Personal Insolvency (Amendment) Bill 2014: Second Stage (Resumed)

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

The 19th century American journalist Ambrose Bierce described debt as an ingenious substitute for the chain and whip of the slave driver. If he had been writing in contemporary Ireland, he could have added a special mention for the banker, the property speculator, the big building firms and big businesses which have forced tens of thousands of households into poverty to pay their boom-time debts. Over 50% of Ireland's households are in debt, way above the eurozone average. It is estimated that as many as 250,000 people are insolvent. This debt crisis is a daily nightmare for tens of thousands of people who are in constant fear of the next telephone call or letter from their bank. I recall last year meeting a young woman whose hair had fallen out owing to the stress caused by the constant harassment of her banks in looking for payments that simply could not be made. Debt is destroying people's lives, forcing them into making daily decisions about whether they should leave bills unpaid, not eat or leave their homes without heat in order to pay their mortgages or other creditors, decisions that are impossible for them to make.

The vast majority of people who are in debt are not those who theoretically "lost the run of themselves" in the course of the boom. Their only crime was to provide for their very basic need to have a home.

Despite the hype and spin about the recovery in our economy, we are still in the midst of a very severe debt crisis, which even the Taoiseach has admitted this morning. The latest Central Bank figures show that nearly 118,000 mortgage accounts are in arrears, which amounts to €2.5 billion and represents over 15% of all mortgages. The number of those in serious mortgage arrears is still increasing. There are now just under 37,500 mortgages in arrears of over 720 days, coming to a value of €8 billion. That is 7.6% of total outstanding mortgages.

When the Government came to power in 2011, there was an expectation that something would be done to ease the burden of those in mortgage and personal debt difficulty. The Labour Party even promised a personal debt management agency that would be armed with strong powers to protect people in debt. All we got was a Personal Insolvency Bill which, although it has worked for some, has demonstrated itself to be woefully inadequate, riddled with shortcomings, and a complete failure in dealing with the mountain of debt heaped onto households. The reality of the existing system can be seen in the fact that since the launch of the insolvency service, just 1,600 people have applied for one of those arrangements, and of those, only 548 have been approved. It is a tiny drop in the ocean compared to the debt crisis that exists. In reality, people have been voting with their feet and not engaging with this regime.

With this Bill, the Government had an opportunity to correct the flaws in the personal insolvency system. Instead, it is tying up some loose ends and making relatively minor and technical changes. Nothing is being done about the fact that personal insolvency practitioners, PIPs, are allowed to set their own rates and charge in the region of €2,000 for their services. Some cases have been reported of €4,000 being charged, to people who are in extreme debt crisis situations, and just a consultation with a PIP can cost in the region of €100 to €300. The whole thing puts the process beyond the reach of many who are in debt. There are also cases of personal insolvency practitioners refusing to deal with people in very serious arrears. The profiting off the backs of people who are in vulnerable and difficult situations must end. Organisations such as MABS have called for insolvency practitioners to be provided free of charge to those in debt. We in the Anti-Austerity Alliance support that and believe it could be funded through a levy on the banks.

This legislation will do nothing to tackle the power banks have under this regime. The banks' veto on proposals remains. The exercise of this veto is not an isolated incident but is something the banks are using on a regular basis. The insolvency service reports that to date, 25% of proposals have been rejected by creditors, which is an exercise of that veto. With the re-inflation of the property bubble, the increase in property prices we are seeing at the moment, we are only likely to see further increases in the use of that veto as banks seek to maximise their profits at any cost. This legislation could have been an opportunity to dislodge the banks from the driving seat in this process. We could have seen the introduction of mechanisms forcing the banks to agree to write-downs, but instead, yet again the Fine Gael and Labour Government has decided to back up the banks.

Debt is a personal nightmare for many people, but it should not be. People in debt are victims of the capitalist system that has forced them into buying modest homes at massively inflated prices in order to swell the coffers of the banks, property speculators and big builders. When the inevitable crash happened, who was forced to pay the price? It was not the vultures who had profited, but ordinary working people who have been forced to pay the bill through austerity and massive personal debt, while the developers and bankers were bailed out. Austerity, the debt rip-off and the private misery must end. We need a common struggle to end the debt nightmare. The Anti-Austerity Alliance calls for debt to be written down to affordable levels, and the cost to be put onto those who profited from housing and unsustainable lending during the boom. Repossessions must be outlawed. It is simply not a solution to turf people out of homes, for them to go onto endless local authority waiting lists or be thrown to the mercy of rack-renting landlords and all the associated crisis surrounding homelessness.

Tackling the debt crisis will also have to take place as part of tackling the housing crisis. We need a massive plan for public investment in social housing to provide affordable housing for all to rent and to buy. We also need to take on the rack-renting landlords by introducing rent controls and decent rights for tenants.

The next speaker is Deputy Neville. Sorry, I call the Minister to reply.

