Debt Law Reform Pushing for a fair, effective system to deal with personal debt

FLAC advocates for a fairer and more effective system for dealing with debt that meets the needs of all over-indebted people, particularly those on low incomes.

We seek to inform law and policy makers and to support individuals and groups who work with over-indebted people in terms of the skills and information needed to advocate more effectively on their behalf.  Since the mid-1990s, FLAC has worked to advance economic human rights, including supporting the rights of those availing of consumer credit and those at risk of over-indebtedness and personal insolvency. 

When the full extent of the economic crisis became apparent, the State began to address the much-neglected area of over-indebtedness and personal insolvency. It has modernised the bankruptcy system and put in place a personal insolvency regime. Throughout the development of these proposals, FLAC actively promoted comprehensive reform – making submissions, meeting departmental and Central Bank officials, informing politicians and campaigning in the media. The Law Reform Commission undertook a comprehensive study of the lack of effective systems to deal with over-indebtedness, crediting work done by FLAC. It was the recommendations made by the Commission that ultimately led to the publication and passing of the Personal Insolvency Act 2012.

Some of FLAC’s recommendations are incorporated in the Personal Insolvency Act, such as recognition of the need for a protected adequate standard of living while paying down debt and the necessity to deal with all debt, both secured and unsecured. However, the legislation remains flawed and geared towards requiring the approval of major creditors before arrangements can be agreed, thus preserving the power imbalance.

 Policy work: Issues of particular concern for FLAC in this area include mortgage arrears, personal insolvency & bankruptcy, non-commercial banking practices and the threat of homelessness arising from over-indebtedness.  

FLAC continues to advocate for fair systems and proper support for those who are overwhelmed with debt. We believe that the state response must meet some key criteria: 

• It must be multi-dimensional, addressing all of a person's debts; 
• It must aim to keep people in their homes where appropriate and to ensure access to social housing where needed, including a radical reform of the mortgage-to-rent scheme in order to allow those with recognisably unsustainable mortgages to ensure reasonable housing;
• It must ensure that there is independent and fair oversight on the resolution of debts, not just a bank veto, such as a service which can objectively assess  whether a sustainable mortgage restructure is possible and what that it might be.
• A move away from the entirely privatised insolvency system by allowing people who cannot afford an insolvency practitioner to have access to a publicly funded practitioner;
• Finally, people must be properly supported with timely and comprehensive legal and money information and advice in addressing their over-indebtedness, right from the start of the process.

(Policy submissions are available in the resources section – select policy from the ‘Type’ and ‘Debt law reform’ from the ‘Category’, then ‘search’.)

Support to MABS: FLAC works with the state-funded Money Advice and Budgeting Service (MABS), a nationwide network of small companies negotiating with creditors on behalf of over-indebted people. FLAC provides expert legal assistance to MABS money advisors on matters of consumer debt, consumer credit and related legal issues. Throughout the recession, MABS has also called for better support for those in debt and is in fact the 'approved intermediary' or the body which administers one particular category of insolvency aimed at those with unsecured debts of less than €20,000, called the Debt Relief Notice.

While FLAC was the only non-governmental voice speaking on behalf of consumers at the start of the crisis, other advocacy organisations have emerged in recent years, frustrated by the lack of progress for those mired in debt. 

Legal Casework: As a legal rights organisation in active litigation practice, FLAC has always maintained a small strategic case load on personal debt issues to promote improved redress through the courts.

 Resources:  These include:

• Presentation: Resolution process for Mortgage Arrears
• Proposal: Mortgage arrears advice scheme
• Report: Owner Occupied Mortgage Arrears: What Progress has been made towards a resolution?
• Guide: Moving Out of Mortgage Arears and Personal  Debt
• Submission on the Personal Insolvency Bill 2012