Banks Should Not Be Allowed To Dictate Progress In Personal Insolvency - FF

Spokesperson on Justice Dara Calleary TD has described the new Personal Insolvency legislation as a major opportunity to address the debt crisis facing thousands of people, but has questioned the decision to allow banks dictate progress.

Deputy Calleary said: "This legislation is overdue. It has taken six months for the Government to progress this vital issue while the scale of the personal debt crisis facing thousands of people has worsened. We welcome the decision to reduce the bankruptcy discharge period to bring it into line with the European norm.

"There is a unique opportunity for the Government to break the hold the banks have over borrowers and the State, but on first reading this opportunity appears to have been missed. The Bill as published requires that creditors holding 65% of a person’s debt agree with the proposed debt settlement arrangement or personal insolvency arrangement. For the vast majority of people, this will mean their bank is still in control.

"We need to ensure in this legislation that there is an appropriate balance of power between financial institutions and borrowers. When read alongside the decision to restrict access to Mortgage Interest Supplement relief, there is a real danger that the Government's response to the mortgage crisis is increasingly relying on the good faith of bankers.

"We will study this Bill in detail and we will be engaging with interest groups and bringing forward amendments to the legislation. Ireland is not going to get another opportunity like the one that exists now to comprehensively deal with this social and economic crisis.

"We are concerned that the Government appears paralysed by the scale of the mortgage crisis with 10.2% of all private residential mortgages now in arrears of more than 90 days. The banks have not stepped up the mark to date in tackling this issue and have similarly failed to support the SME sector to stimulate the domestic economy.

"Our view is that, where a person’s total debt level is clearly unsustainable, the best way of dealing with that is through a comprehensive assessment of that person’s financial position by an independent statutory non-judicial debt settlement office. We have brought forward sound legislation to allow such an office, but the Government has refused to examine the proposal.

"If we are to learn anything from this crisis it is that the banks cannot be left to progress these issues as they see fit. This is not a banking issue. It is a social and economic issue that must be addressed by Government and driven by an independent body. The new Insolvency Service of Ireland must be well resourced and I am concerned that the Government is not dealing with this crisis with the speed necessary to give confidence to borrowers in difficulty."

(CD/GK)