As a member of the Joint Oireachtas Committee on Social and Family Affairs,  today I launched a major initiative on personal debt. The Committee published its own report on personal debt earlier this year.

Over the past months, I along with my constituency office, have been working on a comprehensive response to this issue.

Today, I have outlined several measures he believes government need to take immediately to ease the increasing burden on families an individuals.

These measures include:

– An update on Bankruptcy legislation

– Introduce individual voluntary arrangements (IVAs) for private individuals

– Bringing consumer advocate groups, such as MABS, into the Government Taskforce review

– Tackling the growing transfer for mortgage debt into personal debt via credit cards and overdrafts

“What I have found in recent months is that the issue of personal debt and the ability to repay, is one of the most significant pressures now facing Irish families, especially young families and individuals.

On a daily basis, constituents are in contact with my office with their worries and concerns. While the national focus has been on bailing out bankers and friends of Fianna Fáil, individuals up and down this country, are facing daily financial stress.

Businesses have recourse to examinership legislation in order to restructure their debts. Private individuals have no similar options. The IVAs process as used in the UK is a means to address this type of imbalance. It essentially is a means by which individuals in debt up to a certain amount can get assistance in restructuring and negotiation through their debt issues.

I believe that the level of personal debt in Ireland will hamper our potential to recover and bounce back from the global recession. I’m aware that this is a sensitive issue, especially for persons fortunate to not be in debt. Yet we must take a broader societal view on this matter.

I am calling for us to establish a principles based system allowing for debt resolution in a way that limits overall costs to society. In essence this means a modernisation of our bankruptcy laws.  We need to create the correct balances between the rights and obligations of creditors expectation of repayment and debtors ability to pay.

Debt forgiveness or structured write down has to be earned – there cannot be any suggestion of a free lunch or allowing for free riders. Abuse of any reformed system should be dealt with in a more stringent manner than that which exists previous to adoption or availing of the proposed system.”

He added:

“The government’s most significant input in dealing with Irish indebtedness has to be reform of bankruptcy laws.

Work around debt in Ireland is reactive in nature, occurring generally when an individual is already over-indebted. This needs to change.

Last Spring, the Mortgage Arrears & Personal Debt Review Group Task Force was established by the Minister for Finance. It would appear to be imbalanced. It does not include representation for consumer advocates with credible professional expertise in consumer indebtedness and consumer protection. People such as MABS, Credit Unions and Voluntary bodies such as the Vincent de Paul would offer a valuable perspective. These exclusions are telling. It is difficult to see how consumer interests can be fully, appropriately and expertly included for in the forthcoming report from the group as currently constituted. I am calling today for these groups to be brought into the process and have asked the Minister directly to do the same.”

He said:

“Mortgage debt is different from personal debt in that it has a deep connection with peoples sense of security and safety in their family home. However figures released by the Financial Regulator in relation to the accelerating upward trend in Mortgage Arrears, shows that there is now evidence that people are shifting their debt priorities to unsecured personal debt in the form of Credit Cards and Overdrafts in order to ensure the basic essentials are catered for. This is worrying and will impact on our ability to bounce back from recession.

Recent comments by the Financial Regulator indicate a lack of appreciation of the hardships and pressures on young mortgage holders who have been encouraged by the last number of governments to pay excessive prices for what could only be considered as modest family homes.

The period for a bankruptcy discharge application needs to be reduced from the current period of 12 years. We also need to immediately introduce a system of non-judicial debt settlement such as the IVA (Individual Voluntary Arrangement) system in operation in the UK. There are only two countries in Europe without Personal Debt Management legislation, namely Ireland & Greece. The Bankruptcy Act 1988 needs immediate reform. Unless we take action on this issue now, we will find it hugely difficult to put this economy on a sound financial footing and return to net job creation.”