the downturn in the economy we saw the ridiculous situation where we exported the problem in that some of the big players in terms of financial indebtedness who went to England were able to come back and operate again in a matter of 12 months. Exporting such problems to England or Scotland is not the way to proceed. Time will tell, but the Government did the correct thing in setting a duration of three years. A year might have been too short and anything more than three years would have been too long because while those concerned had financial problems, if they are going back into business we want them to do their business in this country rather than setting up in England which would mean we would lose out on the jobs they might help to create. Not everyone has the wherewithal to create jobs. Such people are few and far between. That is why we want to create a situation where those people can come back, start up their businesses again and begin to create sustainable jobs. If they did it before, I hope they will be able to do it again. We do not want to lose the work ethic of some of those people to other parts of the world.

I have problems with the Bill and we will see which way the vote will go later tonight. Overall, it would be helpful for the Bill to go through, which it will, but I will have problems voting for it because it does not go far enough. I compliment those who work so hard every day on a voluntary basis to help people to try to overcome the difficulties in which they find themselves. We must ensure that people's mental health is protected. I am aware from my clinics of the pressure debt imposes on young families in particular. They were never under such pressure. Our forebears were reared with no money. They had no money but at the same time they did not have the bills or the indebtedness. That is the big difference between the past and the present. In the 1950s we had mass emigration from this country. The people who left did so because there was no work and no money but they were not up to their eyes in debt in the way people are today. There is a mental pressure on people today that did not exist previously. This is unprecedented. We are in uncharted waters. Young couples are starting out in life with young families that are literally buried underneath an avalanche of debt. We must ensure that the State does everything to protect those people.

I have always stated that just because people are heavily in debt does not mean they are lesser people. It does not mean that they do not have to be treated with respect. I am adamant that the banks and lending institutions must treat their customers properly. Just because they are in debt does not mean they can treat them in a disrespectful way. I have seen high-handed actions by repossession companies. Famous cases were highlighted in the Chamber by Deputy Mattie McGrath of people going out in the dark of night repossessing machinery at the orders of banking institutions. In some instances they even got so carried away they repossessed and took machinery on which not a penny was owed; they took the wrong machines. That is what happens when ones goes out in the middle of the night. Such behaviour must not be allowed. If people are in trouble with debt, it must be dealt with in a proper, respectful fashion. The people who incurred those debts were enticed to do so. In many cases they were only trying to better themselves, create employment, improve family farms or in the case of contractors they were trying to buy machinery to get more work. If things went wrong it does not give people the right to go out in the middle of the night under the cover of darkness to act in a totally improper manner. I hope, particularly because of the cases highlighted in this Chamber, that such a scenario will not happen again. It should not be allowed to recur because were such carry-on to be condoned or allowed, it would give rise to a bad situation. Moreover, horrible things could happen because of it, as tempers would be high and one would not know what might happen. As no one wishes to see such situations develop, it is better for the banks, the lending institutions and so on to be calm and thoughtful when dealing with their customers, that is, the people who they enticed in the first instance to bury themselves in this sea of debt. It is to be hoped such occurrences will never happen again.

I spoke about what I called the biggest and most important financial institution in the country, namely, Mom's purse. Over time, it is to be hoped these young struggling families will find themselves in a position in which the weight and worry bearing down on them at present will be lifted and the level of indebtedness in which they find themselves will be reduced. Members have seen the bailouts for the banks and all the big people. Where is the bailout for the young couples who are buried in debt? Where is the assistance for them? Hopefully, such assistance will start in this Bill but it must go further. In addition, the Government must go further to ensure that all possible assistance will be made available to the people concerned.

An Leas-Cheann Comhairle

The Deputy is way over time.

Deputy Michael Healy-Rae

I again plead with the Minister that people awaiting important payments should receive them as soon as possible and every effort should be made in dealing with those applications.

Deputy Dominic Hannigan

With the permission of the Leas-Cheann Comhairle, I wish to share my time with Deputy Alex White.

I welcome the opportunity to speak on this long-awaited legislation. While the Bill is a complex item of law, it has the ability to change the lives of many citizens for the better in a way other Bills cannot. If Members make this Bill as good as it can be, it has the potential to help families sleep at night. This is one of the recurring themes to come up each time I canvass or speak to people in my constituency of Meath East. Many people are afraid they will lose their homes or personal property because of debt and this is a huge concern nationwide. Such debt can range from a credit union loan to credit card debt to large negative equity mortgages. People ask me what the Government will do about it and when will the Government do something to help them out. I believe this Bill will help to do something positive for them. It will give people a way of dealing with their debt, which they have not had the opportunity to do heretofore. Each settlement arrangement enables the debtor to go through a step-by-step process that can result in him or her coming to an agreement with his or her creditors to pay off the outstanding debts over a longer period and this is to be welcomed.

