Ceann Comhairle,
I move Amendment No. 1 to the motion.
I have listened to the Deputies opposite introducing their motion with a sense of disbelief and incredulity. I wondered if they have been rendered amnesiac two years ago and have just woken-up, like Rip Van Winkle. For their information, we are still dealing with the mess in which their Government left this country including huge increases in unemployment and consequent family indebtedness and inability to meet financial obligations. Fianna Fail, who led that Government and to which the deputies who moved this motion belong is the main party responsible for the financial difficulties now being experienced by tens of thousands of our people.
This Government, in stark contrast to its predecessor, has made considerable progress across a number of sectors in addressing the very significant and severe mortgage arrears crisis which it inherited. This crisis is directly linked to the economic situation presided over by members of the previous Government, some of whom are signatories to tonight’s motion.
Let us be quite clear about the utter and total failure of that Government, as this country slid towards the abyss of national bankruptcy, to propose or introduce insolvency or bankruptcy reform legislation. Let us also reflect this evening upon the many consequences of this failure, not least amongst them the loss to emigration of so many thousands of our young people.
Unfortunately, the Fianna Fáil motion before the House this evening shows the same mind-set which they displayed down through the years while causing the economic collapse of this country. They pretended the good times would always roll, that the property bubble would never burst, that a bailout would never be necessary. And now they seek to pretend, to those whose financial lives they were responsible for ruining, that there is some painless way of resolving their problems.
I have learnt from long experience not to be surprised by the calculating cynicism and hypocritical posturing which in Fianna Fáil specialise. But it must be truly galling for those who find themselves in difficult financial circumstances to see the very party which caused them now trying to hijack their plight for their own political ends.
Each motion on financial and economic matters which they bring before this House is informed by the same wilful amnesia: as if they have no recollection at all that what they did and failed to do over the years resulted in an economic, fiscal and banking collapse. Thousands of people lost their jobs, living standards were substantially reduced for families across the country and, despite frenzied denials that it would ever happen, we lost our economic sovereignty. As the people of the country know to their cost, we are still living with the consequences.
I can assure the party opposite, however, that any failure they have in recalling what they did to address the problem of mortgage arrears is quite easy to explain. Because, they did nothing. In particular, they failed to reform the law on bankruptcy and insolvency. They did not provide any statutory debt resolution mechanisms or structures to facilitate individuals in financial difficulty. Having caused so many people to get into financial difficulty, they simply ignored the problem and their responsibility to deal with it.
Against that background, if the motion tonight is to serve any useful purpose, it does provide an opportunity for the party opposite to apologise for all they did to contribute to the mortgage difficulties in which so many people regrettably find themselves.
As the counter motion in Amendment No. 1 makes clear, this Government since coming into office has taken a number of significant steps to address the personal insolvency situation, including the mortgage arrears problem, and also to stabilise the banking and wider economic situation. Such steps can be contrasted with the inactivity of the previous Government in regard to updating our ancient and ineffective personal insolvency law.
Shortly after assuming office in 2011, we established the Inter Departmental Mortgage Arrears Working Group (also known as the Keane Report) and are now implementing the key recommendations of the Report published in October 2011. Based on its recommendations, the Government established the Mortgage Arrears Steering Group to co-ordinate the responses of the Departments and agencies centrally involved. Since March 2012, the Steering Group has reported to the Cabinet Committee on Mortgage Arrears.
In contrast to the inactivity of our predecessors, let us consider some of the important initiatives taken by this Government.
For example, the mortgage-to-rent scheme, available since last June, is a mainstream social housing solution for the most acute cases of mortgage arrears. Lenders are now engaging with the process and substantial progress has been made. Over 800 cases have been put forward for the scheme.
Development of a mortgage to lease scheme is also progressing. Under this scheme, the lender would become the long term owner of the property after voluntary repossession had taken place. The household would become a social housing tenant of the relevant local authority and the local authority would, in turn, lease the property from the financial institution for the period of the lease.
An information and advice service has been established to help people in mortgage arrears through the website
www.keepingyourhome.ie
; an information helpline and the availability of independent financial advice for people being offered long term restructuring proposals by the banks.
The most significant development in addressing the area of personal over-indebtedness including mortgage arrears has been the development and enactment of our new personal insolvency legislation. The Personal Insolvency Bill was published in June 2012, passed by both Houses on December and signed into law.
