My view on the Bill is that it is unpalatable but necessary. Home ownership, as we know, is particularly strong in this country. It is something of which we should be proud. The figures are quite interesting. Our repossession rate is 0.25%, as opposed to figures we heard from the Secretary General of the Department of Finance who said that in the UK it is 3% and it is up to 4% or 5% in the US. Our low rate of repossessions, notwithstanding the recent lacuna, is something of which we should be proud. Unfortunately, I recognise in the Bill that if lenders cannot call on the security against a loan that they will do some bad things, ultimately, for citizens as the price of loans would go through the roof.
The task before us is to ensure that the lacuna in the law is fixed and that repossessions are brought back in but that they are always a last port of call, that the process of repossession is as compassionate and understanding as possible and that it protects the borrower. Obviously, there is significant asymmetry in power between a bank, armed with lawyers, accountants and so forth, negotiating with, usually, very distressed borrowers. There is an enormous imbalance of power and we need to do everything we can within this Bill to make sure that the relationship between borrower and lender is rebalanced in so far as possible.
I welcome the section of the Bill which gives judges the discretion to refer a borrower and lender to the personal insolvency arrangement process rather than go through with repossession. That is a very welcome change and I thank the Minister for including that provision in the legislation.
I would like to cover six issues in my contribution today. There are six additional opportunities presented by this Bill and I will propose solutions against five of those. On one issue, I am afraid the Minister will have to find a solution himself because I do not know what the answer is to it. The first issue relates to the veto that the banks have under the personal insolvency arrangements. The Minister knows that I do not believe the banks should have been given a veto but they have one and my sense is that it could be abused in repossession cases. Let us say a bank moves to repossess a home. It goes before a judge who says that he or she is not comfortable about granting a repossession order because he or she believes that an agreement could be reached via a personal insolvency arrangement. The judge then directs the bank and the borrower to go through the personal insolvency arrangement process. The bank can agree to do what the judge suggests, in the knowledge that it will eventually apply its veto and that it does not really matter what any personal insolvency practitioner might come back with. The bank knows it has a veto, complies with the court order but returns to court at a later date and applies that veto. There is a danger that the veto could be abused.
In that context, I ask the Minister to examine the possibility of including a provision whereby when a case comes back before the judge and the bank issues a veto, the judge can take evidence from the personal insolvency practitioner, as an independent, expert third party, and, ideally, from the borrower too. Should the personal insolvency practitioner give evidence to the effect that the bank is not co-operating with the personal insolvency arrangement and is exercising its veto despite the fact that a structure has been put together which that bank or other banks have accepted in other cases and that the bank is not co-operating with the spirit of the legislation, it would be very useful for the judge to be able to order further adjournments or keep instructing the bank to go back to the insolvency arrangement process. As long as the personal insolvency practitioner was not satisfied that the bank was co-operating - recognising that there may be a repossession at the end - the judge could continue to direct co-operation with the personal insolvency arrangement process. It would be very useful for the judge to know whether the lender has co-operated, has turned down reasonable offers or turned down offers which it or other lenders have accepted in other cases. That would be very useful, evidence-based opinion.
The second issue relates the bank's behaviour during the Mortgage Arrears Resolution Process, MARP, and whether it has adhered to the code of conduct on mortgage arrears, CCMA. My reading of the proposed legislation is that the bank's conduct within the MARP and whether it has adhered to the CCMA is inadmissible in repossession proceedings and does not matter. We would all like the banks to adhere to the CCMA but it is a voluntary code and ultimately the bank can decide to enforce the security, enforce the contract and take possession of the house. We know that there are pretty onerous requirements placed on the borrower to co-operate with the MARP and that a bank, if it deems a borrower to be unco-operative, can designate a borrower as such. In such circumstances, there is a chance that the borrower will not have access to the provisions of the personal insolvency legislation. I would like to see a situation whereby the behaviour of a bank, up to the point of the repossession hearing, can be taken into account by the judge. Ms Noeline Blackwell from the Free Legal Advice Centres, FLAC, suggested recently that the Central Bank code of conduct should be converted to a statutory instrument. If we could find a way whereby, in a repossession hearing, if a lender has clearly not co-operated with the spirit of what the Minister and the Government intends, then that could have some substantive influence on proceedings, that would be very welcome.
