Léim ar aghaidh chuig an bpríomhábhar
Gnáthamharc

Dáil Éireann díospóireacht -
Tuesday, 29 Sep 2015

Vol. 890 No. 3

Other Questions

Property Tax Exemptions

Clare Daly

Ceist:

123. Deputy Clare Daly asked the Minister for Finance regarding the review of the local property tax, if he will explain why the pyrite issue was included in this process, rather than being dealt with promptly, as the difficulty with the manner in which the pyrite exemption was worded and implemented had been apparent since the inception of the tax. [32833/15]

It is a very poor reflection on the Department of Finance and very regrettable that I have to ask this question again. I have spoken about it on the record for almost two years and the Minister is on the record as agreeing with me. Home owners whose properties are virtually valueless because they have pyrite are supposed to have an exemption from the property tax. However, because of the manner in which that tax is being implemented, they have not been able to avail of it.

It is something the Minister said he would have addressed long before now but, as we speak, people in that situation are getting demands from Revenue for a tax on a property that is worthless. Why has this been buried in the overall property tax review when it was well flagged as something that needed independent action before now?

I thank the Deputy for the question. As she is aware, I had initiated a review of the operation of the local property tax, LPT, earlier this year. The review was carried out by Dr. Don Thornhill, who chaired the interdepartmental group on the design of a local property tax in 2012. While Dr. Thornhill's current review focused mainly on property price developments, it also considered and made recommendations on a limited number of other issues relating to the efficient and effective operation of LPT. I considered it appropriate that Dr. Thornhill's review included the operation of the pyrite exemption for local property tax.

It was made clear during the passage of the Finance (Local Property Tax) (Amendment) Act in 2013 that the exemption would be restricted to properties with significant pyritic damage and that not all damaged properties could avail of the exemption. Regulations made by the Minister for the Environment, Community and Local Government in relation to testing, certification and the NSAI protocol were published in May 2013 and these restricted the LPT exemption to properties with significant pyritic damage where such damage had been proven by the appropriate testing and subsequently certified.

Before its establishment, it would have been envisaged that the Pyrite Remediation Board, PRB, would have remediated those properties that would have qualified for a LPT exemption and that the requirement to have the level of pyrite damage verified and certified would be a precondition for remediation. However, it transpired that only properties with a damage condition rating of 2 are being accepted for remediation by the PRB. Also, I understand the PRB is not testing and certifying all properties that are being remediated. That gives rise to two issues - first, properties with a damage condition rating of 1, with progression, are not being accepted for remediation by the PRB and, second, not all properties that are accepted for remediation are tested and certified. A property owner who might have only a damage condition rating of 1, or 1, with progression, established by a second test, and who wants to claim the LPT exemption, has to spend €1,500 to €2,000 on testing and certification. Properties with a damage condition rating of 2 are accepted for remediation but are not eligible for the LPT exemption unless they have the required certificate.

With respect, there is nothing new in the Minister's response. We debated the issues during an amendment I tabled to the Finance Bill last year. I have the transcript of the debate. The problem is there was an anomaly in the drafting of the statutory instrument in the legislation, which means that for somebody to get his or her exemption of hundreds of euro he or she will have to spend thousands of euro. The Minister is on the record of the Dáil as saying that was never envisaged but he is also on the record almost a year ago as saying that he had instructed his officials to deal with the matter, he was examining all the options and he expected an early resolution. The reality is the State is remediating properties, probably at a cost of approximately €40,000 per house because it accepts those properties have pyrite, even though an infill test was not done, but the other arm of the State, namely, Revenue, expects those very same people to get a test done at a cost to them of approximately €2,000 to get an exemption of perhaps €400 or €500 over the course of three years. It is completely unworkable. I do not ask the Minister to identify the problem - we know what that is - but could he outline whether the solution is any nearer than it was two years ago when I first asked him?

The outcome of Dr. Thornhill's review has been presented to me in report form and is currently being considered and will be published on budget day, in two weeks' time. I will outline my response to this very important issue on budget day.

Any resolution to the pyrite issues may necessitate a change in the relevant provisions of the Finance (Local Property Tax) Act 2012, as amended, and-or the Finance (Local Property Tax) (Pyrite Exemption) Regulations 2013. If legislative change is required, then I will examine the possibilities for its advance application on an administrative basis with the Revenue Commissioners.

