I welcome the Minister of State, Deputy Curran.
Mortgage and Debt Support Measures: Motion.
I move:
That Seanad Éireann,
noting:
that the huge increase in the number of people unemployed, or working shorter weeks, has put enormous financial strain on families in meeting their mortgage repayments and paying other debts, with 14,000 households currently in mortgage arrears according to most recent figures — June 2008 — which are now estimated to have doubled;
the 244% increase in the number of households dependent on mortgage interest supplement since the end of 2007, totalling some 14,100 as at October 2009, and the absence of data on the number of applications and refusals for this support;
that debt collectors and commercial debt advisers operate in an unregulated environment;
the 100% increase in the number of applications for repossession in the High Court between 2007 and 2008, with the High Court hearing about 100 cases every week;
the ESRI estimates that 35,000 households will not be able to repay their mortgages next year and that 200,000 households will face negative equity;
that the new code on mortgage arrears and the IBF-MABS protocol fails to sufficiently protect homeowners;
that the Government has taken no steps to update or reform the current system of debt enforcement, which is ineffective, extremely costly to the taxpayer and wasteful of court, judge and Garda time;
that 276 people were jailed last year for failing to repay their debt, receiving an average sentence of 27 days and serving an average of 20 days;
and recognising:
the recent High Court judgment which found that a person must not be imprisoned if they do not have the money to repay their debt;
the recent publication of the Law Reform Commission's consultation paper on personal debt management and debt enforcement, which recommends radical and fundamental reform of debt enforcement procedures;
calls on the Government to:
establish an alternative dispute resolution system to deal with cases where people are unable to repay debt, which will free valuable court time and support families struggling with debt;
regulate debt collection agencies as proposed by the Fine Gael Credit Financial Institutions (Protection of Debtors) (Amendment) Bill 2008 and draw up legislation to regulate commercial money advisers;
incorporate into NAMA a home owner support scheme to protect families facing repossession of their homes;
expand MABS in a meaningful way to support individuals and families experiencing problems repaying debt, but also to support individuals and families in dealing with debt and managing their finances at an early stage before it spirals into a serious problem.
I welcome the Minister of State. This is a worthwhile motion which is concerned not only with mortgage arrears but also with indebtedness in general. Personal indebtedness has become a serious problem due to the haemorrhaging of jobs that we have seen in the past year. Irresponsible and reckless lending, overpriced mortgages and major falls in disposable income are the contributing factors. Most consumers are adapting by changing the amount they are borrowing, making different lifestyle choices and curtailing excessive use of credit card facilities. However, there are many who are in serious financial difficulty and we must help them. The Government which has bailed out the banks and we, as public representatives, must take responsibility for the people in question.
There are many forms of debt, including utility bills, credit cards, mortgages and car loans, and many find themselves in at least one, if not all, of these forms of debt through no wrongdoing on their part. Salaries have been dramatically cut owing to the pension levy and health levy and many are no longer in receipt of bonuses and overtime payments. These are the people who are told to feel lucky that they have jobs. Many struggled to pay their loans during the good times; therefore, it is almost unimaginable what they must be going through now. Why should people who have worked hard all their lives to provide for their families and never claimed anything from the State and who did not in any way cause this recession feel lucky?
There are many who are no longer in a position to pay fixed-rate mortgages. We should use NAMA to negotiate with the banks to establish a get-out clause in order that people currently facing heavy penalties for changing mortgages — some of up to €11,000 — can change to variable rates. This would allow them to benefit from lower interest rates, resulting in lower monthly repayments. Subprime mortgage lenders appear to have the highest interest rates and also adopt aggressive tactics for the collection of arrears.
Fine Gael is calling on the Government to adopt an alternative system to the current court-centred approach. I wish to be clear that there is a difference between those who will not pay back their debts and those who cannot. I am concerned about the latter group. We must support families and not allow them to feel further isolated and descend into despair. Issuing court orders for debt enforcement is not the correct solution. An alternative system would assess people who need the terms of their repayments changed in order that they may pay in proportion to what they can afford and, ultimately, repay their debts. A person's home is his or her castle and we cannot let the current level of home repossessions continue. There was a 100% increase in the number of applications for repossessions in the High Court between 2007 and 2008. We must set an agenda which we collectively aim to achieve.
Fine Gael believes the Government must establish a new central debt enforcement agency which will immediately take over the running of existing court procedures for debt enforcement. The legislation is outdated and applies to a time when not many borrowed beyond their means and got caught up in greed and mass consumption. I understand people must be prudent in how they borrow and admit that some have overstretched themselves but we cannot see families and little children losing their homes to the banks which we are bailing out to the tune of €54 billion.
The Free Legal Advice Centres, FLAC, and other money advisers say that in their experience, people under pressure from debt do not open registered letters. The prospect of court hearings is so terrifying that they just hope the problem will go away. As we all know, that will not happen. We must bear in mind the type of person about whom we are talking: someone who has worked all of his or her adult life, never signed on the dole and always paid utility bills on time but now finds himself or herself in the formal courts system. This is inhumane.
Hear, hear.
I commend the protocol of the Irish Banking Federation and MABS which are working well together. They have set out guidelines for people in debt to agree a sustainable repayment schedule with their financial institutions. I hope this protocol is working and not totally aspirational.
Financial services such as MABS have seen an enormous increase in the number coming to them for advice and help. We in Fine Gael acknowledge and commend the work of MABS but are now calling on the Government to expand the organisation in a way that gives greater support to individuals and families facing enormous financial pressures. This can only be done if the Government provides more resources for MABS in both finance and staff training. There are so many who simply do not understand financial jargon and need their affairs explained to them in simple terminology and there are many who need the terms of their repayments changed in order that they can make repayments in proportion to what they can afford.
We must proceed according to the principles of fairness, balance and enforcement on a case by case basis. Alternative ways of dealing with indebtedness which could assist individuals include debt counselling and advice. Common sense should prevail when people end up in serious debt but fear, embarrassment and lack of confidence can inhibit them from contacting lenders. Many people bury their heads in the sand in the hope that their problems will go away. When people have been deflated by unemployment, their loss of hope can persuade them there is no reason to make contact with lending institutions. I am also aware of cases in which people have agreed unsustainable terms or promised overly high repayments to satisfy their lenders. This is where MABS can play a bigger role. Experienced personnel could act as a third party, offer a level headed perspective and keep emotions calm while at the same time offering sound advice.
Earlier this week, Professor David Blanchflower expressed serious concern about the toll of unemployment on family life and the skills and esteem of our talented workforce. We have to find ways to stimulate the economy and return people to employment. I am also fearful of increased rates of suicide and dependency on alcohol and drugs. Financial stress also increases domestic violence and marital breakdown. It is ironic, therefore, that many couples cannot afford to separate because of the recession and accordingly have to endure each other's company in adverse circumstances.
In June 2009, the financial adviser, Mr. Liam Croke, told the Joint Committee on Social and Family Affairs that a lender can only offer assistance to couples when they are in arrears with their mortgages. This outrageous fact is indicative of the Government's reactive agenda. Banks should be obliged to encourage young people to pay as much as they can afford on a monthly basis. Lenders should not advocate that borrowers get into unsustainable debt because prevention is better than cure.
Too many people who genuinely cannot repay their debts are going to jail. Fine Gael has drafted legislation which would allow the State to make regular deductions from social welfare payments or wages instead of sending people to jail. Last June, the High Court ruled that it was unconstitutional to send a woman, Ms Caroline McCann, to jail for failing to repay her loan. In her judgment, Ms Justice Mary Laffoy noted that the failure was not due to wilful refusal or culpable neglect. Many people across the country would share the personal circumstances of the woman at the centre of this case, a single mother of two with psychiatric and alcohol problems who depends on the lone parents allowance. When her debts, which totalled €18,000, went into arrears her credit union obtained an order for her arrest. She requested MABS assistance in applying for an extension of time but the application was refused. This is the type of situation we must seek to avoid. As public representatives, we have a responsibility to put in place a system that is both effective and personable. It serves no purpose to fill our prisons at enormous expense to the taxpayer with people who genuinely cannot pay their debts.
Fine Gael has proposed measures to regulate debt collectors and prevent criminal gangs from acting as debt enforcers. No legislation is in place specifically to cover debt collection services. My party calls on the Government to take immediate action on regulating debt collection. NAMA must include a homeowners' support scheme to protect the 35,000 families in mortgage arrears. The housing charity, Respond, also supports such a scheme. The ESRI forecasts that 200,000 families will be facing negative equity by next year. Fine Gael believes we must restore stability to the financial system and provide a mechanism to protect the tens of thousands of Irish families facing repossession. To become eligible for the homeowners' support scheme, applicants' main residences must have a market value of less than €750,000 and they must be at least three months in arrears, able prove a loss of income, have investigated different repayment methods and used the facilities of MABS. NAMA would purchase the entire mortgage from the bank at the current market value and write down the loan to the benefit of the homeowner, who would service the remainder of the debt while also paying a rental fee to NAMA set by market rates. Subsidies may also be provided through local authority shared equity schemes. The objective is to provide people who have shown a commitment to repaying their mortgages the opportunity to make affordable and sustainable payments.
I ask my colleagues across the floor to support this motion because we have a collective responsibility to look after the people we were elected to serve.