The third issue is, I hope, just a technical one. The Bill provides that a judge can grant two months for borrowers and lenders to reach agreement under the personal insolvency arrangement process. The guidelines given by the Insolvency Service of Ireland, ISI, refer to 70 days. In order to engage with and set up a personal insolvency arrangement, a personal insolvency practitioner must first review the case, including the financial statements. The practitioner must then submit an application for a protective certificate to the ISI and from that point on, he or she has 70 days to develop a proposal, have it voted upon by the creditors and submit it to the court for assessment. The practitioner must obviously ensure that 65% of the creditors are in agreement with the proposal as well as carry out other tasks, such as recording meetings and so forth. The ISI itself has said that personal insolvency practitioners need 70 days to do their work but this Bill says two months. I am hoping this is just a technical timing issue. I would like to see the practitioners being given three or four months rather than 60 days or two months. If the timeframe could be extended from two to four months, that would provide some much needed time. I hope the Minister will give this proposal favourable consideration.
The fourth issue is a difficult one and relates to costs. Let us go back to the court, where a family is having their home repossessed. They clearly have no money or at least insufficient money to pay their mortgage or even a restructured version of the mortgage and hence the repossession proceedings. The judge can order them to engage a personal insolvency practitioner to put together a personal insolvency arrangement with their lender or lenders. The family has no money or certainly has no spare cash. The market will obviously decide how much personal insolvency practitioners will cost but we are hearing estimates of between €5,000 and €7,000. However, there is no direction regarding who must pay for that. We could very conceivably have a situation where the borrower tries to find a personal insolvency practitioner but the bank refuses to pay for that, except perhaps as part of a restructuring of the loan. The personal insolvency practitioner sees that the borrower has no money and may not be convinced that the borrower will succeed in getting a restructured arrangement, under which he or she will be paid. In that context, it is quite conceivable that the borrower will not be able to find a personal insolvency practitioner to do the work or maybe one or two practitioners who cannot get work elsewhere would agree to take on the case for a lower fee or on the basis of an agreement, but in the context of the market, the borrower would probably not be getting the best available service.
I would like the Minister to consider, in cases where a judge directs the parties to engage in the personal insolvency arrangement process, finding some other source of funding. I would like the banks to be that source of funding, obviously, but perhaps it could be done through some of the civic society groups such as New Beginning, for example, or through the Money Advice and Budgeting Service, MABS. I know that MABS is dealing with debt relief notices but I am not convinced it will be engaged in the personal insolvency arrangement process. Some method should be found whereby the banks or the Government, through service providers in the community, can provide the fees to the borrower. I ask the Minister to examine that option before Committee Stage and consider introducing an amendment to the Bill to ensure that an inability to pay does not exclude very distressed borrowers from the personal insolvency arrangement process. Such an amendment would be very welcome.
The fifth issue is the one for which I do not have a solution because it is very complicated. The scenario is one where a buy-to-let property and a family home are connected and the repossession is coming about not because of the family home, but because of the buy-to-let property. This is a pretty standard case where there is a family home and the borrower has enough income to pay the mortgage. The mortgage may in fact be ten or 15 years into payment. The borrowers made an investment, like so many people, for a pension or other purposes, and bought a single apartment. That apartment has collapsed in both value and rental yield and, as a result, the bank moves for possession of that property. However, the property is in negative equity so the bank also moves for possession of the family home which, from a financial perspective, makes sense because the bank has security on the family home and the buy-to-let property.
It is a perverse outcome for somebody to have a solid home which he or she can continue paying the mortgage for but as an investment has gone wrong, and the person would lose both. I do not know the solution and it is a tricky issue but I would like the Minister, his officials and the committee to think about how to stop this happening.
There is an analogy in the private sector where viable businesses in towns around the country bought one or two investment properties which have since tanked. Businesses may be shut down as a result. There is probably reasonably broad agreement in the House that we should not shut down viable businesses because they made one or two failed investment decisions about property. We are trying to ring-fence viable businesses.