However, I have some concerns in that some steps that must be taken will be extremely complicated, which is regrettable because it is essential to make this process as easy as possible for everyone to use and understand. People who are already facing serious levels of debt have enough to be getting on with without additional stress and pressure from trying to work out precisely how they should work their way through this system. As all Members are aware from their experience of helping people through the difficult, archaic social welfare system, complicated systems only add to people's frustration and sense of despair. This new legislation provides the opportunity to develop a system that will not do this but will help people in a sensible, coherent and easily understandable way. Let a system be created that is easy to use, fair and transparent for all to see and the mistakes that have been made in the administration of some social welfare schemes should not be recreated.

Another issue that has been raised with me is the possibility of people who acted as mortgages brokers during the boom times now being hired to act as the intermediaries between the insolvency service and debtors. This possibility was first reported in a Sunday newspaper many months ago and from speaking to people afterwards, I am aware it was greeted with mixed feelings. I remember one of the first cases I dealt with after being elected was for constituents who approached me about their mortgage debt problem. They were given a mortgage ten times their salary to buy a house in Ashbourne and are now in serious trouble trying to make ends meet and trying to keep up with their repayments, while at the same time trying to maintain a decent standard of living. While this Bill hopefully will help them, the situation is an example of the reckless lending that has led to the urgent need for this legislation in the first place.

People must trust this new service and if they think the people running it are the same individuals who recklessly lent them money five years ago, the Government might have a problem in gaining the public's trust on this issue. This is a point on which I wish to expand on further. The public must have faith and trust in this measure. They must trust that it will help them in a fair and equitable manner. While a new service can be created, were the first few cases to go through it not to be dealt with appropriately and fairly, the danger would be the people's trust would not be gained in the first instance. As Members do not wish to create a folly, it is incredibly important to listen to the concerns of groups and individuals who are making comments on the settlement process at present in respect of what are the potential problems and how it could be made better. They must be listened to and their concerns must be taken into account and responded to through the Committee State debate. Moreover, Member should make changes to the legislation when so doing would make it better. It has been stated by many that this Bill is the most radical solution to personal debt that has been tried by a country. If this is the case, Members must make sure it is easy to access for those who need it. If they can manage that, they can give people the opportunity to get back on their feet in order to move forward with their lives.

Deputy Alex White

I am pleased to have the opportunity to contribute to this debate on the Personal Insolvency Bill 2012. As Deputy Hannigan noted, it is complex legislation and is a vital element of the response of the Government and the Oireachtas to the broader issue of debt and debt resolution faced by so many people and which is faced at a macro level by the economy. As Deputy Hannigan suggested, it deserves close scrutiny. However, I wish to begin by reflecting on the process associated with this legislation. As I stated, it is a highly complex Bill that is a response to a real need. In addition, part of the context of the Bill is that historically, Ireland's bankruptcy laws have required reform for many years or decades. It was only when we entered into the crisis that in many ways we had no choice but to address the shortcomings and flaws in our insolvency regime.

It is important to reflect on the point that this legislation has had the benefit of a considerable amount of debate and discussion, which is only right and absolutely proper. However, one often hears about the process in the Houses of the Oireachtas and the Dáil and the relationship between the Government and the Parliament. The point is made, albeit perhaps more often in television and radio studios than anywhere else, that the Government determines what is the legislation and what is the law and there is little or no participation by Parliament or anyone else. Whereas that criticism sometimes is well made and well taken, this Bill constitutes an example in which there has been genuine participation and input by Members of the Dáil and the Seanad. Moreover, there has been an increasing number of such examples over the short lifetime of the present Administration thus far. Members should not forget the heads of the scheme of this Bill were published in January 2012 and the Bill has had the benefit of pre-legislative scrutiny in the Joint Committee on Justice, Defence and Equality. This is an initiative I am happy to state the Government has been developing in respect of legislation across the board. As Chairman of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, I am pleased to have been involved in a similar type of process in respect of the protected disclosures legislation, which is another element of the Government's reform programme. It allowed for that kind of input; not just of committee members, but also of the various stakeholders, NGOs and interested persons who had an interest in how the legislation should look. This delivered on an undertaking by the new Government to ensure that there was scrutiny prior to the publication of legislation. That is one of the shortcomings that we have had in the past as parliamentarians. Legislation is published and to a great extent, much of the work has been completed at that stage and it has been relatively difficult in the past to persuade the Minister to persuade the Government to look at possible changes. However, I commend the Minister for allowing this Bill to breathe in the committee. The Minister has had the benefit of the responses of the various members of that committee and the representatives of the bodies invited in during the course of that hearing. It is especially important for a Bill such as this.

