Check Against Delivery
Speech by the Minister for Justice and Equality
Frances Fitzgerald TD
3 July 2015
I move: that the Bill be now read a second time.
Ceann Comhairle,
I am very pleased to introduce these new measures to the House today and I look forward to hearing the contributions of Deputies.
The purpose of the Civil Debt (Procedures) Bill is to provide for the introduction of additional measures to the existing suite of measures currently available for the enforcement of debts. These new court-based options will provide for the enforcement of debt – within specified upper and lower limits - by means of attachment of earnings or deductions from certain social welfare payments where the debtor has capacity to repay the moneys owed. Consumer debts owed to financial institutions or licensed moneylenders and arising from loans are excluded from the scope of the Bill. Importantly, the Bill also provides for the abolition of imprisonment of debtors and fulfils a commitment made in the Programme for Government in this regard.
As Deputies will note, the Bill does not apply to recovery by financial institutions of debts arising from money lent to customers. It applies to creditors such as small or sole traders, sub-contractors and other small businesses who have supplied goods and services and provides them with new avenues to get paid what is owed to them by those who can afford to pay. Equally it applies only to modest debts which fall within the lower and upper limits respectively of €500 to €4000. Subject to a number of important safeguards which I will outline shortly it will enhance our legal system for the recovery of debts.
The provisions in the Bill arise from the recommendations made by the Law Reform Commission in its 2010 Report entitled Personal Debt Management and Debt Enforcement. That Report made a number of recommendations for reform of the existing personal insolvency and debt enforcement regimes. Key elements of the Report were implemented through the enactment of the Personal Insolvency Act 2012.
Deputies will be aware that much of the focus of the reforms implemented to date in the area of civil debt has been centred on personal insolvency and those who “can’t pay”. However, the LRC Report also identified the need to reform the existing debt enforcement regime to ensure balance in the creditor/debtor dynamic and recommended the introduction of a number of reforms specifically aimed at improving the current range of court-based options available to creditors in recovering moneys owed to them. These reforms are aimed at debtors who have capacity to pay their debts but fail to do so - the “won’t pay” debtors. This would include Irish Water charges among others. Measures specific to compliance with Irish Water charges and provisions for eligibility and payment of the water conservation grant post 2015 have been addressed separately by the Minister for the Environment, Community and Local Government in the Environment (Miscellaneous Provisions) Bill 2015.
As I have said on previous occasions the most desirable situation is for creditors and debtors to reach an amicable agreement for settlement of debt. However, in some cases the debtor – who may actually be in a position to pay the debt - simply refuses to engage with the creditor or does not adhere to the agreed repayment schedule to satisfy an outstanding debt. The creditor has little option in such circumstances but to take legal action to secure repayment of the debt.
Many Members of this House will recognise that scenario and will be acutely aware of situations across the country where small suppliers of goods and services - often small or sole traders and other small businesses - simply cannot get paid by individuals whom they have supplied even in circumstances where there is little or no doubt but that the individual can afford to pay. This Bill gives those creditors, as well as others where the debts are modest ones falling within the €500-4000 limits, two new court based options in addition to the suite of options already available to secure payment of a debt.
At present, the position is that, once a creditor has obtained a judgment order from the court, the judgment can be enforced. The creditor has 12 years from the date of the judgment to look for an enforcement order. However, if the judgment order was issued 6 or more years earlier, the creditor may have to apply to court for leave to issue execution. Once issued, enforcement orders are generally valid for a year and may then be renewed.
The main ways of enforcing judgments for civil debt are by registration of the judgment first followed by execution against goods, garnishee order, instalment order or judgment mortgage. For smaller debts instalment orders or execution against goods are the most common methods of enforcement.
Along with the economic reality of serious indebtedness and the need to provide for legislative options for those who are insolvent and bankrupt, it is equally an economic reality that creditors must have options available to them to recover money owed to them particularly where the debtor has capacity to repay and will not do so. Those who provide goods and services are entitled to seek repayment from their customers. If this were not the case businesses would simply not survive. Indeed many small businesses will have failed because they have not been able to collect money owing to them.
