asked the Minister for Industry and Commerce the plans, if any, he has to introduce legislation to regulate the activities of hire purchase companies, including those allied to the major banks, who are charging, in effect, interest of up to 40 per cent on borrowings, which institutions have mushroomed in recent times, some of them having been created by the banks themselves; if his attention has been drawn to the social trauma being caused by such practices; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Hire Purchase Companies.
10.
The activities of companies extending hire purchase credit are controlled by the Hire Purchase Acts, 1946 to 1960 and by Part III of the Sale of Goods and Supply of Services Act, 1980. The Hire Purchase Acts provide, inter alia, that:
(i) a note or memorandum of the hire purchase agreement must be made and must be signed by the hirer;
(ii) a copy of the note or memorandum must be sent to the hirer within 14 days of the making of the agreement;
(iii) the note or memorandum must contain a statement of the hire purchase price and of the cash price of the goods to which the agreement relates, and
(iv) the amounts of each of the instalments by which the hire purchase price is to be paid and the date on which each instalment must be paid.
These provisions help to ensure that consumers understand the extent of the financial commitments being undertaken when entering into hire purchase agreements. The Hire Purchase Acts do not regulate the rates of interest that can be charged by hire purchase companies. I would point out that hire purchase has virtually disappeared as a means of credit from the consumer credit market and has been replaced by personal loans from finance companies.
The Deputy refers to the activities of companies allied to major banks. These companies advance personal credit to consumers and are licensed under the Central Bank Act, 1971. Their activities, including rates of interest charged, are governed by the Central Bank Acts, responsibility for which lies with the Minister for Finance.
The Deputy is no doubt aware that the Minister for Industry and Commerce has prepared an order that will require all advertisements and notices which make reference to the cost of credit to indicate the true cost of that credit by means of the annual percentage rate of charge. The APR represents not only the rate of interest charged but also takes all other charges arising from the credit agreement into account. Accordingly, it is a more accurate representation of the true cost of credit to the consumer than the rate of interest. The order has been approved by the Seanad and is on the Dáil Order Paper.
I believe that this order will help consumers make valid comparisons of the true cost of credit available from different sources.
I hope the order the Minister referred to will be introduced soon. In view of the existing legislation to which the Minister has referred and of the genuine concern that exists about the extremely high true interest rate charged by some of the finance houses I should like to know if there has been any intervention by the Department in the last year or two arising from complaints, from the Minister's inquiries or from his feelings about the carry-on of some finance agencies and lending houses. I am anxious to know the rate of activity in recent months.
The action taken has been to advance with this order and the legislation which will make it necessary to publish the true rate of interest. It is most important to ensure that people know the rate of interest they are being charged. We are moving ahead with that quickly.
Is there any concern at the referral by banks to their own sister finance companies and the limit on true interest rates? Do they come within the Minister's ambit of concern?
The Deputy should bear in mind that banks are controlled by the Central Bank Act. I must point out that the Central Bank has responsibility in this area. Our aim is to ensure that the consumer is protected as far as possible and at the end of the day the best protection for the consumer is to ensure that they can shop around and see the true rate of interest. Up to now one of the difficulties has been that people did not know what rate of interest to compare the rate of interest quoted with because a plethora of interest rates were calculated in a different way. The order, and the legislation, will ensure that there will be one common rate of interest to be charged.
Will the Minister agree that the Government have no interest in the area of consumer credit as witnessed by the fact that the order to which he referred has been on the Order Paper of the House since 31 March? Will he agree that the Government have not seen fit in that time to provide time to put the order through this House? Will he accept it from this side of the House that, if the Government wish to do so, we are prepared to agree to have the matter put through following a debate of no more than two hours? Will the Minister agree that it is about time he did something about this matter? He should stop the talk.
That was an exciting tour de force. The Deputy will be aware that the order has been put through the Seanad. The Government have been looking for this order but, apparently, the Whips have not been able to reach agreement on when to debate it. We are ready to put the order through the House, if the Whips can agree.
Deputy Bruton should have it listed for Private Members' Business.
Is the Minister aware that many companies who formerly offered hire purchase agreements have switched to offering personal loans because the person seeking such loans will have less protection?
I did not hear the Deputy's question.
I must point out to Deputy John Bruton that the Deputy in possession has been consistently interrupted and that his supplementary questions could not be heard by reason of a conversation taking place in the area where the Deputy is seated.
Is the Minister aware that many hire purchase companies have switched to offering personal loans because those receiving personal loans have less protection than they would have under a hire purchase agreement? Would he consider in what way the law could be strengthened in relation to personal loans for the purchase of durable goods, household goods and so on?
I acknowledge that there has been a greater interest in personal loans and a movement away from hire purchase, but there are two reasons for that. First, in the case of personal loans the rate of interest is more visible and secondly, in most, if not all, the rate is more attractive. The question of protection is a matter for the Central Bank but I will certainly have a close look at the comments which have been made in the Dáil.
Would the Minister give the House an assurance that the consumer information order, to which he made such lengthy reference, will be put through before Christmas?
If the Whips are agreeable, we are ready to go.
There is no problem with the Whips.
While sharing the Minister's concern about the protection of the consumer, would he not agree it is nothing short of a scandal that the depositor is getting 4 per cent on deposits in banks while offshoots of banks are charging up to 40 per cent on hire purchase agreements?
I want to state once again that the Central Bank is the regulatory body——
(Interruptions.)
Certain procedures have to be followed. The Central Bank deals with interest rates.
I am proceeding to deal with Priority Questions.