The Act introduces new concepts to Irish law. The new Personal Insolvency Arrangement, or PIA, introduces a concept, which I understand is unique in international insolvency law, in providing for the negotiated resolution of secured debt in a court sanctioned process that provides certainty for creditors, and, if I may say so, hope and relief for debtors. If I can describe it as such, the "personal examinership" approach in the PIA is sufficiently flexible and robust to be able to address complex personal insolvency cases which may include combinations of trade, consumer and mortgage debt. It offers a second chance mechanism for talented and capable individuals and entrepreneurs to return not only to solvency but to contribution to the economic development of our society.
The development of modern insolvency law is a key commitment in the Programme for Government. It was also required under the EU-IMF-ECB programme of financial support for Ireland. It was inspired by the Law Reform Commission’s significant contribution in its 2010 Report on Personal Debt Management and Debt Enforcement and by the recommendations of the Keane Report.
The Personal Insolvency Act provides for three new debt resolution processes which, though requiring approval by the court, are essentially non-judicial in nature:
The Debt Relief Notice (DRN) will allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period.
The Debt Settlement Arrangement (DSA) provides for the agreed settlement of unsecured debt, with no limit involved, normally over five years.
The Personal Insolvency Arrangement (PIA) will enable the agreed settlement of secured debt up to €3 million, although this cap may be increased with the consent of all secured creditors, and unsecured debt without limit, normally over six years.
The Act also provides for the automatic discharge from bankruptcy after 3 years subject to certain conditions.
The Insolvency Service of Ireland was formally established on 1 March 2013 by Ministerial Order. It’s Director, Mr. Lorcan O’Connor, is working with all speed to complete the administrative and technical preparations to ensure that the full operation of the provisions of the Personal Insolvency Act can begin as soon as possible. I would expect full operation to commence in the second quarter of 2013.
The Insolvency Service will launch an information campaign early next month which will include launching its website, the issuing of publications, the opening of a public information line and the announcement of the regulatory framework for personal insolvency practitioners.
The Personal Insolvency Act makes provision for the Insolvency Service to draw up guidelines in regard to reasonable living expenses that would be applicable to a debtor in one of the new insolvency processes. In developing these guidelines, the Act required the Insolvency Service to have regard to a number of criteria.
The Insolvency Service has engaged in extensive consultation with relevant Departments, Agencies and organisations. I am informed that these guidelines should be ready for publication in the very near future. When completed, they will be published on the Insolvency Services website.
While the guidelines are primarily a matter for the Insolvency Service, let me counter some ill informed recent media comment by stating that a ‘reasonable standard of living’ does not mean that a person should live at a luxury level, but neither does it mean that a person should only live at subsistence level. A debtor should be able to participate in the life of the community, as other citizens do.
The numbers likely to avail of the new or reformed insolvency processes will be significant. For broad planning purposes for the first full year of operation, our tentative estimate remains for about:
15,000 applications for the Debt Settlement Arrangement and Personal Insolvency Arrangement.
3,000 to 4,000 applications for Debt Relief Notices, and
3,000 bankruptcy petitions may be made.
The critical message to all those experiencing debt problems is that you must engage with your lenders so as to negotiate an appropriate settlement. That also requires that lenders must engage properly with customers. Now that the architecture of our new insolvency legislation is settled, I have made it clear that I expect financial institutions to better engage with debtors.
If our financial institutions refuse to constructively and realistically engage, then I have made it very clear, on a number of occasions, in this House and in the Seanad that the Government will, in the future, take any necessary measures to refine our approach to ensure that the debt resolution processes work. I realise that banks must have regard to commercial considerations, but they must also behave with greater flexibility and insight and apply a broader range of common-sense options based on financial reality.
The new Debt Settlement Arrangement and Personal Insolvency Arrangement are designed to facilitate a workable, sustainable voluntary resolution between a debtor and his or her creditors. A common-sense rather than a coercive approach is taken, as expressed in the creditor voting process provided for in the Act. It is also an approach designed to avoid, insofar as is possible within constitutional constraints, the necessity for contentious court hearings and adjudications together with the substantial delay and inevitable legal costs inherent in such process.
Let me turn now to the emotive issue of repossession of the principal private residence of a borrower. The House will be aware of the well-known 2011 case, Start Mortgages v.Gunn, in which the High Court found that the repeal of section 62(7) of the Registration of Title Act 1964 in the Land and Conveyancing Law Reform Act 2009 had the unintended consequence in certain cases of restricting lenders from exercising their repossession rights. The judgment in this case is under appeal to the Supreme Court.