We have a problem because that is really not good enough. We have been told previously that the Thornhill report would be available no later than the summer, which I took to mean I would have it no later than then.

We are well into autumn now and we are expecting yet another announcement on budget day. The points the Minister made about legislative change were well flagged last year. Is his Government going to announce, on budget day, that it has a potential solution even though, three years ago, its backbenchers were telling people they would be exempt from the property tax if their homes were affected by pyrite? I plead with the Minister on behalf of homeowners who, as we speak, are struggling to pay their mortgages and who, in some instances, have had their houses accepted into the remediation scheme but who are receiving harassment letters from Revenue demanding payment and are being told that this money will be deducted from their salaries. These individuals find themselves in their current position not through any fault of their own but because of the manner in which the legislation was drafted. To receive a response now which is - almost word for word - what I got 20 months ago to the effect that it may need a legislative change, or something else, is not really good enough. If it was the other way around and homeowners owed Revenue money, the latter would not be as tardy as it has been on this issue.

I am considering Dr. Thornhill's report and I hope to be able to announce, on budget day, an appropriate response which will meet many of the concerns the Deputy has raised.

Insurance Compensation Fund

Peadar Tóibín

Ceist:

124. Deputy Peadar Tóibín asked the Minister for Finance if he will provide an update on the liquidation process at Setanta Insurance; and the estimated total cost to the State through the use of the insurance compensation fund, and any legal costs arising from same. [32879/15]

I am seeking to discover what is to become of the hundreds of people who are in insurance limbo in the context of the problems relating to Setanta Insurance. Many of these people have suffered delays due to legal inaccuracies and confusion at Government level. What are the costs to the State of this?

The liquidation of an insurance company is a legally complex and time-consuming process.  Setanta is a Maltese incorporated company and, therefore, the Setanta liquidation is being carried out under Maltese law. Progress in the liquidation of Setanta has been awaiting the outcome of the High Court case of the Law Society of Ireland v. the Motor Insurers Bureau of Ireland.  As this case is still sub judice, there are certain matters upon which I am not in a position to comment at this time.  I will, however, respond to the Deputy's question as best I can within these constraints.

The Setanta liquidator informed me that he has made the following progress. The number of open claims was 1,696 at the end of August. The claims reserves position stands at between €87.7 million and €95.2 million. The liquidator will accept new claims up until May 2016, two years after the insurance policies issued by Setanta were cancelled. Final settlements can only be paid out after all of the company's liabilities are quantified, including claims. On foot of work already done, the liquidator was in a position to move quickly to start the process of paying claims in the event that the insurance compensation fund, ICF, had been deemed liable.

It has proven difficult to settle claims in advance of the High Court judgment because there is a lack of clarity as to whether the MIBI or the ICF is to be held liable.  There is a cap on payments from the ICF of 65% per claim or €825,000, whichever is less.  This cap does not apply in the case of payments by the MIBI. The liquidator continues to await a final outcome to the High Court case.  On 4 September 2015 the High Court held that the MIBI is liable in respect of claims against the policyholders of Setanta.  The matter has been further listed for 13 October 2015, when the matter of costs will be dealt with.  I understand that after that point the MIBI will have a further 28 days to consider an appeal.

The State has no direct liability for costs, but may advance funds to the ICF which would be recouped. The ICF is financed through contributions received from non-life insurance companies in respect of risks in the State, up to a maximum of 2% of gross written premium.  Legal costs for administration of the fund are also charged on the fund itself. The MIBI is also funded through industry contributions.

I welcome the developments in respect of this issue and the fact that the High Court has ruled the MIBI liable for this. When my colleague, Deputy Pearse Doherty, raised this issue with the Minister a great many months ago, the Minister said, on the record, that he felt the MIBI would be called upon, saying "The Motor Insurers' Bureau of Ireland, MIBI, has indicated that it intends to accept all third party claims connected to Setanta policies." The insurance industry then piped up and proffered legal advice and, suddenly, there was a backtracking by the State which then said the insurance compensation fund would be called upon.

In fact, if one reads the letters from the Law Society, which were published, it is striking that both the insurance industry and the Attorney General's office cite unambiguous legal advice on the issue. It is 19 months since Sinn Féin raised this with the Minister and it is now time to do something for these individuals. One Law Society letter cites an example of a very ill gentleman with a shortened life expectancy who is awaiting a payout of €400,000. He remains in legal limbo and he will not be paid until the end of this process. Why is there confusion within government and why is there a delay on the Government side? When will some level of compensation be given to these individuals?

