Building Societies Bill, 1988: Committee Stage (Resumed).
SECTION 31.
Debate resumed on amendment No. 29:
In page 33, between lines 50 and 51, to insert the following subsection:
"(14) The draft of the regulations the Minister proposes making pursuant to this section shall be laid before each House of the Oireachtas by the Minister and the regulations shall not be made until a resolution approving the draft has been passed by each House.".
—(Deputy Shatter.)
Prior to lunch I referred to the fact that section 31 of this Bill would remove the monopoly which has been exercised by the solicitor's profession for many years in the area of conveyancing. This section would extend to building societies the power to carry out conveyancing, and in so doing amend the Solicitors Act, 1954. I also referred to the fact that a serious conflict of interest could arise when a solicitor acts for a building society while also acting for the purchaser of a property who is a borrower of loan finance from the building society. This section recognises that a serious conflict of interest could arise. Subsection (4) states that regulations made under this section may include provisions for: the protection of persons for whom conveyancing services are provided by societies from conflicts of interest that might otherwise arise in connection with the provision of the services; securing that adequate compensation is available to such persons in respect of negligence, fraud or other dishonesty on the part of officers or employees of societies in connection with the provision of the services; the extent to which and the manner in which such services would require the involvement of persons qualified to practice as solicitors and the qualifications and experience of personnel generally engaged in the provision of the services. In other words, it is envisaged that the building societies may use people other than qualified solicitors employed by the societies to carry out conveyancing works.
Regulations made under this section may also include provisions for the class or classes of persons to whom the services by the society in the area of conveyancing may be provided. I am not exactly sure what is meant by the "class or classes of persons." Perhaps the Minister might clarify this for us. Regulations may also include provisions for the restriction of the power to provide conveyancing services to property of a prescribed description. I do not know what property of a prescribed description the Minister has in mind or what restrictions he proposes to impose.
The subsection refers also to regulations as to the maximum rates or scales of fees, costs or expenses which may be charged by societies for the provision of services. In other words, the problem is that this section envisages extending to building societies a power to carry out conveyancing. It ends the monopoly exercised by the legal profession, a monopoly given to it for only one reason, that to carry out conveyancing you need a degree of legal expertise and solicitors were trained to carry out conveyancing. When the monopoly of the legal profession is attacked it is an attack on solicitors for exercising the degree of expertise they are trained to provide in the area of conveyancing. It is a bit like attacking doctors for having a monopoly on surgery in hospital theatres. I do not think anyone would suggest that someone other than a surgeon should be brought in to do the job. If you get it wrong as a surgeon it may have a more dramatic impact on the patient than the solicitor who gets it wrong in dealing with the conveyancing would have on the client.
We are talking about ending a monopoly of expertise and providing for building societies who do not necessarily have the expertise to provide conveyancing services. They will be empowered to employ persons other than lawyers to carry out conveyancing in circumstances where it is recognised that there may be a serious conflict of interest between the society and the purchaser. The conflict of interest of which I was giving an example when we went to lunch was that it may suit a building society to try to encourage borrowers to take out an endowment policy for the purposes of mortgage finance rather than a straight loan because a building society will get a substantial commission from the insurance company. It may be £400 or £500 — may be larger — depending on the extent of the loan. A building society may get a substantial commission for endowment policies which are not available to the building societies in the context of straight loan. The difficulty is that there is a conflict of interests. If the solicitor dealing with the conveyance is seeking additional legal documentation to give the building society extra security, who will advise the borrower, who has the same solicitor acting for him, that maybe the extra legal assurances that the building society's solicitor is seeking are not required? There can be a whole series of possible conflicts of interest.
In fairness to the Minister, he recognised that there can be conflicts of interest but he says that all this will be dealt with by way of regulation. Section 31 contains a skeletal provision which basically says that building societies can undertake conveyancing and the Minister will set out, by way of regulations, protections for the house purchaser and the consumer. There is no indication as to what the Minister will do about the scale of fees or anything else. Let us not forget that this provision has been advocated on the basis that it will result in a reduction in conveyancing costs. There is nothing in this to indicate that it will result in any reduction in conveyancing costs. It seems to be designed to redirect conveyancing fees from the legal profession — which may or may not be a good idea — to the building societies. That may not be a good idea either but I have not heard any rational argument as to why building societies should get conveyancing fees when they can provide untrained personnel to process conveyancing as opposed to members of the legal profession who can provide an objective and independent service.
This is far too serious a matter simply to be left to a regulatory power in the way the Minister envisages. The Minister proposes that he will subsequently publish regulations although he is not required to do so. In the context of conveyancing provisions it is the Minister for Justice as opposed to the Minister for the Environment who seems to be providing some regulations — the Minister for the Environment is involved in other areas. Perhaps this could be clarified. The Minister for Justice, after consultation with the Minister for the Environment, may make regulations authorising building societies to provide conveyancing services. It goes on to say that regulations under this section may include provision for the matter I referred to. This legislation was brought in by the Minister for the Environment to give the Minister for Justice enabling powers to confer authority on building societies to carry out conveyancing with safeguards that are envisaged by the Minister for the Environment but which are not expressly contained in the Bill. They are to be circulated and published by the Minister for Justice who may not, as far as we know, have directed his mind to the issue and may merely see it through the narrow confines of the Solicitors' Acts. All this can come into force without the House having to debate the issue.
My amendment is designed to ensure that before this section, which will have far reaching implications, becomes law, the draft of the regulations which the Minister for Justice proposes making pursuant to this section shall be laid before each House of the Oireachtas by the Minister and that the regulation shall not be made until a resolution approving the draft of the regulation has been passed. On this side of the House we want to see the substance of the protections it is proposed will be put in place to protect the consumer and the borrower of mortgage finance when building societies are carrying out conveyancing. We want to ensure that this section will not come into operation until after the regulations are made because it is quite clear that this section could be brought into operation by the Minister for Justice under subsection (1) without having to make any regulations under section 4 which is only a discretionary provision. It says that the Minister may make regulations, it does not say that he shall make regulations.
In the context of this section coming into operation we believe that this House should have a right to see the substance of the protections proposed. There should be provision in the Bill to ensure that the section does not become operative until the regulations have been put in place and there is no certainty at present that that will be the position. We have a degree of scepticism as to whether this provision will advance the position of the house purchaser one way or another. I recall some six or eight months ago when we had the much heralded Courts Bill before the House being told that abolishing juries in compensation claims would result in a reduction of awards made by the courts and a considerable reduction in insurance premiums paid by motorists. The Government have finally come clean and acknowledged that awards made by judges have not been reduced and insurance costs have not lessened. They now have another high-falutin, equally irrelevant, scheme to suggest another method of bringing down the cost of motor insurance. I know this has nothing to do with motor insurance, all I am saying is that it is popular to suggest that giving someone else powers to carry out conveyancing — in this instance building societies — will result in an automatic saving of money to the house purchaser. There is nothing in the section to indicate that that is the case. If the Minister intends under subsection (4) (g) to provide for maximum rates or scales of fees to ensure that the claims made for this section have some veracity it is only reasonable that the regulations are brought before this House for approval before the section becomes operative.
In regard to amendment No. 29, I do not consider it realistic to propose to clog up the Dáil procedure with discussions and votes on regulations. The regulations under this section, which will have to be made before any society can provide the services, will have to conform to the framework of the section itself and, of course, can only be made after the specified consultations have been concluded. In this instance, that means that the Minister for Justice will have to consult both the Minister for the Environment and the Central Bank. Furthermore, I would expect that the views of representative bodies of those with an interest in such regulations would also be obtained. We are amending the Solicitors Act, 1954, and we are talking about decisions that will be made by the Minister for Justice.