I second the motion. Yesterday, the Society of St. Vincent de Paul published its pre-budget submission, aptly titled, Don't Push Them Over the Edge. Many people feel they are living on the edge. I commend Senator McFadden on her eloquent and humane presentation of the motion. People matter to us.
Unfortunately, indebtedness has become a huge problem for many ordinary people who were happily sailing along two or three years ago. Those who were most vulnerable during the Celtic tiger, namely, the unemployed, the elderly, the disabled and lone parents, have been joined by a new group of vulnerable people who worked hard and saved to purchase their family homes. Five years ago, we had never heard about negative equity or NAMA. People thought developers were gods who built houses across the country to save them from homelessness and social housing.
It is alarming that the Society of St. Vincent de Paul has experienced increases of up to 30% in demands for services. The society is spending more than €18 million per year, including €6 million on food, €3.8 million on energy, €3.8 million on education and €8.7 million on direct financial help. These figures demonstrate that people are suffering.
The motion calls on the Government to take urgent, immediate and proactive steps to support people and, in particular, to remove debt enforcement from the courts by providing an alternative dispute resolution system, allow us to regulate debt collection agencies, incorporate the home ownership scheme in the National Asset Management Agency and expand the money advice and budgeting service. The Minister, in his previous incarnation, was involved in MABS, a fine organisation which does great work.
To take the example of Monday last, 76 applications for home repossessions were listed in the High Court, of which 18, the highest figure ever recorded, were granted. The number of applications for home repossessions before the High Court increased by 100% between 2007 and 2009. I do not fly a flag for people who are careless or greedy but we must differentiate between those who will not pay and those who want to pay but do not have the resources to do so. We all make mistakes and in that respect, mea culpa.
A mea culpa from Senator Buttimer is a rare occasion.
He is big enough to admit a mistake.
I am human. The economic downturn has left an increasing number of people in financial difficulty. Self-employed friends of mine who had three, four or 12 people working for them are struggling to find sufficient work for themselves. According to the Combat Poverty Agency, the ratio of personal debt to disposable income has increased from 48% in 1995 to 170% this year. As I stated, the money advice and budgeting service provides a worthwhile service. Money-lending gangsters are, however, parading the streets of our cities, towns and villages. I have been contacted by people who have been threatened and intimidated by them. We must collectively and without recourse to party politics send a message to these gangsters that they have no place in society. We want to develop our communities and promote values for our children that encourage family life and home ownership. Without such values, society will break down.
The debt collection sector must be regulated. What is to prevent me or Senator MacSharry from setting up a debt collection agency tomorrow morning and collecting money in Cork or Sligo at exorbitant interest rates? Private debt collectors are hijacking the role of the credit unions and MABS. As a former member of the supervisory committee of my local credit union in Bishopstown, I understand the importance of the credit union movement and the great work it does. I appeal to those with debt problems to contact their local credit union or MABS office to negotiate a plan for resolving their problem. The Judiciary must also pause for reflection. It should facilitate plans which would enable people to pay back specified amounts each week. This is a matter involving people as opposed to commodities.
We can talk about home ownership, the market value of a loan, borrowers and so on and use all kinds of fancy jargon. I love the term "negative equity". If I had been wise, I would have bought a house 20 years ago. When I was in college playing hurling and drinking pints, friends of mine were buying houses and now own four or five rental properties. While I do not know if they are happy, I am happy even though I have only one house and can hardly manage it. We must keep things in perspective.
I believe passionately in people. The level of credit card debt is frightening. The banking sector and credit card companies should consider introducing a moratorium on the interest paid on credit card debts by those who are genuinely struggling to pay rather than those who would seek to hoodwink.
As Senator MacSharry will acknowledge, I have not been overtly party political in my contribution. I cringed, however, when I read the amendment. The renewed programme for Government is a missed opportunity and a wasteland of promises. One line in the amendment epitomises all that is wrong today. It reads: "notes that activity in the property market has remained low, making it very difficult to assess realistic price levels, so that any estimate of how many are in negative equity, or how long the position is likely to last is largely speculative". People are in debt and in some cases on the brink. We know property values have declined because we read constantly in the financial sections of the newspapers about the rate of decline in the property market. We also know that people have lost income, have been placed on a four-day week or lost their jobs. It is incorrect, therefore, to argue that it is not possible to make an assessment. I appeal to the Senators on the Government side, who are decent human beings, to support the motion and set aside their amendment in the interests of those who are genuinely struggling.
I move amendment No. 1:
To delete all words after "Seanad Éireann" and substitute the following:
"—notes that legal repossessions of home owners reported by the institutions covered by the Guarantee amount to 20 in the first nine months of this year;
notes that the Mortgage Interest Subsidy scheme provides an important safety net for mortgage borrowers who get into difficulties and that more than 14,000 families are now benefiting from this support;
notes that the Renewed Programme for Government envisages an examination of ways of expanding mortgage support measures and new measures to protect families having difficulties;
notes that the number of home owners in arrears (90 days) with institutions covered by the State Guarantee is currently of the order 15,000–16,000 and that the rate of increase in arrears has moderated notably since the early months of this year;
notes that activity in the property market has remained low, making it very difficult to assess realistic price levels, so that any estimate of how many are in negative equity, or how long the position is likely to last is largely speculative;
notes that the introduction of a statutory Code of Conduct on Mortgage Arrears earlier this year reinforces existing practices at mainstream mortgage lenders and extends legally obligatory protection to all mortgage borrowers;
notes that the Renewed Programme for Government envisages an examination of ways of expanding mortgage support measures and new measures to protect families having difficulties including the introduction of new measures to protect families having difficulties with their home mortgage payments;
notes that the Renewed Programme for Government also provides for the existing statutory Code of Conduct on Mortgage Arrears and the recently agreed protocol between the Irish Bankers Federation (IBF) and the Money Advice and Budgeting Service (MABS) on debt default to be further reviewed with a view to expanding the options available for dealing with debt situations, including for example, the use by banks and lenders of more flexible mechanisms to avoid foreclosure in appropriate circumstances and that these could include:
reduced rates;
longer maturity dates;
rolling-up of outstanding interest;
bank taking equity in the house;
bank taking ownership and leasing back the property to the resident with rent payments coming off the loan;
notes that the Renewed Programme for Government envisages that ways of expanding mortgage-support measures will be examined with reference to the measures adopted in other jurisdictions;
notes that the Renewed Programme for Government envisages reform of debt enforcement in light of the deliberation of the Law Reform Commission, which has recently published a consultation paper on the matter, the regulation of debt collection agencies, a new system of personal insolvency regulations allowing for a statutory non-court-based debt settlement system, and the establishment of a central Debt Enforcement Office to remove as many debt enforcement proceeds from the courts as possible;
notes that NAMA is not a bailout for developers and that extending it to homeowners would not provide them with relief;
notes that the proposal for a Home Owner Support Scheme would involve the State in buying further problem loans from the banks at a discount, would be complex to administer, would cut across the existing Mortgage Subsidy Scheme and could turn the State into both a mortgage lender and a landlord on a large scale;
notes that despite what certain media and other commentators might claim, a person cannot be imprisoned on the grounds of inability to pay a debt. Committal orders are granted where someone fails to comply with a court order, and can only be made where the debtor shows that the failure to pay was due to wilful refusal or culpable neglect;
notes that the Law Reform Commission is giving priority to its work on a Final Report on Personal Debt Management and Debt Enforcement, having already published a Consultation Paper in September 2009;
notes that Section 11 of the Non-Fatal Offences Against the Person Act 1997 provides an adequate system to protect debtors from unacceptable debt collection measures. Under this Section it is an offence to demand payment of a debt in a way designed to alarm, distress or humiliate;
notes that the Money Advice and Budgeting Service (MABS) provides a free confidential and independent debt advice and budgeting service for people in particular those on low incomes who are over-indebted or at risk of getting into debt and need help and advice in coping with debt problems;
welcomes the introduction of the Enforcement of Court Orders (Amendment) Act 2009 as a means of safeguarding the position of debtors who face proceedings in court and to clarify the position of inability to pay, ability to pay or refusal to pay a debt;
welcomes the fact that the operation of the Enforcement of Court Orders (Amendment) Act 2009 will ensure that it will only be in very exceptional cases that a person may be imprisoned for failure to pay a debt;
commends the Government for its actions to stabilise the financial system and to restore the public finances thereby protecting jobs and home ownership;
commends the Government for its increased support for the Mortgage Interest Subsidy scheme;
commends the introduction of the statutory Code of Conduct on Mortgage Arrears; and
commends the provision of additional resources to MABS for 2009 and the appointment of additional money advisors to 19 MABS offices in August 2009, bringing to 271 the number of money advice staff working in 65 locations around the country.".
I welcome the Minister of State and thank Senator McFadden and the Fine Gael Party for using Private Members' time to address this issue. Since March, I and many other Members have been working hard to try to devise innovative ways to deal with the human cost of the international economic downturn and its effects on the national economy. In that regard, I and a number of other people prepared a report which made a number of recommendations to the Minister for Finance. We presented the report to the Minister last August and I am pleased to note the amendment acknowledges much of its content.
There is no question that our economic difficulties are unprecedented. The economy is the sum of the people in it and the problems people face must be addressed. In recent weeks, the Taoiseach and Minister for Finance have noted that the number of repossessions remains relatively low, notwithstanding the figures cited by Senator Buttimer on the number of cases before the courts. At approximately 14,000, the number of mortgage holders in arrears is not especially significant relative to other years. On the basis of available evidence, the type of actions sought by the Fine Gael Party and the group with which I was involved and which presented a report to the Minister do not appear to be necessary.
