JOINT COMMITTEE ON SOCIAL AND FAMILY AFFAIRS debate -
Wednesday, 29 Apr 2009

Personal Debt: Discussion.

Vice Chairman (Deputy Charlie O’Connor)

I apologise on behalf of the Chairman, Deputy Healy-Rae, for his absence. I welcome the following: Mr. John Kelly, head of statistics at the Central Bank; Ms Mary O'Dea, acting chief executive, and Mr. George Treacy, head of consumer protection codes at the Financial Regulator; Mr. Tim Ryan, chairman, and Ms Anne Marie O'Connor, business manager of the Money Advice and Budgeting Service; Mr. John Lyne, superintendent community welfare officer in North Lee, Cork; Mr. Tony Quilty, specialist in social inclusion services, representing community welfare officers; and Ms Noeleen Blackwell, director general, and Mr. Paul Joyce, senior policy researcher of the Free Legal Advice Centres.

I thank all organisations for co-operating with the clerk on the change of date for this meeting. I apologise on behalf of the Chairman and members for any inconvenience this may have caused. The date had to be changed at short notice because of the funeral of our Oireachtas colleague, Senator Tony Kett. I propose to ask the representative from the Central Bank to commence the short presentations on the level and trends of personal debt in Irish society, followed by the Financial Regulator, MABS, the community welfare officers and FLAC. Members will then ask questions of the organisations present.

I draw witnesses' attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I also remind the witnesses that each presentation is confined to a maximum of five minutes and I intend to adhere strictly to that limit. Because of other commitments, we are anxious to finish the meeting by 1 p.m.

Mr. John Kelly

I thank the Vice Chairman and members of the committee for inviting the Central Bank to participate in this round-table discussion on the levels and trends of personal debt in Ireland. To set the scene for later discussions, I will deal with developments in personal debt using a number of charts, which have been distributed. These cover the aggregate level of personal debt in Ireland vis-à-vis banks and building societies. There is other debt but information on that is collected by the CSO on an annual basis so personal debt from other sources is not included in the charts. In addition, the Bank’s data do not tell us anything about the distribution of debt, which is also important. However, the Regulator’s financial capability study provides information on this and Ms O’Dea will refer to that later.

Charts 1 and 2 show the levels and growth rates in Ireland. Personal, or household, debt has grown rapidly in recent years, driven by mortgage borrowing which has doubled since October 2004. Rapid growth in personal debt has been common in most developed countries in the past decade. While the timing and extent of the increase has varied considerably across countries, two common causal factors have been identified, namely lower interest rates and, until recently, an easing of liquidity constraints on banks. Both of these factors had a particularly strong impact in Ireland. Membership of EMU brought interest rates down to a fraction of previous levels and eurozone money markets provided Irish banks with access to a greatly increased supply of funding without exposure to exchange rate risk. In addition, in Ireland's case, demographics played a key role in boosting demand for credit, particularly mortgage credit. As a result, personal debt has risen faster here than in most other euro-area countries and between 2004 and 2006 mortgage debt in Ireland increased at approximately three times the annual rate in the euro area, as shown in chart 2.

Over much of the 2004-06 period in Ireland, residential mortgage lending increased at annual rates of close to 30%. This was associated with strongly rising house prices and record levels of new house completions. I show house price increases in chart 2 to relate them to quarterly changes in mortgage lending shown in chart 4. As house prices began to fall in early 2007, demand for new mortgages also began to weaken and, by the final quarter of last year, the level of outstanding mortgages was almost static. Some €3 billion in new mortgages were advanced in the fourth quarter of 2008 but these were largely offset by repayments on existing mortgages.

One of the features of the Irish mortgage market in the past five years has been the increasing share of personal mortgage borrowing devoted to buy-to-let properties. This rose from 15.4% at the end of 2003 to 23.6% at the end of 2008. Some of that is shown in charts 5 and 6. Expectations of capital gains from rising house prices were possibly a major factor behind this development.

With borrowing for mortgages growing faster than other personal credit, the proportion of personal debt in Ireland which is secured on property now exceeds that of almost all other eurozone countries. This is shown on chart 7. The proportion in the Netherlands is higher but there are particular reasons for that which I can explain if anyone wants. Ireland stands out in another way by having one of the highest proportions of mortgage debt at variable interest rates. This is particularly significant in present circumstances, as it means that about 80% of mortgage borrowing here is benefitting from the ECB's reductions in interest rates.

The now famous tracker mortgages play an important role in this respect. A recent survey suggests that up to 60% of variable-rate mortgages outstanding are tracker mortgages. This means that interest rates on approximately half of all mortgage borrowing are now three percentage points lower than last autumn, as the reductions in ECB interest rates must be passed on in full under the terms of tracker mortgage contracts. Most lenders have also passed on the ECB reductions in full to other variable-rate mortgages. In aggregate, this means that the personal sector will save up to €3.5 billion in mortgage interest payments this year. Allowing for tax relief, this will result in an increase of over €2.5 billion, or about 3%, in personal disposable income. A further positive in this regard is that most of the benefit will accrue mainly to the most indebted households which need it most.

Although it accounts for less than one eighth of personal non-mortgage debt, borrowing on credit cards frequently receives media attention. At an aggregate level, recent trends in personal credit card debt have been reasonably positive. Substantial repayments were made on credit card borrowings during the second quarter of 2007 from maturing SSIAs. Increases in outstanding debt since then have been modest. The year-to-year change was close to 5% for personal credit card debt at the end of 2008, it declined further to 4.3% in February 2009 and there are indications in the March data that it will have declined further in March. On the negative side, the proportion of balances on which interest is being charged has risen a little over the past year.

I hope I am inside the five minutes.

Vice Chairman

Mr. Kelly has set a great example.

Mr. John Kelly

I would be happy to take questions and provide further details.

Vice Chairman

I propose to take all of the presentations and then call my colleagues. I welcome Ms O'Dea.

Ms Mary O’Dea

I thank the committee for inviting us to discuss the important topic of personal debt in Irish society. I am joined by my colleague, Mr. George Treacy, head of our legal and consumer departments. I will briefly outline for the committee the consumer role of the Financial Regulator, particularly our consumer protection and information responsibilities, and our initiatives to date regarding debt issues.

The Financial Regulator has put a number of measures in place to protect and inform consumers on debt on which I will bring the committee up to date. We introduced a statutory consumer protection code that became fully effective in July 2007. On lending, the code requires that a firm must ensure that, at the time a loan is approved, the borrower is in a position to make repayments. It also demands that institutions must act honestly, fairly and in the best interests of their customers.

All loans offered to customers must be suitable for the individual customer — this would include an assessment of affordability. Furthermore, the firm must be able to demonstrate after the event that the loan was, in fact, suitable at the time on the basis of the borrower's circumstances. Offers to consolidate several loans into one must contain information on the extra cost involved.

