Report by Interdepartmental Working Group on Mortgage Arrears: Statements (Resumed)


Tuesday, 25 October 2011

Senator Katherine Zappone

I welcome the Minister of State back to the House. I was delighted to note his sense of urgency and to hear his perspective on the banks. It was quite a contrast with the sense I got when I read the Keane report. I join him in emphasising the political urgency of our response to the Keane report, not only in relation to the scale of mortgage arrears, which is what the Minister of State’s comments largely focused on, but also in relation to the personal debt crisis that continues to unfold as we speak and from the perspective of the Government’s commitment to eradicating the poverty of our people.

I have spent 25 years working with the people of the communities of Tallaght west and especially with the An Cosán organisation, which is located in Jobstown. I view our response to the personal debt crisis, including the mortgage arrears issue, as a prime opportunity to tackle poverty. Rather than happening after we have sorted the bank debt crisis, it should happen alongside and parallel to the development of a banking sector for our country. This is one way of developing a new and socially sustainable political and economic model for this country. My perspective is that the hammering of those with personal debt should not be a core ingredient in the salvaging of the banks. I accept, in light of what he has outlined, that it is the Minister of State’s perspective too.

As we know, stories are appearing in the media every day about households that have drastically cut their expenditure on food in order to pay their debts. In my own experience of working with families, I have witnessed how the almost impossible task of paying debts while meeting the most basic needs of families exerts almost unbearable pressure on people, sometimes resulting in loss of life. I know of a case in which a life was lost in light of this. Our current debates about the eradication of poverty are not sufficiently informed by socially agreed and empirically based income standards. I will return to this in a moment in the context of one of the suggestions I would like to make on foot of the report. We need to keep these issues foremost in our minds as we figure out how to deal with personal debt crises, while ensuring that households in debt retain a sufficient income to meet basic needs. Otherwise, we will unravel our social fabric and our commitment to fairness and justice in the search for an ideal economic solution.

I will focus my remarks on two aspects of the Keane report, namely, its recommendation for an independent mortgage advice function and its proposals on new bankruptcy legislation. The Keane report recommends the creation of an independent mortgage advice function. Additional advocacy, advice and support for people who may be negotiating with large, sophisticated commercial lenders is to be welcomed, yet the structure and the resourcing of this new body and its mooted link to MABS require more consideration. In the current environment, an holistic approach to debt is necessary. In order to provide adequate and efficient advice to people on all of their debts, all of their debts must be considered, both mortgage debt and personal debt. It seems somewhat illogical to require debtors to seek advice on mortgage debt from the proposed new body, and then expect them to seek advice from MABS on all other forms of debt. How should people in already stressful situations reconcile both sets of advice in order to get a clear picture of their overall financial situation? What is needed is an adequately resourced agency that provides necessary advice, but which is also a robust advocate for the needs of the debtors. I am not necessarily arguing that it has to be MABS.

Page 18 of the Keane report recommends a three-tiered approach to bankruptcy legislation. We need such an approach, and I note that this also echoes some of the very helpful work of the Law Reform Commission. It needs to be three tiered to create effective debt settlement and to be supportive of poverty reduction. We need a range of options to manage debt for the good of the individuals and the good of society. A range of options can recognise multiple debts, provide a machinery for debt management, arrange for the write off of debt in individual cases, the amount that cannot be repaid over the insolvency period, and ensure that a minimum income of debtors can be protected to meet their basic needs while repaying debts. The Minister of State referred to some of this in his speech.

The bankruptcy tier of this legislation will give people access to a mechanism which, if worst comes to worst, will allow them to pay as much of their debt as they can over a limited period and in that way, will allow them to earn the opportunity of a fresh start. Not everyone currently in serious debt will want to be declared bankrupt. Many people just want to be able to manage their debt, and it is to that non-judicial aspect of the debt settlement process that I want to address my final remarks.

The Government should give very serious consideration to the FLAC proposal for a debt resolution agency, which is something that is influencing some of Fianna Fáil’s Bill, and something that will bring us in line with European best practice and that will oversee the resolution process of multiple debts and not simply mortgage arrears. What is needed is an agency with statutory powers to make independent binding adjudications, where necessary, that are subject to a right of appeal to the courts. It is an agency that needs to take an holistic approach to all debt, taking into equivalent account the interests of the lender. Equally importantly, this agency should be provided with the statutory authority to allow the debtor entitlement to a minimum income. I wish to draw the Minister’s attention to the extensive work of the Vincentian Partnership for Social Justice, which has been working for over 12 years to develop and implement a robust methodology to determine the minimum essential standard of living for various household types. This methodology has taken into account what has gone on in other EU states.

Finally, I would like to finish where I began. There ought to be a genuine sense of political urgency to deal with these issues, particularly to put in place adequate and appropriate personal insolvency legislation. Can the Minister of State confirm that we will soon have that Bill before the House? I hear it in the Minister of State’s words, but it is not necessarily reflective in the report before us. Is there an appetite to bring this forward soon, even if it means that when legislation is enacted, banks will have to write off some debt, including mortgage debt, and start spending the money with which we capitalised them?

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