I acknowledge the good work done by the Financial Regulator in preparing a code of conduct on mortgage arrears.
The Minster of State was very involved in the establishment and work of MABS. It does excellent work. I acknowledge the protocol it has signed up to. It states it will not commence legal action and will suspend or adjourn legal action which may have already commenced, subject to ongoing compliance with a mutually acceptable, affordable and sustainable repayment.
I would not describe the kinds of complaints and worries families are having in terms of mortgage arrears as a ripple in the context of what is coming. Inevitably, as we constitute less than 1% of the eurozone economy and given the focus of Trichet in the European Central Bank on inflation, as the European economy begins to recover there will be difficulties for Ireland.
Anybody who was up late last night would have seen that many of the international headlines focused on the outlook that the EU is on its way out of recession. It is great news in theory. In the short to medium term it is not particularly good news for us. The eurozone economy, 99% of which does not include us, will inevitably demand interest rate rises. This week Norway, which is not part of the eurozone, increased its interest rates. Interest rates will inevitably begin to creep up here.
People who had a double income and no children were put to the pin of their collar to borrow €250,000 or €350,000 to buy their dream home or first home to get on the ladder and start the ball rolling. Such people are now in a different scenario. Perhaps one of the jobs is gone, one or both people could be on short time or there may be two children to be cared for. The complete outlook for such people has changed and there is no question that as interest rates rise the pressures on them will significantly increase. When that time comes the demands on such people will be greatly increased and far from a ripple, it will be like a tsunami. I am not trying to scaremonger, frighten people or create a mountain out a molehill. It is basic maths. It would be foolish in the extreme if we did not prepare for such an event.
There has been some acknowledgement that we need to do this in the form of protocols from the Irish Bankers Federation. We require a legislative basis for it. Senator McFadden referred to the good development which emerged over the summer whereby a woman could not be put in prison for non-payment of a debt. It is to be hoped a woman or a man could not be put in prison——
I meant to say that. I thank the Senator.
——for non-payment of a debt due to refusal to pay or culpable wilful neglect. It is something I very much welcome on the private debt side, in terms of credit cards and similar products, but such a provision should not apply to mortgages.
I would like to see a proposal along the lines of that which we made in our report to the Minister. I am glad to see the amendment I moved states the protocol for MABS and the IBF can be reviewed and renewed to include a series of other opportunities. It is similar to our report and what Senator McFadden said regarding examining reducing the rates, giving people breathing space, longer maturity dates, rolling-up of outstanding interest, a bank taking equity in a house — I am not sure about that but it is an option — and a bank taking ownership of and leasing back a house.
These proposals were mentioned in our report and by the Opposition. A legislative basis needs to be put in place to guarantee that they will be actively considered. One flaw with the protocol regarding MABS is that it states it is not a legal document. Phrases such as "mutually acceptable", "where possible", "in the event that" and "provided people liaise and work together in an effective and realistic way" are used. The code of conduct from the Financial Regulator refers to viable alternatives. Who determines what is a viable alternative? I have some worries about that.
I acknowledge and welcome the fact that in our amendment we state we will consider all options but, similar to the Court Service of Northern Ireland, we need to put something more concrete in place. Its protocol, which is not a million miles from the proposals from both sides of the House or those envisaged by MABS and the IBF, has a critical line which states "Parties should be able, if requested by the court, to explain the actions they have taken to comply with the protocol". Such a provision is not included in our protocol.
The Department of Justice, Equality and Law Reform deals with this area. I would love to see us introduce a further amendment to the Enforcement of Court Orders (Amendment) Act, which we amended during the summer, focused specifically on mortgage defaulters. I do not support the concept of a NAMA for people. Irish people have their own homes and want to pay for them. As we said earlier, if somebody has lost their job he or she wants to be able to stay where he or she lives. When things become right for him or her again, he or she will live up to his or her responsibilities, continue to pay his or her mortgage and buy a home in the normal way. We need to put in place the appropriate template for people to do that and which gives people breathing space while they get back of their feet. There is no question that there will continue to be a proportion of repossessions and rightly so, because there will be people who, through wilful neglect, refuse to pay their mortgages.
I ask the Cathaoirleach to indulge me. Provident Personal Credit is a finance company which legally charges more than 180% interest in this State. It is not engaged in any illegal activity in the collection of money but a rate of about 30% is more than enough to allow any financial institution to charge. On illegal money lenders, while there are many laws in place in terms of enforcement and the use of illegal methods for collection of a debt, people are not coming forward to the extent they might because they fear harm and violence will come to them. We need to examine the possibility of allowing the sworn testimony of a superintendent as enough to help to convict people who are engaged in illegal and criminal money lending.
I welcome the Minister of State. I congratulate my colleagues in Fine Gael for tabling this very important motion. The Government needs to be thoughtful, as Senator MacSharry has been, in helping us to confront the very serious situation in which we find ourselves and not just dismiss it. One of the principal thrusts of the motion is the terrible situation regarding unemployment. I have spoken about finance; it has never been reported in this House.
I came up with an idea comparable to NAMA some time ago which I will not go into. One of its elements concerned the land banks around cities. It was a simple, perhaps naive idea, but I think it would help. I suggested that some of this land be taken by the Government, divided into allotments and people be given small kits with seeds, plants and tools and title to the allotments. It would get people out of the house and stop depression developing. We hear from all the voluntary agencies that depression is a serious illness which attacks unemployed people. The allotments would give them exercise and supplement their budgets and diets. It is a simple idea which would not cost very much. The Government should perhaps think about it. Responses to this area will be a mixture of small ideas like that and encouraging small business and the grander vision, about which I will say a few words.
We need to clear away a lot of red tape from small businesses and people who have a real entrepreneurial spirit, and do our damnedest to get money flowing, what is sometimes called risk capital, because the banks have become extremely risk averse. It is extraordinarily important that we manage to get finance to people who have ideas and are prepared to act on them.
I will give an example. There is a very well-known Dublin company called Granby's which makes sausages and it is located just behind Parnell Square. It is a small business that turns over a number of millions of euro and employs a considerable number of people. It has come up with what I think is a very good idea of making so-called hot mollies, which are reasonably sized sausages like a frankfurter. It has imaginative little trolleys in the centre of the city and at commuting times the company proposes to sell this product. There would be a certain number of jobs from this and quite a manufacturing capacity which would make up some of the shortfall caused by the practices of certain supermarkets and so on. The company has hit a snag despite the goodwill of local authorities because by-laws prohibit the casual sale of goods on the street without a casual trading licence. As existing casual trading licences are restricted in number and hours of operation and limit the type of goods that can be sold, one is unlikely to get a casual trading licence for an existing location as long as there are no new casual trading areas. A young man in charge of a traditional business has an opportunity to expand employment and give a good service — I have seen the project — and this is only one example. It is simple and could perhaps be dismissed as naive but it will create employment and it is Irish.
I have been speaking about seafood for a very long time in this House because it is one of the great unexploited resources of this country. As Dominic Behan stated in his wonderful song, thank God we are surrounded by water, and it is still relatively full of fish and shellfish in particular. These include crab, lobster, mussels and oysters, and such foods have not been sufficiently exploited. I will be positive and say I was glad to see a Minister of State, Deputy Tony Killeen, in Cork the other day visiting the first dedicated seafood development centre. That is the kind of thing I have been screaming about for years.
We have been exporting our seafood in bulk rather than packaged and prepared for the market, thereby losing approximately 80% of the value. In effect, we hand it over to others. I am very glad that we now have an opportunity to deal with value-added seafood thanks to the work of this Minister of State and Bord Iascaigh Mhara. The development centre has an innovative section which I am sure the Minister of State knows about. In it one can get advice on marketing and help with guiding an initial idea through to a fairly rudimentary export process. It may look like small potatoes — or periwinkles — but that is where we will see growth. These are the small elements that will withstand a financial storm.
We should look to the bigger picture. I am unashamed at having used this House to promote a number of projects, one of which is the metro in Dublin. I have been advocating it for nearly 20 years. I exploited a position where the Government changed without an election and Independent University Senators were put in the pivotal position governing the balance of power. I used the opportunity to amend the Dublin transport Bill to include a rudimentary framework for a metro. The Government should continue with the metro. We can look to the jobs in construction that will be brought into play by this.
Have a bit of courage and do it properly. In consultation with the great imaginative figure of Cormac Rabbitt, the man who is the William Dargan of our day, I have advocated my mark II proposal of an orbital network, which could link with all existing transport networks rather than having a route direct to the airport. Perhaps that could be included. Whatever the Government does, it should not spoil the ship for hap'orth of tar. It should put in decent stations that people will respect. A plexiglass box could be used like that at the Louvre station in Paris, displaying treasures from the National Gallery, the National Museum or the Ardagh chalice, the Book of Kells and the Tara brooch. People should be given a sense of pride again. The Abbey Theatre will produce a few jobs and lift our society. It is not just pertinent to the economy and the feeling and spirit of the people will be helped.
