That leave be granted to introduce a Bill entitled an Act to amend the Personal Insolvency Act 2012 to provide clarity with regard to certain applications before the courts.
I am pleased to have the opportunity to introduce the Personal Insolvency (Amendment) Bill 2017. In 2012, when the original personal insolvency legislation was passed, this was touted as a game-changer for personal insolvency in Ireland. Where the family home was involved, an independent personal insolvency practitioner, PIP, would propose a personal insolvency arrangement, PIA, and this, in theory, would offer the best prospect of protecting the family home.
At the time we in Fianna Fáil pointed to a fundamental flaw in the legislation. By offering the lender an effective veto over any proposed solution, the legislation clearly placed the power in the hands of the lender. We were told that removing the veto would be unconstitutional. The bank veto, along with the banks' unwillingness to co-operate fully, ensured this new system was going to be long and cumbersome, and this has proven to be the case. Some 40% of all applications for a PIA have either been vetoed or the protective order has expired. Recently, the head of the Insolvency Service of Ireland, ISI, informed the justice committee that many lenders are not fully co-operating with this process. After mounting political pressure from Fianna Fáil and others, the law was changed in 2015 and this offered a way to challenge the bank veto in the courts by way of an appeal mechanism. The 2015 Act intended to offer an appeal mechanism whereby the borrower could challenge the veto in the courts but this appeal system is clearly broken. Since the creation of section 115A, some 632 appeals have been lodged and nearly 70% of these cases have yet to be concluded. Therefore, not only is the personal insolvency system long and cumbersome, so too is the appeals process.
It is because of section 115A that I am introducing this amendment Bill today. In September of this year the Dublin Circuit Court made a crucial decision that has thrown the entire personal insolvency system into further turmoil. Under section 115A of the 2015 Act, it was decided that the debtor had no legal authority to appeal a bank veto in the courts and that appeals had to be taken in the name of the PIP. Nearly a month later the High Court, in a similar case, came to the same conclusion. It is entirely unfair and unreasonable to expect a PIP to take a very significant personal risk when proceeding with a case in his or her own name. This has had a major effect on the appeal mechanism. Appeals have been stalled as PIPs have been left completely in the dark on how the system will be rectified. Why would a PIP, under the current circumstances, proceed with an appeal? It is perfectly understandable for them not to go down that route, given all the personal risks that come with it.
Once again, as has been the case with this Government from day one, the balance of power has been shifted even further towards the lender. I have heard evidence that creditors are using the current situation to their advantage and are being overly aggressive. Why would they not be? They have opposed the personal insolvency process at every single point along the road. This Bill amends section 115A of the 2015 Act by clearly placing the legal authority to appeal in the hands of the debtor, not the PIP, which is the crux of the issue which has to be urgently dealt with. This is as it should be, and as it was intended to be from day one. However, I would like to point out that this will not, on its own, solve all of the problems with the personal insolvency process. It is but a small step in the right direction and much more needs to be done. Even if this Bill is enacted, it is a huge challenge for a borrower to go down the legal route of appealing the rejection of a PIA to the courts. The banks too know this, and they are using the system to pressure more and more people into surrendering their home.
Earlier this year we introduced that Mortgage Arrears Resolution (Family Home) Bill 2017. That Bill would remove the veto power from the bank when it comes to mortgage arrears cases involving the family home and would empower an independent office to make the final decision in that situation. The balance of power is firmly with the lender in the current system. The entire onus to co-operate is placed on the borrower while the bank can simply walk away at any point in the process. The net issue that this Bill seeks to address arises because of a court decision in the Circuit Court, and then in the High Court, which has had very serious consequences for the existing appeal mechanism under the personal insolvency system. If it is going to take very long for this Bill to be enacted, I would ask the Government to consider amending another piece of justice legislation so that what is clearly an anomalous situation can be rectified as quickly as possible.