As far as I am concerned it is right and proper to deal with these matters in this Bill. I do not think that for the regulation to be made under this section would require a positive resolution. However, if it should transpire that a Dáil debate is warranted, then it will be open to any Deputy to raise the issue at the appropriate time and to put down a motion to annul the regulations when they are laid before the House, should that happen, but I do not think it will.
With regard to amendment No. 30, tabled by Deputy Shatter, I should like to state that having regard to the fact that a society will not be able to provide conveyancing services until regulations have been made by the Minister for Justice under section 31 and until the power to provide conveyancing services has been adopted by the society and its exercise approved by the Central Bank; and that the Minister for Justice, in making the regulations, and after the usual consultations with the various interested parties, can, if he considers it necessary, provide that the regulations will only come into force after a certain interval. I do not think that an amendment such as this is necessary. If an interval such as that envisaged in the amendment is considered necessary, and personally, at this stage I do not think it is necessary, then the most appropriate place to provide for it is in the regulations themselves.
If, in the course of drafting the regulations, it becomes clear that a three month or even longer interval of the type suggested is warranted for whatever reason, it will be open to the Minister for Justice to provide for it in the regulations.
With regard to amendment No.32, tabled by Deputy Shatter, I should like to state, as I have previously indicated, that I do not consider this approach to be the correct one to adopt. I should point out at this juncture that this provision differs from that in section 31 in that whereas conveyancing services cannot be provided until the appropriate regulations have been made, estate agency and other services relating to land can be provided without regulations, and indeed regulations would only be made if future circumstances so demanded. I would hope that it would be possible to deal with the issues in question by means of agreed voluntary codes of practice.
If, at the end of the day, regulations under this section have to be made they will not be able to go beyond the limits set in the provision itself and, of course, could only be made after the extensive consultations provided for in the section. Furthermore, I would expect that the views of those interested parties would be sought. I do not feel that any regulations that may be made under this section should require a positive resolution. However, in the event that any Deputy wishes to raise an issue at the relevant time and put down a motion to annul the regulations, then of course that is open to him.
With regard to amendment No. 33, in the name of Deputy Shatter, I should like to state that arguments similar to some of those I advanced in relation to amendment No. 30 apply here. That is, a society will not be able to exercise the powers available under section 32 until it has adopted the powers and secured Central Bank approval to exercise them and if regulations under section 32 should prove necessary, then the regulations themselves can provide for an interval before they come into force if that is then considered to be appropriate. In addition, however, and more importantly, the amendment if accepted would have the effect of actually requiring regulations to be made under section 32 whereas in fact the section as drafted does not require regulations to be made before the powers available under the section can be exercised.
The power of the Ministers for Justice and the Environment to make regulations under section 32 has been included as a contingency provision in the event that problems arise in the provision of auctioneering services and other services relating to land in relation to, for example, conflicts of interest. I believe, however, that adherence to the requirements of the Central Bank and the adoption of suitable codes of practice will be sufficient to prevent any problems arising. Nevertheless, I think it is reasonable to provide for the contingency regulation making power.
It is not true to say that building societies will not have people with some expertise and experience in these matters. They will have to use people with expertise in conveyancing and that is catered for in the famous section 36 referred to by Deputy Quinn. Without wishing to antagonise my colleagues on the Opposition benches, I should like to point out that some solicitors sell endowment mortgages and other services for which they are not too highly qualified. That is not a good reason for not having expertise available to the building societies and I am satisfied that they will be able to provide that. They will have to get permission from the Central Bank before they can offer those services and, under section 36, they can be obliged to show that they have bought in that experience and expertise.
I hope Deputy Shatter will understand why it is not possible to accept his amendment. I should like to ask him to be reasonable in regard to this. In my view, this should work out well for all concerned. It is interesting to note that solicitors are not prevented from acting for both sides in conveyancing. That may not be the recommended procedure and I have a feeling that the Incorporated Law Society would not recommend it, but it is not mandatory on them to do otherwise. In fact, solicitors do act for both sides in a conveyance.
The Minister should not have mentioned the word "solicitor".
Have I offended somebody?
The Minister has just brought in another solicitor.
We do not have as many monuments around the city as some architects have.
I met representatives of the Law Society to discuss these issues and we went a long way towards accommodating what they regarded as reasonable. I have to say that I found them very reasonable in those discussions. They did not ask that the regulations be positive and I do not see why that should be pursued in the House. I do not see any difficulty arising about the regulations. I cannot accept the amendment.
It is important that I should make it clear that I am not trying to defend the Law Society, the solicitors' profession or anybody else. My interest is in protecting the consumer and trying to ensure that the legislation works. I want to find out the protections the Minister envisages applying. This section may well satisfy some elements of the legal profession but I do not carry any card for solicitors who act for building societies and at the same time try to act for the purchaser. The Minister is aware that the Incorporated Law Society discourages that practice, not always successfully. The Minister has not added one scintilla of substance to the alleged protections these regulations will provide. I do not think any Member knows what protections will be put in place by virtue of section 4 (a) to (g).
It will be possible for the Minister for Justice under section 31 (i) to make an order bringing that section into force and to do no more than that. I want the Minister to spell out the substance of the protections that will be provided for in those regulations. That is the kernel of the issue. If one accepts that there is a conflict of interest, and the legislation by implication accepts that, one has to know how one can deal with that, but the regulations do not set out how one can deal with it.
There is an irony in all of this in that in 1982 it was the building societies who talked of a conflict of interest. It was they who made it clear that they did not like the suggestion put forward at that time that the solicitor employed by a purchaser should do the work of the building societies' solicitor. The report of the Restrictive Practices Commission inquiry into the effects on competition of the restrictions on conveyancing and the restrictions on advertising by solicitors of 1982 stated:
Where a purchase is financed by a lending institution, the work of the lender's solicitor largely overlaps that of the purchaser's solicitor, but the interests of the purchaser and lender can diverge and the lending institutions——
in this instance the building societies,
——maintain that it is necessary for them to employ their own solicitor.
Prior to 1986, not only were building societies employing their own solicitor, but they were forcing the purchaser to pay the legal fees they were incurring for the solicitor they were employing. That was banned under the 1986 Act and we now have the poacher trying to take over the job of the gamekeeper. The building societies, having said that it is not acceptable that a purchaser's solicitor should do their work, say that they would happily do the purchaser's work because they know their interests would be protected. That is good enough. I do not wish to be contentious but, with respect to the Minister, this is a serious issue. It is not about preserving the privileges of the legal profession or giving a new power to building societies: it is about ensuring that, first, the claims made for this section, which is that it will reduce the cost of conveyancing, have some substance to them and, second, it is about ensuring that protections are truly placed as regards conflict of interest. If these are not truly in place it will give rise to a great deal of litigation and create many problems in the whole conveyancing area in the future. I invited the Minister to indicate to the House — and I again invite him to do so — to state what these protections are to be.
The second matter is in regard to the regulations. It is not good enough to tell us that the Minister for Justice will consult with all the outside interests. I presume what he will do is look at each of the vested interests, weigh them up, give a bit to one and a bit to the other, and at the end of the day their mutual committees will be given a political pat on the head and sent away satisfied. It is the consumer, the house purchaser and the borrower, who is somewhere in the middle of that cosy arrangement who may find that the protections he requires are not in place. I am not interested in whether the committee of the Society of Building Societies or the Law Society are pleased with what is on offer. I want to ensure that there are proper protections in this Bill, and I do not think it is unreasonable for us to ask that the regulations in this very important area come before this House. Very often people's main purchase in life is their family home and if the transaction goes wrong or the protections are wrong, the people concerned may be affected for the rest of their lives. I do not see this as any less serious for the management of someone's family and their affairs than, for example, the provision in the Water Pollution Bill. The Minister was quite happy to include a provision in section 2(b) of the Water Pollution Bill which says:
Where it is proposed to make regulations under this subsection, a draft of the regulations shall be laid before each House of the Oireachtas and the regulations shall not be made until a resolution approving of the draft has been passed by each such House.
