I move that the Bill be now read a Second Time.
The purpose of the Bill is to provide a suitable legislative framework for co-operative societies known as credit unions. The provisions of the Bill follow generally the recommendations of the Committee on Co-operative Societies, the Chairman of which was the Registrar of Friendly Societies. A credit union is defined in section 2 of the Bill as a co-operative society consisting of individuals having a common bond and formed for the purpose of promoting thrift among the members, creating a source of credit for them at a fair and reasonable rate of interest and using and controlling their savings for their mutual benefit. This kind of financial institution is well known in other parts of the world as a special form of co-operative effort and there is a widespread demand for its legalisation in this country.
The development of the credit union movement is set out in the report of the Committee on Co-operative Societies and it is hardly necessary for me to go into detail on that particular aspect of the matter; a brief outline of this story may, however, be of interest to the House. The first co-operative credit society was founded in Germany in 1849 for the purpose of combating usury. Societies of this kind spread rapidly on the Continent but it was not until 1900 that the first North American equivalent was set up in Quebec. Enabling legislation was enacted in that province in 1906 and the credit union idea quickly spread in Canada. Many Deputies will be familiar with the story of Monsignor Coady whose efforts to solve the economic difficulties of the people of Nova Scotia in the late twenties and early thirties have found a special place in the history of co-operative endeavour. This resourceful and practical man made good use of credit unions in his fight against poverty.
The first United States Credit Union Law was passed in 1909 by the State of Massachusetts. By 1934 credit union laws had been passed in 39 of the United States and a Federal Credit Union Act became law in that year. The United States credit unions also promoted in that year the Credit Union National Association and a mutual insurance society with the object of providing suitable services for credit unions. The Credit Union National Association now promotes the credit union movement all over the world and one of its representatives visited Ireland in 1959 to give evidence before the Committee on Co-operative Societies. In the credit union movement it is the practice for each country to have its own national league and, accordingly, the Credit Union League of Ireland was set up around this time and it was admitted to membership of the Credit Union National Association in November, 1961.
To-day there are credit unions in all of the United States, in all provinces of Canada, in Central and South America, in certain Pacific countries and also in several European, African and Asian countries. The movement has a total membership of about 30,000,000 persons and assets in the region of £5,000 million. The total number of individual credit unions is about 50,000 and it will be seen from these figures that the average asset for each unit is about £100,000.
I think it desirable also to give Deputies some idea of the history of somewhat similar bodies in this country. Under the Friendly Societies Acts, special provision was made in the final quarter of the last century for the registration of societies formed for the purpose of creating funds by monthly or other subscriptions to be lent out to or invested for the members of the society. From the point of view of administration and finance, societies formed for this purpose were on the whole extremely unsatisfactory, particularly in the case of non-agricultural loan societies. In 1917 the authority for the registration of loan societies was withdrawn and substituted by a new one which was limited to societies formed to grant loans for agricultural purposes. Since that time, therefore, it has not been permissible to register non-agricultural loan societies, but those which were established prior to August, 1917, were allowed to continue in business and there are now about 23 of them on the register with total membership of about 20,000 persons.
As regards agricultural credit societies, the first of these was formed in 1894 and was quickly followed by a large number of others. In 1914 a Commission on co-operative credit drew attention to a number of inadequacies in the operations of these societies. They put forward certain recommendations to rectify the position, but war broke out before any action could be taken on their report. A later Commission on Agriculture endorsed these recommendations in an interim report on credit which was issued in 1923. In 1927, however, the Agricultural Credit Corporation was set up under the Agricultural Credit Act of that year and this, in effect, put an end to the establishment of further societies of this kind in the private sphere. No new agricultural credit societies have been registered under the Friendly Societies Acts since 1928 and there are now only seven such societies actually operating.
In paragraph 125 of their report, the recent Committee on Co-operative Societies stated that having considered the whole question they were of opinion that savings and loan societies conducted on the credit union plan, with proper safeguards, would be a useful form of co-operative effort. They pointed out, however, that with the withdrawal of the statutory authority in 1917 for the formation of loan societies other than those in the agricultural sphere, various legal difficulties stand in the way of the formation of credit unions in this country. They recommended, accordingly, that the Industrial and Provident Societies Acts should be suitably amended in order to make provision for the registration of credit unions. In paragraph 128 of their report, they set out in some detail the kind of provisions which they feel should apply to credit unions.
In paragraphs 129 and 130 of their report the Committee dealt with the question of supervision of credit unions. They recommended that in any legislation to deal with these societies provision should be made for supervision by some authority other than the individual societies. This should involve, they felt, an annual inspection and intermittent surprise inspections and also instruction and organisational assistance. The aim should be to have supervision provided by a representative organisation as soon as possible but in the early stages the cost might, they thought, have to be borne by the State.
Since the report was published, the credit union movement has expanded rapidly in this country, mainly through the work of the Credit Union League of Ireland. There are, at present, some 136 credit unions here with assets well in excess of £1 million. Individual unions which wish to become affiliated to the League must comply with the League's requirements. It is the intention of the League to employ suitably qualified personnel whose jobs it will be to make the kind of inspections, annual and surprise, which were envisaged in the report of the Committee on Co-operative Societies. The need for interim supervisory arrangements on the part of the State has, therefore, been obviated as the ideal form of control by a representative organisation on the lines which the committee had in mind is now developing.
On this question of supervision, I should like to draw the attention of Deputies to the three reservations which were appended to the report of the Committee on Co-operative Societies. Two of these reservations are fiatly opposed to the idea of State intervention; the third, which was put down by a credit union representative, expresses doubt about the value of State subventions to credit unions. I agree with the general tenor of these reservations and have drawn up this Bill on the basis that the credit union movement should be allowed to regulate its own affairs as far as possible.