There are many citizens who are interested in this Bill and who are affected by our current insolvency regime. There are also non-governmental organisations that have had a very useful input into the Bill already. They may not have been entirely ad idem with the Minister on all aspects of what is proposed, but at least they had an opportunity to have an input prior to the publication of the Bill. I know that their voices will be listened to in the next few months when the Bill is on Committee Stage.

The banks and the credit institutions have also been consulted. When people reflect on that fact, they are critical of the idea that the banks would have an input into this Bill. There is no point in believing that we can exclude the banks and the lending institutions from an assessment of the proper balance between the needs of debtors and the position of the creditors and the lending institutions. We in the Parliament and the Government in particular have to establish what that correct balance should be. I notice that in the Bills digest prepared by the very helpful Library and Research Service, the objectives of the Bill from an economic viewpoint are set out. There are four such objectives and it is written in very helpful but perhaps rather stark, cold economic language, although it makes sense. The first objective is to allow sufficient repayment to creditors that lenders are willing to lend, if not to the insolvent debtor, at least to others in the economy. The second objective is to reduce the disincentive to work for insolvent debtors. The third objective is to prevent creditors from harming debtors by racing to be the first to collect. The final objective is to provide debtors with partial consumption insurance, which means if a person reduces outstanding debt, it frees up cash to be spent on consumption in the economy.

On Second Stage we often talk about the philosophy of legislation, rather than its detail. Part of what we need to do is to have regard to the viability of the lending institutions. We should say that clearly. We are parliamentarians and representatives and we have seen in the community many pressurised situations faced by citizens. Our principal focus is on the citizen, the debtor and the person who is in financial difficulty. Nobody should apologise for that being our principal focus, but we must answer other questions. What do we say about the lending institutions? What do we say about the viability of the lending institutions? There is always the temptation to say that we use every opportunity to punish the lending institutions and God knows they deserve punishment for many reasons outlined in the House. However, do we want to continue to have viable lending institutions? That is to say nothing of the fact that the particular institutions we are talking about are owned by the taxpayer; therefore, there is an additional reason to ensure they are viable. I do not make that point to take away from the necessary focus on the dilemma and the situation faced by debtors. We should be looking to ensure we have the best possible protection for them. The three stage process outlined in the Bill seems appropriate to me, but there is no point ignoring what we think the banks should be able to do in the future.

There has been much talk about the veto and there is some disagreement as to whether the voting powers, percentages and so on outlined in the Bill can be described as a veto. There is the possibility for lending institutions to block agreements in certain circumstances. For that reason, the attitude taken by the banks in the future will be absolutely crucial to the success of this legislation. It is very clear that the banks will be required to take the most flexible and sensitive approach to these debtors and the agreements and settlements proposed.

The chief executive of Permanent TSB was before the finance committee this afternoon. We look to what people do with greater interest than listen to what they say, but if he is to be believed on what he said, I thought there was quite a flexible, sensitive attitude being displayed by PTSB on this Bill. However, it will be actions that will speak rather than words. All eyes will be on the banks and the lending institutions. There will be a very high expectation that they will come across for the working out of this legislation for individual debtors and proposals. I know that all Members will want to see that addressed properly.

I welcome the Bill. Although we have had this pre-legislative scrutiny, much work has been done. Considerably more work needs to be done to go through the Bill line by line. It is enormously complex. It is a very important reforming Bill introduced by this Government, and is one of a raft of laws brought forward to address the crisis and the impact of the crisis on ordinary citizens. I congratulate the Minister once again and wish the legislation well in the course of its passage through the House.

Deputy Tom Fleming

I cautiously welcome this Bill, which is long overdue. The basis for the Bill is the recommendation from the Law Reform Commission, published in December 2010, which outlined the reform of the legal system on how our society manages and deals with problems of indebtedness. The recommendation of the LRC makes sense and represents a breath of fresh air in an area of law that has long been forgotten.

The main thrust of the recommendations are contained in the insolvency Bill, but there is a need to tease out many issues in it to figure out the best options available to citizens when the Bill finally becomes law. I welcome the fact that the Bill will permit those who no longer service the debt to seek a remedy outside of the courts through the non-judicial route. These trustees will play a crucial role as a go-between for the mortgage holder who applies for one of the non-judicial options and the various creditors. There should be penalties and sanctions to ensure the personal insolvency practitioners remain 100% impartial in their dealings with clients. How will the Government ensure these practitioners remain independent?

The proposal to reduce the term of automatic discharge from bankruptcy from 12 years to three in the case of a judicial petition for bankruptcy is a progressive step. The new mortgage arrears support unit should be integrated with the money advice and budgeting service, MABS, whose existing structures are invaluable. Such a move would also ensure more one-to-one contact because MABS has the personnel available with the required experience. It seems that with the proposals for the new unit, the emphasis will be on electronic communications with uncertainty regarding staffing levels and the unit's staff being available to meet with mortgage holders in difficulty.

