I welcome the Minister [Michael Noonan] back to the Chamber and thank him for his contribution. I will begin on a positive note. The Personal Insolvency Bill, which I have read, is complex but we welcome and will support the reduction in the bankruptcy term from 12 years to three years.
There are aspects to the proposals that must be considered seriously. With regard to the debt relief certificate and the unsecured debt, the threshold the Government has set for people in order to avail of this is extremely high. With regard to unsecured debt, the level for the person’s net disposable income is set at €60 per month and net assets must be no more than €400. Therefore, this will pretty much just apply to a person without a car and with no assets whatsoever. More needs to be done in that regard.
The Minister has issued the figures today with regard to mortgage debt, an issue I and many Members have been raising here for some time. The figures issued mention 10.2% of people in mortgage arrears of 90 days or more. The Department and the banks also have figures with regard to those in arrears of between 30 and 90 days, who are moving in the same direction. That figure is closer to 15%. What is the Minister’s view with regard to how many of this 15% of people who hold residential mortgages will be helped by the personal insolvency legislation published last week by the Government? My view is that not very many will be helped by it in its current form. There are a number of reasons for this, one of which is the veto regarding 65% of creditors. For most people, the banks will make up 65% of creditors as their mortgage makes up 65% or more of their debt. The situation now is that the veto will apply because the creditors must agree if someone is to proceed with insolvency arrangements.
With regard to the position people are in when considering insolvency, we are dealing with people who are extremely distressed. They have come to the end of their tether and have no alternatives but to take this massive step towards insolvency or bankruptcy. However, something is missing from the process, although the Minister alluded to it in his speech, namely, the mortgage arrears resolution strategy from the banks. We have heard again that this will be issued shortly. Tens of thousands of families are in need of help from this strategy, as pointed out recently by the Irish League of Credit Unions report. Over 50% of families have less than €100 per month left to spend after all the bills are paid. Therefore, the nut that needs to be cracked does not just concern the people in severe mortgage difficulties, but also those just keeping their heads above water. As the Minister has said, domestic demand is flat. Forbearance and a moratorium are all very well, but they will not stimulate domestic demand. We have not moved forward with issues such as zero interest or split mortgages, which would be interesting. Has the Minister set a timeframe for the banks to come back with the mortgage arrears resolution strategies? Are all lenders committed to that, not just the covered institutions? These strategies are an important part of the solution.
To return to the Personal Insolvency Bill, the fact the veto exists at such a high threshold is an issue. We had proposed a Bill that would provide an independent debt settlement office that would be arbitrary. I know Minister for Justice and Equality said that would not be constitutional, but that is not correct once someone has recourse to the courts. Once the agency has recourse to the courts, we can do that. It would be far preferable were a lender and a mortgagee to submit their position to someone truly independent who could make an arbitrary ruling on it. Instead, we now have a situation where all the creditors will sit around the table with the borrower and the personal insolvency adviser. We do not know yet know how this will be regulated or how it will work out, but this is what will happen. Therefore, things are stacked against the borrower straight away.
There is also no appeals process although this was a strong recommendation of the report of those who worked in the committee on this. As things stand, if the decision is taken and if the lenders, 65% of them, decide they will not accept the application for insolvency, where does the borrower go then? The appeals mechanism is missing, but it should be included. The Minister for Justice and Equality has said he does not expect the Bill to be enacted until October.
An appeals mechanism should form a significant part of this Bill.
We were promised it would be a non-judicial process. How will the courts deal with all of these orders? Why are we going down the road of a judicial process? The Minister referred to people who can pay but who do not want to. I believe there are very few of them and that the figure would be minute. Effectively, we will be bringing people, who have been going through an extremely difficult time, through the courts.
In regard to the mortgage arrears strategy, to which the Minister referred, it places a strong onus on mortgage lenders to develop solutions and to present them to the Central Bank of Ireland. I would like to know when that will happen. The Minister is right that this is extremely complex. He said that every year, the mortgage arrears situation is getting worse. Fortunately for most people on variable or tracker mortgages, they have had their mortgage interest rates reduced because of low ECB lending rates. The only lender which gave the full reduction the last time was AIB. Bank of Ireland was let off the hook and ICS Building Society, which is owned by Bank of Ireland, has one of the highest variable lending rates. Permanent TSB gave a small reduction to existing customers.
Thousands of people who are struggling to pay will not feature on the Minister’s arrears figures. Those people, who are three months or more in arrears, are really struggling. As I said, we reckon approximately 15% of people are in arrears of 30 to 90 days. If the Minister wants to see an increase in domestic demand and the economy taking off like a rocket, he will not see that happen any day soon unless we can free up disposable income for hard pressed mortgage holders.
I mention the extension of mortgage terms – I am not talking about debt write-down – split mortgages, to which the Minister referred, and the zeroising of interest. All a moratorium does for someone is add to his or her interest bill and make the situation worse. The mortgage-to-rent scheme is an absolute con. I would never advise anyone to go down that route. Someone who has paid thousands of euro to a lender will hand his or her house over, the local authority will manage it and he or she will pay rent for his or her house. Does that take into consideration the mortgage that has already been paid? I do not welcome the fact 60 people are already availing of this scheme and that perhaps 100 families will access this scheme.
I thank the Minister for the update he gave us but the Minister of State, Deputy Brian Hayes, said in the House a few weeks ago that the Personal Insolvency Bill would be a game changer. It is not a game changer and much more needs to be done on it.