I have spoken for quite a long time about negative equity and warned about the position in which people would find themselves in having been offered 100% loans and gotten into difficulty. The figures are frightening and something must be done. MABS is a wonderful body but the Minister of State should tell his colleagues that it should be properly resourced and financed, which it is not at the moment. It will be needed more and more as we slide to a catastrophic 350,000 people in negative equity, of whom 10% or 35,000 may suffer repossessions. Despite what Margaret Thatcher said, we are more than an economy. In this country we are a society. We cannot permit such repossessions except to our undying shame.
It is unusual, in one sense, to see an amendment to a motion which is longer than the motion itself. The spirit in which it is being tabled is not part of the usual cut and thrust of Government and Opposition politics. All of us in the House recognise that a significant problem exists in our society that must be identified and dealt with. The purpose of a debate such as this is to work through such identification and work out common approaches on how to deal with the problem. From what I have heard of the debate, it has been conducted along those terms.
I will read into the record a section which has been included in the recently revised programme for Government. It is not my wont to read in most debates but for the sake of accuracy I would like to have these couple of paragraphs put in as a context for the debate we are having this evening. The revised programme for Government, under a section entitled "Protecting the Family Home" states:
We will introduce new measures to protect families having difficulties with their home mortgage payments. The existing statutory Code of Conduct on Mortgage Arrears and the recently agreed protocol between the Irish Bankers Federation (IBF) and the Money Advice and Budgeting Service (MABS) on debt default will be further reviewed with a view to expanding the options available for dealing with debt situations, including for example, the use by banks and lenders of more flexible mechanisms to avoid foreclosure in appropriate circumstances. These could include:
reduced rates
longer maturity dates
rolling-up of outstanding interest
bank taking equity in the house
bank taking ownership and leasing back to the resident with rent payments coming off the loan.
With reference to the measures adopted in other jurisdictions, the Government will examine ways of expanding its own mortgage support measures.
Under the section dealing with regulation of debt collection, the programme states:
We will reform debt enforcement in light of the deliberation of the Law Reform Commission, which has recently published a consultation paper on the matter. We will regulate debt collection agencies. We will create a new system of personal insolvency regulations allowing for a statutory non-court-based debt settlement system. We will seek to establish a central Debt Enforcement Office to remove as many debt enforcement proceeds from the courts as possible.
I have read this into the record because there are several elements included in the original motion which references the greater support of MABS, the use of the Law Reform Commission and how there should be regulation of debt collection agencies. There is no disagreement from anyone on either side of the House on such questions.
We must be aware of the scale of what exists as a potential problem in our society. The debate which has been ongoing in the other House and which we will have in this House next week relates to a speculation-led property development debt of €77 billion in many of our financial institutions. The level of private debt altogether in our financial institutions at €400 billion dwarfs our own State debt, and there is even a level of that debt which can be attributed to personal sources such as the use of credit cards and household mortgages. One is still talking about a sum of €160 billion, which is NAMA multiplied by at least two. The potential for default and the difficulties in which individual citizens may find themselves are very real and there is an onus on Government and the political system to ensure they can be averted. The five bullet points in the revised programme for Government offer as good a code to help stem that as anything we might do as a political system. Reduced interest rates and longer maturity dates, the rolling up of outstanding interest, the taking of equity by banks in a house or their taking ownership and leasing back or renting are some of the measures we must adopt to a greater extent. We must recognise that the moratorium that was put in place, and is to be renewed shortly, has had an effect.
Even under conventional methods the time difference between a debt being recalled and acted upon in a repossession is still approximately 18 months. Once we have those kinds of benchmarks within which to work, there will be a timeframe in the lifetime remaining to this Government, and for whomsoever shall compose the next Government, to put in place measures that over the next five years will protect as many as possible in our society. I hope today's debate will be an important contribution to that. I cannot see any real political disagreement. The amendment to the motion is an attempt to adopt most of what is in the original motion and in what the Government proposes and further embellish it. That would give the greatest agenda possible for all Members in this House to ensure that as many of our citizens as possible are protected from this risk and that the risk can be avoided in years to come.
I welcome the Fine Gael initiative and this motion which my party will support, in content and intention. Senator Boyle said he seeks to minimise the level of disagreement that exists. However, when we look at the amendment we do not see a real engagement with what was tabled by Fine Gael Members. Instead we see this tried and trusted formula, namely, to delete the entirety of what was proposed and substitute the Government's amendment. I say this for the umpteenth time on Private Members' business.
That is unfortunate. If there really were the level of agreement about which Senator Boyle talks, we should have had meaningful discussion between parties prior to the session and put down on paper the basis of the agreement the Senator claims exists. We do not serve that purported agreement by knocking out the entirety of the proposal put forward by the Fine Gael Members and substituting the Fianna Fáil motion. That is not agreement but the deletion and insertion of an entirely new motion.
In her introduction, Senator McFadden carefully and very compellingly set out the context in which the issue was raised. People face a very real human situation. Members on all sides of the House know that and I do not suggest that colleagues on the opposite side are not aware of or do not confront or hear about this problem every day of the week. I am sure Ministers do so too. The question is what are we going to do about it and when will we do it. The point has been made repeatedly that there has been a comprehensive response by the Government on this question. I disagree with the proposal relating to NAMA.
That ringing telephone shows incredible disrespect to the House. I am sorry the Member is not present now because I do not like to say things when somebody steps out. When a telephone rings, the very least one would do is switch it off.
I have pleaded with Members not to bring telephones into the Chamber.
Even in circumstances where a mistake is made surely the telephone can be switched off.
There has been a response on the banking issue. When we talk about people who face or are trapped in negative equity, it is not merely rhetorical for us to point out they cannot sell their house with the benefit of long-term economic value. A person stuck in negative equity who looks to sell to get out of a problem will have to sell at whatever market rate exists. Whatever they manage to eke out will be little or nothing in current circumstances.
Compared with the gift of so-called long-term economic value that is to be assigned to loans in the bailing out of the banks, no such long-term economic value is being afforded or gifted to individuals who find themselves in negative equity. They must face the music if they can manage to offload their houses for any price at the moment. In the circumstances, it is fair to draw the comparison between what the Government did for the banks and what they have failed to do for individual mortgage holders.
The other point about the Government amendment is that it is replete with references to the renewed programme for Government. Senator Boyle echoed that in his speech. I look for two things from the Government, as do all of us. First, what is going to be done? Second, when will it be done? The difficulty is that the references to the programme for Government are completely devoid of any timelines in respect of commitments in these matters. For example, the third paragraph of the Government amendment notes: "the renewed programme for Government envisages an examination of ways of expanding mortgage support measures". When will that happen? It is only an examination. Where is the action or the delivery?
At the bottom of the first page the same phrase is used again, namely, "the renewed programme for Government envisages an examination of ways of expanding mortgage support measures". I do not know how that managed to get in twice. It continues: "and new measures to protect families having difficulties". The section quoted by Senator Boyle noted that the renewed programme for Government also provides for the existing statutory code of conduct and the recently agreed protocol to be reviewed further. That is a commitment to review. The bullet points state that the new mechanisms "could include" the measures that follow. Will they? Is there any commitment to their doing so? When will this be done? The following paragraph "notes the renewed programme for Government envisages that ways of expanding mortgage support measures will be examined with reference to the measures adopted in other jurisdictions", and continues: "the renewed programme for Government envisages reform of debt enforcement in light of the deliberation of the Law Reform Commission". These are the references to which Senator Boyle referred so warmly as being a response to what the Fine Gael motion seeks to achieve. They are not commitments for action but are repeated references to reviews and examinations to happen in the future.
As colleagues will be aware, my party proposed a very concrete set of proposals in this area in the other House. I commend those proposals to my colleagues. The Government code of conduct as introduced in February is simply not adequate in the circumstances. It requires a very serious effort on the part of the Government. People become concerned about the legal problems. We all know a mortgage is a contract between a borrower and a lender. There is a reluctance on the part of the State to intervene in that contractual relationship. However, all the old rules have been thrown out the window in the current circumstances. What we are doing in the context of NAMA is completely unprecedented. Apart from the fiction of long-term economic value, the State is intervening like never before in contractual relationships by taking them over and stepping into the banks' shoes. If this can be done in respect of the banks and at a considerable cost, the full amount of which we do not know and might not know for many years, Fine Gael's relatively modest proposals to deal with the concrete, everyday dilemmas facing mortgage holders should commend themselves to the Government.
I second the amendment because the Opposition's proposal is to incorporate in NAMA a home owner's support scheme to protect those families facing home repossessions. However, NAMA's purpose is to protect the economy. It is a single purpose vehicle and repossessions can be addressed by other means and methods.
On most, if not all, other issues, we agree that the situation in which we have found ourselves is, in large measure, the making of the banks and credit institutions. On the international scale, it is of their making in full measure. The collapse of the sub-prime lending sector in the US is worth noting. Housing loans were rolled over and sold forward in packages, the money from which was used to fuel the lending fire further.
It is not that long ago that one might have received a note through the door asking whether one wanted to go on a holiday or to get €15,000 with no strings attached. Those of us who went through the 1980s and remembered interest rates at 18%, 20% and 22% and the difficulties in getting and holding on to a job until our knuckles went white because the only other option was emigration knew that those practices were dangerous. In glossy store card offers, people were told they could borrow up to a limit and pay off 2% per month, but doing so would have taken 18 years.