If it is appropriate to bring regulations under the Water Pollution Bill formally before this House for debate and approval before they become law. I fail to understand why regulations of even more far reaching importance in the context, not of solicitors and building societies but in the context of the purchases of homes, which are designed to provide protections against recognised conflicts of interest should not require a formal debate and approval in this House. The Minister well knows that the negative mechanism with regard to regulations does not work and I fail to understand why he cannot come along with us on this amendment. I fail to understand why the Minister opposed an earlier amendment to the Bill which required affirmation of regulations on the grounds that it would clog up the House it always had to approve regulations. If the Minister provides for this type of provision in the water pollution legislation why should the consumer, the house purchaser, the borrower, buying their family homes, not be entitled to the similar protections of this House and why should we in this House not be entitled to see what protections the Minister proposes putting in place, be it by him or his colleague, the Minister for Justice, before this section becomes operative?
I support the tenure of what Deputy Shatter is looking for in his amendment. The nature of conveyancing, because of the magnitude of the purchase which somebody contracts to buy, is of serious concern. It is obvious in a competitive mortgage market, to which the Minister referred earlier, that some mortgage houses, including building societies, will throw in as a loss leader free legal services. Obviously that is going to be there. I know the Minister will say that they will not be allowed to do so but I believe they will. There will be "hello" money and all sorts of other things involved. This will be a consideration and some people will be looking at this Bill not in regard to what it requires them to do but of how they will get around it, as they do with every Finance Bill.
The Minister is asking us to confer this power on building societies. The Labour Party and I fundamentally support this proposal. However, the Minister is saying he will not tell us in detail until the regulations are published how this power will be exercised. He is asking us to abide with him so as to allow him to publish the regulations and if we do not like them we can bring in a motion to annul them in the Oireachtas. I do not think that is sufficient in this instance. In response to what Deputy Shatter said, why is the Water Pollution Bill open, democratic and consultative but this Bill is different? I am not putting any adjectives on it, it is simply different. I suggest that this Bill was drafted by another section in the Custom House who have a different attitude to these matters. Perhaps that is one of the reasons it is different.
With regard to the amendment which requests the Minister to alter the provision whereby the regulations would have to be introduced into this House and approved, rather than be annulled — it is the positive rather than the negative approach — I suggest that the Minister would be well advised to take on board the proposal put forward by Deputy Shatter in this respect. We will not necessarily be calling a division on Committee Stage on this point but if there is not some constructive and positive response on Report Stage we will have to review our position. The Minister is changing very much the fundamental nature on which the conveyancing of residential property in the main could be effected in this country. It is right and proper for the protection of the consumer and the citizen, to whom Deputy Shatter referred, that this House would have sight of the regulations. It may very well be that if the regulations are satisfactory there will be no need for a debate in this House and they can go through by agreement. However, if it is appropriate for the Minister for Justice to come in here and discuss the regulations in relation to the selling of liquor in restaurants, I think it is appropriate for him to do so in relation to conveyancing. I urge the Minister to take on board the spirit of the amendment put forward by Deputy Shatter in this regard.
I want to make a couple of points. With regard to the principle of the changes that are proposed in the conveyancing arrangements, I have no problem. The essence of the present procedure is that it is unduly expensive and is already a duplication of work. There are some risks certainly but I think that on balance the public would welcome what is being given to them, which, as I understand it, is a choice. This is a point which has not been made. As I understand it, nobody is compelling anybody to use a specific solicitor proffered by a building society. If the purchaser of a property so wishes he or she can get their own solicitor. The main concern which is expressed to me is the high fees which are charged by legal interests in assisting people to purchase their homes. I have no doubt that if people have a choice they will opt to use a building society's solicitor. In the interests of keeping costs down, and accepting the reasonable integrity both of the building societies and most members of the legal profession, it is not courting disaster to suggest that this is a reasonable course of action for them to take.
Obviously the regulations which will follow are important in instituting safeguards but we should bear in mind that the initiative for the proposed arrangement, as I understand it, does not come from the building societies but may come as a result of an interdepartmental document entitled Discussion Document on Legislative And Regulatory Arrangements In Relation To Building Societies which was published in April 1986. Paragraph 5.14 of that document specifically refers to this situation and states:
The situation concerning conveyancing is unsatisfactory. At present three solicitors i.e. for the vendor, the purchaser and the society are involved in the typical building society loan transaction, and typically, three scale fees are charged. While the building societies feel that they need to have legal representation in the transfer of title to protect the interests of their depositors, the duplication of work as between the purchaser's solicitor and that of the society is very wasteful.
The document goes on at some length to suggest that some modification of that unnecessary duplication is desirable.
So far as I can ascertain what is being proffered here is greater choice, more efficient and speedier resolution of questions of title and cheaper house purchase. If someone does not want that, they can go the traditional way. That is not unreasonable. I have no doubt the reason that has emerged in this fashion is the cost of solicitors' fees over the years.
The regulations are fairly essential in this case. I do not believe it is necessary to go as far as having the Dáil vote on regulations. If they are published and found to be unsatisfactory by any Member or any party here they should have no problem — particularly within the present political logistical arrangements — of bringing an appropriate measure before this House to give the issue centre stage. In the meantime, it seems to me that the move essentiallly is progressive, affords people greater choice and makes for cheaper, and hopefully, more efficient purchase.
Deputy Keating is somewhat out of date in the point he was making about three firms of solicitors being involved and three sets of fees. Probably he will recollect that, under the previous Government, when we were both backbenchers, legislation was introduced whereby, henceforth on the production of a certificate, there will now be no third solicitor involved.
I was quoting the discussion document of 1986.
I am sorry, I thought the Deputy was saying that was now the position because the situation has changed since then.
I contend there are grave dangers enshrined in the provisions of this Bill. Indeed, the Minister is on record as stating that he had some reservations about the way property values are going, particulary in the capital but throughout the country, in that house prices are rising at an alarmingly rapid rate. The circumstances evolving mean that a boyfriend and girlfriend planning on marrying, trying to buy a house, irrespect of their savings, their incomes — let us assume they are in the middle income bracket — will experience grave difficulties in house purchase. Even taking their combined salaries into account current house prices in Dublin will mean that, on their paying, say, £50,000 or £60,000 for a house in Dublin they would hardly be able to go out for a drink on a Saturday evening on account of the amount they will have to repay on their borrowings in order to purchase their home. It is alarming and the Minister is as aware of it as I and others in this House.
Indeed, these circumstances are evolving at a time when there is little or no house building being undertaken by local authorities nationwide. I predict there will be a serious housing crisis in this city. I say to the Minister that, frankly, he is making a bad situation worse with this Bill. I will explain why I put it in that manner to the Minister. We have seen circumstances develop nationwide of large numbers of supermarkets taking complete control of the grocery trade.
Mind you, the Minister was pretty good on this side of the House when he had to do a filibuster job himself.
If somebody could tell me the reason I would be happy to accept.
On a point of order, I want to ask — and I do not mean any disrespect to Deputy Enright who is entitled to comment — how relevant is this contribution? It is a very large Bill and we are endeavouring to make some progress. With respect, the Deputy's remarks are very wide of the mark. Of course, that is the job of the Chair, not mine.
With the greatest respect to Deputy Keating, I should say that his problem in life always has been that he could talk but was not good at listening. Perhaps on this occasion he could listen rather than talk.
I did listen and I find that the Deputy's remarks are wide of the mark.
If the Deputy would allow me the courtesy of listening, he might discover something whereas if he continues to interrupt——
I listened all day when the Deputy was elsewhere.
