Personal Insolvency (Amendment) Bill 2014: Second Stage

I move: "That the Bill be now read a Second Time."

This is a short technical Bill, which makes some prudential and clarifying amendments to a small number of procedural provisions in the Personal Insolvency Act 2012. Before turning to the provisions of the Bill, however, I would like to take this opportunity to update the House on recent developments regarding the 2012 Act and to place these developments in the context of the debate about the interaction between insolvency policy, and the broader question of mortgage arrears and the levels of general indebtedness arising from the economic crisis. Deputies will have seen media coverage of last week's meeting of the Taoiseach, the Tánaiste and myself with the Insolvency Service and insolvency practitioners. I attended part of the meeting and found it very useful. The Taoiseach has spoken publicly in recent days about the need for banks to co-operate effectively with the personal insolvency regime and he has reiterated the Government's determination to ensure that people who are trapped in unsustainable debt can reach satisfactory solutions.

As Deputies will be aware, the Statement of Government Priorities 2014-2016 already underlined that high levels of personal debt continue to threaten to exclude thousands of individuals and families from the economic recovery. The Government is committed to reviewing the implementation of Central Bank mortgage arrears targets and the operation of the insolvency service to ensure that both bodies have the powers needed to support families willing to work their way through their debt problems. The review of the Central Bank mortgage arrears targets is primarily a matter for the Minister for Finance. We welcome the tangible evidence that there has been a significant increase in bilateral engagement between banks and customers in debt distress. Over 89,000 mortgages were permanently restructured by the end of November 2014, which is an increase of almost 10,000 since August. It is a very important figure to note. While there is a huge amount of work still to be done, particularly in the area of long term mortgage arrears, it is now clear that the mortgage arrears resolution strategy is progressing significantly. Of course, it is no coincidence that there has been a significant increase in bilateral deals between the banks and their customers since the establishment of the insolvency service and the reform of the bankruptcy laws. The review of the personal insolvency aspects is nearing completion by my Department and I will be giving particular attention to its outcome over the coming months.

I note at this point the valuable work done by the Joint Committee on Finance, Public Expenditure and Reform in its report on mortgage arrears last July. Most of the report's recommendations relate to the mortgage arrears resolution process and are therefore a matter for the Minister for Finance and the Central Bank. However, there are four recommendations which relate to personal insolvency and bankruptcy. Their focus is on ensuring that fees and costs do not present a barrier to a heavily indebted person who wants to avail of personal insolvency solutions or to access bankruptcy and reviewing the engagement by financial institutions with the insolvency legislation. The recommendation on engagement by financial institutions has been fully taken into account in my Department's review and it will form an important part of the issues which I will be considering. On the issue of costs, which were highlighted with a focus on ensuring that costs are not a barrier to heavily indebted persons, I have taken some immediate measures. Regarding insolvency fees, I have provided for a complete waiver of all fees payable to the ISI and the courts in respect of insolvency applications with effect from last October. It was an important recommendation. In my discussions with the insolvency service and its director it was clear that they felt this measure could make a major difference and improve matters for those who wanted to use the service.

As regards bankruptcy costs, I have provided for a waiver of all fees payable to the courts on bankruptcy applications and for a substantial reduction in the costs of entering bankruptcy. The effect is that the fees and charges payable to the courts and the official assignee in bankruptcy by a debtor entering bankruptcy have been reduced from nearly €1,400 in early 2013 and approximately €935 early last year to approximately €275 since 31 December 2014. That compares to an equivalent cost for entering bankruptcy in England and Wales of approximately €900. Further in response to the joint committee's recommendations, the insolvency service is providing support of €750 on a temporary basis to defray the expense of a personal insolvency practitioner in any case where creditors reject a reasonable DSA or PIA proposal. In this context "reasonable" refers to a proposal which offers a better outcome to creditors than bankruptcy. The ISI will be reporting on the outcome of this initiative over the coming year.

The insolvency service carried out focus group studies and found that people needed more information on the personal insolvency legislation. On foot of those studies, the insolvency service launched a major "Back on Track" information campaign towards the end of last year, which I supported. The campaign is targeted to reach those most in need more effectively and appears to be already delivering results. Following these very practical and immediate measures, there was been a marked increase towards the end of last year in the number of applications for personal insolvency deals and in the numbers agreed. I record some of the relevant figures. The insolvency service concluded almost 1,000 solutions for individuals in unsustainable debt last year; with 547 insolvency deals agreed and 448 bankruptcy adjudications. The number of new applications for protective certificates, which is the first stage in the process, rose by 50% from quarter 3 to quarter 4. This is an important figure. The number of personal insolvency arrangements approved during quarter 4 of 2014 increased by 148% over the third quarter and exceeded the previous three quarters of 2014 combined. It shows that the changes recommended by the insolvency service to make it easier for people to access it have shown results in the last quarter of last year. These substantial increases should continue into 2015 as the cost reductions package continues to take effect and the insolvency service's "Back on Track" information campaign continues with targeted local meetings around the country to inform people about the possibilities open to them. However, I would like to see a more fundamental change in the overall number of solutions reached under the Personal Insolvency Act. People who are struggling with unsustainable debt must be able to benefit directly from the statutory debt solutions already introduced. I do not exclude taking further measures to ensure that this is the case. If that is considered necessary, it will be done in the context of our review under the statement of Government priorities, as I have indicated.