A new consultation paper on reforming the credit reporting system argues the State should take control of it. If and when the new credit register comes into force, how will people be protected from this new State body forcing people to pay non-credit bills such as property taxes and the like? Could the State use the new system to blackmail people to pay their property taxes against a threat of a bad credit reference?

How will people be protected against unscrupulous banks which may unfairly reject their payment plans? The banks and financial institutions will have to show compassion. The veto option for the banks and financial institutions will have to be amended. All the Bill's provisions must leave ample flexibility to ensure citizens are engaged in an affordable and working debt resolution process.

Minister for Justice and Equality (Deputy Alan Shatter)

I thank all the Deputies who contributed to what has been a very lengthy Second Stage debate. There were many and positive contributions spanning across a range of issues in respect of the legislation, in particular with regard to the serious difficulties many of our citizens are confronted by with regard to indebtedness. It is clear from the various contributions made by Members that they are often at the forefront of hearing of these difficulties and seeking ways to resolve them. n recent years every Member has had to deal with constituents under substantial financial pressure who cannot see any light at the end of the tunnel.

I am pleased to present the Personal Insolvency Bill which is significant and legally complex legislation providing for the comprehensive reform and modernisation of our insolvency law and practice. It provides for new and more flexible options to address the circumstances of insolvent debtors. It addresses in a balanced and proportionate way the obligations of debtors as well as the rights of creditors, having regard to the financial reality of individual circumstances. It will incentivise both parties to come to an agreed solution.

The Bill's purpose is to provide for the reform of personal insolvency law and introduce three non-judicial debt resolution processes, namely, the debt relief notice, the debt settlement arrangement and the personal insolvency arrangement. To protect the constitutional rights of all concerned, the Bill makes provision for enhanced oversight by the Circuit Court or the High Court in cases where the debts concerned exceed €2.5 million.

Deputies will appreciate reform of our personal insolvency regime is not a simple task. It is a very complex area of the law and one in which the consequences and implications of new policies need to be carefully assessed. We must get the balance right between the legal rights of the various parties involved. The system has to be fair to both creditors and debtors alike. Otherwise, we risk making worse a situation which is already difficult for the parties concerned. In this debate it seems it is always assumed creditors are financial institutions. The reality is that in many instances creditors are ordinary individuals owed money by other individuals in financial difficulties. Often, it also puts them into difficult financial circumstances, resulting in them being weighed down by debt. It is extraordinary how little of that aspect was addressed during the debate, with the sole focus instead being on financial institutions. The debt resolution process must provide solutions which are appropriate to the level of an individual's indebtedness and based on his or her ability to make payments.

A great number of Deputies contributed to the debate; certainly too many to be able to refer to every individual point raised. I hope those Deputies whose contributions I do not mention specifically will forgive me for not doing so. There are some Deputies' contributions to which I do intend to refer specifically. The issue of the bank veto was raised by many of the Deputies who criticised the Bill as giving an effective veto to banks which would impact on personal insolvency arrangements and debt settlement arrangements. This is a somewhat simplistic reasoning and misses a major point. While there is no denying that creditors can veto the reaching of a personal insolvency arrangement through the weighted provisions with regard to voting at creditor meetings, the new measures taken by the Government also give the debtor a veto. This comes in the form of a significant change to the bankruptcy law. This change has been gainsaid by some Members as not being a balancing factor. I very much suggest, however, it will be in the future operation of debt resolution and will be a very particular and important balancing factor to the benefit of debtors.

We have seen in recent times the so-called bankruptcy tourists travelling to the UK to be declared bankrupt there because bankruptcy in Ireland has been so harsh. By reducing the term of automatic discharge from bankruptcy from 12 years to three, it greatly strengthens the hand of debtors in their dealings with the banks. If a creditor refuses to engage fully and fairly where debts become unsustainable or refuses to agree a responsible personal insolvency agreement, then there is the option for the debtor to file for bankruptcy and, if successful, he or she can be relieved of the unsustainable debts within three years. The reality is this legislation will force financial institutions to take a more realistic view of how to address issues of unsustainable debt in circumstances where substantial sums are owed and individuals are simply unable to pay them. This seems to be a matter some Deputies are unable to grasp.

Deputy Mattie McGrath

There is not a hope of that provision working.

Dáil Éireann debate - Wednesday, 18 Jul 2012

Personal Insolvency Bill 2012: Second Stage (Resumed)

Dáil Éireann debate -
Wednesday, 18 Jul 2012