I have been in the House all day. If the Deputy wants to examine the record he will see that I am on record much more than he.
Deputy Enright, that has nothing to do with the amendment before the House.
Taking the provisions of section 21 in conjunction with those of sections 31 and 32 I predict we are heading into a position in which there will be a complete monopoly of land and development, auctioneering and conveyancing services by building societies. Henceforth the danger will be that building societies will be in a position to purchase and develop land, build houses, auction houses and, on having auctioned houses, can carry out the conveyancing, provide the necessary finance and insurance, etc. Putting all those services into the one basket constitutes a grave danger as I see it.
It is my belief that the powers being given to building societies are much too extensive. If this Bill is passed in its present form I predict we will live to regret it. I predict that building societies will have total control of a major portion of lands and housing here, that is, owned totally and controlled by them. I do not think that will be good. Not alone will they have total control but I predict that independent advice will have gone out the window. That is a very real danger. It is not good enough that a building society can buy land on which they build a house, sell that house, carry out the conveyancing, provide the finance and insurance as well, all of those transactions being carried out by the one entity, but building societies will have a vested interest in increasing their revenue and profits. The inherent danger will be that Seán Citizen will be the poorer and, in the long-term, the sufferer.
I would earnestly ask the Minister to reconsider the position vis-à-vis the conveyancing services. For example, if he wanted to improve things somewhat there are a number of options open to him. First, the Conveyancing Acts could be scrutinised. Delays in the Land Registry cause people endless trouble with regard to bridging finance and obtaining loans.
Is the Chair asleep? Is the Chair paying any attention to this debate? This is a Second Stage contribution and you should interject to say that. We are on a particular section and amendment, and that is a Second Stage contribution.
Acting Chairman
Deputy Keating, I will decide that.
As long as you adjudicate or take some decision I am happy rather than abdicating totally from your responsibilities, which is what you have done.
Acting Chairman
I do not think the Deputy is entitled to make that comment.
I have to make the comment because somebody should say so.
Acting Chairman
It is obvious there is some conflict between Deputy Keating and Deputy Enright. Would Deputy Enright please continue.
There is no conflict at all. You have ears to hear the debate and know what is taking place. You should be the person who takes the decision but you decided simply to let it run.
To revert to what I was saying——
I hardly think that was the idea.
I was just trying to be helpful.
The temperature in this House is rising rapidly.
It must be the hot weather outside and or the political climate.
I should like the Minister to consider how the position could be improved, particularly in regard to the Land Registry and the delays occasioned there which are causing people many problems.
It is my firm belief that the proposals contained in Deputy Shatter's amendment are wise and necessary — that the regulations he proposes be fully and properly scrutinised by this House. It would be essential that this House would pass judgment on them. I refer now to the services of solicitors and auctioneers. I am referring specifically to the regulations in regard to conveyancing because they cover such a wide area. It is most important that they be examined. As Deputy Shatter's amendment says:
The draft of the regulations the Minister proposes making pursuant to this section shall be laid before each House of the Oireachtas by the Minister and the regulations shall not be made until a resolution approving the draft has been passed by each House.
It is essential that they be approved by each House. Fundamental changes are being made here and the repercussions will be felt for a long period. I am sure the Minister for the Environment would like to ensure that the legislation he is bringing in today would be properly looked at. We would all be failing in our duty if those draft regulations were not passed by this House. It is in the interest of the consumer that they be discussed and passed by the House. If that is not done I envisage a serious situation developing in the years to come.
I should like to say to Deputy Enright that the Minister for Justice is answerable to the House for all matters related to his brief and to regulations made by the Minister as well. I agree with Deputy Enright that this is fundamental and important legislation. I would also like Deputy Enright to recognise that the Bill is full of controls. I would refer him to section 35 where he will get a good idea — and it is specifically stated — why a building society cannot offer or make a housing loan to a person subject to a condition in regard to any other services that it is providing. That is the kind of fundamental control that is there and the Deputy has not recognised that, regrettably, at this stage.
Deputy Keating is correct in saying that the purchasers do have a question of choice. He is also right when he states that considerable unease was expressed by a number of people and by Members of the House over the years about fees and delays and all those matters to which he referred. There has been some improvement in that regard. Deputy Enright accepted that there was some improvement in that area. To my knowledge there is evidence to suggest that solicitors are providing better and more reasonable services. Much of that has come in advance of this legislation being passed but may be contingent on it. I am pleased with that.
I have dealt very carefully with the question of the conflict of interest. The legislation is framed in such a way as to ensure that these matters do not arise and particularly in subsection (4) to which Deputy Shatter referred. Before I deal with that, let me refer to the specific matter referred to by Deputy Quinn in relation to loss leaders. That is written specifically into subsection (12), which adequately covers the important matter referred to by the Deputy.
Subsection (4) outlines some of the areas which the regulations to be made under subsection (1) might cover. This list is certainly not exhaustive or compulsory but it serves as a guideline to explain the thrust of the section as a whole in that regard. I would like to refer to a few of the eight guidelines that are considered individually in that area and to which Deputy Shatter was anxious that I refer.
Under paragraph (a) of subsection (4) in addition to subsection (3) the regulations may identify other possible conflicts of interest and provide accordingly, for example, where a society has an arrangement with another person for the introduction of clients to or by the society. That would be covered under the regulations. Under paragraph (b) people who currently employ solicitors to do their conveyancing enjoy the protection of the Incorporated Law Society's compensation fund. In addition, most solicitors now have professional indemnity insurance. In fact, it may be mandatory on them at this stage. Certainly, it was heading in that direction a couple of years ago. The regulations will certainly be making some provision in this area such as requiring a society to provide indemnity insurance or a bond, perhaps, guaranteed by an insurance company.
Under paragraph (c) the regulations will also stipulate that a certain percentage of the staff engaged in providing the service be qualified solicitors and that qualified people would oversee the operation generally. Deputy Shatter was concerned about that and it is reasonable to state that to him as an undertaking, or an understanding, of what the regulations will deal with. The regulations might otherwise lay down qualifications of personnel involved generally. This provision is necessary to ensure that a high standard of conveyancing is maintained, and we all accept the need for that.
Under paragraph (d) it is possible that the regulations would preclude societies from providing conveyancing services to certain classes of persons, for example, owners of commercial property or corporate persons. This is included as a contingency provision. At this stage I would not see the initial regulations confining the service in any way.
Under paragraph (e) the regulations might also restrict the power to the provision of services of a prescribed description, for example, residential property. Again, this is a contingency provision which I do not envisage being involved in the initial regulations. Under paragraph (f) it may be necessary to restrict conveyancing to societies of a certain size, for example, by reference to total assets. Small societies may not be in a position to generate the volume of business required or have the financial resources to employ sufficient numbers of qualified staff. The qualifying limit, if any, has not been decided yet but will have to be considered before the regulations are made.
Under paragraph (g) the regulations might give the Minister for Justice power to prescribe scales of fees, charges etc. for conveyancing services in the case of societies while recognising that solicitors fees are already governed by Statutory Instruments. All in all those are some examples which Deputy Shatter was anxious to know about. They are not exhaustive by any means and after consultation it may be necessary for the Minister for Justice to go further than that or even to be more restrictive. They give an indication of what I would expect to be catered for in the regulations. In relation to the question of bringing them in here I must conclude that Deputy Keating's point is made for me in that regard. I do not see it as necessary to have all these matters dealt with in that way.
Sincerely, that is a mistake. I would ask the Minister to reconsider it on Report Stage.
Let us move on. I am not accepting it.
