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Personal Insolvency Bil 2012: From the Seanad (Resumed) (Continued)

Wednesday, 19 December 2012

Dáil Éireann Debate
Vol. 787 No. 4

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(Speaker Continuing)

[Deputy Alan Shatter: Information on Alan Shatter Zoom on Alan Shatter] However, if there are difficulties I will not be slow to amend the legislation, and it is very important this is understood outside the House. The Government has engaged with the financial institutions in the lead-in to the enactment of this legislation. Some weeks ago, because I thought it was a useful exercise to do so, I met AIB and Bank of Ireland, and what I am now saying in the House I said very clearly at that meeting. One of the attendees was Mr. Boucher. I expect he understands exactly where the Government is coming from, what our concerns are and what Bank of Ireland should do in the context of operating the legislation constructively and sensibly, engaging with personal insolvency practitioners and the circumstances of their customers and ensuring appropriate and sensible arrangements are made.

Deputy Donnelly is right, of course, and his point applies to AIB as much as others. Banks have a duty to try to recoup debt owing to them. They also have an obligation to recognise a debt which is not recoverable, and not maintain a pretence that some part of a debt which cannot be recovered is recoverable. The Bill provides the mechanism for this and I hope we do not find ourselves back here too soon having to amend it. However, I have no doubt all of us, in government and in opposition, will be watching very carefully how the legislation works in the early months of its operation.

Deputy Stephen S. Donnelly: Information on Stephen Donnelly Zoom on Stephen Donnelly As before I appreciate the Minister's reply and his intent. I encourage him to take a look at the video of the interactions between Ray MacSharry and Deputy Pearse Doherty and myself. He will have to draw his own conclusions, and I appreciate he has not seen what Mr. MacSharry said, but I can quote him. He stated there will be no debt forgiveness and that they will not write off any debt. In my questioning I pointed to the monitor where this conversation was taking place and mentioned this legislation. His view was that the bank would deal with the legislation but there will be no debt forgiveness. To my mind Richie Boucher said the same thing in the public domain yesterday, certainly if the reports I have read are accurate. Mr. Masding, when he came before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform a few months previously, said exactly the same thing. This is publicly stated policy by Richie Boucher, Mr. Masding and Mr. MacSharry. I agree with the Minister's interpretation. I was shocked by what I heard and I believe various members of the committee were also shocked by it.

I fully accept the Minister's statement that he will bring this back and tighten up the legislation if needed, but I am concerned because it could take at least a year before there is sufficient space, momentum and evidence to bring it back. It could then take the Minister and his officials another length of time to reconstruct or amend very complex legislation. There may be a Cabinet reshuffle or a general election before this happens. I hope the Minister remains in his portfolio but we do not know this. It could be a year and a half before sufficient evidence is gathered, there is space in the Oireachtas and time for the Minister, his officials and those in the Office of the Attorney General to construct the amending legislation. The Minister may not be in this portfolio at that stage, and this concerns me. There may be a new government at that stage, and this also concerns me. Were I the banks, it is exactly the game I would be playing, and it seems to be exactly the game they are playing.

The amendment is about three years versus eight years. I agree it is a three-year period and I do not suggest it is an eight-year period. We all know this because we have been living and breathing this for quite some time, the Minister and his officials more than us in opposition. However, those at the negotiating table will not know this. The bank may know it, but the distressed borrowers, whom we all meet, who walk in on their own to these banks and are met with lawyers and accountants and anonymous bank officials, will not know. The real power of the legislation is not, I hope, how it is interpreted by the courts, it is how it plays out at the negotiating table. It is what never gets seen and the deal that gets done. The bedrock for this legislation was a credible threat of bankruptcy.

I was willing to accept the bank veto, and I believe the banks will use their veto as they have publicly stated they will do - perhaps not AIB, but Bank of Ireland and Permanent TSB have done so - because ultimately it was superseded by the credible threat of bankruptcy. If not technically, then in real terms at the negotiating table, amendment No. 200 removes this credible threat. Were I acting as the bank I would look through this, point to the five years and further point to the line which states any order under subsection (1) or varied under subsection (5) shall cease to have effect on the eighth anniversary of the date on which the bankrupt was adjudicated bankrupt. I would show this to the man or woman who came in, who has not been sleeping for months, who is suffering from unbelievable stress and who does not have access to lawyers and accountants. I would show those who came in this line and state they will be free on the eighth anniversary, that they will be bankrupt for three years and if after three years they manage to walk away from the negative equity and distressed mortgage and then try to get on with their life and work hard and earn money and invest in their future and their children's future, that I will take all of that off them for the next five years.

It will not matter at the negotiating table that technically there are all sorts of hoops which must be gone through, and that the official assignee may or may not give it to them, and we do not know what percentage of the income they will give them. What matters is the eighth anniversary and this is what the banks will use. If we go back to our example of the borrower with a debt of €400,000 who can service €250,000, how this is meant to work is that the €150,000 is surrendered. However, Richie Boucher, Mr. Masding and Ray MacSharry are stating publicly this is not what they will do. They will use their veto and state they will not write it down but take off the person the amount which services the €250,000 but park the €150,000 and never let the person off it. The bank will use its veto and not care that the person has a personal insolvency professional. It will not have to engage with the legislation because it has a veto. The only credible threat is a voluntary surrender coupled with bankruptcy which will take eight years. Therefore, the person must service the €250,000 and the bank will never let him or her off the €150,000.

I accept what the Minister is saying technically within the legislation, and I believe our intent for the legislation is the same. We differ on how it will play out. As I stated previously, amendment No. 200 removes the single most important part of the legislation, which is the unambiguous bounded three-year period.

Deputy Alan Shatter: Information on Alan Shatter Zoom on Alan Shatter I wish to briefly point out to Deputy Donnelly one issue which he has missed, which is that the debtor will not in these circumstances be walking into the bank faced by the bank's lawyers and bank manager pointing out the section, because the personal insolvency practitioner will be the expert and intermediary and will be able to, when speaking to the creditors, deal with any threats that might be made and put them in context. I wish to point this out because it is an important issue. We all know people are intimidated by their bank managers and banks, and they are fearful. They feel very dependent and are very concerned and, on occasion, so stressed they are unable to engage in a way that is of assistance to themselves. This is the importance of the personal insolvency practitioner, an individual who sits down with the debtor and goes through income, assets, liabilities and resources and engages with the creditors and puts together a plan. If a financial institution is unco-operative, it may not be possible to conclude a personal insolvency arrangement.

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