The banks have significant responsibility for allowing 110% loans, providing money to developers who were trying to outbid one another and pushing up the price of land to the extent that people who had not been around the circuit before believed that all one needed to do to get rich was get a job, of which many were available, borrow money to the maximum, buy a house and watch its value increase by 40% within two years. The banks had a large part to play but, this notwithstanding, we could have got through it all with our exports as we had a good, strong economy.
What the banks did internationally was pure criminal. They knew it was wrong. When people started to default, banks hid the facts from the regulators. This story is almost biblical in that the banks have been forgiven a large debt because we need them to bail out the economy. Time and again, the Opposition states that we are bailing out the banks, but neither I nor anyone in Fianna Fáil holds a brief for a bank. We hold a brief for the economy, which is what we have been doing. We have helped the banks, but the way they will now treat people is how they will be judged. Banks should not believe that they can return to the old days of 3% margins, putting people out of their homes and using a Victorian legal system to ensure the repayment of debts to the last penny after they have been forgiven significant amounts. This Oireachtas and its future versions should protect people because we have not forgotten the lesson.
MABS is doing a good job. A system for the rescheduling of debts with banks, taking equity, rolling loans over and working with people to ensure they can repay a certain amount has been proposed. It has never been acceptable that those who will not pay would not pay. However, it has always been acceptable that those who cannot pay would not pay. These are the people we are supporting.
With this responsibility in mind, I remind the banks of a warning from the past. If they start going after the poor people in question, there will be a strong feeling in the community to legislate to ensure that what we are proposing as a voluntary code of conduct will quickly become a legal one. The banks' future is in their own hands.
We are going through difficult times, but better times are on the way. However, I share my colleagues' concerns regarding the rise in ECB interest rates. It could easily come about. We only constitute 1% of the euro market and there is no doubt the Germans, who have strong sway in Frankfurt and the ECB, have an historical fear of inflation. As the threat of inflation returns and economies move forward, the ECB will raise rates. However, we can take solace from two elements. First, ECB rates are historically low and are within no measure of the 18%, 20% and 22% penalty rates paid in the 1980s. Second, if the European markets are improving, there is no doubt our economy, as the world's most open economy, will start improving.
While agreeing with much of the Opposition's comments, NAMA is not a suitable vehicle for ensuring the home owner's support scheme is put in place. However, the voluntary nature of the proposed support scheme must be accepted by the banks in full. There is more than hearsay evidence to suggest that some of the banks are using Ireland as a piggy bank, in that foreign banks are taking in deposits but not giving out loans. They are using us to increase their tier 1 capital ratios abroad and are sucking money out of the Irish banking system. If necessary, we should legislate to ensure moneys deposited in Ireland are given out on loan in Ireland. The Irish economy comes before any or all other banks.
Hear, hear.
I welcome the Minister of State, Deputy Curran, to the House and look forward to his response. I suggest that he consider having my good friend, Senator Hanafin, contracted as a scriptwriter for the Government. The Senator's revision of history and his new economic analysis of the past decade would make him a worthy and valuable script writer. I suggest that he be contracted and paid in his spare time to produce more such scripts.
Senator O'Reilly means "even more valuable".
He does not have any spare time.
While I accept the Senator's analysis of the culpability of the banks, the lack of international regulation and the disgraceful sub-prime lending in America, we cannot exonerate our Government of responsibility for allowing the building boom to go out of control for the sake of collecting revenue and allowing waste to develop in the economy and elsewhere. I do not like taking issue with my good friend, Senator Hanafin, and he will take it in the proper spirit, but he has a future as a scriptwriter or fiction writer for the Minister of State. Perhaps he could be a modern economist with a new commission. Fair dues to him. This is all part of the cut and thrust of debate and is worthwhile because we must consider matters from every perspective.
I congratulate my colleague, Senator McFadden, on her presentation of this motion. She has much compassion and empathy for people and a real feel for politics at a local level. This motion was born out of that principle and that type of conviction. It is a very worthy motion and, tragically, a very relevant one. I congratulate her on her exposition of it and Senator Buttimer on seconding it.
Tragically, indebtedness is a huge problem which arises from, and is aggravated by, unemployment. The current unemployment figure is in excess of 400,000 people. In June 2008 the Financial Regulator estimated that 14,000 people had mortgages in arrears. It is now estimated the figure could be double that. Some 200,000 people have negative equity and that figure will increase.
I take Senator MacSharry's point that unfortunately there is a risk of interest rate increases. I also accept the modification made by Senator Hanafin that we may not return to the 1980s. Even if there was a marginal increase in interest rates, it would have a huge implication for people who have borrowed to the pin of their collar.
The 2009 code on mortgage arrears, or the existing code on how mortgage arrears should be dealt with, is reactive in the sense that it is a timetable for court, repossessions etc. It is not proactive in the sense of interfering to deal with the issue, engaging in conciliation, applying a moratorium on the debt in some instances, extending the duration of the mortgage or looking at interest rates or payment methods. It is not that kind of system and that should be addressed immediately.
The protocol between the Irish Banking Federation and the Money Advice and Budgeting Service while worthy is not set out in legislation and that is a difficulty. The problem with MABS is understaffing and the waiting list. It is argued that some of the personnel in MABS do not have the capacity, or are not sufficiently qualified in all instances, to negotiate fully with lending institutions.
I refer to the open court procedure. Thank God we have not all had the experience of attending court, although nobody can say with his or her hand on heart that he or she will not do so in the future, especially if the doomsday scenario of a doubling or trebling interest rates occurs. Those who have attended court know it is archaic and unlikely to get the right reaction. It is punitive, public and adversarial and does not provide a mechanism to deal with this issue. The imprisonment of debtors is hugely expensive and is not a practical option. Senator McFadden cited a court ruling earlier. An alternative is needed.
The legislation needs to be reviewed and a new proactive process must be put in place to try to resolve this difficulty almost like in marital and other disputes where a conciliation system applies which rectifies the difficulty. That would be better than a punitive approach or a cornering of the debtor. There will be dishonourable exceptions and where they exist, there is no option but to allow the law to take its course. It probably was the case at one stage in our history where only very dishonourable people who would not pay came before the court but that is not always the case now. We must adjust to the new reality.
Despite criticism of it from the other side, and that is the job of a debate in the House, our concept of a home owner support scheme, or our amendment to the NAMA legislation, is worthy. I commend that to the Government and ask the Minister of State, Deputy Curran, to take another look at it. I take the point we are attempting to save an economy but we take issue with the entire NAMA concept and propose an alternative. Saving the economy is central but the economy involves house owners and property. We have a society as well as an economy and both must be dealt with.
We propose that part of a property would be taken over after negotiating the debt with the relevant financial institution. A new price would be negotiated in light of changed circumstances. NAMA would negotiate if there was an endangered property and take equity, if required, and charge a rental fee for the equity. The debtor would then pay the remainder. That is what Fine Gael proposes. It could work in practice. The Government argues that NAMA can work for property developers in a macro sense so why could this not work for house owners in a micro sense?
If a debt on a house is €400,000 and there is a write-off of €80,000, the €320,000 would be divided between equity to NAMA and the remainder being paid off by the house owner. A rental would be paid to NAMA, almost like in the shared ownership scheme. That should work in practice and should be considered. MABS should also be extended.
This is a worthy debate and I look forward to the Minister of State's response. We should all work together and look at all practical solutions because we are dealing with considerable human misery which results in domestic violence, marital breakdown, substance abuse and suicide in some instances. It is beyond politics in the narrow sense.
I congratulate Fine Gael on tabling this worthy motion. It is an important debate. The Government amendment to the motion is equally responsive. When there is as much agreement as this among the main parties, it is important to ensure we carry this goodwill forward to the budget which is a very important part of what we are trying to do.
The motion suggests using NAMA as a vehicle for this proposal. I support what Senator Hanafin said that we need separate legislation to deal with mortgages. I have had dealings with Deputy Thomas Byrne in regard to a proposal he has written on mortgages. We have taken advice from the chief executive officer of the Educational Building Society and he sees no reason we should not legislate in regard to mortgages and equity being taken by the banks. That would be an important first step. There is much merit in what was said but there should be separate legislation in this regard.
There is no doubt but that everything has changed. Senator MacSharry outlined a scenario which could be a doomsday one for mortgage holders, namely, if there was a substantial rise in interest rates. Even an increase of 2% could put a large number of people under pressure and they would not be able to repay their mortgages. If only one member of the household is paying the bills as a result of another member losing his or her job, as has happened in many cases, that would place huge pressures on the household.
It is a bit rich for the Labour Party to talk about what it would do. When it had an opportunity to do things for the less well off during its time in Government, it gave old age pensioners five shillings.
When was that?
Therefore, the statement condemning the Government is a bit rich. We are in a serious budgetary position. The Government has not run out of compassion; it has just run out of money. That is how serious the position is.
As Colm McCarthy said.
No interruptions, please.
I was agreeing with the Senator.
Members will have an opportunity to speak.
The Cathaoirleach is very tetchy.
I do not want any interruptions, please.