High Court judgments in later similar cases appear to have limited the potential impact of that judgement. As a result, there is now an uncertainty in the law relating to the exercise by lending institutions of their repossession rights in certain cases of default.
Arising from this case law, the Government, in the context of the Revised Index of Conditions/Actions following Q3 2012 Review of the EU/IMF Programme of Financial Support for Ireland, made a commitment to introduce legislation remedying the issues identified by case law in the 2009 Act.
That legislation is currently being drafted and I hope to be in a position to publish the Bill shortly. Essentially, the Bill will seek to eliminate any doubt which may exist, as a result of the case law, regarding the continued application of repealed provisions of the Conveyancing Acts 1881 to 1911 and the Registration of Title Act 1964 to all mortgages created prior to 1 December 2009. The Bill will also contain a provision that will allow a court, in proceedings for repossession of a principal private residence, to consider whether a Personal Insolvency Arrangement (PIA) under the Personal Insolvency Act 2012 would be a more appropriate course of action. Where the court is of such an opinion, it may adjourn the hearing for no more than two months. What I am seeking to provide, by way of this provision, is a transparent, final, time limited safety net for a homeowner where repossession is being pursued without the PIA possibility having been fully explored by the parties.
However, it may also be that, as a last resort, it may be in the best interests of the borrower if repossession does take place. This could arise, for example, if there are substantial arrears and there is no prospect that the borrower will be in a position to address these arrears or to restore some stability to the mortgage situation. This is in fact recognised in some cases and currently the majority of repossessions arise on a voluntary basis, or there is some other voluntary arrangement to address the unsustainable mortgage.
In circumstances in which individuals borrow money to acquire a home and that home is security for borrowing, it has been the law of this State going back over the centuries that ultimately the financial institution that provides the loan can apply to the courts for possession of the property where the borrower fails to discharge mortgage repayment. In the absence of such a law no financial institution would lend money for house purchases as their security would be meaningless.
Modern insolvency legislation is a required feature of any properly functioning market economy. It will assist not only debtors and financial institutions, but also business of all types and sizes, tradespersons, local co-operatives, etc. All debtors and creditors are concerned by this reform. All must be treated fairly. Many persons or companies may be both debtors and creditors. While I can understand and indeed, share, some of the very negative and jaundiced feelings towards financial institutions and their contribution to our current economic difficulties, we must not lose sight of our objective, which is to introduce reformed, workable and balanced insolvency legislation.
This approach, which seeks balance and fairness, has been criticised as suggesting that creditors, particularly mortgage creditors, will exercise a veto. That criticism is reflected in the ill thought out Opposition motion. Such a contention is based on an incorrect view of how normal commercial contractual issues may be resolved. Where one borrows, one must repay where one can. If you receive a good or service, say for example, essential plumbing repairs, the provider is entitled to be paid. If the debtor is genuinely unable to pay, negotiation with creditors may resolve the difficulty, and this Act provides the new framework for sensible negotiation.
The approach in the proposed Debt Settlement Arrangement and Personal Insolvency Arrangement is that the insolvent debtor will, with the assistance of a personal insolvency practitioner, put forward what the debtor considers to be a realistic offer to his creditors, one that will restore the debtor to solvency within a reasonable period while at the same time giving creditors a better financial outcome than the alternatives of debt enforcement or bankruptcy. The creditors will need to consider carefully the debtor’s offer, conscious that if they refuse, the debtor has another option - the standard debt discharge procedure available under the reformed bankruptcy laws.
The motion from the Opposition Deputies tonight makes reference to developing some form of non-judicial independent agency or process to arbitrate and impose solutions on creditors and debtors. However, the new debt resolution processes which this Government has introduced are designed to operate on a voluntary basis with common sense and enlightened self-interest in mind rather than coercion. I know of no example of the type of body that appears to be demanded by the Members or suggested in a recent Private Members’ Bill existing in any jurisdiction. During the debate on the passage of the Personal Insolvency Bill last year, no Deputy could give an example of such a body. There is good reason for that. Such a body would be struck down by the courts as a gross interference in the rights of parties to conduct their affairs.
The State cannot impose a settlement on parties to a private contract involving the provision of goods, services or capital.
I very much oppose this quite cynical, badly informed and misguided motion. It seeks not to inform or educate or indeed to improve matters by offering constructive and objective proposals. It has no particular purpose. Rather, it serves to again highlight the inaction of the previous Government.
Thank you.