Tuesday 25 October 2016

PIP's trophy-home gaffe just another glaring example of two-tier citizenship

Published 12/09/2013 | 05:00

It makes our blood boil. We take to radio comment lines and social media to let off steam. And then we forget about it for a time – until yet another example of Ireland's two-tier system of citizenship slithers into the open.

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A nest of snakes was unearthed on Mary Wilson's 'Drivetime' show this week, when a Personal Insolvency Practitioner (PIP) made a land grab for well-heeled debtors, as opposed to the little people, arguing that hospital consultants and solicitors had more cause to stay in their trophy houses than PAYE workers. No doubt, members of the professional classes who are up to their oxters in buy-to-lets are stampeding for his door.

Despite the perfect storm he whipped up, PIP Jim Stafford did the State some service. He let in the light of day about access to the new insolvency arrangements: they will not be available on an equal basis to all citizens.

Over-leveraged people with high salaries and savings on deposit, maybe even a holiday home, to trade for a debt writedown appear likely to receive preferential treatment. Meanwhile, citizens who haven't a bean and are saddled with mortgages they can't service, might struggle to find a PIP to take on their cases.

As ever, the moneyed class is at an advantage – even when the moneyed class is in the red.

PIPs are in business to make a living, and clients who have nothing to barter do not promise much of a yield.

Thankfully, not all PIPs are seeking an upfront fee, and some may take on cash-strapped homeowners if they meet the criteria. But meeting the criteria will be tough.

So do we allow thousands of distressed borrowers to slide through the cracks? No, we look at ways of improving the new insolvency regime so that everyone has a possibility of a second chance.

A start can be made with equal access to PIPs. Why are they all private practitioners? Why hasn't the State licensed some public PIPs? Alternatively, a certain level of pro bono work from private PIPs could be required once profit targets have been reached.

Naturally, private operators will take on cases with the strongest likelihood of success.

They will find it more lucrative to handle a few high-value cases rather than a stack of labour-intensive cases.

But nobody deserves to be consigned to hopeless case status from the get-go. The debt worries of someone with no job in a two-up, two-down are as valid as the debt worries of someone with an important job in a trophy house. Besides, the former's debts may well involve less of a writedown, and some of the cost to the public purse will be recouped from the banks if a deal is struck.

Overall, society benefits when the kiss of life is delivered to as many debtors as possible – not when some are left in a state of suspended animation.

Let's pause here to compare the way small debtors are dealt with, as opposed to how the developer caste has been handled. Take Bernard McNamara, whose property empire crashed owing €1.5bn: he is out of bankruptcy in just seven weeks' time.

Mr McNamara removed himself to Britain to declare bankruptcy two years ago, and has been living in London in far from modest circumstances. But on November 2, the past is behind him.

Contrast that clean slate with someone who didn't buy property as a speculator, but to put a roof over their family's head, and is now in negative equity with an unsustainable debt burden.

Mr McNamara, by the way, was in the rarefied air of the Hamptons at the weekend to give away his daughter in marriage. It's not her fault that her father's business dealings have contributed to higher taxes and reduced services for the Irish people. But a little more discretion wouldn't go amiss as yet another crushing Budget bears down on us.

While the lifestyles of the developer caste have been pranged, they haven't been left teetering on the scrap heap – the fate for a host of ordinary people sucked in by the property bubble. Which brings us back to our two-tier society.

The banks have the final veto on any deal, with no requirement to explain a refusal and no right of appeal allowed: another flaw in the insolvency regime. A culture of debt forgiveness isn't visible at the banks, as last week's Oireachtas hearings demonstrated.

Why is there no independent arbiter to adjudicate in cases of refusal? Surely it can't be too late to address such a deficit. The Free Legal Advice Centre lobbied both for a state-funded register of PIPs, and an independent review mechanism to protect against unfair use of the creditor veto.

Neither suggestion was acted upon for the legislation. And distressed borrowers may struggle to enter insolvency as a result. Perhaps they could approach legal aid centres for some initial advice. Currently, however, waiting lists for an appointment with civil case solicitors are at crisis point. People are waiting up to 20 months in Dublin, up to 17 months in Kildare, 15 months in Donegal and Clare and 14 months in Galway.

Insolvency schemes must be helped to succeed. Partly to reanimate the economy. And partly out of justice to all of our citizens, who ought not to be divided into hopeless cases and high rollers going through a bumpy patch.

Speaking of which, the defining quote from the bust goes to deal-maker Derek Quinlan, asked in a London court about maintaining a lavish lifestyle. "Extravagant is a relative term," he said, noting that what was extravagant to one person may not be extravagant to somebody else.

And the two-tier system of citizenship was exposed once again.

Irish Independent

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