There is no confusion within government. I set out clearly in my reply that there were two possible sources of compensation and it ended up in the High Court. The court has decided that MIBI is the responsible agency but that could be appealed. There is a further hearing in the court on 13 October to decide on costs and then there will be 28 days for MIBI to decide whether it will proceed. It has been a difficult situation for the policyholders but it was not the State that caused the delay; it was the legal proceedings that were being taken.

The Deputy asked when the first compensation payments would be made. It is not clear yet as the court case must be fully resolved but it is close to being resolved at this stage.

There is confusion on this because the Attorney General's office contradicted the Minister's initial opinion in this House that it would be the MIBI. The advice of the Attorney General's office has proved inaccurate because of the High Court decision. Urgency is not something, obviously, one associates with the Government's approach and accuracy is not something that we would necessarily associate with the Attorney General's office. Why did the Minister change his view? Did he object to the Attorney General's intervention? Would he apologise on behalf of the Government regarding the delay and confusion involved? Will he review his interactions and those of the Department of Transport, Tourism and Sport with the Attorney General's office regarding this debacle?

The Deputy should reserve that kind of commentary for the chapel gate in the forthcoming general election where, I am sure, he will impress his constituents no end. I cannot answer allegations; I have set out what is the position.

These are not allegations: they are facts.

The position is being resolved with all due speed but the matter is before the courts. I do not intervene in a process that is before the High Court.

Will the Minister review his interactions-----

I call Deputy Michael McGrath on the next question.

Insurance Compensation Fund

Michael McGrath

Ceist:

125. Deputy Michael McGrath asked the Minister for Finance the current position regarding the payment of claims due by Setanta Insurance following the recent court ruling regarding the role of the Motor Insurance Bureau of Ireland; the level of payments that are expected to be made; the approximate timeframe for this matter to be dealt with; and if he will make a statement on the matter. [32866/15]

My question is on the same subject. This has been a shambles from the beginning because when Setanta Insurance was liquidated in April last year, we were told initially on the record of the House that the MIBI would be responsible. Subsequently, the bureau received legal advice to the contrary and the issue ended up before the courts because another arm of the State took the MIBI to court. The net effect has been that, for almost a year and a half, 1,700 claimants have been left in limbo. The Joint Committee on Finance, Public Expenditure and Reform examined this issue and all the relevant parties appeared before us. They all sat around looking at each other and no one had answers. It has been a complete shambles for almost 18 months. The issue has ended up in the courts, which is not satisfactory. At this stage, we should be able to provide some clarity to people who are waiting on outstanding claims as to when the issue will finally be decided and when payments, which have been awarded, will be made.

My reply to Deputy's question is much the same as my reply to the previous question.

The liquidation of an insurance company is a legally complex and time-consuming process. Setanta is a Maltese incorporated company and, therefore, the Setanta liquidation is being carried out under Maltese law.

Progress in the liquidation of Setanta has been awaiting the outcome of the High Court case of the Law Society of Ireland v. the Motor Insurers' Bureau of Ireland. As this case is still sub judice, there are certain matters upon which I am not in a position to comment at this time. I will, however, respond to the Deputy's question as best I can within these constraints.

The Setanta liquidator informed me that he has made the following progress: the number of open claims was 1,696 at the end of August; the claims reserves position stands at between €87.7 million and €95.2 million; the liquidator will accept new claims up until May 2016, two years after the insurance policies issued by Setanta were cancelled - final settlements can only be paid out after all of the company's liabilities are quantified; and on foot of work already done with the Office of the Accountant of the Courts of Justice and the State Claims Agency, the liquidator was in a position to move quickly to start the process of paying claims in the event that the ICF had been deemed liable.

It has proven difficult to settle claims in advance of the High Court judgment as there is a lack of clarity as to whether the MIBI or the ICF is to be held liable. There is a cap on payments from the ICF of 65% per claim or €825,000, whichever is less. This cap does not apply in the case of payments by the MIBI.