Offering pre-approved unsolicited credit is banned. Unsolicited increases in credit card limits are also banned. Prior to the introduction of these measures in July 2007, an examination by ourselves found that the average monthly number of limit increases processed automatically by credit card providers was 42,000. Conscious that not all lenders were subject to our regulation, we called for a change in legislation to bring non-deposit taking mortgage lenders under our remit. As a result of this change in the law in 2008, non-deposit taking lenders, now called retail credit firms which include so-called sub-prime lenders, must comply with the consumer protection code.

Clearly, while a decision to make a loan must be based on an assessment at a point in time as to whether the customer can afford the loan, no one can predict future events affecting a customer's income or change in circumstances that may have the effect of leaving him or her over-indebted such as job loss or income reduction. Where this happens, the code requires lenders to alert customers as soon as possible if their mortgage falls into arrears and have procedures in place for handling arrears. If anyone is dissatisfied with the way he or she is treated in these issues, the person can take the unresolved complaint to the Financial Services Ombudsman. In adjudicating on complaints and considering appropriate restitution, the ombudsman will take the provisions of the code into account.

A themed inspection carried out by us last year examined residential mortgage arrears and repossessions across regulated mortgage lenders, including the newly-regulated retail credit firms. Following from this inspection, we recognised the need for stronger provisions in the area of arrears and repossessions and we worked with the Department of Finance to develop a statutory code of mortgage arrears which is designed to ensure that mortgage lenders take action to assist householders who are in arrears. Under the code, mortgage lenders may only apply to the courts to commence enforcement of legal action for repossession six months from the time arrears first arise. A lender may not seek repossession until every reasonable effort has been made to agree an alternative repayment schedule with the borrower. This code is critical in the current environment. However, we must be careful that by setting out rules we do not automatically push people towards loopholes. We have separately written to all lenders stating our expectations that not only should they deal with people fairly when they are in arrears but also when they seek to move to prevent an arrears problem.

There has been much recent discussion on the role played by debt collection agencies and whether legislation should be enacted so that they are regulated. Of course debt recovery services apply across a range of activities wider than the recovery of money for financial products, for example, for utilities and other consumer debt. At present, the law does not allow for debt collection firms to be regulated by any agency.

Preliminary inquiries made by the Financial Regulator suggest that most regulated lending firms do not assign or sell on consumer debt. However, they often outsource debt collection. In such cases the person contracted to collect the debt must comply with the requirements of our code.

Regardless of the reasons for a person becoming over-indebted, I have already publicly stated that we support the development of a more effective debt settlement system based on the models that have been tried and tested elsewhere and have been found to work well for creditors and consumers, and we welcome the Law Reform Commission's review of this issue.

The issue of credit and debt for low-income consumers is, of course, linked to the issue of access to financial services. We are committed to fostering access to financial services. We included specific provisions supporting financial inclusion in the consumer protection code.

Access to credit is a more complex area. We require lenders to act in the interests of their customers and to sell suitable products. In the new environment of less credit and tightened credit requirements, this means that in some cases a consumer's application for credit will be refused. Equally, borrowing will not always be the answer to a consumer's money problems.

Vice Chairman

I hate to interrupt Ms O'Dea but the time allotted to her has expired. I will allow her half a minute to sum up and we will take the rest as read. I apologise for being a time keeper.

Ms Mary O’Dea

That is the Chairman's job and I thank him.

It is important to make two quick points on consumer information. Consumers may fall into the habit of using their credit card, assuming that the debt will be short term when in fact it will be long term. We have had consumers contact us on this point. We receive about 4,000 contacts a week from consumers. Within that context, unauthorised overdrafts are being used more often and that is a very expensive form of credit. I would be happy to answer questions and discuss the rest of my presentation later.

Vice Chairman

I appreciate Ms O'Dea's co-operation. The next five-minute presentation is by MABS. If Ms O'Connor mentions the Tallaght MABS office at least once in her presentation, it will keep me very calm.

Ms Anne Marie O’Connor

MABS very much welcomes this opportunity to appear before the Oireachtas Joint Committee on Social and Family Affairs and to contribute to its discussion on levels and trends in personal debt in Irish society. Some members are perhaps familiar with the founding objectives of MABS which still shape its activities and ethos today. The 1992 budget provided a special allocation to establish five pilot projects aimed at building new and more comprehensive approaches to combat the problems faced by people who borrow from moneylenders. The service has grown and now employs 250 staff nationwide across 53 offices.

In addition to the money advice process, core components of the MABS approach in the early years were the provision of access to affordable credit to MABS clients in times of need, and the MABS special account scheme. A further innovative feature of MABS was its emphasis on community education through the provision of structured programmes on money management and budgeting delivered to key target groups. It has long been evident that MABS does much more than this to service the needs of its clients. The landscape has definitely changed. There is now much greater access to credit, albeit there are still those who access credit at a very high cost from sub-prime lenders, legal moneylenders and catalogue companies.

I will speak in a moment about changes in the caseload. However, it is worth stating that while these are growing trends, they have always been apparent in the MABS caseload and, as such, the issues that I will discuss in a moment have always been part of the organisation's remit and within the competence of money advice staff.

I will concentrate, in the main, on the period Q1 2006 — Q1 2009. Over those three years the active caseload of the MABS grew by 7,079 or 43%. This growth in numbers is attributable to the increase in new clients on an annual basis, which grew from 11,630 in 2006 to 16,600 at the end of 2008. In addition, in October 2007, MABS launched a new help-line which in its first full year of operation took almost 11,000 calls.

The demographic profile of the client base remains relatively stable over time. In the main MABS clients are social welfare recipients, the majority are female, they are aged between 26 and 40, and 60% have children. Over the past three years we have seen a big increase in the number of MABS clients with mortgages. The latest statistics suggest this is 35% compared with just 22% in Q1 2006. The average amount owed by clients presenting at MABS services has grown, from just over €6,990 in 2006 to €13,700 at end Q1 2009. The average number of debts per client has declined from three in Q1 2006 compared with 2.7 in the same period in 2009 — this may be due to the way we are recording different categories of clients. At the end of 2008, 64% of all debts owed by MABS clients were owed to banks or financial institutions.

As the Members will understand, people contacting the MABS have multiple debts, not all of which may be a cause of concern for them. In this context it is worthwhile looking at the top ten debts about which people contact the MABS and these are listed in my presentation. I will speak briefly about the top five of these debt types just to illustrate the reality of those cases for MABS clients.

In terms of personal loans and credit cards, the average amount owed on a personal loan in 2006 by a MABS client was €9,706 compared to just under €13,000 in 2009. The average credit card debt for MABS clients was just over €8,009 in 2009 compared with €3,833 in 2006. Typically, such clients will have other debts.

It is no surprise that as most MABS clients will have a utility bill the average utility debt has increased from €443 in 2006 to €625 in 2009. In our experience clients presenting with utility arrears, because they are for the essentials of light and heat, as their principal debt type will have an ongoing inability to manage income from week to week. We are working closely with the utility providers on these issues.