However, I am mindful that in introducing new measures in relation to enforcement of debt that there is a need to protect vulnerable debtors from the aggressive actions of certain creditors. The Civil Debt (Procedures) Bill provides for a number of important safeguards which will ensure that debtors are given adequate protections in this regard. I think it is important if I outline those safeguards for the information of the House:
· Firstly, the debtor will be offered an opportunity to make representations to the court on his or her behalf before the court may make a decision on the matter.
· Secondly and importantly, in making a decision, the court will be required to take into account the debtor’s capacity to repay the debt in terms of the amount of the attachment or deduction which would be ordered. The proposals provide that the debtor’s situation must be assessed by the court deciding on enforceability so that the attachment of earnings or deduction from social welfare cannot cause him/her undue hardship or encroach on basic income sustainability to ensure basic living costs can still be met by the debtor. The debtor will be obliged to provide a statement of means to the court which will then be examined by the court in assessing his or her capacity to pay. Where the debtor is not an employee but is on Social Welfare payments, this statement of means will have attached to it a verification statement from the Department of Social Protection setting out exactly what payments are being made to the debtor and the deductions, if any, already being made from them. The court will be thus in a position to make a fully informed assessment of what the debtor can or cannot afford to pay.
· Thirdly, provision is made for variation or termination of the order if the debtor’s circumstances change materially.
· Finally, the court may adjourn proceedings for such period or periods as the court thinks reasonable if it appears to the court that the judgment debtor is likely to be able to pay the debt within a reasonable period
I would like also to say a few things about the provisions of the Bill which allow the court to order appropriate deductions from payments to a social welfare recipient in satisfaction of a debt. Affordability is absolutely critical here and will be judged by the court on the basis of accurate information provided by the Department of Social Protection to the court. Deductions may be ordered only from ‘Net Scheme Payments’ – i.e. those payments which are prescribed by the Minister for Social Protection as being suitable for deductions on the basis of their being stable ones with long term recipients and taking into account any deductions which are already being made. Deductions may also be ordered only from a recipient’s ‘personal rate’ – i.e. the portion of the person’s social welfare payment which does not include payments or elements of payments which might be in respect of their dependants. The Minister for Social Protection will be in a position to designate those benefits to which a deduction order may be applied and it is expected that these would be broadly similar to those from which deductions in respect of local property tax may be deducted at present. In the end of the day, it may be that in assessing affordability a court will be in a position to order only very small deductions from the payments of social welfare recipients or indeed in some cases none at all and there is a strong set of safeguards in place to ensure balance and fairness in these situations.
Law Reform Commission recommendations
Before I move on to the content of the Bill itself, I would like to briefly mention some of the recommendations of the Law Reform Commission which have influenced the development of the policy in relation to the Civil Debt (Procedures) Bill.
The LRC Report acknowledged the need for creditors to recover their debts, particularly where the debtor has capacity to repay and refuses to engage meaningfully with the creditor. The Report also made a number of recommendations for wide scale reform of the current debt enforcement regime, including the setting up of a Debt Enforcement Office. I should mention at this juncture that the Civil Debt (Procedures) Bill does not propose to implement this particular recommendation rather it focuses on improving on the existing court based enforcement measures.
During the LRC Consultation process which was conducted prior to the publication of its Report, it was noted that there is general dissatisfaction in relation to the operation of the instalment order procedure, both from the point of view of debtors and creditors. The LRC acknowledged that while the most serious deficiencies in the procedure were remedied by the Enforcement of Court Orders (Amendment) Act 2009 (which was introduced on foot of the High Court judgment in Mc Cann v Judge of Monaghan District Court and others), some difficulties remained to be addressed and other mechanisms introduced to the existing debt enforcement regime.
Debt enforcement by means of attachment of earnings orders was examined by the LRC. Their Report noted that in Ireland attachment of earnings orders are mainly used in the enforcement of judgments except in the context of family law where they are used for enforcing court orders. The LRC received a number of submissions on the subject during their consultation process. The majority of respondents supported the introduction of an attachment of earnings order mechanism. It was noted that future income is often the single most reliable source of funds to satisfy proven debts, particularly in the case of consumer debtors. Potential efficiency was also cited as an argument for the introduction of such a mechanism
As part of their consultation process, the LRC sought views on this issue and found that the introduction of such a measure was widely supported. The LRC also noted that this method is used to enforce judgment debts in a large majority of the systems they surveyed in other jurisdictions.