The liquidator continues to await a final outcome to the High Court case. On 4 September 2015, the High Court held that the MIBI is liable in respect of claims against the policyholders of Setanta. The matter has been further listed for 13 October 2015, when the matter of costs in these proceedings will be dealt with. I understand that after that point the MIBI will have a further 28 days to appeal the case.

I am not currently in a position to confirm the level of payments expected to be made or the timeframe for the matter to be dealt with. I expect, however, to be in a better position to advise the House once the High Court proceedings have finally concluded.

The main point I would put to the Minister is that he should appoint somebody to examine this whole saga with a view to bringing in changes if this happens in the future. In view of the way insurance companies can passport in their services, they can be regulated primarily in another European country and regulated here for conduct of business purposes only. We are at the mercy of the strength of the regulation in another country. It is being standardised with a new European directive and so forth but that will take time to settle down.

The reality is that there are 1,700 individual stories involved here. They are very human stories and some of them are harrowing. I have seen solicitors' letters sent to many of the Setanta policyholders who were involved in accidents whereby they were being personally threatened that they would be held liable themselves, including by way of a judgment mortgage against their home if a payout was not made. That is the human dimension of this. It is unsatisfactory that almost a year and a half on these people have no clarity as to where they stand.

It is a fact that the Attorney General advised that the MIBI was not responsible. The High Court subsequently found in the other direction, that, ultimately, whatever the outcome, the MIBI's policyholders are going to pay, whether it be through the insurance compensation fund by way of the 2% levy or the MIBI members who will simply pass it on to policyholders. The Minister needs to take account of, and learn from, this experience and get all the parties together to ensure that if something like this happens again, there will be a much better and more efficient way of dealing with a liquidation scenario.

I do not disagree with what the Deputy has said and I could agree with most parts of his intervention. On the Deputy's question regarding the situation following the High Court decision and what we will do to ensure this does not happen again, I would point out that many of the arrangements are subject to European law and European regulation. That is why a Maltese company can write insurance here in this jurisdiction. I would ask for the assistance of Deputies, perhaps through the finance committee, when the High Court finally decides on this, such that the finance committee would consider what lessons we can learn from this and if there are any changes in domestic law which would be required, or if there is any advocacy which we could conduct in Europe to improve the situation to ensure there is no repeat of what the Deputy rightly said was a tragic situation for many of the 1,700 people who were affected by this.

The final point I would make is directed towards consumers and policyholders, namely, that they should listen very carefully to the tag-lines we hear on radio advertisements, for example, that an insurer is regulated by the Central Bank for conduct of business purposes. That does not mean that the Central Bank is the principal regulator of that insurance company; that insurance company could be regulated in Malta or Slovenia and it could just passport its services into Ireland. There is no consumer awareness of the difference between a firm being prudentially regulated in Ireland and being regulated here for conduct of business purposes.

There should be an awareness campaign to ensure consumers are more informed about this issue. As a result of the Setanta collapse, we saw the difference it can make. We also saw the difficulties presented when a company, essentially regulated abroad, collapses in Ireland with the claims of 1,700 customers directly affected, as well as the 70,000 customers who did not get the full value of the premium they had paid for the year ahead. This issue needs to be examined.

As in many other matters dealing with insurance companies, there is the issue of caveat emptor. It is hard to let the buyer beware, however, if he or she does not have the full facts. In any review that takes place after the liquidation and the court case are completed, we should certainly take into account the suggestions the Deputy has made about raising awareness for people purchasing motor insurance if their policies are underwritten in another jurisdiction.

Mortgage Interest Rates

Michael McGrath

Ceist:

126. Deputy Michael McGrath asked the Minister for Finance the action he is taking to deal with overcharging of tracker mortgage customers; his views that it is a widespread problem in the banking industry; and if he will make a statement on the matter. [32864/15]

I raised the issue last week about the overcharging of certain tracker mortgage customers by way of a Topical Issue debate with the Minister’s colleague, the Minister of State, Deputy Deenihan. As the Minister knows, a scandal has emerged with Permanent TSB and 1,400 of its customers wrongly denied a tracker rate, having come off a fixed-rate mortgage, for example, or not properly informed of their right to a tracker rate. Of course, a tracker mortgage rate in the current interest rate environment is very lucrative and essential to the customer who is entitled to it.