Money advisers are noting the increasing number of clients presenting with mortgage difficulties. The number of MABS clients who have a mortgage and are also experiencing a problem with their mortgage is approximately 27% in comparison with 22% in Q1 2008 and 18% in Q1 2006. A small minority of our clients will have multiple mortgages. Mortgage debt has always been addressed as an aspect of the money advice process. However, the average amount of money owed on mortgages has increased significantly and there is a degree of complexity emerging in the money advice work. This is because some clients purchased their homes at the top of the market and may now be trying to meet payments on a much reduced income. In such cases mortgage interest supplement is a vital support. In other cases, home equity has been used to secure other loans and once affordable loans are now unmanageable due to changed circumstances. There are also a small number of complex cases where homes have been purchased on mortgages from sub-prime lenders, and money advisers, looking at the client's situation in its entirety, believe that the loans were never affordable and the mortgages should not have been granted. Finally, we note an increase in the number of people who want advice on voluntary surrender or "handing back the keys". This has significant consequences for mortgage holders.

On hire purchase, we note an increasing number of people who are having difficulty with repaying and want to end their hire purchase agreements — this may be linked to the failure of a small business and a person's desire to hand back a vehicle they had once used for business purposes and that is no longer needed.

I have some other observations on the work we are doing. One of the key principles of the MABS approach is the distinction we make between priority and secondary debts. Often when clients come to MABS they are in difficulty because they have been neglecting to pay their priority debts. They may have bowed to the source of most pressure — sometimes a persistent debt collection agency or a legal letter — and as a result may be prioritising secondary debts. We know that MABS clients appreciate the structure and the independence of the MABS approach. In MABS we believe all debts should be repaid, based on ability to repay. However, it is vitally important that priority debts are serviced first as the negative consequences of default on these debts can often further impair capacity to pay, forcing people into further difficulty and more debt.

In this context, we are concerned about the practices of some debt collection agencies and have examples of cases where clients have been subjected to hourly phone calls, calls after business hours, and so on. This adds to the vulnerability of MABS clients who may have, for example, lost a job or suffered a loss of income through illness or family breakdown and are already making significant adjustments in all aspects of their lives.

Vice Chairman

I ask Ms O'Connor to conclude.

Ms Anne Marie O’Connor

There are three minor points to highlight.

Vice Chairman

I do not want anybody to think I am giving Ms O'Connor special attention.

Ms Anne Marie O’Connor

Fine. The committee can see the rest of our documentation where we refer to the emergence of commercial debt relief agencies, our support for a non-judicial approach to debt settlement is outlined, and prevention which is an important and increasing part of our work.

Vice Chairman

I thank Ms O'Connor for her co-operation. The next presentation is by the community welfare officers. They will understand that my local knowledge of their colleagues would not be as strong as that of some of my colleagues, but Mr. Lyne and Mr. Quilty are both very welcome. I am glad they have been able to travel to see us.

Mr. Tony Quilty

I thank the Chairman. I will be as brief as possible. I can feel the guillotine.

The HSE welcomes the opportunity to be part of this discussion today on levels and trends of personal debt in Irish society.

Some of the organisations here this morning with whom we work closely as well as the members of the committee will be aware of the supplementary allowance scheme administered by the community welfare service. This is a front-line service which is in daily contact with the most vulnerable in our society and which provides us with first-hand experience of the level of debt that many individuals and families face. Perhaps before going into some detail in this regard it might be useful to give some general outline of the supplementary welfare allowance.

The supplementary welfare allowance, SWA, scheme is administered by the Health Service Executive under the general direction and control of the Minister for Social and Family Affairs. The scheme is a safety net within the overall social welfare system in that, subject to conditions, it can provide assistance to persons in the State whose means are insufficient to meet their needs and those of their dependants. The scheme is made up of a number of basic component parts: basic weekly payments, rent and mortgage interest supplements, diet supplements, other supplements, exceptional needs payments, ENPs, and urgent need payments.

The role of the community welfare officer, CWO, is to relieve social distress and prevent its recurrence by advising people of their rights and entitlements and helping them to obtain the entitlements. In addition, the community welfare officer provides: a standard minimum of income which can be immediately provided to those whose means have been assessed as insufficient to meet their needs, and those of their dependants; income support in the form of weekly/monthly supplement to those with additional specific needs, identified either in association with other personal and social services, or on an individual basis, that cannot be met from their standard minimum income; and financial support by way of a single payment.

Given that supplementary welfare is driven by need, any downturn in economic circumstances such as we are now experiencing will have a knock-on effect on the scheme and will incur, as we are seeing in the current climate, increased levels of activity and expenditure. This is evident from the level of debt the CWOs are encountering and the complexity of cases they are dealing with. My colleague, Mr. John Lyne, who is a superintendent community welfare officer based in Cork, is dealing with these situations on a daily basis and will outline some of the practical examples of such cases, if the members require. It is worth stating at this stage that our colleagues in MABS are an invaluable resource in such cases and the community welfare service works closely with our MABS colleagues in trying to ensure some relief for people in serious debt, many of whom are in debt for the first time and who are extremely stressed and traumatised by it. From discussion with my MABS colleagues I know the volume and complexity of cases appears to be increasing by the week.

To put some overall context on the current situation, the CSO figures show that the number of people signing on for jobseeker's payments at the end of March 2009 was 372,800 or10.4%, and it represented a rise of 26,700 on the previous month. There has been a rise of 164,952 or 87% over the past 12 months in the numbers signing on the register. The unemployment rate of 10.4% represents the highest figure since October 1997. Such a considerable increase in unemployment is having a significant effect on the take-up of supplementary welfare allowance because of the new circumstances in which people find themselves and the level of debt they are experiencing. The impact on supplementary welfare allowance manifests itself in a number of ways. There has been a significant increase in the level of basic payments made. This is due predominately to the volume and complexity of applications for job seeker's allowance and benefit presented to employment exchanges and the consequent waiting periods. Many cannot survive the waiting period without income and interim payments must be made to maintain them until their DSFA application is finalised. Such payments are then recouped. A large proportion of applicants for job seeker's allowance are non-nationals which can often bring complications by way of the habitual residence condition, language difficulties, etc. Included in the submission are figures for 2006, 2007 and 2008. The letter "m" following the figures should be disregarded because, thankfully, it does not mean millions.

On rent supplement, those in rented accommodation who subsequently lose their jobs may have an entitlement to receive rent allowance. There has been a significant increase in the amount of such payments; the figure increased from €388 million in 2006 to €432 million in 2008.