An alternative Government would have the same situation to face and actions to take. I am glad to see the House is in agreement on many issues this week on how the budgetary position should be tackled. I do not wish to be petty but in reply to Senator Alex White, the Government has improved the living standards of everyone, including the low paid, by way of the carer's allowance, increases in pensions, social welfare, education and sports grants. There has been significant investment in all these areas but there is a difficulty in maintaining it. We must, therefore, look at how we can continue to support the same people but with less money. When money is scarce, we need to obtain better value and savings will be needed in certain areas. To extend the process over a longer period would create problems for an alternative Government and result in extra interest repayment of €12 billion. We must grasp the nettle now and tough decisions will be required. Such decisions will not be pleasant but it is important they are taken for the future of the country, otherwise I foresee problems further down the line. It is our job, as legislators, to ensure legislation on mortgage measures is in place. That is the way to look after those who have mortgages. We must ensure the banks do not take us to the cleaners like they did in the past five to ten years, offering unrealistic mortgages. There is still sub-prime lending. People who would not be given a mortgage anywhere went to sub-prime lenders and now have them. Legislation should be enacted to cover not just our own banks but the entire banking system in the country. It is important we do this because that is our job, as legislators. I make that proposal — the legislation should come from this House in the first instance.
I compliment my colleague, Senator Nicky McFadden, on initiating this Private Members' debate and welcome the Minister of State, Deputy John Curran. I am in agreement with much of what has been said, particularly by my party colleagues, Senators O'Reilly, Buttimer and McFadden.
A number of issues have been raised in the course of the debate. Senator Butler referred to the need for the Government to make tough decisions. We have been listening for a long time to the excuse that the Government is unpopular because it had to make tough decisions. No tough decisions have been made. It is just 30 days to budget day and we expect tough decisions will be taken because they need to be, otherwise what is already a very bad situation will be made much worse.
The Government decided to spend €4 billion on the recapitalisation of Anglo Irish Bank, the most reckless of all the Irish financial institutions and which will never again trade successfully. The Government ignored advice from many sectors, not least the Opposition benches when we pointed out that this was good money after bad. That €4 billion would go a long way towards helping the people about whom we are speaking. I am thinking, in particular, of many people in my own age group who left school or college and had no difficulty in finding work in the past few years. Many of those jobs are gone. I know many people who have left the country, handed back the keys to houses and will have a black mark against their creditworthiness which will remain with them if they ever return to Ireland. That is the sad reality. Thousands of families in new developments around this city and in the horseshoe commuter belt towns around Dublin and towns across the country paid extortionate amounts for houses that were not worth the money in the first place. They did so in the hope and belief they would be able to remain in employment and meet their mortgage repayments but that has not been the case for many of them. The Government has introduced certain measures such as NAMA, about which I have significant difficulties but at least it is an attempt to close a gaping hole. However, very little has been done for private individuals. The Fine Gael proposal to include private home ownership within the terms for NAMA is an attempt to show the ordinary suffering Joe Public that the Government is not just about bailing out banks but that it will do something for those individuals who have been badly hit. That is the biggest credibility gap for the Government but it has made no effort to fill it.
I am disappointed at the Government's proposal to amend the motion. Senator Boyle said the Government amendment included the proposals made in the motion but that is not the case. The amendment commends the Government on providing additional staff for MABS, which is a fantastic service. As a constituency politician, I have been dealing with it in my seven years in the House. In recent times I have referred many more of my constituents to its offices. To seek to claim credit for providing five full-time additional staff for MABS is pathetic and bears no resemblance to the pressure that organisation has to bear.
The Government seeks a clap on the back for the introduction of a statutory code of conduct in respect of mortgage arrears. However, there is no reprimand for those who breach the code which seems to be voluntary in its operation. It is all well and good for Government Senators to say that if the banks do such and such, we will introduce firmer controls, as we have reached that position already. The Government should do something more concrete to help people who find themselves in arrears on mortgage repayments. As I stated earlier, the reality is that thousands of people are in that position. The most recent figures on mortgage arrears for June 2008 state some 14,000 people are in that category. It is estimated this figure is now greater than 30,000 and the ESRI forecasts that by next year some 200,000 people will be in negative equity on their homes. This is a very disconcerting position, especially for any Irish person because we have had a tradition for centuries of ownership of homes and property. It goes to the very foundation of what makes us Irish because a major part of our struggle for independence and freedom was the fight for the land. There is a sense that if one does not own the property in which one lives something is not right. This is bred into our psyche. The people have a great tradition of home ownership and rates of ownership are significantly higher than throughout the rest of the European Union and the world.
This attachment to home is especially concerning for those families who face the possibility of repossession. There has been a significant increase in the past 12 or 18 months in the number of cases coming before the courts and the number of repossessions. By all accounts the figure will mushroom in the coming years. The Fine Gael proposal seeks to remove the process from the confrontational sphere of open court. It is very good and it should happen.
The proposal does not mean people who made errors and who owe substantial amounts of money should be let off scot free. However, it gives genuine people who, through no fault of their own, cannot find the money to meet mortgage repayments a degree of comfort to the effect that they will not face a team of barristers representing their financial institution across the floor of the court while trying to defend what, in many cases, is the only thing they own. We are not discussing the protection of people who speculated in land or people who accumulated several houses or properties in other parts of the world. At issue is the protection of the family home, which I believe is worth protecting. The Government has done nothing in regard to protecting such people, the reason I have a significant difficulty with the current situation.
It is my pleasure to return to the Upper House to contribute to this debate. I compliment Senator McFadden on tabling the motion because it is timely and relevant to the current situation. I thank her for her contribution and all those who have contributed to the debate. Before I respond to the issues raised and go through generally what is at issue I make one or two specific comments. Senator Norris is not here now but he covered a whole range of issues. I refer to his comments on allotments in particular. The practice is actively pursued in the Dublin area, especially by South Dublin County Council.
I was interested to hear the comments of Senators O'Reilly and Hanafin in respect of rewriting history. I make no apologies for saying that with the benefit of hindsight the Government may well have made different decisions and pursued different policies. However, the same also applies to the policies pursued by the Opposition. With the benefit of hindsight they may have purported or supported different policies. The Opposition should consider the Give it Back policy campaign which it ran in 2002 and some of its proposed changes in stamp duty. If such policies had been followed they may have radically and adversely changed the problem we face.
The people place a high value on home ownership and make great efforts to secure and retain their own home. The Government has been supportive of this aspiration in good times and bad. In the current economic situation, the Government's objective from both a social and an economic point of view is that home owners who lose their jobs should be assisted to retain their homes during their period of unemployment. This is being done through the application of the new code of conduct in respect to mortgage arrears, support from the mortgage interest scheme under the supplementary welfare allowance system and the provision of advice on debt management through the Money Advice and Budgeting Service.
Before setting out in more detail what the Government is currently doing for those facing debt difficulties, including the issue of mortgage arrears, I wish to address briefly the proposal that a homeowner support scheme be incorporated into the NAMA legislation to support families facing repossession of their homes. The housing market has been especially hard hit by the economic downturn. It is a large and complex sector and I believe this proposal is unnecessary, overly complicated and would be costly to administer. It would involve the State in further buying of loans from the banks and further increase taxpayers' exposure. I reiterate it is a priority of the Government to ensure as far as possible that difficulties of mortgage arrears do not result in legal proceedings for home repossession. Home repossession should be and generally has been the last resort for the lender. I do not believe NAMA should be seen as the saviour of all ills. Although the issue will not be dealt with through NAMA it does not mean it should not be dealt with or is not important. Several measures may apply and I will outline these.
The new code of conduct on mortgage arrears which was published by the Financial Regulator last February applies to all regulated lenders on a statutory basis and replaces an earlier voluntary code operated by the mainstream lenders. The code applies only to mortgage lending activities to consumers in respect of their principal private residence in Ireland. I emphasise the code requires a lender to wait at least six months from the time arrears first arise before applying to the courts to commence enforcement of any legal action on repossession such that there is no deadline looming after which this protection will expire. In the case of Allied Irish Banks and Bank of Ireland, which have been recapitalised by the State, this period has been extended to 12 months from the time arrears first arise, for the duration of the recapitalisation subscription agreement.
The main features of the code include early recognition of problems, active management of arrears problems, examination of alternative solutions and repossession only as a last resort. Lenders must distinguish between borrowers who are genuinely unable to pay and those who could pay some or all of the arrears but will not do so. All genuine cases must be handled sympathetically and positively by the lender, which must explore with the borrower a number of alternate repayment measures.
The Financial Regulator has already undertaken an on-site themed inspection in respect of arrears and repossessions handling in selected mortgage lenders. Further work on monitoring and enforcement of the code is ongoing. Mortgage arrears continue to be closely watched. While there are estimates of the overall number by different economists and commentators, based on various assumptions, the number of home owners actually shown, in returns to the Financial Regulator, to be in arrears for 90 days or more with institutions covered by the State guarantee is currently of the order of 15,000 to 16,000.
The mortgage interest subsidy scheme under the supplementary welfare allowance system provides money, subject to a means test, towards the interest payments on a home mortgage. The number of people assisted by the scheme has risen sharply from a low base and stands at in excess of 14,000 since the end of September. More than 71% of those are in payment for less than a year and almost 2,300 are in payment for 18 months or more. Applications to the scheme are regarded as lagging unemployment by some months and the rise in numbers is expected to continue for some time. Funding for the scheme has been substantially increased for 2009. Expenditure on mortgage interest supplement was €12.2 million in 2007, €27.6 million in 2008 and €40 million was included in the 2009 supplementary budget. However, this is expected to be exceeded and the final outturn for 2009 may be in the region of €60 million.