I welcome Deputy Quinn's support on this amendment. In a nutshell he is right in saying that the Minister is making a mistake. I asked the Minister to outline, in general terms, what sort of things he envisaged arising under section 4 because of the complexity of the different possibilities things that could arise and the different options that the Minister for Justice may have regarding whether he excludes different types of conveyancing or the extent to which the service may or may not be restricted. The Minister for Justice might have to lay down scales of fees. It seems to me that what we are proposing is a fundamental change, the beneficial effects of which I am extremely sceptical of. Nevertheless, if we take it on its face value and take it that it can contribute to the lowering of costs — in the long term I do not believe it will — it seems to me that where there is a recognised conflict of interest the regulations which would have to be made here are sufficiently serious to warrant consideration by this House prior to their being approved. Regulations made, subject to a negative resolution, becomes law automatically 21 days from its being laid before this House. Deputy Keating is of the view that because of the current political make-up of the House that is not necessarily important. This Building Societies Act may be with us for decades and the current political make-up of this House may be an irrelevancy to the period during which it operates. I think the Minister is making a mistake.
This amendment is proposed as a constructive amendment. It is not proposed to get the Minister offside, there is no hidden political motive behind it; it is merely there to ensure that this House can act as a legislator. If the Minister, as a legislator, had additional subsections in this Bill spelling out the details of these protections it would not be necessary for regulations of this nature to be made and it would not be necessary for them to be approved by this House. In the absence of the Minister being willing to either accept the amendment, or even say that he will give it consideration on this side of Report Stage, I personally do not care whether this is an amendment the Law Society was not seeking or whether it is an amendment that the building societies were not seeking. Our job is to protect the people for whom this legislation is designed to provide protection and a better service. Our job is not to protect the vested interests of building societies or solicitors or lawyers. I am not satisfied with the Ministers response on this. It is quite clear that the Minister has no clear idea yet as to the final detail that will be included in these regulations. He has very fairly listed for us a number of possibilities and said that some may be included and some not.
I do not know the thinking of the Minister for Justice and ultimately it is the present Minister's colleague in the Department of Justice who will make that decision. The Minister for Justice is not present today to indicate his thinking on this. The Minister for the Environment has suggested that reforms of the Solicitors Acts may impinge on this area also. It is a very unsatisfactory way to deal with a fundamental change in our legal system which goes back centuries.
I am all for reforming our system, but this House should know the nature of the legislation it is enacting. I do not believe we know it in the context of our passing this provision. In the circumstances, I have no choice buT to move amendment No. 29 unless the Minister wishes to indicate to us that he will give consideration to it on Report Stage.
When this matter is discussed by this House at some future date, this amendment should be accepted. It is reasonable and straightforward. The different types of safeguards that will be included can be set out in those regulations. As Deputy Shatter has rightly said, the structure of the whole process will be changed by this Bill. We must have concern for all sides. However, the main concern of this House must be for the ordinary individual, the ordinary husband and wife. The family home is the most important possession of any family. Building societies are huge institutions and the ordinary person can feel intimidated by them. They are told to sign here and sign there and on occasion, many have not a clue what they are signing.
As the Minister has outlined, there will be a ratio of qualified solicitors in these building societies. In the city of Dublin and right across the country, people have been used to going to the family solicitor to discuss these matters and the loss of this advice, coupled with having to deal with a large institution, brings a very real danger. The change that we are looking for does not affect this Bill to any real extent. It is a small enough change. It proposes that the draft regulations should be brought before this House and passed by it and it is important that that should be done.
I do not know whether it is the Minister himself, or his Department, or the Government, who is responsible for rejecting this amendment. If the Minister turns down this amendment he will be proceeding into the unknown, where there is a very real danger. He knows the situation with regard to problems relating to family homes. The existing safeguards will be reduced. We have seen the problems of farmers and private home owners who have run into difficulties, are unable to pay their debts and have had their family homes sold over their heads. We have all read about such cases in the Sunday newspapers. That bad situation can be further aggravated by not including some safeguards and not providing independent advice. Whether it is a wife signing away her rights, or a husband, or both, there is a very real danger when they do not have an independent person advising them.
The Minister may say that I speak on behalf of the solicitor's profession, but I am speaking here as a public representative and as somebody who has seen these problems first hand. I have seen the hardships experienced, going back quite a number of years. We must try to avoid making an already bad situation worse with people buying houses they will not be able to pay over the years. A building society may make an error of judgement, but the house is there for that society to repossess. There is nowhere for the private person to go. Solicitors and auctioneers may be friendly, meet people socially on a regular basis, and they can advise somebody against a certain purchase. We are flashing a red light at the Minister here today and he should be wise enough to stop.
I can tell Deputy Quinn that I want this procedure to happen. That encompasses much wisdom. I am taking precautionary measures to make sure it does happen. I am satisfied that the Minister for Justice has enough experience and expertise available so far as conveyancing procedures and matters of family law protection are concerned to make the right regulations in this regard. If the situation arose where an accumulation of these regulations required the Minister for Justice to be returning to the House with every single one of them, it would be just as simple to have new legislation in a new format. It is not going to happen and consequently I cannot accept that it is necessary to do as Deputy Quinn wishes. The details are for the Minister for Justice and I am satisfied that it will be properly done.
Listening to some of the contributions, one would imagine that somehow things can be slipped through to the disadvantage, or detriment, of either side in this matter. I do not accept that. When regulations are made, if somebody wishes to change them, and they are worth changing, the facility is available to them rather than the alternative method virtually of bringing in amending legislation every time this is attempted. I cannot accept the amendment, I am sorry.
Amendment put.
The Committee divided: Tá, 42; Níl, 66.
Tá
- Barrett, Seán.
- Boylan, Andrew.
- Bruton, John.
- Bruton, Richard.
- Carey, Donal.
- Connaughton, Paul.
- Cosgrave, Michael Joe.
- Creed, Donal.
- Crowley, Frank.
- Deasy, Austin.
- De Rossa, Proinsias.
- Doyle, Avril.
- Dukes, Alan.
- Enright, Thomas.
- Farrelly, John V.
- Flaherty, Mary.
- Flanagan, Charles.
- Griffin, Brendan.
- Hegarty, Paddy.
- Higgins, Jim.
- Howlin, Brendan.
- Kavanagh, Liam.
- Kemmy, Jim.
- Kenny, Enda.
- Lowry, Michael.
- McCartan, Pat.
- McGahon, Brendan.
- McGinley, Dinny.
- Mitchell, Jim.
- Naughten, Liam.
- Noonan, Michael. (Limerick East).
- O'Brien, Fergus.
- O'Keeffe, Jim.
- O'Sullivan, Toddy.
- Pattision, Séamus.
- Quinn, Ruairí.
- Shatter, Alan.
- Sheehan, P.J.
- Spring, Dick.
- Stagg, Emmet.
- Taylor-Quinn, Madeleine.
- Yates, Ivan.
Níl
- Abbott, Henry.
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Vincent.
- Brennan, Matthew.
- Brennan, Séamus.
- Browne, John.
- Burke, Ray.
- Byrne, Hugh.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Mary T.
- Daly, Brendan.
- Davern, Noel.
- Dempsey, Noel.
- Dennehy, John.
- Ellis, John.
- Fahey, Frank.
- Fitzgerald, Liam.
- Fitzpatrick, Dermott.
- Flood, Chris.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat the Cope.
- Geoghegan-Quinn, Máire.
- Hilliard, Colm Michael.
- Hyland, Liam.
- Jacob, Joe.
- Kitt, Michael P.
- Kitt, Tom.
- Lawlor, Liam.
- Leonard, Jimmy.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- Mooney, Mary.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West).
- O'Dea, William Gerard.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- O'Keeffe, Ned.
- O'Leary, John.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Roche, Dick.
- Smith, Michael.
- Stafford, John.
- Swift, Brian.
- Tunney, Jim.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
- Wright, G.V.