I turn now to the Bill before the House. As the amendments are very technical, I propose to start with a brief overview of the Bill's purpose and to present its overall thematic objectives before coming to specific provisions. The amendments in the Bill relate to the chapters in the Personal Insolvency Act which deal with procedures for approving or varying two of the three statutory debt deals. These are debt settlement arrangements, or DSAs, and personal insolvency arrangements, or PIAs. The Bill is not making any change to the rules on voting in creditors' meetings as they are understood and applied in practice. Its main purpose is a prudential one; to put beyond doubt a possible ambiguity in the wording of two sections which might otherwise make it more difficult for a debtor's DSA or PIA proposal to succeed even where it has the support of the main creditors. The secondary purpose of the Bill is to clarify some aspects of the detailed procedural arrangements for approving or varying a DSA or PIA in two specific scenarios which are already provided for in the Personal Insolvency Act. I remind Deputies that a DSA provides for agreed settlement of unsecured debt only with no upper limit. A PIA provides for agreed settlement of secured debt up to €3 million, or more than that if creditors agree, and can also include unsecured debt with no upper limit. The third type of statutory debt deal is the debt relief notice or DRN, which is not affected by the reasons for the proposed amendments as it does not involve a creditors' meeting. A DRN allows a limited write-off with court approval of unsecured debt up to a maximum of €20,000 for a debtor with very little income or assets.

The main purpose of the Bill relates to a possible ambiguity which has been identified in the wording of sections 73 and 110 of the Personal Insolvency Act 2012. These sections specify the majority of creditors that is required to approve a debtor's proposal for a DSA or PIA. The intention of the legislation and the interpretation that is currently applied by all stakeholders in practice is that such a proposal can be approved by creditors holding 65% or more of the overall debt. The 65% threshold is the only threshold set for creditor approval of a DSA proposal which deals exclusively with unsecured debt. In the case of a PIA proposal, the Act lays down an additional requirement of approval by creditors holding over 50% of the secured debt and by creditors holding over 50% of the unsecured debt. Legal advice has raised the possibility that the wording of sections 73 and 110 could be open to the technical interpretation that, in addition to the requirements I have just mentioned, a proposal must also be agreed by a majority, or over 50% in number, of all creditors both for a DSA and for a PIA.

Such an interpretation would impose an unintended additional hurdle for debtors and make it unnecessarily complicated to secure agreement on a reasonable proposal for a debt deal. It could allow a creditor with a small share of the overall debt to block a debtor's proposal for a DSA or PIA which was agreed by the main creditors. This would be unfair to debtors and would mean a debtor's proposal for a PIA would have to satisfy four separate creditor voting tests, which would be unnecessarily onerous. Nor would it be helpful to debt resolution, given that such creditors' rights are already appropriately protected under the existing provisions of the Act. The issue is being addressed on a precautionary basis only. There has been no legal challenge or court decision on this point. Even if such a challenge were to emerge, the court might uphold the interpretation which is intended and generally applied. However, the Government considers that given the importance of the provisions, the wording should be clarified on a prudential basis, to remove any possible doubt and to avoid any risk of uncertainty or delay for parties to statutory debt deals.

The secondary purpose of the Bill relates to the rules laid down in the Act for the more detailed procedural aspects of decisions on proposed DSAs or PIAs. Normally, the decision to approve or reject a proposal is taken by a vote of creditors at a creditors' meeting. In this standard scenario, the Act sets out precise rules for detailed procedural aspects such as notice periods, time limits and documents to be provided to the creditors. The Act also provides for two less typical decision-making procedures which apply in specific situations. First, if a creditors' meeting is called to decide on a debtor's proposal but no creditor votes, the proposal is deemed under the Act to be approved. This is the "no-vote scenario". Second, if only one creditor is entitled to vote at a creditors' meeting, the decision may be made without the formal need to convene a creditors' meeting. This is the "sole creditor scenario".

In the two scenarios, where there is either a creditors' meeting but no vote, or no creditors' meeting because there is a sole creditor, the Act does not fully specify how the detailed procedural arrangements, which are laid down in the context of decision by vote at a creditors' meeting, will operate. The Bill, therefore, provides amendments to clarify, where necessary, the detailed procedural arrangements which will apply in the two scenarios. They are designed to be closely equivalent to those applicable in the standard scenario. No legal doubts or challenges have been raised in regard to this secondary objective. The changes are being made simply for the convenience of the main stakeholders, namely, the parties, the Insolvency Service of Ireland and the courts. They have been requested by the Insolvency Service, and can readily be made along with the main changes proposed by the Bill, as they relate to the same chapters of the Act.

I turn now to the specific provisions of the Bill. The technical context and effect of each provision is set out in the detailed explanatory memorandum accompanying the Bill, which has been published. Following the structure of the Personal Insolvency Act, sections 2 to 9, inclusive, of the Bill propose amendments to the procedures for proposed DSAs. Sections 10 to 17, inclusive, propose equivalent changes to the procedures for proposed PIAs, as I have outlined. Sections 2 and 3 follow the secondary purpose of the Bill. Section 2 is designed to clarify the documents which should be provided in advance to a creditor asked to decide on a DSA proposal, in a sole creditor scenario. Section 3 deletes the existing provision for the sole creditor scenario at section 72(8) of the Act, so that it may be replaced under section 5 of the Bill with a more detailed and comprehensive provision. Section 3 also clarifies, for the avoidance of doubt, that in a no-vote scenario, where the debtor's proposal is automatically deemed to be accepted by creditors under the existing provisions of the Act, the protective certificate issued by the court continues to have effect until after the court has decided whether to approve the proposed DSA.