I believe, however, a much wider review across the banking system is needed because evidence is emerging that other banks have employed similar tactics against customers. I am not satisfied with the Central Bank’s response to date. The Minister should intervene and make his views known that there needs to be a system-wide review of how customers entitled to tracker mortgages were denied them and how other customers were coaxed from their tracker products by certain methods used by the banks.

This topic was considered in a Topical Issue debate last Wednesday, taken by my colleague, the Minister of State, Deputy Deenihan. The Central Bank has taken direct and very public action on the failures by Permanent TSB and Springboard Mortgages associated with tracker mortgage options and rates. Arising from the Central Bank's enforcement investigation, Permanent TSB has agreed to implement a redress and compensation programme to address the detriment suffered by 1,372 customer accounts. The consequences of these failures are serious and include mortgage overpayments, mortgage arrears, legal proceedings and, in certain cases, loss of ownership of properties, including some homes. 

I understand from the Central Bank that enforcement investigations into these issues at Permanent TSB and Springboard are ongoing. For that reason, it is not in a position to provide any additional information in respect of these enforcement investigations at this time.

I also understand the Central Bank is examining several lender-specific practices, particularly with regard to transparency of disclosure for borrowers. The determination of the most effective and appropriate further supervisory engagement will be informed by the outcome of this current supervisory work, as well as any other market intelligence, including its engagement with the Financial Services Ombudsman. If the Deputy is aware of other banks that have behaved in similar ways, leading to failures similar to that of Permanent TSB, he should bring them to the attention of the Central Bank. Although it does not investigate individual consumer complaints, it does welcome information from consumers of financial products. Individual customers can complain to the Financial Services Ombudsman if they are unable to resolve a complaint satisfactorily with their financial services provider.

The Central Bank is an independent institution and I do not have a role in directing its enforcement or investigative activities, nor does it report to me on specific investigations it undertakes. That said, the Government expects the Central Bank to use the powers available to it and to take whatever steps are necessary to ensure all customers are protected, whether this involves formal investigations or other means.

As the Minister knows in the case of Permanent TSB, it lost a High Court case on this matter and had findings made against it by the Financial Services Ombudsman. However, it still took it to the steps of the Supreme Court before, under duress from the Central Bank because of an enforcement investigation, it bowed to the inevitable, put its hands up and acknowledged up to 1,400 customers had been mistreated, denied a tracker mortgage rate after coming off a fixed-rate or given the wrong information about their entitlement to a tracker rate. That is a serious matter. At least 22 families lost their homes directly because of the overcharging by the bank. They are now in the process of going through a compensation scheme.

I do not believe the matter ends there, however. It was reported in the Sunday newspapers that AIB has reinstated tracker mortgage rates to certain customers who were wrongly denied the rate after coming off a fixed-rate mortgage for some time and that some customers have had a write-down of their mortgages because of this issue. Action needs to be taken on this. There must be a system-wide review by the Central Bank across the banking system as to how customers, entitled to return to a tracker rate having come off a fixed rate, were treated. The six-year limitations rule for complaints to the Financial Services Ombudsman means many customers who should have been entitled to go back on a tracker rate in 2009 and 2010 will have the window for recourse to the Ombudsman shut in their faces shortly. This issue needs to be dealt with.

The bulk of the decisions taken by Permanent TSB were taken between 2004 and 2008, which was before my watch. Practices were not corrected then. Subsequently, it went to a Supreme Court case and on into 2013.

The Central Bank is independent but is responsible under law to investigate matters such as this and to rule out malpractice in financial institutions. I will bring the Deputy’s concerns to the attention of the Central Bank because he has indicated he firmly believes the practice also prevailed in other institutions. If that is so, it should be fully investigated.

Before the end of this Dáil, will the Minister address the issue of the six-year limitation rule for access to the Financial Service Ombudsman, not just for customers denied a tracker rate but those affected by the mis-selling of payment protection policies, for example? They are being denied justice and recourse in respect of financial products which were defective or unsuitable for them from the very beginning. While the issue seems to be tied up with a wider statute of limitations review, will the Minister deal with this? The Central Bank investigation into payment protection insurance policies only dealt with cases from 2007, meaning tens of thousands of other customers have been denied justice in respect of these financial service products. If the Minister could amend that six-year rule, it would open the door for those customers to be properly and fairly treated.

If the Deputy frames a suitable parliamentary written question, which covers the ground he has indicated now, I will ensure he gets a full and detailed considered reply.

Barr
Roinn