Debtors Bill 2009

Dail Eireann speech by Dan Neville TD, on Central Bank and Services Authority of Ireland (Protection of Debtors) Bill 2009 – 20th May 2009

I wish to share time with Deputies Michael Ring, Jim O’Keeffe, John O’Mahony and Paul Connaughton.

I welcome the opportunity to contribute to the debate and I congratulate Deputy Charles Flanagan on introducing this important legislation. The purpose of the Bill is to regulate debt collectors in order that there is control over them and to ensure that they are registered with the Financial Regulator and vetted by the Garda before they can operate as a debt collection agent in Ireland. The State has no system of debt regulation unlike most EU countries and, as a result, anyone can set up a debt collection agency. There are no rules on how they should operate. Debts can also be sold on without the creditor’s knowledge. With more people owing more money, debt collection will become a more profitable business for some.

Individuals should honour their debt obligations. However, debtors and members of the public should be protected in law from debt collection methods that overstep the bounds of acceptable pressure. Debt collection can involve the exertion of pressure on the debtor. The media have reported on examples of the tactics employed by debt collectors to retrieve funds owing. There is also evidence that persons with a criminal background are operating in this industry and, as a result, some debtors feel intimidated, harassed and threatened.

I refer to those with mental illness who are particularly affected by debt and who must be handled in a compassionate fashion. There is a greater likelihood they will accrue debt than normal people. A recent study in the UK – the money would not provided to conduct a similar study in Ireland – found that in times of recession a significant issue is the worsening of conditions for those with mental health problems. The report showed that 50% of respondents went without food or heating at certain times of the week. The research found that people with mental health problems are three times more likely to be in debt, as they live on low incomes and are unable to work due to difficulties obtaining a job because of the stigma surrounding their ill-health. A total of 71% of those with mental health problems debt ran out of money every week or most weeks, 87% relied on credit to pay for food and everyday costs, 56% had gone without food due to the debt, 21% had gone without heating and 92% reported not being able to socialise because of the pressure of the debt.

It is important that debt collection agency staff receive mental health awareness training. If one does not have an organised debt collection controller, as proposed by Deputy Flanagan, it is difficult to ensure that this will happen. Debt collectors and banks should adopt a system whereby customers can choose to have their accounts monitored for erratic spending to better protect their finances. Irish personal debt stands at a staggering €172 billion and it is a significant burden on our mental health. Money worries do not only keep people awake at night as they also cause high levels of stress, depression and, in some cases, lead to self-harm and suicide. At a time people are anxious about their finances, debt depression is a real and growing concern. People living with mental health problems are particularly vulnerable to being trapped in a cycle of debt and poverty with many unable to work due to ill-health. People are becoming dependent on credit to pay for everyday essentials. Those on lower incomes are more likely to obtain credit from lenders who charge astronomical interest rates. It is a worrying trend, as people are left facing a debit mountain for which they have no means to repay.

If we are to tackle this massive inequality and help people who are struggling with mental health problems and debt, we need action from the Government, the HSE, banks, debt collection agencies and other creditors. Changes in practice such as waiving fees when a customer has been unwell and introducing mental health awareness training for bank staff would make all the difference. Creditors have a duty to help by not hounding their customers, especially when they are coping with serious health problems. People with bipolar disorder, which can cause them to spend extravagantly during a manic phase, or schizophrenia are four times more likely to be in debt than the rest of society.

According to the survey I mentioned, fewer than one in three with problem debt informed the organisation to which they owed money of their mental health problems because they did not think they would be understood or believed. A total of 83% of those who informed their creditors continued to be harassed about their debt payments. The Government must give leadership in this area to ensure resources are available to the psychiatric services to deal with this fall out from the current economic crisis.

The debt collection industry in Ireland comprises a small but wide spectrum of operators ranging from solicitors to known criminals. There are no official statistics for the number of debt collection agencies in operation but, according to RTE, there are approximately 50 such agencies. An article in The Sunday Tribune in April revealed that:

“gardaí in the midlands gave security advice to a businessman after he complained that the criminal called to his home seeking money in a manner that made the man “ill at ease”.

The criminal is regarded as a notorious gangland figure; he has dozens of convictions. The businessman owed a creditor a significant amount of money but was unable to pay it and received a visit from the notorious criminal.

The debt collection business is thriving but he is by no means the only convicted criminal branching out into this area. There is evidence that, as the economic downturn continues, several criminal gangs have become involved in the industry. As many small companies fold, there is an emerging trend of frustrated creditors hiring criminals when they are unable to collect debts.

Often the creditors claim they cannot afford to wait for the outcome of court proceedings as their own businesses are in jeopardy. This is most common in the construction and property sectors, which have been badly hit by the recession.

Some criminals acting as debt collectors have threatened physical violence and damage to property. Eastern European gangs and Russian mafia are also suspected of getting involved in the business, particularly in Dublin.”

According to Deputy Charles Flanagan, “There are disturbing reports of threats, intimidation, destruction of property and even physical assaults on people owing substantial debts”. The main function of the debt collection regulator is to issue licences to suitable applicants once they have supplied all relevant documentation, including certificate of clearance from An Garda Síochána and a tax clearance certificate by the Revenue Commissioners. A licence will issue on a two yearly basis. It is the right of the regulator to refuse, revoke or suspend a licence at any time.