Mortgage interest payments are of particular importance. This is an area in which we have witnessed very significant increases in the numbers of SWA applications and expenditure. Persons who took out substantial mortgages in good times and in good faith and who may have consolidated other debts as part of an equity release package are now finding that they have no means of meeting their obligations to pay. Such applications were often made on the basis of two incomes. The figures involved are substantial and such cases often involve 100% mortgages. My colleague, Mr. Lyne, will be able to outline some real examples of how this problem is manifesting itself, if members desire. The figures demonstrate an upward trend. In 2006 the number of recipients was 3,023, whereas in 2008 it was 7,080.

Exceptional needs payments are designed to assist, generally on a once-off basis, where there are no alternative sources of assistance or an ability to pay. In the past while there has been an increase in the level of such payments. Although the increase is not as defined as in the case of other supplements, there is increased complexity to the presentations. Generally, people will have entered into borrowing arrangements, again in good faith, commensurate with their capacity to repay. However, they now find themselves in a situation where they have a multiplicity of loans and no capacity to repay. The community welfare service, often in collaboration with our colleagues in MABS, may be a party to an integrated plan to assist such individuals. This may require the making of once-off payments to assist in the process of debt relief.

Vice Chairman

I ask Mr. Quilty to conclude.

Mr. Tony Quilty

The figures are included in the presentation for members to see. In summary, in order to address the complex cases presenting to us, an integrated multi-agency approach is required. In that regard, we welcome the opportunity to be a party to these proceedings.

Mr. Paul Joyce

I thank the Chairman and committee members for the invitation to participate in this debate.

FLAC is a non-governmental organisation which has a long track record of working in the area of credit and debt relief since the early 1990s, in particular, since the Money Advice and Budgeting Service began as part of a series of pilot projects. We also work on access to justice issues and have a network of legal advice centres all over the country, including Tallaght, which people are welcome to visit at any time.

We have noted a considerable increase in the level of interest in the issue of over-indebtedness generally. We note the debate in the Oireachtas following the tabling of a motion by Deputy Olwyn Enright recently. The contributions to that debate were of great interest. Obviously, there is a greater focus on indebtedness issues. Up until now, it has been centred principally on the question of mortgage arrears, a very serious problem, but there are other personal debt issues that are coming into sharp focus. In the presentation we set out a number of indicators in respect of the increase in indebtedness, on which I will not dwell for time reasons. However, one, in particular, may be of interest. In May 2008 Business Pro, the owner of Stubbs Gazette, reported a 30% to 40% increase in one year in the number of debt collection cases coming before the courts. There has also been a doubling of the number of mortgage repossession cases brought in the High Court.

Of particular concern to us, as a human rights organisation, is the increase in the number of persons going to prison due to the non-payment of instalment orders. In 2008 there were 276 such persons. This is a waste of State money. The credit industry in general is opposed to this; these procedures need to be updated quickly.

For the remainder of the presentation we would like to focus on some positive suggestions. Obviously, this is a time of major cuts in public expenditure. Although we have consistently advocated a root and branch reform of the legal system on debt enforcement, that may be more a long-term objective.

On ways forward, the mortgage arrears code referred to by the Financial Regulator does not go far enough. We have been quite critical of it in terms of its content, as the committee can see in the submissions we have included in the appendices to our presentation. However, the approach taken in the code is something that should be promoted in dealing with the issue of debt arrears in general. Alternatives to the taking of legal action are key. The approach taken in the code of obliging mortgage lenders to seek alternative repayment measures and enter into negotiations with those who find themselves in difficulty is the right one, but it should be extended to credit agreements, personal loans, hire purchase agreements and so on. We see no reason there should not be a code of practice enshrined quickly to try to prevent legal proceedings being taken.

On how the code would work, there should be compulsory referral of persons in arrears to the Money Advice and Budgeting Service or similar services. This poses a resources problem. MABS, with which we work closely, is under significant pressure. If ever a service needed more money, it is MABS because waiting lists are growing. The code should oblige lenders to look at the complete financial circumstances of the borrower taking into account his or her over-indebtedness and look at affordable repayment options without going to the courts. Where court proceedings become necessary, we suggest two immediate reforms and amendments to the enforcement of court orders legislation. To inform the committee, many brought to court in debt enforcement cases to have debts repaid by instalments do not appear. The hearings are held in open court and people are embarrassed and ashamed. In many cases they do not have access to legal aid and advice and, consequently, do not appear. Orders are made for sums that they cannot afford. This leads, in turn, to an application for their committal to prison. We believe District Court judges should have the power to adjourn proceedings and that the debtor should have to appear before the court to ensure a complete review of his or her financial circumstances.

We are very concerned about the lack of a connection between State policy on mortgage arrears for consumers and the difficulties mortgage lenders experience generally in the collection of the debts. In particular, we are concerned about the payment of mortgage interest supplement. We echo some of the comments made by MABS on reckless lending by certain lenders, in particular, sub-prime lenders who had an open field for a number of years before there was regulation in the form of the consumer protection code. Many of the loans involved should never have been given. They were made available on the flimsiest of financial information on the person's capacity to repay. The review of the mortgage interest supplement scheme should also involve an examination of lending policies with particular reference to reckless lending. It is our suggestion that legislation be introduced to allow loans to be rescheduled in certain circumstances rather than allow the repossession of family dwellings to go ahead.

Vice Chairman

Mr. Joyce's organisation is celebrating 40 years of service to all our communities. I single it out in that regard. I do not want the Central Bank or the Financial Regulator to think we would treat them differently from the other three organisations but, in fairness, the other organisations have a great deal of contact with local members. I do not suggest that we do not go to the banks, so they should not be offended by my saying that, but there has been talk about the work of the CWOs, MABS and FLAC. We have an interesting mix of guests. We have two sides or maybe even three sides.

I appreciate the fact that the speakers kept to the allotted time. I apologise for being a timekeeper. I propose to take contributions from my colleagues. I do not know how I am going to organise a round-table discussion, but I will try to do that. I ask Deputy Seymour Crawford from Cavan-Monaghan to start.

Deputy Seymour Crawford

I apologise on behalf of our spokesperson Deputy Olwyn Enright. I thank all the groups for the depth of the information they gave us. We are at the coalface, and although we do not deal with the numbers of people they deal with, we certainly deal with a large cross-section of the issues they discussed. I cannot help singling out the community welfare officers as a first port of call in the current difficult situation. They do a tremendous job. At present there are long delays in processing social welfare claims and if it were not for the cheques that come out quickly from community welfare officers and the way in which they deal with their clients, I do not know what would happen. Some of us on this side of the House worry about what will happen when they come under the social welfare banner. I hope they will not deal with cases in the way a social welfare officer dealt with one of my clients. The officer even costed the benefit of meals given freely to my client against his means test, but that is another story.

The last speaker, Mr. Joyce, discussed the main issue that worries me — the way in which sub-prime lenders have operated, lending to people with a flimsy ability to repay the money. I am not sure what we can do about it, but something must be done fairly quickly. I have come across cases where Start Mortgages, for instance, did not stress-test lending and gave mortgages to people under severe stress and when they could not pay they brought them to the High Court straight where they suddenly found themselves with an extra High Court charge of €10,000 to €12,000. The House must deal with that as a matter of urgency because it is completely immoral.