I thank all of the Deputies for their contributions to the debate on the Personal Insolvency (Amendment) Bill 2014, and for the broad support that has been expressed for the technical but important changes it will effect. Taking up some of the points that Deputy Murphy and others have made, last year the Government committed to reviewing both the implementation of the Central Bank mortgage arrears targets and the operation of the insolvency service to make sure that both bodies have the necessary powers to support families who are trying to work their way out of their debt problems.

There is not a Deputy in this House who does not understand how serious this issue is. The Government is absolutely committed to taking steps to make a difference in this area. Our review of the insolvency legislation has examined closely the full range of issues which arise. It has included consultation with a range of stakeholders, including those working directly with people who are deeply in debt. I intend to bring forward proposals to the Government shortly arising from that review, so that the insolvency legislation can work effectively to ensure that people trapped in unsustainable debt can arrive at sustainable solutions.

Many of the Deputies, including Deputy Murphy, referred to direct contact with individuals and families, which we have all had. We are all very aware of the struggle that people are experiencing and the total pressure they feel when they are carrying debt of the order that pertains for many families. That is why we need a range of initiatives and why I took those decisions to remove the barriers to working effectively with the insolvency service. I have reduced the fees to make it much more likely that people will be able to go and work with the insolvency service. The insolvency service has also done a lot more work in making people aware of its existence. It has become very clear from the insolvency service's own research that people are not sufficiently aware that the service exists. Once it did that work in the fourth quarter of last year, as I informed the House yesterday, we saw a very substantial rise - well over 100% - in the numbers of people going to the insolvency service. I hope that will continue.

I want to say a word directly to those families. It is very clear that many of them are struggling alone and feel embarrassed to seek help. I would like to echo what was said by the director of the insolvency service. We want people to know that there is help available, and that there is no embarrassment in seeking it and no shame in taking it. Many of those who have made contact with the insolvency service or with other agencies have spoken of the relief they feel and have said that they really regret not having gone for help earlier. I have heard this directly from the PIPs working with families, from the director of the service and from others. That is a message we really need to get out to many people. I am constantly surprised at meeting people who have had an awful lot of contact from those to whom they owe money, but have not responded to any of the letters because of that fear. I want to say to them to use the insolvency service, go and get that initial help and begin to work through the difficulties. A lot of help can be given.

I am examining a whole range of issues in the review and we have consulted very widely. I am bringing proposals to the Government arising from the review. If I can table some amendments on Committee Stage that would make a difference to areas where we see that action needs to be taken, I will do that as well.

Moreover, I am keen to see what practical action can be taken quickly and effectively. Yesterday, and again today, I referred to the steps we have taken to lift barriers to people seeking help and to spread information in order that people know where to get help. I am pleased that this is showing results and I believe we can do more.

I emphasise clearly and strongly that the banks must engage constructively with the insolvency legislation and the Insolvency Service of Ireland. We have seen some banks working strongly with individuals while other banks are not and that must change. This is of key importance. We are seeing overall mortgage debt reducing significantly and steadily but more needs to be done to ensure sustainable solutions are put in place for families in long-term arrears who are making every effort to pay what they can.

I thank all the stakeholders, including MABS, the other services and those facing heavy debt who were involved in the review. During the review I will examine carefully possible measures to address any question of unreasonable refusal by creditors to engage with the legislation, but this will be done in a reflective manner. The Government has already shown a willingness to hone the legislation. Earlier, I heard the Minister for Finance, Deputy Noonan, speaking about other initiatives being taken. These topics were covered on "Morning Ireland" this morning. Efforts to hone the legislation and processes relating to insolvency have been made by the Government to ensure they work better and better assist those they are designed to serve.

Reference was made to the mortgage-to-rent scheme. The scheme holds considerable potential to provide solutions. The operation of the scheme has been kept under review by the Minister for the Environment, Community and Local Government, Deputy Alan Kelly, with a view to addressing any barriers which may have arisen.

As Deputies have said, today's Bill is technical but it has an important objective. No court actions have been initiated in respect of these issues. It is technical but it is prudential and serves to ensure that there is procedural clarity for all stakeholders. I believe effective and well-designed legislation has a vital role to play in addressing indebtedness and helping people. It is vital that each Deputy and Senator make people aware of the services of the Insolvency Service of Ireland when they come to their clinics. Help is available. It is a flexible service and the practitioners, many of whom I met last week, are there to help.

I thank Deputies for their support for the Bill. I take the points they have made about the further actions needed in respect of the debt situation facing people. Of course I understand the pressures people are feeling. We are keen to do everything possible to ensure that people can access the services and benefits which the insolvency service can bring in a timely way.

Deputies have spoken about the low numbers. I emphasise that in other jurisdictions when insolvency services were introduced it has taken several years to really get started. There was an increase in the numbers who went to the insolvency service in the last quarter of 2014. People became aware of it through local radio or advertisements placed as well as through the work of the personal insolvency practitioners. It is clear that the numbers increased and more people were helped. I expect that to continue in 2015 and beyond and that the insolvency service will become an important part of the solution for people who are facing debt at the levels we have been discussing this morning.

Question put and agreed to.