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Bank Codes of Conduct (Continued)

Tuesday, 2 July 2013

Dáil Éireann Debate
Vol. 809 No. 2

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(Speaker Continuing)

[Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan] This will give co-operating borrowers time to consider other options that may be available to them, such as voluntary surrender, voluntary sale or a personal insolvency arrangement, PIA. The combined effect of the protection period and the requirement for a notice period is that, for a co-operating borrower, legal proceedings must not commence until three months from the date the letter is issued - where the lender declines to offer an arrangement or where the borrower does not accept an arrangement offered - or eight months from the date the arrears arose, whichever date is later.

  Additional information not given on the floor of the House

  With regard to the Dunne judgment, the Government has taken steps to address a lacuna in the law arising from the High Court decision in July 2011 which created uncertainty in the law relating to the exercise by lending institutions of their repossession rights. A Bill which will ensure that statutory provisions in force prior to implementation of the Land and Conveyancing Law Reform Act 2009 on 1 December 2009 will continue to apply to mortgages created prior to that date was published at the end of March. The Bill has recently completed Committee Stage and will move to Report Stage shortly. However, one of the important provisions in the Bill is that it will give a discretionary power to a court to adjourn a repossession hearing in respect of a principal private residence - if it considers this to be appropriate - in order to allow the debtor to propose, and the secured creditor to consider, the possibility of a PIA as an alternative to repossession. In preparing a PIA, there is an onus on a personal insolvency practitioner to formulate a proposal, in so far as is reasonably practicable, on terms that will not require the debtor to dispose of an interest in or cease to occupy a principal private residence.

  The Deputy will be aware that the Personal Insolvency Act 2012 provides new statutory insolvency frameworks to allow debtors - through the utilisation of professional personal insolvency practitioners - and creditors to consider an arrangement to resolve unsustainable mortgage and personal debt. It also provides a legal framework for the resolution of mortgage arrears as well as other personal debt. It will also provide certainty for borrowers and lenders alike regarding the consequences of non-payment and failure to reach agreement. The effect of this legislation is to rebalance the relationship between debtors and creditors and to offer more accessible and effective options to debtors to deal with debt difficulty. The Insolvency Service of Ireland, which will oversee the operation of the new insolvency frameworks, has been established and will shortly begin accepting applications for the new personal insolvency processes.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty As the Minister said, the new code of conduct on mortgage arrears came into force yesterday. There is no doubt that the banks are enjoying the fact that the Government and the Central Bank have let them off the leash. In recent months there has been a major spike in the number of people whose mortgages are in distress contacting my constituency offices in Donegal. The distress to which I refer takes a number of forms. We continually refer to mortgage and financial distress but there is also the distress which happens behind closed doors. Such distress puts pressure on individuals and families. In some cases it can lead to marital breakdown, while in others it has obliged people to leave the country - I have met some of them while travelling abroad - in order that they might find better opportunities which will allow them to repay their mortgages here. Unfortunately, and this has been attested in the courts, it has also led to a number of people taking their own lives. We must be conscious here of what we are discussing. We are not, for example, concerned simply with a sheet of paper containing numbers, statistics, percentages and values, what is at issue here is real people and real suffering.

As already stated, the banks have been let off the leash. That is not surprising because this is the Government's plan. I stated previously that I very much hope the new targets will work. It is my view that an independent body should be established to adjudicate on this matter. The new code of conduct on mortgage arrears will mean nothing more than harassment of people. Who demanded the mechanism whereby it will be possible for a bank to repossess, within three months, the property of someone who is being unco-operative? The banks will only be obliged to produce flimsy evidence of people being uncooperative and their staff will be able to carry out home visits. Report Stage of the Bill relating to the Dunne judgment, which will allow repossessions to happen, is to be taken tomorrow. The fact that the banks retain their veto clearly shows that the Government is on their side. Even at this late stage, will the Minister not agree with some of those who have made submissions - including myself on behalf of my party - to leave the code of conduct as it stands or to try to strengthen it in favour of consumers rather than the banks? Will he not consider pulling back from his current position on the code of conduct? The code is clearly an aggressive move which supports the banks and which will place some consumers under serious financial and other pressures.

Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan The Central Bank is responsible for the code of conduct on mortgage arrears. It initially proceeded in this regard by publishing a draft code and it then took into account advice it received. The code was put out for public consultation, 230 submissions were made and it was modified accordingly. The final version which has been promulgated seems to have attracted significantly more support than the draft version. The Central Bank commenced this process in 2009 when it issued a statutory code of conduct on mortgage arrears. As matters progressed, the relevant group recommended that the mortgage arrears resolution process, MARP, and the appeals process be formally reviewed within 18 months of the announcement. Consequently, a review took place in 2011 and another is currently taking place. I presume this is principally due to the fact that matters have again moved on and because the insolvency legislation is coming into effect.

The House will be aware that the Personal Insolvency Act 2012 provides new statutory insolvency frameworks to allow debtors - through the utilisation of professional personal insolvency practitioners - and creditors to consider arrangements to resolve and make sustainable mortgage and personal debt. The code of conduct has been in place since 2009. It was reviewed in 2011 and it is now being reviewed again in light of prevailing circumstances and the current legal position.


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