Section 4(a) implements the main purpose of this Bill regarding DSA proposals. It amends the existing wording to put beyond doubt that such a proposal may be agreed by creditors representing 65% of the total amount of the debt, in line with the intention of the legislation, without any further requirement. Sections 4(b) to 9, inclusive, continue the secondary purpose of the Bill regarding DSAs, by specifying notice, documentation and variation requirements for the no-vote scenario and for the sole creditor scenario, in a more precise and comprehensive manner.

With regard to the provisions relating to personal insolvency arrangements, sections 10 and 11 follow the secondary purpose of the Bill. Section 10 is designed to clarify documentation requirements where a PIA proposal is made, in a sole creditor scenario. Section 11 deletes the existing provision for the sole creditor scenario, so that it may be replaced under section 13 of the Bill with a more detailed and comprehensive provision. Section 11 also clarifies, for the avoidance of doubt, that in a no-vote scenario, where the debtor's proposal is automatically deemed to be accepted by creditors under the existing provisions of the Act, the protective certificate issued by the court continues to have effect until after the court has decided whether to approve the proposed PIA. Section 12 implements the main purpose of the Bill regarding PIA proposals. It amends the existing wording to put it beyond doubt that such a proposal may be agreed by creditors representing 65% of the total amount of the debt, plus agreement by creditors representing over 50% of the secured debt and by creditors representing over 50% of the unsecured debt, in line with the intention of the legislation, without any further requirement. Sections 13 to 17, inclusive, continue the secondary purpose of the Bill regarding PIAs, by specifying notice, documentation and variation requirements for the no-vote scenario and for the sole creditor scenario, in a more precise and comprehensive manner.

I have gone into some detail on these technical changes, which are designed to make a prudential amendment to avoid any possible uncertainty arising in future on the correct interpretation of sections 73 and 110 of the Personal Insolvency Act, and to clarify some issues of detail regarding the procedural arrangements which apply in the specific circumstances of the sole creditor and no-vote scenarios already provided by the Act. Despite their technical nature, these amendments are important to clarify situations and avoid doubt in the future. They will support the smooth operation of the personal insolvency legislation. Following the changes to the fees and some other changes we made last year, the number of people accessing the Insolvency Service of Ireland services for people in this very difficult situation began to increase from the last quarter of last year. I look forward to hearing the views of Deputies on the proposals in the Bill and I commend this Bill to the House.

Fianna Fáil welcomes the Bill, which seeks to correct and clarify a number of key legislative ambiguities in the Personal Insolvency Act 2012. However, after the Bill has been passed, significant weaknesses will remain with our insolvency laws. Only 1,000 debt solutions have been approved since 2013, comprising 547 alternatives to bankruptcy and 448 bankruptcy cases. This is in stark contrast to the former Minister for Justice and Equality, Alan Shatter's estimation that the Personal Insolvency Act 2012 would, during the first full year of operation, receive more than 21,000 applications for debt resolution. 2014 was the first full year of operation and, as we can see, it has failed to live up to the potential promised by the previous Minister. The insolvency system has failed to deliver on the promise of solving Ireland's personal debt crisis.

We welcome the main purpose of the Bill, which will, finally, clarify the wording of two provisions of the Personal Insolvency Act 2012, which set out the voting requirements for creditors to approve a proposal made on behalf of a debtor for a DSA or a PIA under the Act. We welcome the fact that these amendments remove the possible ambiguity in the language of those provisions, in order to avoid any possible uncertainty or confusion on this point and preserve the intention of the legislation, which is the generally understood and applied interpretation. While the issue relates only to the technical interpretation of a phrase in the creditor voting provisions in sections 73(6) and 110(1) of the Act, it appears to have had a dramatic cooling effect on the potential impact of the legislation. There has been only one successful DSA and no debt relief notices, DRNs, or PIAs. The reason for this total initial failure is that the current wording of the two sections for amendment is generally taken to indicate that approval is required by creditors holding 65% in value of the debt.

This is supported by sections 73(2) and 108(2), which state that the voting rights of a creditor at the creditors' meeting are proportionate to the amount of debt due. Approval by those holding the majority of the debt, as opposed to a simple majority of creditors in number, is the core intention of the legislation. It is possible, however, that the wording could give rise to an alternative interpretation that a majority, over 50%, of creditors by number and a majority by value, 65% of the debt, are required.

Therefore this legislation is very welcome in its clarifying character. However, the Personal Insolvency (Amendment) Bill 2014 can also be seen as yet another missed opportunity to reform our personal insolvency laws. Banks will still have a veto over any debt restructuring proposals and the insolvency regime will still lack an independent authority to review and grant binding personal insolvency resolution proposals. Fianna Fáil believes that any new legislation should ensure there is an appropriate balance of power between financial institutions and borrowers. We also believe that a system of State-funded, and creditor-funded, insolvency practitioners should be created as suggested by the Free Legal Advice Centres in March 2012.

In this regard, we understand a promised review of the 2012 Act and associated mechanisms is proceeding. We would appreciate if the Minister could clarify this matter as we have been informed that the Department of Justice and Equality has gathered views about the legislation's application. We would be anxious to know where this review is at, what it has found and what further actions will be taken, either through legislation or otherwise following on from it. The Minister might respond to this point in her reply if possible.

