Ending the use of imprisonment for debt, preventive measures to address personal debt at an early stage, new non-judicial debt settlement procedures and the redrafting of the law on debt enforcement are among the provisional recommendations from the Law Reform Commission in its latest discussion paper.
Its 420-page
Consultation Paper on Personal Debt Management and Debt Enforcementcontains 123 provisional recommendations or invitations for submissions, and it will be launched this evening by the Attorney General Paul Gallagher SC. It forms part of its Third Programme of Law Reform, adopted by the Government last year.
In June last the High Court found unconstitutional a law permitting the imprisonment of a woman who could not pay her debt. The Government then prepared legislation to amend the law to allow the imprisonment of debtors who could pay their debts but refuse to do so.
The proposals include both changes in the law of debt enforcement, in particular the replacement of the Bankruptcy Act, and suggestions for measures to be taken by other bodies, such as the Irish Financial Services Regulatory Authority (Ifsra) and the Review Group on Financial Services Law.
The consultation paper recommends the law recognises the distinction between debtors who cannot pay and those who refuse to pay. It states that international studies indicate those who "won't pay" number only about one in 20 of people who get into difficulties with debt.
It questions the usefulness of coercive measures for people who cannot pay their debts and outlines alternative ways of tackling their indebtedness. These include debt counselling and advice, binding non-judicial debt settlement procedures, which could include attachment of earnings, and the use of mediation in such procedures.
It also provisionally recommends that any debt settlement arrangements provide for money for a basic standard of living for the debtor and his or her dependants.
It envisages access to the courts for creditors, but only as a last resort.
Submissions are invited on the approach any debt settlement procedure should take to the debtor's home, the circumstances where it should be protected from sale, and those where the debtor could be required to sell it.
It invites submissions on whether a "responsible lending" test should be introduced under the licensing process for credit institutions, as part of the review of financial services legislation. The commission also recommends the regulation of debt-collection agencies, with supervision from Ifsra or a similar body. There should be a binding code of practice for all debt collection agencies, it says.