We must also deal with the charges imposed on those who want to get out of fixed mortgages. As a group of taxpayers, through our Government, we are giving the two biggest banks €7 billion, never mind the sums we will have to give to all the others, yet the bankers are still charging those who need to get out of fixed mortgages massive sums. Some say that people knew what they were doing when they signed up to fixed mortgages, but they often did so thinking they had a solid job, and they now find themselves with no job. We must examine that as well.

On attachment and fines, we have brought the matter to the Dáil a number of times in the past ten years and discussed the waste of money and resources. Somebody might go to jail for a few weeks or a few months and then walk away from their problem. It would be much better for them to pay the money back or pay their fines out of their pay packet, social welfare or whatever. The sooner the Government puts such a system in place, the better.

I could go on at length on the issues, but I will not do so because of time constraints. However, I might come back in if possible.

Vice Chairman

I am in your hands, but I was instructed to try to finish the meeting by 1 p.m. I am always happy to take instruction.

Deputy Kathleen Lynch

I welcome all the groups. Public representatives probably refer about 20% of their clients to them, and I probably send more than anyone else. We have a unique combination of interest groups in front of us. On the one hand we have the regulator and the banking system, if that is what we want to call it, and on the other we have the people desperately trying to keep people afloat as a result of what went on in banking.

I remember trying to get legislation introduced 15 years ago to deal with the crazy system of jailing people for indebtedness. Mr. Joyce's comments about people in those circumstances are correct. Not only will they not appear in court, but they will not open the letter that comes to tell them that they have to appear in court. The situation becomes overwhelming and they cannot deal with it. When they finally break their silence and go to see someone, there are many agencies out there prepared to help them.

I cannot praise the community welfare officers enough. They are swamped and they have not had an increase in staff, yet they are the first port of call now that there is a three-month delay in respect of jobseeker's allowance. People have to go to their community welfare officer, but the CWOs have not received any additional resources. They face an enormous problem because they are dealing not just with weekly payments but with rent subsidy applications and everything else. When people get themselves into trouble, we have to refer them to MABS. We all do that. Also represented today is FLAC, which continuously lobbies us about how legislation should be changed to protect people. The combination of witnesses is unique, and we should perhaps have a repeat meeting with them.

In its submission, FLAC makes the point that the regulator deals only with mortgages, yet we all know that in some instances credit card debt is as bad as defaulting on a mortgage. We see that every day of the week. Do any of the bodies propose that we should amend legislation — at the end of the day it will be up to us — to deal with that? Mr. Kelly said at the outset that there was a huge drop in credit card debt in 2006 because people used their SSIAs to pay it off. Are we the only people in the world who save to pay debt? I found it unique that people would use a savings scheme to pay off credit card debt. What proposals exist in respect of credit card debt? When one considers that people have credit card debts of €9,000, there must be something that can be done to ensure this does not happen again. We are in a mess and this should be about how to prevent this recurring. I am glad to learn of the ban on letters in the door offering people €20,000 on credit cards. My daughter, who was in school, was getting such offers. What proposals do the witnesses have to tighten up the legislation to ensure this does not happen again?

Deputy Michael McGrath

I thank all the contributors for their comments, welcome them before the joint committee and thank them for their contribution to this debate thus far. It is clear that much of the lifestyle that people developed during the Celtic tiger years was based on debt. As economic circumstances have changed, which is affecting people directly in respect of loss of employment, reduction in earnings and increased taxation, such debt is now coming home to roost and the agencies and bodies represented here are left to pick up the pieces. As Deputy Lynch noted, as public representatives, members also see this on a daily basis and are glad to have the facility of referring people to the experts who work in this field. The witnesses have a particularly onerous task at present and I am aware that those who work at the coalface are under intense pressure as I have met them to discuss issues on a regular basis.

I wish to ask a few questions, beginning with MABS, which I will direct to Ms O'Connor. In her experience, when MABS agrees on a plan with people to resolve their debt issues, how flexible are the financial institutions in coming to an arrangement? I assume that MABS does not deal directly with the institutions and that its contacts and ongoing interactions are with the person who is in debt. Are the institutions flexible and are they showing an understanding of the concerns and difficulties being experienced by people at present? In the context of the Government's guarantee and recapitalisation of the banks, I am interested to learn how they are responding to the severe and acute difficulties people are encountering when facing up to their debt issues.

Second, members have read recent media reports on the backlog of cases with which MABS is dealing and the length of time that some people are being obliged to wait to access its services. Ms O'Connor should comment on this issue. Can MABS cope with the current demand for its services? How long must a person wait to access such services and to get an initial consultation or detailed meetings? If I refer someone in Cork today, how long must he or she wait?

I must raise one issue because whenever I go canvassing, the urban myth is raised about non-nationals and their ready access to welfare, to the effect that they can get things no-one else can. Is there a disproportionate reliance on welfare among the non-national community? Can the witnesses confirm that all people in the State are treated equally? While I believe this is a myth, it should be addressed in this forum because it certainly comes up regularly when one goes out to canvass and meet people.

In respect of the community welfare officers, CWOs, how much discretion do they have when dealing with individual cases? I have seen instances in which inconsistencies appear to have arisen. While I acknowledge I do not possess the full information with which the CWOs are dealing, the witnesses might comment on the level of discretion they have when dealing with individual cases.

Ms O'Dea from the Financial Regulator's office might respond to my final question. To what extent is illegal moneylending a growing problem and to what extent is it being policed in the current climate? Anecdotally, all members have heard stories of people who rely on moneylenders who are not registered or licensed with the Financial Regulator and have heard stories of heavies turning up to collect debts. This issue must be dealt with and I refer in particular to the policing by the Financial Regulator, the enforcement of the licensing regime and the compliance procedures that are in place.

Deputy Thomas Byrne

Deputy Michael McGrath's question to the community welfare officers regarding non-nationals also comes up frequently in my constituency. Many urban myths exist on what they receive from community welfare officers in particular. The community welfare officers in my constituency do a tremendous job and do not have time to discuss such urban myths with me. Perhaps the HSE or another body on a national level could deal with this issue because there are a large number of such myths, which create resentment in the community. I believe most urban myths are mythical and false and should be addressed by the HSE rather than by individual CWOs such as those who are present.

I am sure Mr. John Kelly is aware the CSO also has some interesting statistics and the Oireachtas has put together a factbook on each constituency. One point that struck me from the factbook on my constituency of Meath East was that it has the second highest percentage of mortgaged households in the country. I believe that 56.5% of households there are mortgaged. The equivalent figure for Dublin North, the constituency with the highest percentage, is 56.6% or 0.1% higher and the national average is approximately 39%. Has the Central Bank examined the extent to which specific areas of the country are mortgaged? I refer both to the percentage of households and the level of mortgage debt, which I suspect is also significantly higher in the commuter belt constituencies such as Meath East, Dublin North and Kildare North. I am sure this also applies to Deputy Michael McGrath's constituency in the Cork area. I seek details in this regard because the issue of mortgages in my constituency is of great significance, is of major concern to me and is a matter to which I have given great consideration.