As I am sure the Minister is well aware, we still face a huge challenge in the area of personal debt in Ireland. Looking at the area of mortgages we see that the number of people in serious mortgage arrears continues to soar. There are 37,484 owner-occupiers more than two years behind in their mortgage payments. This category now constitutes 32% of all accounts in arrears, and 73% of arrears outstanding. These families are at serious risk of repossession. This is a terrible prospect for any family. The social impact of repossession is huge and something which has the potential to seriously damage Irish society and leave a lasting scar on those involved. Data provided by the Central Bank show that two thirds of those in arrears are in employment indicating that it should in most cases be possible to put in place a payment arrangement that is sustainable.

While we welcome the fact that 109,000 mortgages have been restructured to date, more needs to be done in this area. In fact, statistics show that when mortgages are restructured, payments are generally kept in line with the agreements made. The latest statistics show that 82% are meeting the terms of their new arrangements. However, this should not be interpreted as a measure of sustainability overall, as not all restructuring represents genuine long-term solutions. The most common arrangement, arrears capitalisation, where the arrears are simply added to the overall balance, has a 32% failure rate. This is not surprising given it does not tackle the underlying reason for the mortgage falling behind. Creditors need to be realistic in their approach to individuals who have personal debt problems. There is no benefit in developing a debt solution which only lasts for a year, a month or even a week. In this regard, the failure to establish an independent oversight of debt proposals with an appeals mechanism in this legislation is disappointing. The banks are still in charge even after this Bill becomes law. That is regrettable.

As I have previously pointed out, the current insolvency legislation has not delivered tangible benefits. Just 448 people have gone through the insolvency system and been successful in their bankruptcy proceedings. The Government is cagey about publishing data on how many cases relate to mortgage debt but we know only a fraction of these dealt with secured debts.

Another significant challenge arises from the fact that 31% of local authority mortgages are in arrears, nearly three times the rate of arrears in the private sector. Only 50 mortgage to rent proposals have been concluded to date, with approved housing bodies. This is another area which must be addressed as it has a fundamental impact on social housing policy in Ireland.

Some of the problems I have outlined may be addressed by the technical Bill being discussed here today. Nonetheless, I put it that the Government remains stuck in a mode of thinking whereby the banks should be allowed to dictate the pace and nature of any restructuring arrangements put in place. We believe this is a flawed approach and one which fundamentally undermines Ireland's insolvency laws and in particular those relating to mortgage arrears. We are not asking for a free-for-all where any proposals would be accepted. That would not help address this problem either.

We have, however, brought forward a number of ideas which should be considered to address the challenges currently faced by those facing significant debt problems surrounding their mortgages or otherwise. Some of our proposals include our Family Home Mortgage Settlement Arrangement Bill 2014 which would adapt the under-utilised infrastructure of the personal insolvency regime to allow for a restructuring arrangement solely in respect of the family home. This would be available to people who had exhausted the mortgage arrears resolution process and for whom the banks had not provided a meaningful resolution proposal. The process would be handled by a personal insolvency practitioner and the outcome would be binding on the parties. In parallel we would set up a system of State and creditor funded insolvency practitioners. These would take on cases where the debtor's payment capacity is so impaired that existing personal insolvency practitioners are unwilling or unable to do so. It is bizarre that someone who is struggling with debt to the extent of seeking a resolution under the personal insolvency legislation has to spend more money seeking the advice of personal insolvency practitioners. While we welcome the fact that some court fees have been reduced until the end of 2015, the Minister should consider extending these reduced fees indefinitely.

Fianna Fáil has also proposed that a zero interest rate would apply to the warehoused portion of all split mortgage products offered to customers in arrears. In our view this makes logical sense as it reduces the overall burden on the individual concerned as it removes the ticking time bomb of continually increasing interest on an already unaffordable aspect of the mortgage. Finally, we have also proposed an overhaul of the mortgage to rent scheme with an increase in the maximum current market value of houses eligible for participation in the scheme and more realistic income guidelines. In addition I am aware of quite a few cases where the provisions set out in the mortgage to rent scheme can be applied only where the accommodation needs are suitable. I accept that but unless the property is in negative equity it is not considered suitable. That is unfortunate because in many instances homeowners are prepared to hand over that additional equity to the State or to the arrangement being put in place. I would have thought that resolved the issue for many. Would the Minister and the Minister for Environment, Community and Local Government review that provision? If somebody is prepared to relinquish any expectation for the portion of the house in which he or she retains a value, regardless of whether it is in negative equity, although it would not be, something could be done in that respect.

As I am sure the Minister is aware, Fianna Fáil published a Bill in October 2011 to establish a debt settlement and mortgage resolution office and provide an independent, non-judicial debt settlement system for persons struggling with personal debt and those in difficulties with their mortgage. This Bill was specifically based on the recommendations of the Law Reform Commission's report from December 2010. This still holds value today.

Our Bill set out a debt settlement arrangement which involved a comprehensive assessment of the person's financial affairs and a personal insolvency trustee making a proposal to the person's creditors. Where 60% of the person's creditors in value approve the proposal to restructure the person's debts over a maximum period of five years, the proposal then becomes binding on all creditors. Importantly, our Bill allowed a borrower to apply to the office for a mortgage resolution order in respect of the family home. Following a thorough process involving the borrower and the financial institution, the office has the power to impose a binding mortgage relief order to restructure the mortgage. Sadly, no such provision exists in current legislation.

