Sir, – Hugh Linehan (Opinion & Analysis, September 14th) raises the serious issue of how the new insolvency legislation will fall short in restructuring business failure, while serving the “entitlements” of a professional class, and leaving the PAYE sector to pay for the privilege.
As presently structured, the Insolvency Service is set to inflict several new rounds of hardship on every man, woman and child in the coming years.
First, for those on very low income or social welfare it is welcome that Debt Relief Notices will mean an exit from credit card debt of less than €20,000. However, with the stark and crazy omission of registered and unregistered moneylenders from the legislation, the unintended consequence is likely to condemn many to a lifetime of poverty.
Second, bank repossessions are costly. After the required visit to the High Court, the legal costs of repossession average €60,000 per case.
With a tsunami of such cases pending, this legislation and the Insolvency Service of Ireland simply outsource the process to the accountancy profession, with the debtor picking up the tab. As only debtors on higher earnings (€50,000-plus) can be presently considered as “prospective clients”, the State will inevitably have to subsidise the service.
Third, most if not all applicants seeking the assistance of the insolvency service will have a mix of secured debt (mortgage/personal guaranteed loans) and unsecured loans, which will be mostly from credit unions. UK experience of writedown of unsecured debt is in the range of 60 per cent to 70 per cent. The secured debt is deemed excluded from writedown unless the banks play ball. In all but name, this is another bank bailout facilitated by the State.
Fourth, regardless of any lack of due diligence or whether any debts were out of control prior to mortgage approval, the practitioners have no powers to ask questions about reckless lending or unprofessional conduct; they have no authority to make recommendations about whether a proportion of the bank’s secure debt should be discounted, nor request the insolvency service to investigate discovered questionable practices.
At one swift stroke the reckless practices are forever swept under the carpet – an Irish approach to prudent financial practices!
After six to seven years of insolvency arrangements, few entrepreneurs will be back in action. While they may again be solvent, the grind and time taken will exclude many from the energetic world of business.
Inadvertently or otherwise, this legislation is yet another bank bailout courtesy of – or to the detriment of – the PAYE sector and local communities. As unsecured write-offs gather pace, more credit unions will be wound down.
In their place will be a small coalition of banks unwilling to lend to small business or to the neediest, but no shortage of moneylenders more than willing. – Yours, etc,
CIARAN WALSH,
Kincora Drive,
Clontarf,
Dublin 3.