I thank FLAC for its response on the Financial Regulator's code of conduct. While the Financial Regulator's statutory code of conduct is both welcome and positive, issues arise in this regard. Although the Constitution specifies that the High Court has full original jurisdiction, one issue that shocks me concerns those repossession cases that simply should not be heard in the High Court. Before my election to the Dáil, I acted as solicitor for the borrower in a fairly substantial commercial repossession case before the Circuit Court. While I should not criticise it too much, perhaps the Circuit Court is less efficient. The High Court appears to be highly efficient and quick when dealing with repossessions, which poses a danger for families. I could not understand the reason one of my constituents, who had a house worth less than €200,000 — although I do not know how the rateable valuation is checked nowadays — appeared before the High Court. His case should have been taken before the Circuit Court at Trim. The Circuit Court moves slowly, certainly in country areas, and sits less frequently, which in itself will give borrowers a chance. This is what I mean by being less efficient, as it sits less frequently. I have raised this issue with the Ministers for Justice, Equality and Law Reform and Finance and as of yesterday, the latter replied that he would look into it.

However, this issue must be addressed. Ordinary people should not be dragged to Dublin, Cork or wherever the High Court sits for this purpose. This issue is a hobby horse of mine and if there is a constitutional issue, it must be dealt with. However, I do not believe that there is such an issue. Plenty of cases are dealt with in the District Court and the Circuit Court. Perhaps there even could be an increased monitoring role for the District Court, as I believe FLAC has suggested at this meeting. Fundamentally however, such cases should be heard before the Circuit Court and, in so far as possible, before a judge. Much of the procedure is dealt with by county registrars and while they do a fantastic job, perhaps such cases should be directed towards judges to a greater extent and should be included on the Circuit Court timetable. If it is good enough for other court cases, it should be good enough for those who face repossession. As for repossession, the statistics demonstrate that not as many take place in Ireland as in other jurisdictions but this issue must be examined. I ask FLAC to comment in this regard.

My next question is for the Financial Regulator. A constituent, who first approached me in February 2008, was living in what I consider to be abject poverty. He had a stone floor, his house was without mod cons and I understand he did not have a job. However, he approached me last month with a letter from GE Money, which apparently lent him €12,500 to buy a car last August. Although I was dealing with him in respect of many personal issues, I was not aware of this. I was shocked that this man could get a loan at the height of the credit crunch, as my understanding was that he was not working. Apparently, he had a fine credit history and the company had dealt with him previously. It seems to me that it is very easy to get a car loan in some cases. While many motor industry people might state they are harder to get now, I refer to the facts that one must provide to get a car loan. In my experience, one is not obliged to give evidence of income and one is simply obliged to state what is one's job. This issue must be dealt with. While I do not wish to cause damage to the motor industry, this man could borrow €12,500. Moreover, it turned out that a judgment had been made against him on behalf of a credit union but that the credit union was not part of the bureau system. This issue should also be expedited. The credit union realises it would be better if it was part of it but if that were the case this man would not have got the loan. That would be to his benefit. We should examine car loans. This man had no income yet he could get a car loan. He cannot pay and we are dealing with the aftermath.

Deputy Catherine Byrne

I thank the witnesses for their presentations. I thank Mr. John Lyne and Ms Mary O'Dea. It is nice to know someone is reassuring those who wish to borrow and guiding them. I refer to what Ms Anne Marie O'Connor and Mr. Tony Quilty said. I dealt with MABS on many occasions, particularly on behalf of those who came to my clinics with bill problems. I compliment the MABS organisation and the community staff, who are always available at the end of a line. At a first meeting they show a caring attitude and are not judgmental. Those with debts are ashamed and come with a certain amount of gloom. MABS staff I meet are more than understanding and realise that people are in crisis and need advice.

I have dealt with people who had small businesses that went bust. They are left with no income of any kind, young children and huge mortgages. I have real concern about these people because they have nowhere to go. MABS has been kind enough to give me advice on these cases. I dealt with a woman who got into real trouble with a moneylender and ended up having to hand over her children's allowance book. I thought this practice went out with the Indians but it is still alive and well. These people can intimidate and prey on vulnerable people at a time when they need extra help. MABS has played a major role.

Although its representatives are not present, I have a major understanding of the work of the Society of St. Vincent de Paul in the inner city. The organisation has seen a major increase in the number of people coming to it for help on a weekly basis. Its role in the community is vital. I do not know what MABS or many of us can do about moneylenders but it is of growing concern. It will become more relevant to people, including those coming into the poverty trap for the first time. I pay tribute to MABS and its staff, particularly in respect of how kind they have been to me in helping me understand what is happening out there.

Many people have complimented social welfare officers and I wish to do the same. There is a major increase in the demand on community welfare officers. For many people these are the first people they meet when there is a problem with rent. Other members have referred to newly unemployed people not being able to access assistance as soon as they would like. I hope people do not take my criticism personally.

I have a problem with the rent supplement. Last year we paid out over €432 million. On all occasions I ask those who seek rent supplement or guidance the address to which they are going and the landlord involved. There is a scam going on with landlords putting people into accommodation which is in poor condition. I have visited numerous rented properties, some of which are far below the minimum standard in terms of living conditions. I cannot understand why the Department of Social and Family Affairs will write a cheque for premises that have not been visited for five years.

When I visited one young girl she was living in the basement of a four-storey house. She had two young children and no access to a toilet, apart from one shared by everyone in the house. There was no access to a garden and the door opened onto a main road. There was nowhere for the children to go outside of this kip, the only term that comes to mind. It was terrible. The Department of Social and Family Affairs was paying the landlord over €1,000 per month. It was indescribable.

Through the environmental health officer, the HSE and the Department of Social and Family Affairs this girl has recently been allocated a small place by Dublin City Council. For one person and her children life may change. No one seems to take responsibility for paying the cheque to the landlord — not the city council, the HSE or the welfare officer. I am concerned at the amount of money paid out and the fact that no one is made responsible for inspecting these premises. Some of them are appalling and one would not put a dog in them, never mind a child or an adult. When the wind of change comes to this country, a major burden will descend on all those who contributed to this situation and on public representatives to serve people most in need, those who live in sheer poverty. When we get back to normality we will still have the poor. Thank God for people in MABS and other organisations. Without their input I could not do my job.

Vice Chairman

One of the disadvantages in chairing a meeting is that one does not have the opportunity to make a contribution. I agree with much of what was said to all groups, particularly the groups with a presence in Tallaght, which includes banks. I have failed to finish at 1 p.m. but I am sure this will be excused. I propose to invite our contributors to reply to the questions that they understand relate to them.