This legislation, while welcome, does not go far enough. The Government has failed to show the imagination required to seriously tackle the huge personal debt crisis currently being experienced by many Irish citizens who want to be given the opportunity to tackle their debts. This Bill is a lost opportunity. The failure to comprehensively address the imbalance between the banks and those in debt will result, as many commentators have predicted, in a two-tier recovery. Those saddled with debts incurred over the past ten years or longer may not see much hope in what this Bill holds out for them.

I hope the Minister will recognise the issues I have raised and seek to address them on Committee Stage. A more independent approach to debt relief, whereby the banks would not hold all the cards and which provides for an appeal to an independent resolution office, would go some way towards further address of this crisis. Now is the time to act on this. Now is the time for leadership. People who are sunk by the challenges they face in indebtedness can no longer wait for another day.

One could not but welcome this Bill, which is in the main a technical Bill. Since my time as Minister for Social Protection, I have been working with the Phoenix Project. The view that this problem has gone away or that there is not a huge crisis in this area is incorrect. All that has happened is that it is no longer reported on in the media, leaving the silent to suffer.

We need to come up with solutions that work. While many schemes have been put in place they are so surrounded by rules it is almost impossible to benefit from them. Under the mortgage-to-rent scheme only 50 arrangements have been concluded. In reality, this scheme is not making any impression on the massive number of people who are in long term arrears. For example, on 3 December 84,955 people were in arrears of over 90 days. This does not take into account the many people whose mortgage repayments are up to date but have personal debts in unsecured lending. There are currently 117,000 people in mortgage arrears. A solution for 50 of those 117,000 people is no solution. While it is good for the 50 people concerned it is not in the greater scheme of things making any impression on the problem.

I was always doubtful about the establishment of the personal insolvency regime for many reasons, including the cost of engagement with the regime and the fact that the bank had the final veto. In many cases the banks were as culpable as the borrowers in what happened. The former Minister, Deputy Alan Shatter, indicated that under the personal insolvency regime arrangements would be put in place for up to 21,000 people in the first year. That would be a significant number of solutions. Instead, only 1,000 arrangements were put in place, of which 547 were personal insolvency without bankruptcy and 448 were bankruptcy, which meant those people could have gone straight for bankruptcy in the first instance. This means the personal insolvency regime put in place arrangements in only 547 cases.

It is often said that a large number of the people in debt have jobs but a large number of them have been temporarily unemployed. Having been Minister in the Department of Social Protection, I can never understand what came over the Government that it abolished the mortgage interest supplement. In the context of the four-year plan and the troika agreement, the mortgage interest supplement was supposed to be one of the main instruments to assist people who ran into mortgage debt because of unemployment. Many people who lose their jobs often secure employment again. However, during the period of unemployment debt may have been created. The idea of tiding people over during periods of unemployment of, say, a year or two, makes a lot of sense because once they secure employment again, unless they have allowed large debts to accrue, they can then live without the mortgage interest supplement. Instead, this safety net, when needed most, was abolished. Abolishing the supplement did not save any money. The reality is that if people cannot pay their mortgages they end up claiming rent supplement on another property, if they can find a property to rent.

That only 50 arrangements were put in place under the mortgage-to-rent scheme is unsatisfactory. My colleague, Deputy Dooley, identified a number of problems in this regard, including the income limits and the valuation of houses. However, I have come across another perennial problem, namely, the people who have a mortgage on a three bedroom house, which is at some point remortgaged to consolidate other debt, who have fallen on hard times and when they try to access the mortgage-to-rent scheme are told their home - I am speaking in this regard about three and four bedroom homes and not trophy homes - is too big for their requirements. Do we have a heart, or not? What is the point in putting people out of their homes and then, at even more expense, having to relocate them and pay for their accommodation through rent supplement or social housing provision? The mortgage-to-rent scheme needs a total revamp.

The banks cannot continue to have a veto. In this regard, we are speaking about the so-called covered institutions, which would not exist but for the Irish people, who saved them not for the good of the people who owned them but because of the many implications if our banking system collapsed, including implications for depositors in our banks. The banks take a ruthless view and in my view are not particularly increasing their own incomes. One often hears of people making an offer to a bank that would sustain the mortgage relatively well but the bank does not accept it and instead puts the house on the market and accepts less money than it would have gotten had it written-down part of the mortgage.

My understanding is that some banks that put in place arrangements on split mortgages do not any charge interest on the part that is split but other banks do. Some banks defer the capital, in respect of which they come after the people again at a later stage, which means those concerned are only putting off the evil day. As I said, in some cases it would be cheaper to write-off 20% or 30% of the loan than to sell the house on the open market at a 50% discount. There has been much said about moral hazard. Having bankers lecture us about moral hazard is a little bit ironic. The reality is that most people got into trouble for a variety of reasons, including loss of income or paying too much for a house because they had a family.

I have been in continuous contact over the past four or five years with the Phoenix Project, which is a voluntary body based in Portlaoise. I understand members of the project have met with the Minister for Finance and are seeking a meeting with the Taoiseach. What they tell me from the coalface is frightening. They are justifiably concerned that there is a hidden crisis coming down the road. The banks claim they have come to 109,000 solutions. When one actually looks at more closely, 49,000 of these actually involved loss of ownership. These are family homes, not buy to let. Where will these 49,000 households go to? We have already established there is no mortgage-to-rent scheme worth talking about and the people in question cannot afford to buy houses. Where are they going to get houses to rent? Who will pay the rent? Inevitably, it will be the State which will have to pick up the bill. We are going to play musical chairs with 49,000 families, which works out at 122,000 people. Is this humane or fair? Are there other solutions?