Tellers: Tá, Deputies J. Higgins and Boylan; Níl, Deputies V. Brady and D. Ahern.
Amendment declared lost.
Amendment No. 30 not moved.
Question proposed: "That section 31, as amended, stand part of the Bill."
Subsection (12) of section 31 is designed to ensure that building societies do not use conveyancing as a loss leader. If they did, instead of providing increased competition in this area, they would in a short time bring to an end the conveyancing services being offered by the legal profession and leave two or three large building societies in a monopoly position.
The Minister might comment on how the accounting operation will work in practice as opposed to theory. Building societies currently invest large sums of money on advertising their interest rates and their loan opportunities. These advertisements do not always accurately portray the position to the ordinary person in the street who does not always understand the nuances of advertising on a two-year basis for gross sums of net sums, with or without the deduction of tax. What will be the position of the building society who decide to take over a major chunk of the conveyancing market and, while advertising their lending services, ensure that a portion of the advertisement reveals the wonderfully efficient conveyancing services they will provide? In the context of building societies having far more money available by way of resources to advertise in this way, how will we work out what portion of this advertisement is a cost relating to conveyancing or a cost relating to new loans? The Minister might shed some light on this.
The Minister might also clarify a matter which has been of some puzzlement thoughout the debate today. He has deployed one of two types of argument when particular issues have been raised. The argument he has deployed to oppose some amendments is that he wants to provide an even playing pitch, allowing building societies and banks to compete from a position of equality. He has used that argument to object to certain amendments. Speaking on other amendments he has said that building societies have a unique role to play in providing housing finance and this is why this Bill provides this or that provision. Which of those two arguments does the Minister deploy in explaining why in this legislation he extends to building societies the power to carry out conveyancing when his colleague in Government, the Minister for Finance, has not extended a similar facility to banks? The Bank of Ireland will be all right because they have the ICS as their building society. I could understand why that bank would raise no objections in this area. It may be that AIB and other major banks do not see conveyancing as any great advantage to them and are hoping the building societies will trip themselves up by getting into this area. On the basis of the even playing field argument, one would have expected that if the exception was to be made to the controls imposed by the Solicitors Act, 1954 by allowing building societies to carry out conveyancing, the banks would be given a similar power. The Minister might explain why building societies should get preferential treatment in this area and why the banks should be treated differently.
The short answer is that we are not dealing with banks in this legislation.
We are dealing with a matter of Government policy.
I do not know why this has been raised. It is not relevant. The section gives the Minister for Justice powers to make regulations enabling building societies to provide conveyancing services. As the societies have been heavily involved in the purchase and sale of houses throughout the years, it is only logical that any consideration of the extension of their powers should include giving societies the opportunity to provide legal services associated with those transactions. Although I recognised that there might be some risks in allowing societies to provide conveyancing services, the Government came to the view that those risks could be minimised and that on balance the societies should be allowed to compete in that area. However, the section contains very important safeguards because it was recognised that we would have to be careful since it was such a big change.
The safeguards are aimed at ensuring that the public is protected from any conflicts of interest that might otherwise arise and that adequate compensation will be available against negligence, dishonesty or anything of that nature and that the standard of conveyancing does not suffer. That is inherent in the whole thrust of that legislation. It does not directly confer on societies the power but it sets the framework within which the regulations to be drawn up by the Minister for Justice will operate. I am satisfied that the Minister for Justice has all that expertise available to him to enable him to make regulations that will deal adequately with this.
In addition, the Minister for Justice, the Central Bank and the Minister for the Environment will have consultative roles in the formulation of the regulations and the bank will have the ongoing supervisory function, as with all the power exercised generally by societies.
In regard to the conflicts of interest, the society is absolutely prohibited from acting for both parties to a transaction while the regulations to be drawn up may provide further prohibitions in that regard as well.
The question of loss leading and other unfair practices was referred to. The section makes specific provisions for keeping separate accounts relating to the provision of conveyancing and the requirement that such services are not to be provided on a loss making basis, and that was a genuine fear.
How long is a piece of string?
It depends on how big a ball of string one buys. I am selling a very small ball of string.
The Minister is kicking the ball around somewhat.
Because it is such a short piece of string, the controls are everywhere. The building in of controls took the longest time when framing this legislation. It was easy enough to write what one wanted to allow the societies to do. The difficulty arose in making sure to provide sufficient protection for the consumer and for the societies themselves. Protection for the societies is what exercised me initially because once they were protected against making mistakes and taking risks in areas where they do not have the experience or expertise, we were in fact ensuring the consumers' interest as well. Taking all that into consideration, we have it right.
I support what the Minister is saying and I think the provision in subsection (12) is necessary; but I would not hold my breath in relation to ensuring there will not be some degree of cross subsidisation of conveyancing services. That is the point I am making. In the framework of enabling building societies to go from a one product operation to a multi-product operation, it is to be assumed that there will be benefits of efficiency and cost effectiveness that, in the natural run of things, will be offered to the customer on the open market.
Would the Deputy accept that, with the two directors signing it and it being a part of the published accounts, there is an extra safeguard in subsection (12) (b)?
I would accept that the drafters of this Bill have done everything reasonable to guard against unnecessary loss leading subvention, but we should not be so naive as to think that these things will not happen.
The Minister gave me a very brief reply when I asked why we are giving this power to building societies but not to banks. He said we are not dealing with a banking Bill. Deputy Keating seemed to regard this as something of a revelation in the sense that he thought this was an obvious reason; but the Minister is part of the Government and the Government have made a policy decision to provide building societies with a level playing field vis-à-vis the banks. The Government have then gone on to give building societies what are perceived to be advantages that the banks do not have by extending to the building societies powers to carry out conveyancing.
Is it part of Government policy to extend similar powers to the banks? If that is the case, why was it not in the Central Bank Act? At an earlier stage the Minister tried to indicate that the need to provide a level playing field was the philosophy behind this Bill. Indeed, it is a philosophy that we support. I do not understand whether or not it is Government policy that financial institutions other than building societies will be extended the power to carry out conveyancing.
The short answer is it is Government policy to allow building societies to get involved in this service.
That is a matter for somebody else at some other time. It is really not relevant here. The Deputy has options in that regard which I do not need to spell out.
It is another piecemeal approach to another important issue.
We are dealing with building societies.
Question put and agreed to.
SECTION 32.
Amendment No. 31 in the name of the Minister was discussed with amendment No. 27.
I move amendment No. 31:
In page 35, subsection (5) (b), line 21, to delete "executive," and substitute "executive and".
Amendment agreed to.
Amendment No. 32 in the name of Deputy Alan Shatter was discussed with amendment No. 29.
I move amendment No. 32:
In page 35, between lines 32 and 33, to insert the following subsection:
"(7) A draft of the regulations proposed to be made by the Minister for Justice or the Minister under this section shall be laid before each House of the Oireachtas by the relevant Minister and such regulations shall not be made until a resolution approving the draft has been passed by each such House.".
Amendment put and declared lost.
Amendment No. 33 was discussed with amendment No. 29.
Amendment No. 33 not moved.
Question proposed: "That section 32, as amended, stand part of the Bill".
In the absence of auctioneers I think I should say something. At the bottom of page 34, section 32 (4) it says that no employee of a society, a subsidiary or other associated body of which provides services under this section, shall act as agent etc. Am I to understand it that the current practice whereby some directors of building societies can also act as estate agents and auctioneers for building societies will now be barred as a consequence of the coming into power of this provision?
Subsection (4) provides that an employee of a society may not act as an agent for a subsidiary of a society that provides services under this section. This is a necessary safeguard to prevent the blurring of lines and confusion in the public mind in relation to the provision of the services. For example, a society may be required to provide services under the section through a subsidiary as a means of minimising conflict of interest situations, so it is necessary to ensure that employees of societies do not dilute the effect of the requirement by actively working as agents for the subsidiary. The subsection does not prevent the society from acting as agent for the subsidiary. There is no such prohibition on agency law.