The LRC also looked at the possibility of making deductions from social welfare payments as a means of debt enforcement but were of the view that this was a policy matter which lay outside the scope of their review. However, the LRC identified a number of principles which it considered to be important in the development of any policy in this area, such as:-
- that the principle of enforcement should be appropriate and proportionate in all cases and that decisions on the enforcement of a judgment must be based on an accurate and comprehensive assessment of the debtor’s capacity to repay the money owed; and
- while recognising that the creditor’s right to have their judgment debts satisfied must be vindicated and respected, there should be safeguards to ensure that the debtor’s standard of living is not reduced below a basic level.
These principles have been taken into consideration in the development of the Bill and I will deal with them in more detail in a few moments.
One of the key recommendations of the LRC in this area is the abolition of imprisonment of debtors. Under existing law, arrest and imprisonment remains a possibility as an enforcement mechanism of last resort in cases where a creditor has proved beyond all reasonable doubt that the judgment debtor has failed to comply with an instalment order due to his or her wilful refusal or culpable neglect. The LRC noted that the role of imprisonment in the system for the enforcement of judgments has been considerably curtailed following a change to the law in 2009 arising from the High Court decision in the Mc Cann case. Recourse to imprisonment may now only be had after all other less restrictive enforcement mechanisms have been attempted or found to be inappropriate. However, the possibility of imprisonment for non-payment of debt still remains. The Commission also noted that the removal of imprisonment for failure to comply with a judgment debt in ordinary civil proceedings could be without prejudice to the retention of imprisonment in other scenarios such as the enforcement of family maintenance orders.
Given the extensive consultation process conducted by the LRC in this area of the law, the fact that their Report entitled Personal Debt Management and Debt Enforcement has been in the public domain for almost 5 years and its content is well known at this stage, the requirement for pre-legislative scrutiny by the Joint Committee on Justice, Equality and Defence has not been considered necessary.
Ceann Comhairle, before turning to outline in more detail the provisions of this Bill, may I remind Deputies that what the Government is proposing here is a straightforward piece of legislation, built from long standing analysis and recommendations of the LRC, which provides two key enhancements for suppliers of goods and services to recover modest debts in the courts. Yes, it will be open to be used by utilities such as energy or telecoms providers or indeed Irish Water. But it will also be available for use by small businesses and traders around Ireland. It will not be directed at those who can’t pay but at those who can pay but choose not to and it will not be directed at anyone unless the court decides that it is within their capacity to pay.
Overview of main provisions of the Bill
The Civil Debt (Procedures) Bill seeks to implement further recommendations of the LRC Report aimed at enforcement and recovery of debts which could be developed to streamline the existing enforcement procedures. The Bill provides that creditors, having first sought a judgment in respect of the debt, may apply to the court for an order enabling either attachment of earnings or deductions from social welfare payments, as appropriate, for the purpose of enforcement of debts to which the legislation will apply.
Attachment of earnings would arise where a court orders the debtor’s employer to deduct specified sums from the debtor’s earnings to pay over to the creditor. Deduction from social welfare payments would arise where the court orders the Department of Social Protection to deduct specified sums from the debtor’s social welfare payments to pay over to the creditor. However, these provisions are subject to a number of safeguards for debtors – which I have already outlined in detail - and the court will be required to have regard to the debtor's capacity to repay the amount owed.
The debtor will be offered an opportunity to make representations to the court on his or her behalf about their circumstances before the court may make a decision on the matter.
Importantly, in making a decision, the court will be required to take into account the debtor’s capacity to repay the debt in terms of the amount of the attachment or deduction which would be ordered. The Bill provides that the debtor’s situation must be assessed by the court deciding on enforceability so that the attachment of earnings or deduction from social welfare cannot cause him or her undue hardship or encroach on basic income sustainability to ensure basic living costs can still be met by the debtor.