Facing up a blind alley, these people have no choice. No one can say they have a free choice when someone else has a gun to their head. The banks are saying they will either throw out these families or wait for them to walk out of their homes. The advantage of walking out voluntarily is that one might get a higher price for the house and, therefore, reduce the residual debt. The bank might also agree to write off the residual debt because it would prefer the home owner to sell the house voluntarily. The reality, however, is that we are making these people lose their homes.

It is a concern that the number of repossessions is rising. For the fourth quarter of 2013, legal proceedings for repossessions came to 1,491. For the third quarter of 2014, it had gone up 168% to 2,514 cases. The number of homes taken into repossession in the fourth quarter of 2013 was 68. This had risen to 302 by the third quarter the following year. Not only are voluntary repossessions going through the ceiling, but the banks are beginning to repossess too. The Minister knows, as do I, the reason for this. The banks have sold their loan books to funds which have no high street presence and, accordingly, no need to protect their reputations. We warned about this. They treat debtors very differently to the way a high street bank does. Civil bills for repossession issued countrywide between January to December 2014 came to 7,266. If one takes an average of three people per house, that comes to 21,000 people affected by this. We have a major problem.

We can talk about how it came about forever. We now need to recognise the timebomb on which we are sitting and do something about it. We need radical change. The idea this problem is under control is not true. It is certainly not true for any of the households about which I have spoken. Particularly with the introduction of the so-called vulture funds into the equation, we need to change the whole process, bringing forward compulsory resolution where it makes sense. That means we need to take away the banks' veto and ensure that anybody who has to leave their house because of a repossession order has somewhere to go. If someone parks on public property illegally, the local authority must provide somewhere for them to go if they are moved on. In the case of repossession, that should not be the case even when the person has made significant efforts to look for alternative accommodation.

To put it simply, there needs to be no interest charge on split mortgages and term extensions, particularly for older persons as people in their 50s or 60s are often told they cannot get term extensions, should be for life. Mortgage-to-rent needs to be radically revamped. Until we see that scheme giving significant numbers, we cannot consider it even as part of the package because the numbers so far have been derisory. We need to take moral hazard out of debt write-down. If one wants to take the moral hazard argument to its logical conclusion, someone who smokes should not be taken into hospital when they fall ill. It is irrational and an absolutely mad sort of thinking. No one in a civilised society can buy into this so-called moral hazard rule. If it is cheaper for a bank to write down a debt than to sell a property on the open market, it should be compulsory for the bank to accept that particular solution. Take a mortgage of €200,000 on a house that will now sell on the open market for €100,000. If the home owner in question requested a write-down of €60,000 and offered to pay the new mortgage debt of €140,000, would it not be ridiculous for the bank then to sell that property for €100,000 and lose another €40,000 when it could leave the person in situ? I hope the Minister will give serious consideration to the points I have made.

It is good the debate on the Personal Insolvency Act has been reopened. In 2012 when this legislation was first debated, mistakes were made by an arrogant Government which decided it was better off trusting the banks rather than listening to those who work at the coalface with people in debt. We cannot let another opportunity slip past us. This time the Government must listen to those in debt and those who work with them.

On the face of it, the Government is simply tidying up a range of issues that require clarity. We will listen closely to the Minister and examine in detail these proposals to ensure they do the job as intended. There is a much wider issue at play and the cat is now out of the bag. The comments from the Taoiseach and senior Ministers last week that the system was not working showed what this Bill should really be about. It should be about correcting mistakes made, the same mistakes about which the Opposition parties warned the Government.

In 2012, we were promised a review of this legislation. Where is that review now? Can we just skip to the part where we do what should have been done in the first place?

The reality of debt is with us as much as ever. The reality of debt for many is that it is the last thing on their minds before they sleep - if they can sleep - and the first thing on their minds when they wake up. It has led to suicide and addiction. That is why we have to get this right. The economic realities of debt are stark too. Thousands of households see every cent soaked up by interest and repayments. Paying a mortgage has meant not spending a cent in the real economy above and beyond the bare essentials. Like our national debt, personal debt is a huge burden preventing economic growth.

My party is prepared once again to engage constructively to tidy up the Government's mess and build a personal insolvency service that actually works for people and families who are over-indebted. When this Bill was first proposed by the then Minister, Deputy Alan Shatter, he told my colleague, Deputy Pearse Doherty, that he expected 15,000 people to avail of the various new arrangements in the first year of the service. Less than 10% of that number have actually availed of it. As a systemic solution to personal debt, it has failed. The reason it has failed is that the game was rigged from the beginning. The banks had a veto and they have used it. What the experts who work with people in debt said would happen has happened. The Act has not delivered. The proof lies in the numbers who still choose bankruptcy. Years later to hear the Taoiseach and Tánaiste suddenly realise there is a problem just shows once again how out of touch they are.

While we will examine the Bill in detail on Committee Stage I am stating clearly here that my party's primary objective is to remove the veto. If the penny has finally dropped on the Government side then we will work with it to achieve that goal. It is apt that we are discussing this Bill in the same week as my party and the Technical Group have tabled a motion in Private Members' motion calling for an EU-wide debt conference. We must never forget that the personal debt crisis in this State did not come out of the blue. While some people clearly made poor decisions, most were simply hit by a tide beyond their control. The Banking Inquiry has begun to look at the ties between politics, property and finance in the State, which lie behind much of the crash. For my party, this debate is not about forgiveness or doing people favours, it is about repairing society after it was attacked.

