Léim ar aghaidh chuig an bpríomhábhar
Gnáthamharc

Seanad Éireann díospóireacht -
Tuesday, 24 Sep 2013

Vol. 226 No. 3

Adjournment Matters

Personal Insolvency Act

I welcome the Minister of State, Deputy McGinley, to the House.

I welcome the Minister of State. I am asking the Minister for Justice and Equality to explain why an up-front fee of €500 is payable for a protective certificate to commence a personal insolvency arrangement. That is in addition to the fees of €250 and €100 fees, which I see as a tax on people's inability to pay or entering into an insolvency arrangement. This is contrasted with the UK, which has an almost identical service with no fee involved.

I have asked the Minister to explain the €500 charge. According to an expert in the area, this charge is payable before the personal insolvency process can commence. That means that if a young couple meet a personal insolvency practitioner and he or she advises that they take the route of personal insolvency, they would have to pay €500 to get to the next stage. That is in addition to the fee they would have to pay and the VAT on that fee. That is out of line with what is happening across the Border and throughout other jurisdictions. I have already raised the matter of a 23% VAT rate on the fees; such a VAT rate was challenged by a debt settlement agency when it was introduced in the UK and that objection was upheld in the courts in the UK as HM Revenue and Customs did not challenge it. We have almost identical legislation here and if somebody challenges the imposition of VAT, they will win the case. The 23% VAT rate and the imposition of the €500 has come out of the blue.

The statutory instrument was signed on 30 August, when we were on holidays and the House was not sitting, and it was not flagged. I ask the Minister to consider the issue in light of the plight of many young families who must get advice on personal insolvency and if they must pay extra money, it will be an extra burden on most couples. As we know from the findings of the credit union survey this morning, many couples do not even have €20 extra at the end of the month, yet we are asking a couple to pull out the guts of €1,000 before they can even get on the road to getting their affairs settled.

There are many personal insolvency advisers but many are being excluded from this process because of the stringency of the process in becoming a personal insolvency practitioner. It is much more stringent than the process in the UK. We will lose many people who have expertise in the area as a result, and even if these people become practitioners, they cannot advise people who were formerly clients. There are many anomalies to be addressed.

I am replying on behalf of the Minister for Justice and Equality, who is unavoidably absent, and I thank Senator Harte for raising this issue.

The Personal Insolvency Act 2012, as amended, introduced three new debt relief solutions. The first arrangement is called a debt relief notice and it will allow for the write-off of qualifying debt up to a value of €20,000, subject to a three-year supervision period. The second arrangement introduced by the new Act is the debt settlement arrangement, which provides for the agreed settlement of unsecured debt with no limits involved over a period normally expected to be five years. The third and final arrangement, the personal insolvency arrangement, will facilitate the restructuring or settlement of secured debt of up to €3 million, a cap that can be increased with the consent of all secured creditors, and the settlement of unsecured debts without limit, over a period normally expected to be six years.

The application fees prescribed by the Insolvency Service of Ireland, ISI, for the three new debt solutions are set out in the Personal Insolvency Act 2012 (Prescribed Fees) Regulations 2013 (SI 329 of 2013) and are application for a debt relief notice of €100; application for a protective certificate or debt settlement arrangement of €250; and applications for a protective certificate, or personal insolvency arrangement, of €500. The fee is to be paid at the point when an application for a protective certificate in the case of a debt settlement arrangement or personal insolvency arrangement is being made on a debtor's behalf by a personal insolvency practitioner, PIP, or when an application for a debt relief notice is being made by an approved intermediary, AI. The fee is paid by the debtor as part of the application process. Following a consultation with an AI or PIP, the debtor agrees a prescribed financial statement. The debtor must then get the statutory declaration signed and present an invoice to An Post for payment of the relevant application fee, depending on the chosen debt relief solution. The statutory declaration must be signed and the invoice paid before the application for a debt relief solution can be submitted by the Al or PIP to the Insolvency Service of Ireland.

I am advised that the fees being applied by the Insolvency Service of Ireland are a contribution towards the cost of providing an insolvency service, are considered fair and reasonable and are in line or below the comparable fees applied by insolvency services in other jurisdictions. Part of the prescribed fee will be paid to the Courts Service as a contribution towards the legal costs relating to each insolvency application. The remainder of the prescribed fee will make a contribution towards the running and administrative costs of the Insolvency Service of Ireland. It should be noted that the fee in each instance represents only a small fraction of the debt that may be written off for each successful applicant. For example, up to €20,000 of qualifying debt could be written off for someone applying for a debt relief notice where the application fee is €100, assuming that they fulfil all of the relevant eligibility criteria. It might also be noted that approved intermediaries will not charge a fee in respect of assisting an applicant in applying for a debt relief notice.

I would also like to briefly refer to the matter of fees payable to personal insolvency practitioners, which has been the subject of some media commentary. Personal insolvency practitioner fees associated with the development of debt settlement arrangements and personal insolvency arrangements will likely be negotiated with an insolvent debtor by the PIP in advance of a case proceeding.

Payments to personal insolvency practitioners are ultimately likely to be a charge on creditors as they will reduce the amount available for repayment. Thus, the arrangement put forward to creditors for agreement at the creditors' meeting would normally be expected to include details of the personal insolvency practitioners' fees. It will be a matter for creditors to decide whether these are acceptable, and they may seek to negotiate to reduce them.

Any other fee arrangements that might arise are matters to be agreed between the individual debtor and his or her personal insolvency practitioner.

I understand that a number of practitioners and prospective practitioners have indicated that they will not charge an up-front fee for an initial consultation. As I have already indicated, it is not within the remit of the Insolvency Service of Ireland to set the fees of personal insolvency practitioners. This is a matter for both parties to agree.

I thank the Minister of State, Deputy McGinley. There is nothing new in the statement by the Minister for Justice and Equality, Deputy Shatter. It is unfair that a young couple or person going down the road of personal insolvency must pay €500 before being able to do so. I stand to be corrected in questioning the statement that our procedures are in line with those in other jurisdictions. My information is that there are no fees involved in the United Kingdom. I ask the Minister of State to clarify this. I will check my sources and information to determine whether the Minister of State was correct in making the statement. I have been assured by a practitioner that there are no fees in the United Kingdom. Through the Minister of State, Deputy McGinley, I ask that the Minister for Justice and Equality, Deputy Shatter, clarify the position on fees. I ask the Minister to remove the fee of €500 as it is totally at odds with what we are trying to do. According to the explanation, the fee is to fund the actual service. People in debt should not be asked to fund it again when the banks have already been funded for this purpose.

The Seanad adjourned at 8.05 p.m. until 10.30 a.m. on Wednesday, 25 September 2013.
Barr
Roinn