Another extremely important measure in the proposed Bill is the abolition of imprisonment of debtors (except in the case of maintenance arising from family law proceedings). This implements one of the key recommendations of the Law Reform Commission in this area. Under existing law, arrest and imprisonment remains a possibility as an enforcement mechanism of last resort in cases where a creditor has proved beyond all reasonable doubt the judgment debtor has failed to comply with an instalment order due to his or her wilful refusal or culpable neglect. The Bill removes this possibility for the vast majority of debtors and, I think Deputies will agree, represents an important milestone.
Contents of Bill
I would now like to outline the detail of the Bill.
Section 1 provides for the definitions used in the Bill. Among the terms defined is "net scheme payments" which is required for the purposes of dealing with deductions from certain social welfare payments. “Debt” is defined as not including debts arising from the repayment of loans to a debtor made by a bank, credit union, moneylender or credit card debt. The reason for this exclusion is that such debts are based on a loan where credit has been extended to a debtor and risk has been factored into the interest charged on the loan. I am mindful that banks and other financial entities already have a range of mechanisms for recovering unpaid loans. However, it is important to point out that the exclusion in this Bill does not apply to the other enforcement mechanisms already available nor would it preclude an application under the provisions of this Bill related to non-lending related activity.
Sections 2, 3 and 5 are standard provisions.
Section 4 provides that the provisions of this Bill come within the jurisdiction of the District Court.
Section 6 provides that a creditor, having first obtained a judgment against a debtor in respect of a debt, may make application to the court for an attachment of earnings order or a deduction from payments where the judgment concerned is for a debt of not less than €500 but no greater than €4,000. In setting the debt levels I am mindful that attachment of earnings mechanisms are best suited to the repayment of relatively low value sums over a short time period. The existing enforcement of debt measures provide remedies more suitable to creditors seeking to recover larger sums of money owed to them.
The requirements in relation to the information to be provided to the court by the judgment debtor on his or her financial circumstances are set out in Section 7. The judgment debtor, on receipt of a notice under section 6, is required to complete a statement of means providing details of their income and financial commitments. Where the debtor is a social welfare recipient he or she will be required to request a certificate from the Department of Social Protection verifying their payments. This ensures that the court has accurate information on the debtor’s social welfare payments. The certificate will not be disclosed by the court to the judgment creditor. The court is empowered to request further supporting documentation from the debtor or his employer if so required. The statement of means provided to the court and the verifying certificate from the Department of Social Protection shall be admissible in evidence.
Section 8 is an important provision. It allows for the adjournment of the court proceedings for such period or periods as the court thinks reasonable if it appears to the court that the judgment debtor is likely to be able to pay the debt within a reasonable period. This pause in proceedings may be beneficial to the debtor in allowing them a final opportunity to pay the debt.
Section 9 provides that an attachment of earnings order and a deduction from social welfare payments order cannot be in effect concurrently in respect of the same judgment debt.
The court is empowered in Section 10 to make an order directing the employer of the judgment debtor to make deductions from the debtor's earnings and to pay the sums deducted to the creditor in accordance with the terms of the court order. Importantly, the section provides that before deciding whether to make or refuse an attachment of earnings order, the court must give the judgment debtor an opportunity to make representations. In addition, it provides that in specifying the amount of deductions to be made, the court shall have regard to the "normal deduction rate" which is the rate which the court considers it reasonable that the earnings to which the order should be applied in satisfying the debt and the "protected earnings rate" which is the rate below which the debtor's earnings should not be reduced (having regard to the needs of the judgment debtor and his or her particular circumstances). The court shall not make an attachment of earnings order unless it is satisfied that the judgment debtor is a person to whom earnings fall to be paid and that regard has been given to his or her particular circumstances, including financial circumstances.
The method of service of the attachment of earnings order is set out in Section 11.
Section 12 deals with compliance with an attachment order. The employer is required to comply with the order but is not liable for non-compliance during the first 10 days. This is to allow for the situation where the person served with the order is not the person's employer, in which case the person concerned is required to notify the court accordingly. Provision is also made for a situation where the debtor changes employment.