Maybe it is a question of definition and the interpretation section may answer my question. Is the director of a society considered to be an employee for the purposes of law?
No, not in so far as it applies to this Bill.
Question put and agreed to.
Sections 33 and 34 agreed to.
SECTION 35.
Question proposed: "That section 35 stand part of the Bill."
The Minister referred to section 35 and to the prohibition on the linking of services on earlier occasions. Could he clarify how this section will be policed in the context of conveyancing? A building society may say that their making a loan available to a person does not depend on him availing of their conveyancing services, but that they will make the loan available a lot quicker if the person uses their solicitor rather than an independent solicitor. In the way of the world, when a building society is trying to establish a niche in the conveyancing market, there is a very real possibility that such a development could take place. The offer is not conditional although someone may know implicitly that he will be on bridging finance for much longer if he does not use the building society's solicitor. Will the Minister explain how this section will be policed to ensure that a fair service is provided on all sides?
There is a grey area here as there is in everything. One can only go so far in framing legislation giving protection. If something that was not intended happens we must accept that it is not possible to cater for everything. This is a new provision seeking to prevent possible abuses of their position by societies in the housing mortgage market through practices like requiring persons obtaining loans to use the other services provided by the society, such as auctioneering, conveyancing or financial services. The section does not prohibit the societies from advertising the availability of a range of services. It prohibits them from making it a condition of a loan that a borrower must use, for example, conveyancing services provided by the society. The section does not prohibit the building society from making an offer of a loan, other than a housing loan, on condition that the borrower would use the services provided by the society or a subsidiary. This provision is confined to housing loans because that is the sector of lending in which building societies would be in a position to abuse their power.
Does the Minister accept that this is an infirmity in this whole thing? On section 31, I talked about the need to have protections in place. If it is now accepted that a building society may use their monopoly position in the housing market to indicate that one will only get efficiently processed mortgages if one uses their services, the consumer may benefit in the short term, but there is a very real danger that the building societies will create a monopoly in conveyancing and operate a far more restrictive practice with a good deal less competition than there is now with solicitors operating conveyancing on a monopoly basis. At least, now one has a choice between 3,000 different solicitors. I want the Minister to consider my constructive suggestions for Report Stage. In later sections of the Bill which I will not address now the Minister has introduced certain mechanisms which could be regarded as consumer protection provisions. The only way to ensure that building societies do not abuse the new powers they have been given so that within a few years they can operate a monopoly charging uncompetitive fees, is to appoint some form of building society ombudsman to whom an agreed person could complain. This person would not play the role of the Central Bank or of the Minister. A person who felt unduly pressurised by building societies to take up some of these other services on offer, but refused, the offer and subsequently discovered that things had gone unaccountably wrong, could register a complaint and the ombudsman would have a role which could be played by either a Government Minister or the Central Bank, in protecting the consumer. In the light of difficulties that people have had with building societies over the years it might be a breath of fresh air to appoint a building society ombudsman who could play a role in dealing with the type of problem to which I have referred, which the Minister fairly admits is a grey area, which the Bill does not provide for in its substantive provisions?
I am inclined to the view that no such institution as a building society ombudsman could operate efficiently unless the law is there. An ombudsman would be helpless unless he could function within certain legal parameters, obtaining legal entitlements for individuals. If there is a weakness in the law, it should be dealt with at that level and not by appointing an ombudsman who would not be effective in pursuing rights which were not secured in law.
There is certainly a need for protection if what the Minister has said is true. Will the Minister say whether section 35 (2) deals with the problem raised by Deputy Shatter? My understanding of subsection (2), which could be wrong, is that if a society offers services, they must do so without any qualifications other than the reference to price so that if a building society suggested — as Deputy Shatter said — that they would offer a more speedily available loan if a person used their solicitor, it would be illegal.
Where then is the grey area? From what I read in section 35 (2) the building societies are entitled to refer only to the cost of the service and any other qualification such as that referred to by Deputy Shatter would be illegal. Would subsection (2) not deal with the problem?
It would. I may have misled the Deputy in relation to a grey area: it was not, in so far as that section was concerned. That problem is very adequately dealt with in subsection (2). A grey area could occur where there is a new provision. Deputies know how, in new provisions, one tries to build in as many controls as one can. There is always the possibility that someone will find a way around it. That is why amending legislation comes before this House on a regular basis.
It is interesting that subsection (2) has been referred to. That subsection specifically would prohibit a society or a subsidiary body from lumping the fees for the services provided together. They may be required to itemise the charges for each service provided. This provision has been included to ensure the fees are made transparent and to inhibit societies from engaging in anti-competitive practices, such as concealing the real cost of the different services they provide to the public. In response to Deputy Shatter, I do not see how the building societies would be in a monopoly. I do not see this happening. In fact the Deputy conceded this point. Solicitors have a long tradition in conveyancing and I do not see this changing very dramatically over the years. I knew that a question would be asked on how complaints would be dealt with. I can tell the House that this matter is very effectively dealt with in section 92. I think it contains a good provision. This is a better approach than setting up any new agencies or establishing new procedures. Section 92 would give the Central Bank and the complaints committee a role to play. This is a good safeguard.
Question put and agreed to.
SECTION 36.
I move amendment No. 34:
In page 36, subsection (3), lines 35 and 36, to delete paragraph (b) and subsitute the following:
"(b) the reasons for the adoption of each power, and".
Amendment agreed to.
Amendment No. 35 not moved.
Question proposed: "That section 36, as amended, stand part of the Bill."
I would like the Minister to clarify a number of matters for me. I indicated earlier that I would be raising these. This is a substantial and very important section and I seek clarification either now or perhaps on Report Stage, whichever is covenient. Many of the new powers to be conveyed on building societies would be subject to this section. For example, they would have the legal authority to engage in the holding and developing of land and all of the new areas, such as financial services, conveyancing, auctioneering, investments in support of bodies corporate and so on. The Central Bank would have a role to play in monitoring and controlling these activities. Each society would have to make a special resolution if they decide to avail of either one or all of these powers.
My first question is this: will the response of the Central Bank be a general or a specific one? I said before that building societies should live up to their name and should not become banking societies which many of their current managements wish them to become. If building societies get into the business of holding and developing land in a substantial way would they first have to obtain the general consent of the Central Bank or would they have to obtain the consent of the Central Bank on an item by item basis? In other words, each time a building society wishes to participate in a property development, would they have to obtain the sanction of the Central Bank or would they be able to obtain general sanction?
My second question is in connection with subsection (11) (g). I would like the Minister to tell us what his intentions are in including this provision. Do I take it that subsection 11 (i) has been included to avoid, to use shorthand the House would understand, some of the problems which emerged consequent to the PMPA or ICI debacles? What we are looking for is for the Central Bank, acting on behalf of the Legislature, to ensure that notwithstanding the best and benign intentions of a building society they do get out of their depth.
I would like the Minister to tell us how the drafters of this legislation envisage section 36 functioning. I have my own impression as to how it would function but I would like the Minister to tell us how he would see it functioning. As I said, it is the gearbox for the new engine of powers the building societies would have.
Earlier Deputy Quinn was gracious enough to indicate that he would be raising these matters. He wishes to know the way in which the Central Bank would discharge their functions under section 36. Under this section they would have a dual role to play. The first aspect of their role would involve the regulation of societies in that the bank would be concerned to see that the procedures outlined in the special resolution and so on were adhered to correctly and that the consequent alterations to the memorandum were registered. That is an important point. The second aspect of their role would involve the prudential supervision of societies. In this respect the Central Bank have been afforded quite a considerable degree of flexibility for the very reasons the Deputy mentioned.