A review of the scheme is ongoing and it involves representation from the Departments of Social and Family Affairs, Finance and the Environment, Heritage and Local Government with a representative from the Office of the Financial Regulator. The purpose of the review is to examine how the scheme can better meet its objectives of catering effectively for those who need short-term assistance when they are unable to meet their mortgage interest payments, especially given the increased number of those in receipt of mortgage interest supplement. All aspects of the existing scheme are being examined and the group hopes to issue recommendations by the end of 2009. The initial output from the review has been the issue of guidance notes on specific and operational issues for community welfare officers operating the scheme.
In addition, the Government funds the money advice and budgeting service, MABS, which provides valuable help to those in difficulty. A new debt protocol agreement has been finalised with MABS and the Irish Banking Federation, IBF, that provides added reassurance for borrowers with the most difficult issues. MABS is the main Government-funded service which provides assistance to people who are overly indebted and need help and advice in coping with debt problems. It is important that people coping with debt difficulties take early action and approach MABS for help and guidance. This can be the first positive step for people in addressing debt difficulties. The role of money advisers is to help clients to assess their financial situation, make a budget plan and deal with creditors. MABS now is dealing with increasingly complex debt situations in respect of clients who are presenting with multiple creditors and debts.
There are 53 independent MABS companies with voluntary boards of management operating the local MABS services from 65 locations throughout the country. In addition, the MABS national telephone helpline is available from 9 a.m. to 8 p.m. from Monday to Friday at a LoCall number and budgeting and money management information also can be accessed 24 hours a day. All MABS companies operate an appointment system for meeting clients. Clients with urgent difficulties are prioritised for attention and are dealt with promptly. Less urgent cases are referred to the telephone helpline and to the MABS website in the first instance. More than 90% of callers to the helpline find that their money management and budgeting issues can be resolved with the assistance of the helpline adviser. Approximately 10% of callers are referred to the local MABS for assistance.
Historically, repossessions in Ireland have been low and while comprehensive statistics have never been kept, the Department of Finance has obtained reports from lenders covered by the State guarantee. The total of legal repossessions of owner-occupier homes in this year to the end of September by those lenders is 20. A comparison of repossession figures for IBF members, which are the mainstream lenders not including sub-prime, with figures from the United Kingdom's Council of Mortgage Lenders indicates that the repossession rates per 100,000 mortgages in the United Kingdom are 30 times higher than those in Ireland. I note that the number of residential properties taken into possession by Irish Banking Federation members in 2008 was 99, and for the first half of 2009 the figure was only 70. To put this in context, the equivalent figure in the United Kingdom was approximately 24,000 for the first half of 2009. I understand there are approximately 11,000 mortgages in the United Kingdom for every 1,000 here. Consequently, the position in Ireland is completely different. These figures include a substantial number of voluntary repossessions and buy-to-let properties. There were very few legal repossessions of owner-occupier houses.
Media reports of repossession cases taken through the courts show that most involved sub-prime lenders which made mortgages available to borrowers who would not have been customers of the mainstream lenders, often because of perceived higher risks. Cases in which borrowers stopped payment after a few months, failed to respond to repeated attempts to contact them or even abandoned the house feature regularly in media reports of repossession cases before the courts. However, it is clear that the scenario that some commentators put forward suggesting that thousands of ordinary families are at risk of being evicted from their homes very shortly is far from the truth. These stories are unfairly and unnecessarily frightening for those who find themselves in difficulty. The repetition of horror stories about a great wave of repossessions that is always just over the horizon can rightly be called irresponsible. Members have been hearing these stories since this crisis began and yet the number of actual repossessions remains small a year later.
All estimates of the extent of negative equity appear to be based on general economic assumptions but it is difficult to assess realistic price levels when property market activity remains low. In any event, as being in negative equity does not change the level of mortgage payments, the problems it may cause are more long-term and should be considered on that basis. The Financial Regulator has estimated that only a small proportion of borrowers with the covered institutions who are in negative equity are in arrears on their payments.
The renewed programme for Government envisages an examination of ways to expand mortgage support measures and new measures to protect families having difficulties, including the introduction of new measures to protect families having difficulties with their home mortgage payments. The renewed programme for Government also provides for the existing statutory code of conduct on mortgage arrears and the recently agreed protocol between the Irish Banking Federation and the money advice and budgeting service on debt default to be reviewed further with a view to expanding the options available for dealing with debt situations, including for example, the use by banks and lenders of more flexible mechanisms to avoid foreclosure in appropriate circumstances. These could include reduced rates, longer maturity dates, rolling-up of outstanding interest, a bank taking equity in a house or a bank taking ownership and leasing back the property to the resident with rent payments coming off the loan. The renewed programme for Government also envisages that ways of expanding mortgage support measures will be examined with reference to the measures adopted in other jurisdictions
The Law Reform Commission's consultation paper, Personal Debt Management and Debt Enforcement, provisionally recommends that the Irish enforcement system needs fundamental reform and that existing enforcement procedures should be replaced. The proposed new system would be based on the introduction of a central debt enforcement office, which could build on the current arrangements and the removal of much but not all debt enforcement proceedings from the courts.The Law Reform Commission's consultation paper recommends that a licensing system should be introduced for the debt collection industry and that subject to specified exceptions, all debt collectors and debt collection agencies should be obliged to hold a licence before operating a debt collection business. All these recommendations will be fully examined in due course. The renewed programme for Government envisages reform of debt enforcement in light of the deliberation of the Law Reform Commission that will include the regulation of debt collection agencies, a new system of personal insolvency regulations allowing for a statutory non-court-based debt settlement system and the establishment of a central debt enforcement office.
The difficult and sensitive issue of persons who may be imprisoned owing to failure to fulfil a contract or contractual obligation is often raised in the context of debate on debt. All Members are aware of recent media reports about large numbers of persons being imprisoned in respect of unpaid debts. However, I am informed by the Irish Prison Service that, at present, five persons have been imprisoned for failure to honour contract or contractual obligations since July of this year. As a general point, the aim of the legislation with regard to enforcement of court orders is to uphold contractual rights but with specific safeguards. Despite what certain commentators might claim, a person cannot be imprisoned merely on the grounds of inability to fulfil a contractual obligation.
In response to the High Court judgment on 18 June 2009 in the McCann case in which section 6 of the Enforcement of Court Orders Act 1940 was found to be incompatible with the Constitution, the Government provided a short Bill last July to remedy the situation on an interim basis. The High Court found that the then section 6 did not require the debtor to be present in court, no provision was made for legal aid to an indigent debtor at risk of imprisonment and the reversal of the burden of proof meant that the debtor might be imprisoned simply because he or she had not proved that his or her failure to pay was not the result of wilful default.
With the co-operation of this House, relevant new legislation in the form of the Enforcement of Court Orders (Amendment) Act 2009 was enacted on 14 July 2009 and this ensures the court is in a position to hear from the debtor. The Act amends sections 6 and 8 of the Enforcement of Court Orders Act 1940. It has the effect of ensuring that where a debtor does not appear, a court can issue a summons to ensure he or she appears and if he or she still fails to appear, can issue a warrant for his or her arrest. This enables the court to hear the debtor and be satisfied as to whether the debtor has wilfully refused to pay and that all other steps possible have been taken to recover the debt. The court will not imprison the debtor unless it is satisfied that he or she has the means to pay and may also postpone the execution of an imprisonment order until such time as it thinks just. In addition, the court will inform a debtor of the risk of imprisonment and of his or her entitlement to apply for legal aid. The new Act gives the court a clear power to vary the terms of the breached instalment order or alternatively to refer the parties for mediation.
Members will appreciate that it was desirable to proceed as quickly as possible in view of the gap created by the High Court judgment. The new Act takes account of the issues raised by the judgment and provides certainty for creditors and debtors whose interest is not best served by avoidance of their obligations. The legislation makes it clear that imprisonment is a last resort and will facilitate the parties in addressing debt by every other means.
The Government has measures in place to assist families in difficulty with their mortgages and to help them keep their homes. The renewed programme for Government envisages further action to deal with problems. Repossession, other than in high-risk sub-prime mortgages, remains rare. The mortgage interest subsidy scheme is available for families in difficulty. The code of conduct on mortgage arrears provides borrowers with significant legal rights and makes repossession a last resort. Moratoria of six months and 12 months for AIB and Bank of Ireland are in place. MABS has been given extra resources to help those in difficulty with debt. The renewed programme for Government envisages reform of debt enforcement, regulation of debt collection agencies and a new system for personal insolvency. Imprisonment for debt-related reasons is now very rare and is governed by new, fairer, legal arrangements that protect borrowers who genuinely cannot pay. I urge the Opposition to examine the Government's amended motion and consider supporting it.
I propose to share time with Senators Twomey and Mullen. I found the reply of the Minister of State to be interesting and reassuring in ways. I do not agree with the Government motion. There could have been more movement towards the Fine Gael position. I refer to the call for the Government to establish an alternative dispute resolution system to deal with cases where people are unable to repay debt. The Minister of State could have accepted this. Members on the Government side of the House, including the Senator closest to the Minister of State at the moment, Senator MacSharry, have been seeking this and have raised it a number of times in this House. The proposal has extraordinary merit. As the Minister of State says, it is true that people will not be committed to prison without wilful neglect but that does not deal with the question of repossession. I am reassured by some of the figures of the Minister of State on repossession. I hope the media take note of this. Last night, the presenter of a radio programme said he had never seen any repossessions in his time in court.