I have no doubt that the Credit Union League of Ireland with the assistance of the international credit union organisations will keep a watchful eye on all credit union activities in this country and that it can be relied upon to take all necessary steps to protect the interests of the public.
Nonetheless the unhappy history of credit societies in this country in the past suggests that any legislation dealing with organisations of this kind which handle money should be tightly drawn and should be provide ample powers to deal with any undesirable situation that may arise. It will be noted that the Bill does, in fact, contain many such provisions. Apart from detailed safeguards and restrictions of one kind or another which are interspersed throughout the Bill, Deputies will note the specific provision in section 12 for the establishment by each credit union of a supervisory committee. The function of this committee is to oversee the activities of the directors and other officers, and the manner in which this function is to be discharged is set out in section 17.
There are ample clauses designed to ensure that the supervisory committee will be independent of the other officers of the credit union and will be in a position to carry out its duties adequately. I should also like to draw attention to section 27 of the Bill which provides for the establishment by me of the Credit Union Advisory Committee. This will be a body of persons having a knowledge of accountancy and other matters of significance in relation to credit unions who will keep an eye on developments in this field and advise me as to any action I should take to safeguard the interests of the public in this sphere.
It will be noted from section 35 that the powers to which I could resort in making any such regulations are very comprehensive. Normally, I would not think it desirable to seek such wide powers from the Oireachtas but in this particular case I think it is important that I should have authority to deal speedily with any situation that may arise by means of regulations. One of the most important items in section 35 is paragraph (c) of subsection (1); this paragraph enables the Minister for Industry and Commerce, after consultation with the Credit Union Advisory Committee, to take a more direct part in the auditing of credit unions if this should be demonstrated by experience to be necessary.
Deputies will also notice the power given by section 33 of the Bill to the Registrar of Friendly Societies to petition the High Court for an order to wind up a credit union if it is unable to pay its debts or wilfully violates the provisions of the law. I think it no harm to mention here too that the Industrial and Provident Societies Act, 1893, into which this Bill is being written, already contains a number of provisions which will assist in ensuring proper supervision of the activities of credit unions. Section 20 of that Act will require each credit union to submit an annual return in a prescribed form. Under section 18 of that Act, there is provision for the inspection of the books of a society by an accountant or actuary appointed by the Registrar of Friendly Societies, while section 50 provides for a full investigation of the affairs of a society. Finally, the Industrial and Provident Societies (Amendment) Act, 1913 requires every society to have its accounts audited by public auditors appointed by the Minister for Industry and Commerce.
It is not necessary for me to refer to the other provisions of the Bill as these will be the subject of closer examination on Committee Stage. To a substantial extent, the Bill is modelled on the legislation prevailing in other countries where the credit union movement has been a success and where failures have been rare. A considerable amount of technical drafting difficulty was encountered in fitting legislation on these lines into the Industrial and Provident Societies Acts. This has given rise to some delay in producing the Bill, but I am satisfied that we now have before us a set of provisions which will provide a suitable basis for regulating the affairs of credit unions in accordance with the principles accepted internationally in relation to those bodies.
It is necessary, I think, to say that though we expect the spread of credit unions to give rise to increased savings which will help in the fulfilment of our plans for economic development, the credit union movement must be regarded as being of social as well as economic significance. The object of the movement is to bring people together in co-operative endeavour so that they may help each other by pooling their financial resources. Participation in enterprises of this kind has prevented many people from falling into the clutches of moneylenders or getting into difficulty through over-involvement in hire purchase commitments.
Apart from this particular aspect of providing alternative sources of credit at fair and reasonable rates of interest, it has been found that by taking part in the management of a body such as a credit union, the members gain an insight into the meaning and purpose of money, and their understanding of the workings of the economic system is greatly improved. Most important of all, perhaps, people who come together like this to help each other through their own efforts develop that independence of outlook which is such a refreshing feature of the co-operative movement, particularly nowadays with the prevailing tendency to seek State assistance for so many activities.
I presume that it is for these reasons that the credit union movement has always held the interest of churchmen. From the very begining, the Credit Union Movement has had a socio-religious background, but at the same time it seems to have been free from any element of sectarianism. I understand, in fact, that in many parts of the world the organisations promoting this form of co-operative self-help have included representatives of diverse religious denominations who have worked together in the greatest harmony to achieve the aims of the union movement.
Deputies will be interested to know that the late President Kennedy of the United States, where credit unions have had a long and happy history, was an admirer of the credit union movement. His messages of support and encouragement are cherished by credit union people all over the world. Our own President, too, has given his support to the movement and a message which he transmitted to the International Credit Union Year in 1962 pointed out that "the encouragement of thrift and the provision of credit for desirable objects is of the greatest individual, local and national benefit". I might mention here, too, the message conveyed in 1958 by the Secretary of State to Pope Pius XII in which it is stated that "the Holy Father could not fail to derive comfort from the knowledge of the meritorious achievements, both economic and social, of the credit union movement in pursuance of the laudable purposes for which it was founded".
In commending this Bill to the House, I think it is my duty to state that I fully realise the element of risk involved in permitting relatively un-skilled persons to handle substantial amounts of money. I am satisfied, however, that if we maintain a sufficiently careful watch, it will be possible to take corrective action in time if anything should appear to be going wrong, and this Bill contains all the necessary powers to this end. In any event, all the authorities associated with the credit union movement are satisfied that if this risk were measurable in terms of evil, it would be very insignificant indeed in comparison with the very substantial amount of good which the enactment of this Bill will make possible.