Personal debt, like business debt and our sovereign debt, must be made affordable and sustainable. This Government saying no to a debt conference is like a highly-indebted family refusing to meet with an insolvency practitioner out of pride. It makes no sense and can only hurt the country. From 2011 it was the mantra of this Government when asked about the mortgage arrears crisis that the Personal Insolvency Act was on the way and thousands of struggling homeowners would be liberated from unsustainable debt and would be free to remain in their homes. That was bluster and deceit which has now been exposed. What the Government actually did for struggling homeowners was remove the legal protection given by the Dunne judgement. When Sinn Féin proposed a Bill replacing Dunne with a more sustainable model, Labour and Fine Gael marched the troops in to vote it down. Anybody looking at that debate would have found no coherent reason for voting it down other than that the Troika told them to do it. In connivance with the Central Bank, they then allowed the banks to meet their targets for mortgage arrangements through legal actions. The Government sat back and let the banks off the leash. Now that fruit is ripening as we see hundreds of repossession cases taking place across the State. Labour and Fine Gael might be happy to consider repossessing a family home as a "sustainable solution" but Sinn Féin is not.

The number in long-term arrears is continuing to rise over three years after this Government came to power. The personal debt crisis is still with us and nothing substantial has been done to tackle it. The mortgage to rent scheme, for example, has failed utterly. My party has consistently called for an independent resolution system to be put in place to force banks into arrangements where the family home is concerned.

The core issue remains that we have a Government that trusts the banks and supports the banks over the people, a Government that owns two-and-a-bit banks but will not use that leverage to benefit the people in whose name they own those banks. We have seen this time and again. The Minister for Finance, Deputy Noonan paid top dollar to Mercer to publish a report on bankers' pay but then let the banks ignore it, force the cuts on the lower paid workers or just get rid of those workers altogether while protecting the bankers at the top. The Government owns 99% of AIB but will not lift a finger as it outsources its core staff. Banks were hiking up interest rates on variable mortgages at a time when the ECB was lending to them at record lows without a peep from the Government who owned those banks.

There is a pattern of capitulation to the banks time after time. It is that fear of the banks that means the Personal Insolvency Act has failed in its intended aim. It is not the fault of the insolvency service staff who are doing the best they can. People in debt are not going to play a game they know is rigged to their disadvantage.

We have before us an opportunity not just to tidy up but properly to sort out once and for all a functioning insolvency system which will make a difference. I will be tabling amendments to remove the veto and to empower people in debt to break free and start rebuilding their lives without the bank having to agree. I am calling on all sides to bang our heads together and to work together to rectify the mistakes made in 2012 and to put in place an avenue of hope for the tens of thousands of struggling households worried about losing their homes, and for all others burdened everyday by fears of debt taking over completely.

The amendment is needed. The Bill is too detailed, takes too long and is too prescriptive and cumbersome. They look for the CC of an engine and the mileage of a car. I am not one who would agree that it needs to go through the courts. It can be solved before that. We have a problem coming down the line in the next 18 months in the form of 57,000 houses. If the banks do not make some decision it is going to be a problem. There will either be 57,000 more rent allowances or 57,000 more families looking for accommodation. I know there are no simple solutions, but we cannot decide to bury our heads in the sand on this.

In the last few weeks, I have come across a sad reality as regards middle Ireland. I have talked to a few people who are public service workers and have got into difficulty in the last few years. They are looking at going through the insolvency process and they have children who are ready to go to college. Because of the top-line earnings they have, they will not even get a college grant.

As politicians, we need to look at this broadly. There is no quick-fix solution. We have to ask if NAMA can get involved, if we can buy these houses that are in difficulty and rent them back, or else do a new deal in a type of mortgage system. If we do not do something, the amount of money that will be involved will be significant. We cannot bury our heads in the sand. We have not got enough accommodation.

Do we want to let more American vulture funds come in buying Irish property, or do we want to solve it as a nation for ourselves? We have talked about the country taking a turn. The growth forecast looks to be good, but there is no point in spinning nice stories if people out there in what I call middle Ireland are in a situation where there is no hope.

I will support the Bill, but I think the whole insolvency process needs looking at. We have to tweak the system to make sure that it works efficiently. It is not right that someone could be still going through that process five months down the road. The good old banks into which we have put €64 billion of our taxpayers' money, and for which we will be paying for the next 30 or 40 years, seem to be calling the tune. That should not be the case in any world. The people of Ireland deserve to be given hope and to be brought out of this the same as the banks have been brought out of it. Everything should be working together. I encourage the Minister to look at the whole issue of insolvency.

On top of that, I encourage the Government to consider the 57,000 people in arrears. Indeed, a further 30,000 or 40,000 people are in arrears above that figure. We cannot keep going with a cover over our eyes or decide that this is not happening. It has been coming down the tracks for years. Not as many have lost their houses as will lose them in the coming 18 months. Cometh the hour, cometh the man. Cometh the Government, something has to be done and I encourage the Government to examine it.