Mr. John Kelly

I should not have to use much time because only one question was asked of me, by Deputy Byrne, about the regional distribution of mortgage lending. Three public sector bodies collect mortgage data. The CSO has produced good data via the household budget survey. A regional breakdown is easy to provide. The second is the Department of the Environment, Heritage and Local Government, which collects mortgage data from banks on a case-by-case basis. It provides a regional breakdown in some of its publications but these tend to lag. The report on Q4 of 2008 has not yet been published but is probably due shortly. Q3 of 2008 is the most recent data I could get last week. The Central Bank collects data from banks, the aggregate data on mortgages compared to all other lending amounts. We cannot give a regional breakdown. The other two sources can provide that.

Ms Mary O’Dea

We do not see ourselves representing banks, which are well able to represent themselves. We see ourselves as regulating banks and protecting consumers.

Deputy Crawford referred to sub-prime lenders, who lent money in an environment that was unregulated. They dealt with a particular category of people who previously had defaults. We advocated very strongly for those lenders to be regulated because we felt the protection within the code should apply to them. It does now but legally this has only applied from last year, with the code applied immediately to the sub-prime lenders.

There was also mention of fixed rate and variable rate mortgages and we are seeing consumers in both areas getting into difficulty. Although we are focusing on unemployment numbers, the issue is not just about those who lose their job. Many people have reduced working hours or cuts in bonuses and overtime, which puts significant pressure on people.

We see people concerned about mortgages most often because for many, it is their biggest outgoing. We fully accept what Mr. Paul Joyce has indicated in his presentation with regard to issues raised by FLAC. We put the mortgage arrears code on a statutory footing very quickly in the environment we were in but unfortunately we did not have all the submissions at the time. We wanted to ensure it was in force quickly. We would be open to discussing those particular issues further in so far as we can extend or adapt the issue to make it more in the interests and protection of the consumer.

On the SSIA issue and those who paid off debt, we might humbly take a tiny bit of credit for this because we issued many campaigns at the time indicating that people should use the SSIA money to pay off debt. We were very concerned by the rising levels of debt. There were various terms and conditions applying to SSIAs but because people were getting a euro for every €4 saved, it was a sensible way to save and people used the money to pay off debt, which was positive.

On credit card debt, having €9,000 on a credit card is madness because of the interest rates being paid. Even considering the various rates, one may pay 8.5% or 14% or 15% on a credit card. Even when people use a credit card and pay it off two or three months later, they should ensure they have the cheapest credit card. People can access our website through libraries or if they have access to the Internet to get up-to-date figures. Even for people in difficulty, there are some alternatives.

The ban on credit card limit increases was useful for the time, although there is a tricky balance between people who need credit, perhaps to put food on the table in cases of poverty, and people who have credit that is not suitable, which they should never have taken on and which they cannot pay back.

Deputy Thomas Byrne raised some issues relating to repossessions and asked whether such cases should be brought immediately to the High Court. We considered the matter and our predisposition was to think this was wrong and the process should go automatically through the Circuit Court. We sought and got very specific examples where the consumer was facing a lower court bill because the process went through the High Court. We have written to all lenders and indicated that in deciding how to proceed with repossession cases where they are necessary, it should take the consumer's best interests into account. It is a complex issue and I am sure FLAC also has views on it.

Deputy Thomas Byrne

My point was not just about costs, although they should generally be lower in the Circuit Court. If the case drags on, the costs may increase. The Circuit Court in Trim only sits every so often, so there may be delays, as opposed to the High Court, which sits every day. If the Circuit Court is used, people are given the breathing space which is inherent in the court system, which would be useful. I know Dublin has a different court system but I am just speaking from my own experience in Meath.

Ms Mary O’Dea

Absolutely, and the mechanism used should be in the best interest of the consumer. The Deputy also mentioned a particular constituency issue. The requirements which we have in the code are far-reaching and I do not believe other jurisdictions have the same type of requirements at all. They apply to all types of lending.

From July 2007, if there is any kind of a loan — it does not have to be a mortgage — it must be suitable and the lender must be able to demonstrate that the loan was suitable. If somebody has been given a loan after July 2007 where they do not believe it was suitable and assuming the correct information was given to the lending institution, they have a right to complain. We will help such people. If the people are not satisfied with that treatment, the ombudsman will deal with specific complaints where there are breaches of the code, including giving restitution to clients. We would like people to be aware of that.

Since the beginning of this year, these criteria relating to suitability apply to regulated money lenders, so they are now obliged to be able to demonstrate that their lending is suitable. The issue of money lenders is difficult because they often operate in a market where mainstream lenders do not. They give very small amounts of money over short periods, which mainstream lenders do not.

Sometimes a good alternative is a credit union and we would promote such an option. If a person is operating with a regulated money lender, the money lender must comply with the code policed by us. Where people feel there are breaches, we are more than willing to listen to such views.

Illegal money lending is a criminal activity and if there is any suggestion of somebody dealing with an illegal moneylender, we automatically refer to the Garda, as we are obliged to by law. It can be very difficult as people may not want to come forward, although they are getting money from somewhere. It is a difficult one for the Garda to take on and prosecute; nevertheless, the illegal moneylending is a matter for it.

Vice Chairman

Does Mr. Treacy have anything to add?

Mr. George Treacy

As Ms O'Dea stated, there is much confusion between the legal money lending sector and the illegal sector and we have come across cases of illegal moneylending. It is understandable why people do not want to go to gardaí with a complaint but if they do not, the matter is left in a bad position. Unfortunately, there is nothing we can do about illegal moneylending.

Mr. John Lyne

I thank Deputies for their kind words on the service we provide, which has seen unprecedented growth.

Vice Chairman

That is true in Dublin as much as Cork.

Mr. John Lyne

Welfare officers are dealing with a 58% increase in basic payments and it takes ten or 12 weeks to process the number of people now signing on the live register. There has been an 18% to 20% increase with regard to rent issues and mortgage issues in Cork and in Kerry it has gone up 120%. In Dublin for the first quarter, there has been a 300% increase in applications on 2008. With the limited resources available, we are providing a great service and, historically, we have always responded to emerging need.

Deputy McGrath raised the issue of discretion and many of our payments are enshrined in legislation, and there are also regulations. The only section where people have discretion is in exceptional needs payments. With a scheme of last resort or first call, sometimes people say discretion is a positive aspect of our service while others say it is negative. Ultimately, anybody refused a payment has an entitlement to appeal the system and a proper procedure follows. There is discretion and each case is dealt with on an individual basis according to merits.

There was a question regarding the urban myth that non-nationals are treated more favourably than Irish people but that is not so. We have dealt with emerging need and a programme of refugees came to us in the late 1990s followed by a flow of asylum seekers from the turn of the century. They are put into direct provision centres and paid a minimal payment plus food and keep. They are treated exactly the same when they make an application for supplements or allowances.