I cannot agree with the Government amendment because the phrase "notes NAMA is not a bailout for developers" is true but the phrase "extending it to homeowners would not provide them with relief" is untrue. NAMA could be extended beyond developers with their homeowners support scheme. In the same way as NAMA will conclude at some stage with the Government owning equity in the banks, there is no reason why the State could not have shared equity in homes, as many local authorities do. This proposition is dismissed and that is unfair to the Fine Gael position. Fine Gael went to a lot of trouble to define a motion that is not harsh or condemnatory of Government. It contains suggestions that could be examined.
I figure that in the past three years, some 200,000 houses have been sold at an average price of €300,000. This amounts to some €60 billion. The total amount people paid for houses is very close to the figure for NAMA. I am a supporter of NAMA unlike many Members on this side of the House. There is no one suggesting anyone should go anywhere near this but the merit of the Fine Gael position is that it would give a personal balance to it and show the Government is providing support for ordinary people by recognising their problems. There could have been a moment of hands across the House if we did so.
I thank Senator O'Toole for agreeing to sharing time. Much of the motion is acceptable to most Members on both sides of the House. It should have been incorporated into the Government's motion. I am sad that this was not done. The Minister of State presented figures to suggest there is no problem but significant problems exist. The Minister of State should consider the percentage of take-home pay required to pay off mortgages. Income is dropping, as is take-home income, and they must now pay a greater percentage of take-home pay in order to hold on to their houses. To dismiss the idea that there is a problem is an insult to those who are trying to hold onto their homes. There may be a small number of people going to jail or whose house has been legally repossessed but many have handed back the keys and many have reached an agreement with the banks. Many are in dire straits and sacrificing other things, such as presents for their children and quality of life, in order to hold on to their house. For the Minister of State to talk as if there is no problem is an insult to such people——
I did not say that. I quantified the problem.
The amendment is congratulatory.
The Government amendment contains no apology for the way the Government has landed the people in this mess. When the banks were giving out 100% mortgages over 30 years and suggesting there should be no interest repayments, Deputy Bertie Ahern was saying that everything was grand and people should belt away. The Government landed the people in this mess and gave them a false sense of security. The Government should acknowledge that and try to do something for the thousands of people in this mess at the moment. It should not be passed off as a bland issue that does not matter.
NAMA is having a significant impact on this because the Government is up to its neck in trying to bail out the banks and stabilise the financial system. The Government does not have funding to assist people in trouble right now because it is paying so much to stabilise the banks. That should also be recognised in the contribution by the Minister of State.
I thank Senator O'Toole for sharing time. Cuirim fáilte roimh an Aire Stáit. I compliment the Fine Gael Senators on bringing forward this comprehensive motion. The Government could have been more positively disposed to incorporating it in the response. Without taking from the welcome figures the Government brought to our attention, I agree with the thrust of Senator Twomey's contribution. The Government motion appears to minimise what remains a very unpleasant reality. The Government notes that the rate of increase in arrears has moderated notably since the early months of this year. That phrase is a giveaway because people are in dire straits. To say the rate of increase has moderated is to minimise what is a very unpleasant situation for many people.
When thinking of this motion, I remembered the famous parable of the king, to whom the servant owed 10,000 talents. The servant begged the king to forgive the debt rather than insisting on him selling his wife and children and the king relented. The servant was ungrateful and, on going out, he met someone who owed him money, seized him by the throat and began to throttle him. That reflects the position of the banks, who have had tremendous grace and favour shown to them. The taxpayer is going bail for the banks and we all understand why this must take place. The banks are not acting honourably towards people who find themselves in dire straits. Today I read a report on the surcharges of interest that banks are imposing as penalties on people who are in arrears on mortgages. It is necessary that we have measures to look after the small person in the same way as the more powerful interests in our society have been looked after in recent months. I note what the Government said about the renewed programme for Government and examining the code of conduct on mortgage arrears. It is time to examine the measures adopted in other jurisdictions, particularly individual voluntary agreements.
In the past few days I spoke with a hard-working man who is self-employed. He is doing his best to provide for himself and his family and he is in dire straits with mortgage repayments. He just does not know what he will do if mortgage interest rates increase. He asked me to speak in favour of measures to introduce individual voluntary arrangements to enable people like him to deal with their creditors. They are doing their best to be honourable in repaying their debts but they find themselves in dire straits. It is very important we work together and that the Government in particular gives a lead in looking after those good people and helping them in what must be very worrying times for them.
I thank my colleagues on both sides of the House for their honest contributions. However, I am utterly disappointed in the amendment, which is an insult to the people. How dare Fianna Fáil "welcome" anything. The word "commend" is used four times in the amendment and "welcome" is used twice. It is an outrage. I am very angry about this.
I asked about a number of issues. I asked for a home-owner support scheme to be incorporated into NAMA; that is very reasonable. I asked about the regulation of those terrorising and intimidating sub-prime debtors. I asked about lenders being helped by a bank only when they get into arrears. I asked about fixed-rate mortgage holders. Senator Boyle then spoke about the renewed programme for Government and about how it "envisages" and how it will be "reviewed". I am sick to the teeth of "envisaging", "reviewing" and "in due course". The country and people cannot wait.
As other speakers stated, the purpose of NAMA is to bail out the banks and it is correct to state it is not to bail out developers. Why can we not support the poor honest to goodness people who were taken in by the Celtic tiger and the bubble to which the Government never put a halt? Now, they find they will have to bear the brunt of losing their homes. There has been a 100% increase in High Court repossession applications between 2007 and 2008. Christmas is coming, and Senator MacSharry from Sligo spoke about a tsunami. We are speaking about "envisaging", "reviewing", "commending" and "welcoming". Shame on you.
Amendment put. The Seanad divided: Tá, 27; Níl, 22.
Tá
- Boyle, Dan.
- Brady, Martin.
- Butler, Larry.
- Callely, Ivor.
- Carty, John.
- Cassidy, Donie.
- Corrigan, Maria.
- Daly, Mark.
- de Búrca, Déirdre.
- Ellis, John.
- Feeney, Geraldine.
- Glynn, Camillus.
- Hanafin, John.
- Keaveney, Cecilia.
- Leyden, Terry.
- MacSharry, Marc.
- Ó Domhnaill, Brian.
- Ó Murchú, Labhrás.
- O’Brien, Francis.
- O’Donovan, Denis.
- O’Malley, Fiona.
- O’Sullivan, Ned.
- Ormonde, Ann.
- Phelan, Kieran.
- Walsh, Jim.
- White, Mary M.
- Wilson, Diarmuid.
Níl
- Bacik, Ivana.
- Bradford, Paul.
- Burke, Paddy.
- Buttimer, Jerry.
- Cannon, Ciaran.
- Coffey, Paudie.
- Cummins, Maurice.
- Doherty, Pearse.
- Donohoe, Paschal.
- Fitzgerald, Frances.
- Hannigan, Dominic.
- McFadden, Nicky.
- Mullen, Rónán.
- Norris, David.
- O’Reilly, Joe.
- O’Toole, Joe.
- Phelan, John Paul.
- Prendergast, Phil.
- Regan, Eugene.
- Ryan, Brendan.
- Twomey, Liam.
- White, Alex.
Tellers: Tá, Senators Diarmuid Wilson and Déirdre de Búrca; Níl, Senators Maurice Cummins and Nicky McFadden.
Amendment declared carried.
Question put: "That the motion, as amended, be agreed to."
The Seanad divided: Tá, 27; Níl, 22.
Tá
- Boyle, Dan.
- Brady, Martin.
- Butler, Larry.
- Callely, Ivor.
- Carty, John.
- Cassidy, Donie.
- Corrigan, Maria.
- Daly, Mark.
- de Búrca, Déirdre.
- Ellis, John.
- Feeney, Geraldine.
- Glynn, Camillus.
- Hanafin, John.
- Keaveney, Cecilia.
- Leyden, Terry.
- MacSharry, Marc.
- Ó Domhnaill, Brian.
- Ó Murchú, Labhrás.
- O’Brien, Francis.
- O’Donovan, Denis.
- O’Malley, Fiona.
- O’Sullivan, Ned.
- Ormonde, Ann.
- Phelan, Kieran.
- Walsh, Jim.
- White, Mary M.
- Wilson, Diarmuid.
Níl
- Bacik, Ivana.
- Bradford, Paul.
- Burke, Paddy.
- Buttimer, Jerry.
- Cannon, Ciaran.
- Coffey, Paudie.
- Cummins, Maurice.
- Doherty, Pearse.
- Donohoe, Paschal.
- Fitzgerald, Frances.
- Hannigan, Dominic.
- McFadden, Nicky.
- Mullen, Rónán.
- Norris, David.
- O’Reilly, Joe.
- O’Toole, Joe.
- Phelan, John Paul.
- Prendergast, Phil.
- Regan, Eugene.
- Ryan, Brendan.
- Twomey, Liam.
- White, Alex.
Tellers: Tá, Senators Déirdre de Búrca and Diarmuid Wilson; Níl, Senators Maurice Cummins and Nicky McFadden.
Question declared carried.
When it is proposed to sit again?
Ag 10.30 maidin amárach.
The Seanad adjourned at 7.25 p.m. until 10.30 a.m. on Thursday, 5 November 2009.