I thank the Leas-Cheann Comhairle for the opportunity to speak on this important legislation, the Personal Insolvency (Amendment) Bill 2014. This is an urgent Bill and I hope it assists the many families under stress with mortgages and other major financial problems. Our duty as legislators is to support and assist these families as well as to come up with solutions, by which I mean solutions that are feasible and sustainable. There has been much talk in the past four years and it is about time we saw action and about time these people got adequate help. In the past four years we have seen an increase in poverty, the number of people losing their jobs and the number of families under stress. This is the reality for many people and that is why the Bill is urgent.

The Personal Insolvency (Amendment) Bill amends the Personal Insolvency Act 2012 in respect of the procedures for the approval of debt settlement arrangements and personal insolvency arrangements. Moreover, it makes supplementary provision for more detailed procedural aspects in respect of a DSA or PIA. It aims to clarify, where necessary, the detailed procedures which apply in respect of both processes. That is essentially what this legislation is about.

The broader humanitarian issue is about families and people who are in distress. There are families suffering and worrying about making repayments and it is a difficult time for them. The situation impinges on relationships and children going to school and college. It puts people under severe stress. We need to face up to these realities in the debate.

Let us consider the current situation and what is going on in the broader society. In its first year of operation, a little over 300 people were granted one of the three options open to them by the Insolvency Service of Ireland. A similar number declared themselves bankrupt. Given that more than 100,000 people are in long-term mortgage arrears and thousands are struggling with unsecured debt, we expect that approximately 10,000 would have gone through the service or have been declared bankrupt by the courts in the same period. A total of 100,000 is a significant number of people to have been affected by this issue.

Many families are really struggling. Many people are in debt but are not seeking help and this is something we must deal with as well. These people are living below reasonable living standards because of a commitment to pay off their debt. These brave people are suffering and scraping together every euro and cent to pay their mortgages. Along with a lack of awareness of the solutions available this may be the reason for the lower-than-expected numbers seeking help. This is something we must examine. It is an important issue. Many families are very proud and do not like to get into financial difficulties. They want to pay every cent that they are perceived to owe to financial institutions. We should remind them that it was not their fault if they lost their job or if they got hit in the economic downturn. We should remind them that there are procedures and legislation in place to assist them. It is important to say that to them. There are many brave people who are very shy and reserved and for whom the term "in debt" is almost a bad word. These are fine people - we know many of them ourselves - and they should be encouraged to get assistance and supports.

The most recent quarterly report from the ISI states: "So far this year, the ISI has dealt with insolvent debtors with an aggregate debt of almost one billion euro." As of 22 October 2014, there were 140 personal insolvency practitioners and 43 approved intermediaries authorised by the ISI. These are the figures we are dealing with. These are the statistics and the realities. I emphasise the importance of supporting the families. According to the ISI the total debt in approximately 1,200 cases is close to €520 million. It is important that we emphasise the importance of knowing the detailed facts and what is going on in broader society.

Many people say the legislators in this House are out of touch and living in a bubble. We are not out of touch. Deputies meet these families every day in our constituency offices and at local public meetings. We are very much in touch. There is one thing about Irish politics: one could never accuse Members of being out of touch. There is a relationship between the local Deputy, as a public representative, and the people. They know the real issues. This is not a party statement; it applies across the board in all political parties and particularly among my Independent colleagues. It is important that we make these points in respect of the Bill.

Let us dig deeper into the legislation. As I said earlier, the main purpose of this legislation is to resolve an urgent consideration. Legal advice, confirmed by the Office of the Attorney General, has identified that the drafting language used in two provisions governing voting by creditors on a debtor's proposal for a statutory debt deal, a debt settlement arrangement or a personal insolvency arrangement could possibly be open to an alternative interpretation to that intended by the Oireachtas. The effect of this alternative interpretation would be to impose an extra requirement on the debtor, potentially making it more difficult to gain creditor agreement, even to a reasonable proposal. This is the main purpose of the Bill. I accept that there has been no court challenge so far or decision on the possible alternative interpretation and, were this to occur, the court may well uphold the established interpretation. However, given the importance of the matter, the Attorney General's office has advised that it appears preferable to make a prudential amendment as a matter of urgency and to put the wording beyond doubt. I support this view. It is sensible and I commend the Attorney General on the matter. The relevant sections are sections 4 and 12. This measure will avoid any risk of uncertainty or delay pending a court decision arising from parties to statutory debt deals. Furthermore, it will preserve the intention of the legislation. The advice of the Attorney General on sections 4 and 12 is important in view of the possibility of uncertainty and delay. We cannot allow that to happen. We need to be prepared and we need to be strong on this issue. This is why I welcome these changes to the legislation.

A second point in respect of this legislation is important. The Bill includes a supplementary provision to clarify the more detailed procedures which apply where creditors are deciding on a debtor's proposal for a debt deal, debt settlement arrangement or personal insolvency arrangement in two specific scenarios. This may not be urgent but it has been included in the Bill on the advice of the Attorney General since it arises in the same sections of the legislation. Effectively, the Act provides for a standard decision-making procedure by a vote at the creditor's meeting. Alternative decision-making procedures may arise only in specific scenarios. The Act sets out detailed procedures for these scenarios, including notice periods, time limits for decision, procedures for varying any decision and documents to be provided to the Insolvency Service of Ireland and the court.

Overall, this is important legislation. I welcome the publication of the Personal Insolvency (Amendment) Bill. I hope families gain from this legislation and I hope they will be assisted in a strong way because many of them have been suffering for too long.

Debate adjourned.