Other non-nationals are workers who have come from EU accession states in the past four or five years and they must satisfy a habitual residence condition, which means they must be in the country for two years, prove their centre of interest and intentions of employment. Under EU law, for migrant workers there is a dispensation through the supplementary welfare allowance whereby if they have worked and contributed, they may qualify for unemployment benefit, which is not subject to the habitual residence condition.

All cases are treated equally. We have regulations and policies across the board and we try to get consistency among CWOs.

Deputy Catherine Byrne inquired about the standards of dwellings. It is not a cop-out to state local authorities have powers to enforce the standards relating to dwellings, etc. However, within our regulations it is acceptable to refuse to pay rent where the accommodation is not suitable to meet the residential needs of a person. We have often done this and notified local authorities accordingly. I cannot speak for all areas.

With regard to landlords, including missing landlords, their names are registered with the Department of Social and Family Affairs and the Revenue Commissioners. The system has been enhanced during the past six months and the PPS number of the landlord or agent must be registered. There is a tracing system which allows Revenue and the local authorities to follow up on cases of this nature.

In our system the definition of a mortgage is that it should be used for the purpose of purchasing, improving or repairing a house and that the person who takes it out should be in a position to meet his or her repayments. It is clear that some of the loans taken out in recent years were generous, to say the least, because people may not have been in a position to meet the repayments on them. I am aware of a person who was in low-paid employment and in receipt of family income supplement but who was able to remortgage and consolidate existing loans to the tune of €240,000. The repayments were €1,500 per month, even though the person was only earning approximately €500 and receiving a certain amount in the form of family income supplement. In such circumstances, one must ask whether the individual concerned was in a position to meet the repayments.

Many applications are being refused because the mortgages were not taken out for the purpose of purchasing a house. A national review group, comprising representatives of the Department of Social and Family Affairs and community welfare officers, has been charged with considering what should be done in respect of the mortgage interest supplement scheme as a result of the major increase in the number of applications.

Vice Chairman

I thank Mr. Lyne. Mr. Ryan will reply on behalf of MABS.

Mr. Tim Ryan

I welcome the opportunity to address the committee. Deputy Mattie McGrath inquired about the flexibility of creditors and the acceptance of proposals. In general, the MABS brand has become very acceptable. However, in the interests of consistency, we are working with a range of creditors, including the Irish Banking Federation, with a view to achieving a more consistent approach throughout the country. It is frequently the case that the relationship is very personal to an individual adviser and it is important that this be the case.

As we do not keep specific statistics in respect of waiting lists, I am not in a position to provide exact numbers in that regard. However, all urgent cases are dealt with in a prompt manner.

We have changed our modus operandi in order to take account of the difficult times in which we find ourselves. We now have a three-strand approach. Traditionally, MABS provided advice for clients on a one-to-one basis. However, we introduced a helpline in October 2007 and people can now obtain advice and perhaps some support in preparing for their first meeting with a money adviser. The latter is of assistance to both parties because it makes the client much more aware of what is required and it cuts down on the amount of time the money adviser is obliged to devote to his or her case. The third strand is that there is a group of people who are IT literate and can use our website, thereby helping themselves. However, we frequently receive feedback from those who take this self-help route to the effect that financial institutions, in particular, are reluctant to accept proposals from individuals which they would find acceptable if they were made on MABS headed paper. We are probably a victim of our own success in that regard. In an attempt to defer growing waiting lists, we are attempting to promote the process of self-help.

Deputy Kathleen Lynch referred to credit cards. I must inform her that the figure provided relates to an average credit debt. We frequently come across people whose debts are multiples of that amount and spread across several credit card accounts.

Ms Noleen Blackwell

I will reply to a couple of the points made and Paul Joyce will respond to the others.

Deputies Crawford and Thomas Byrne referred to repossession proceedings being brought to court. We are concerned that such proceedings can be instigated so quickly and that, as matters stand, the code is not sufficient to ensure a proper consumer focus is maintained. There is also a difficulty in that the steps introduced under the code cannot be introduced in court. This is a matter which the committee could monitor.

We agree with Deputy Thomas Byrne that at least the Circuit Court in areas outside Dublin provides people with breathing space and an opportunity to settle matters. There is a major gap in this regard. On the previous occasion on which the Legal Aid Board furnished the committee with particulars relating to the number of cases with which it dealt with in respect of debt, it indicated that it had dealt with four in one year throughout the country. If people received legal advice, we are of the view that in many cases they would settle rather than go before the courts. Legislation relating to land is before the Houses and it might be useful if it was amended to take account of this matter.

I welcome the indication from IFSRA that there may be a further opportunity to strengthen the mortgage arrears code. From the point of view of the committee, it might be useful to consider whether a code might be put in place in respect of all debt arrears. If such a code was introduced, there would be procedures, of which people could avail before going before the courts. We provide six or seven suggestions in this regard and do so because, as Deputy Kathleen Lynch stated, we are in a mess and this must not be allowed to happen again. Now is the time to consider matters of this nature.

Deputy Catherine Byrne referred to moneylenders. The awful practice of taking people's children allowance books is entirely illegal. However, I am sure it happens. This is a matter for the courts. FLAC often makes the unpopular point that at least moneylenders are highly regulated. I am sure several of my colleagues would agree that others such as debt collectors are not so regulated.

With regard to community welfare officers, our information line and centres show that the urban myth to which Deputies Thomas Byrne and Mattie McGrath referred in respect of non-nationals is simply untrue. Non-nationals are more likely than most to be exploited in the workplace. The habitual residence condition is of particular concern to us. Owing to the fact that the regulations in this regard are extremely complex, people often do not receive their social welfare payments, which is unjust.

The mortgage interest supplement review will be crucial. The purpose of the supplement is to keep people in their homes. I intend no reflection on how the scheme is operated but people who often had no choice other than to take out extremely expensive fixed rate loans and sub-prime mortgages in order to remain in their homes are not receiving the supplement in respect of that part of their loan which is not considered unreasonable. They were allowed or even encouraged to borrow money in order to buy their homes. However, they cannot claim the supplement which would allow them to remain in them.

I understand Mr. Joyce does not wish to add anything to what I have said.

Vice Chairman

I thank everyone who contributed.

Deputy Thomas Byrne

It is important to remember that what we are discussing is part of our ongoing work. In that context, I would have thought it would be appropriate to invite the Financial Regulator and FLAC which made many suggestions regarding the code of conduct in dealing with mortgage arrears to come before the committee again at a later date.

Vice Chairman

This discussion has shown how important it is that the committee should deal with issues of concern to people. I thank everyone for their co-operation. We will return to the issues raised as we continue with our work.

The joint committee adjourned at 1.20 p.m. until 10 a.m. on Wednesday, 13 May 2009.