Treasury Demands Major Changes to Pending Reform in Bailiff's Office

A progressive reform to the operation of the Bailiff's Office is coming up against opposition from the Finance Ministry's budget division. The treasury's opposition to the reform, which was formulated in the Knesset Constitution, Law and Justice Committee, demands major modifications to both the bill's prohibition on arrest of debtors and the obligation to provide alternative housing to anyone evicted from his apartment. The position of the ministry was announced by deputy budget directors Sharon Gambashu and Rotem Peleg in a letter to committee chair Menahem Ben-Sasson (Kadima).

The opposition of the budget division adds a member to the bitter front established by the Israel Bar Association and the banks that is already waging war against the reform.

Originally, the reform in the Bailiff's Office was part of the 2007 Budget Arrangements Law. Now, it has been decided to separate the reform from that bill, and to refer it back to Ben-Sasson's committee, which will prepare it for its second and third readings.

The main means of debt collection at present is arrest warrants. The number of such warrants issued by the Bailiff's Office doubled between 2000 and 2007, from some 100,000 to about 200,000. At the same time, only 650 warrants were actually carried out last year. In other words, the warrants could be said to serve as a method of intimidation that forces debtors to pay up.

The Knesset committee has proposed a three-year experiment, during which the arrest warrants would be canceled entirely. Instead, the Bailiff's Office would be provided with tools to improve its debt-collection ability, such as access to information about the debtor's financial situation. The treasury's Gambashu and Peleg expressed a fear that a three-year experiment was liable to undermine debt-collection ability and suggested limiting it to only one year.

In response Ben-Sasson commented that, "my position is that arrest is not for purposes of intimidation." In either event, the reform in the arrest warrants is to take effect only a year after passage of the reform, during which the effectiveness of the new collection methods granted to the Bailiff's Office, and intended as a substitute for the arrest warrants, would be examined. Ben-Sasson also indicated his willingness to have the legislation stipulate that a cancellation of the arrests would come into effect only after an additional vote by the Knesset constitution committee. This will be held after it becomes clear whether the new methods really do improve collection ability and constitute a substitute for the arrest warrants.

A second major aspect of the reform is the committee's decision to provide alternative housing for a period of at least a year and a half to any resident who is evicted from his home. Gambashu and Peleg write that, according to the assessment of the supervisor of banks, application of the rule retroactively, in other words, to borrowers who have already taken the loans, will cost the banks NIS 1.1 billion. They express a fear that it will constitute a serious blow to the banks, and particularly to small ones, and are opposed "to any retroactive application of the amended legislation."

Gambashu and Peleg also want to restrict the period of alternative housing to half a year, for new borrowers as well. Instead they propose an arrangement whereby the Ministry of Construction and Housing, in a fast-track process, will recognize anyone who has been evicted from his apartment as homeless and provide him with assistance. The deputy directors warn that the banks will inevitably collect the cost of the alternative housing from the high-risk population, which will make it difficult for weak populations in particular to take out a mortgage.

Ben-Sasson is willing to consider applying the alternative housing arrangement only to those taking out new mortgages, if in exchange the state commits itself to the track requiring fast recognition of any evictee as a homeless person, and to providing significant assistance.