Section 13 deals with notification of changes in the judgment debtor’s employment and employment status. Where an attachment of earnings order is in force, the judgment debtor must notify the creditor within 10 days of a change in earnings of greater than €50. The debtor is required to notify the creditor in the event that he or she becomes employed, re-employed or leaving employment accompanied. Any person who becomes the employer of the judgment debtor and knows that an attachment order is in force is required to notify the judgment creditor in writing that she or he is the debtor's employer and to provide details of the debtor's earnings and expected earnings.
Section 14 empowers the court, on application by the employer concerned, the judgment debtor or the judgment creditor, to rule on whether certain types of payments are earnings for the purpose of an attachment of earnings order in force.
The provisions which are to apply in relation to debtors who are in the service of the State, or local authorities etc. are set out in Section 15.
Section 16 deals with the arrangements which apply in relation to deductions from social welfare payments. It empowers the court on application to make an order directing the Minister for Social Protection, to deduct certain specified amounts from the judgment debtor's net scheme payments and to pay them to the judgment creditor. Before deciding whether to make or refuse a deduction from payments order, the court must give the judgment debtor an opportunity to make representations. The court shall not make a deduction from payments order unless it is satisfied that the debtor is a person to whom net scheme payments fall to be paid and that regard has been given to the debtor's particular circumstances.
The social welfare payments which come within the scope of this Bill are to be prescribed by the Minister for Social Protection under section 25. While these have to be determined, they are likely to be the same payments which are identified as being suitable for deduction for the purposes of the collection of the Local Property Tax.
The method of service of the deduction from payments order on the Minister for Social Protection is set out in section 17.
Section 18 deals with compliance with a deduction from payments order. The Minister for Social Protection is required to comply with the order as soon as practicable after it is made. Importantly, the section provides that the Minister for Social Protection shall not make deductions which would have the effect of reducing the net scheme payments below the basic social welfare rate specified in column(2) of Part 1 of Schedule 4 to the Social Welfare (Consolidation) Act 2005.
Where a deduction from payments order is in force, the debtor is required to notify the creditor within 10 days of an increase of €50 to his or her net scheme payment subsection or if he or she becomes employed. Where the debtor becomes employed, the debtor must provide particulars of his or her earnings or expected earnings when notifying the creditor. This is provided in section 19.
Section 20 allows the court to vary an attachment of earnings order or a deduction from payments order on the application of the judgment debtor or the judgment creditor. The debtor can initiate a variation application where his earnings or social welfare payment have decreased or his or her circumstances have changed and compliance with the attachment or deduction order would not allow the debtor sufficient amount to maintain himself or his or her dependants. A creditor may initiate the variation application where the debtor’s earnings or net scheme payment has increased.
Section 21 provides that an attachment of earnings order or a deduction from payments order will cease to have effect on payment by the judgment debtor of the remaining balance of the judgment debt.
Section 22 provides that the making of an attachment of earnings order or a deduction from payments order causes proceedings commenced or any order made under section 17 of the Enforcement of Court Orders Act 1926 for instalments to lapse. Should an order be made under section 17 of the 1926 Act, an attachment of earnings order or a deduction from payments order lapses.
The sequence in which the payments made under an attachment/deduction order are to be applied is specified in Section 23.
Section 24 provides for a number of penalties in respect of false or misleading statements or contraventions of the Act.
Section 25 provides for the repeals of Parts I and IV of the Debtors Act (Ireland) 1872. These repeals effectively remove the sanction of imprisonment of debtors from the statute book. I should mention here that I will be introducing amendments at Committee Stage which seek to amend the imprisonment provisions of the Enforcement of Court Orders Acts.
Section 27 is a standard provision regarding the commencement of the Act.
Concluding remarks
I am sure that Deputies will agree that there is a need for a balanced approach in relation to civil debt to ensure the protection of creditor rights by making available a range of legal mechanisms which compel payment by “won’t pay” debtors who knowingly refuse to pay their obligations. Therefore it is important that any legislative initiatives in this area support and protect those who simply cannot pay their debts while dealing appropriately with those who have capacity to pay but simply refuse to do so.
I believe that the Civil Debt (Procedures) Bill provides that balance in relation to the enforcement of modest debts owed to providers of goods and services through attachment of earnings or deductions from social welfare payments and I look forward to the Deputies comments on the Bill.
I commend the Bill to the House.
Thank You.