Subsections (10) and (11) provide that approval to exercise any power may be given subject to conditions. A lengthy list of conditions is included in subsection (11) as the Deputy is aware. These include the power to impose a condition that a society seek particular approval for particular investments. This may be necessary in certain circumstances, particularly where the regulatory authority would say "be careful". Specific approval would be required before a specific job of work could be undertaken. This is wise. On the other hand, subsection (5) would enable the bank to give blanket approval subject to general conditions. Both provisions would be in place and they could exercise either. I think it is important that there be flexibility. This is a good control and safeguard to apply in the initial stages. Obviously, as time goes on it may not be applied as consistently.
I thank the Minister for his reply. What I am trying to find out is whether the Minister is satisfied that the Central Bank would have the necessary qualifications to exercise this function. They did not have them when we came to a bank which shall remain nameless. Perhaps we are that much wiser now and the bank in question which is highly regarded in financial circles will respond. I hope they take on extra staff. It may well be that Part IV of the Bill, relating to the control and supervision of the building societies by the Central Bank, covers this but my real fear is for the consumers.
Many people have deposits with building societies who now think that these institutions are to become the eighth economic wonder of the world. While I hope that will be the case for some of them, the reality is that it will not be for most of them. They will possibly speculate or take risks with depositors' money. Depositors put their money into building societies for a variety of reasons, one being that it is a very safe safety box. If, for example, the Central Bank get it wrong and allow a building society to embark on a path of investment or provision of service which turns out to be unprofitable and loss making, what redress will the depositor have? If building society X embark with a great fanfare on a course of investment requiring capital injection and turns out disastrously unsuccessful and, to regain solvency, the society have to increase rates of interest, will the depositor be protected? I may not be expressing myself very clearly and I may not have all the technical language correctly in place, but my fear is that if you allow building societies to speculate, to play a market or to take risks in a manner which they are not currently allowed to do and risk depositors' money, will the depositors be required, for example, through the mechanism of subsection (3) to participate in this? I may be anticipating further sections.
These are the kind of questions I have but I will not take up the time of the House. I am sure the Minister understands my concern. If the Central Bank make a mistake and the building societies, through no fault of their own, but just by misreading the situation, get it wrong, what redress will be available? Can a depositor know in advance what the redress will be if a building society embark on this course? Can depositors safeguard themselves?
The quick answer is that the depositor will know because it will require a special resolution on every single item. I agree that it gives the Central Bank considerable powers and they will certainly have to take on people with more expertise if they feel that their present expertise is inadequate in certain matters. They will have to deal with this urgently if they need extra advice. However, the Central Bank have years of experience in banking supervision, they are a supervisor of the highest standard and recognised as such. They have an experienced corps of banking supervisors which will form a sound foundation for the supervision of the societies.
In anticipation of the recently published Central Bank Bill the bank had been reorganising and strengthening their structures in this area. I am assured that further resources will be devoted to that area. The bank have already been working in close co-operation with the Department in the drafting of the Bill so the Deputy can take it that they are fully aware of what is involved from the point of view of control and the supervision of societies.
Subsection (2) provides that each of the specified new powers available to a society must be adopted by the society by special resolution before they can be exercised by the society or even an associated body attached to the society. It is envisaged that societies will adopt, as they consider necessary, each of the power by a separate, special resolution which may also provide for limitation or restriction on the exercise of the power. It is required to record each adoption in the memorandum for the purpose of informing the general public and for the purposes of section 11.
Subsection (3) is intended to ensure that the members of the society are fully informed of what the adoption of a power will mean for the society, by requiring the society to circulate with the notice of the special resolution a description of the service to be provided or activity to be undertaken by the society. The statement circulated will also spell out the financial implications such as the likely costs and income arising from the activity and if it is likely to have any effect on mortgage lending. The Central Bank may specify other information to be sent to the members in connection with the proposed activity. It is a good wide provision as far as protection for the members and their knowledge of everything contemplated on their behalf is concerned.
I have questions of clarification because this is an important section and I am not clear how it will function. Do I take it that all existing building societies will have to reconstitute themselves when this Bill becomes law?
They will have to adopt an amendment?
Is it possible, therefore, that in a single meeting, subject to the proper notices being sent out to all members, etc., in compliance with the requirements for notification under subsequent sections, that X, Y or Z building society can say that they are the building society of the future and invoke all the powers under sections 21 and 23 on the assumption that they have got prior approval and clearance from the Central Bank?
Each one will have to have a resolution.
Presumably, they will have to discuss the resolution in advance with the Central Bank. Is the Minister satisfied that the Central Bank have the powers under this section to require the building society in the promotion of such a resolution and their advocacy among their members to convey adequately and substantially to the members upon whose vote the adoption of the resolution will depend, the implications of these powers?
I am because if they do not allow the resolution to be passed I understand that members, who should have been further involved by way of extra information, can ask that that be applied. That is in subsection (3) (c) on page 36.
Question put and agreed to.
Sections 37 to 43, inclusive, agreed to.
SECTION 44.
I move amendment No. 36:
In page 45, between lines 47 and 48, to insert the following subsection:
"(5) In any proceedings for an offence under this section, it shall not be necessary to prove that the provisions of subsection (2) do not apply and the onus of proving that any of those provisions do apply shall be on the person seeking to avail himself thereof.".
Amendment agreed to.
Section 44, as amended, agreed to.
Section 45 agreed to.
SECTION 46.
I move amendment No. 37:
In page 48, lines 8 to 14, to delete subsection (5) and substitute the following:
"(5) Nothing in this section—
(a) shall compel the production by a barrister or solicitor of a document or material containing a privileged communication made by him or to him in that capacity or the furnishing of information contained in a privileged communication so made, or
(b) shall require the disclosure by a bank or a building society of any information as to the affairs of any of its customers other than the society or body the affairs of which are being investigated.".
This is a drafting amendment.
Amendment agreed to.
Section 46, as amended, agreed to.
Section 47 agreed to.
SECTION 48.
Question proposed: "That section 48 stand part of the Bill".
This section deals with the management of building societies and requires that a building society shall have at least three directors. It goes on to make a number of other subsidiary provisions and, of course, the following sections are interrelated. I should like to make the point that building societies seem, uniquely, to have been dominated always by male directors. Women seem to have had very little chance of featuring although I understand that one woman has been elected to the board of one of the building societies.
We have all followed with some interest the persistence of Muriel Scorer, and others, who have attempted to get on the boards of individual building societies.
The Deputy should not pick out that particular lady.
That woman was involved in the most recent event and I do not wish to express preference for any person in particular. I should like to suggest to the Minister that he introduce an amendment on Report Stage requiring that there be a minimum of at least one woman as a director of each building society. One could suggest that there should be an equality of men and women but no doubt if I did that I would be accused of interfering with the prerogative of the members to vote. I am raising this matter because it seems to me that building societies remain one of the last bastions of male privilege in the way they are run. It seems to me that they are very much a closed shop, a club, run by the directors of the society who seek to effect each others re-election whenever their term of office comes to an end. It is time that the cobwebs of the last century were blown out of the board rooms of our building societies and we recognised that women have a role to play. I am not talking about bringing one woman in as a token public relations exercise by a building society.
I suggest to the Minister that there is a need for some positive discrimination in regard to this and I invite to consider bringing forward an amendment to this section or, if appropriate, another section in the Bill, to ensure that each building society is at the very least required to have one woman as a director on the board of that society. There are so many women of talent here that I do not believe it would be impossible for building societies to have women directors on their boards. It is quite extraordinary that we have but one woman on the boards of our building societies and that she was invited to become a director. She is the first woman to be appointed to the board of a building society in all the years we have had such institutions.
I accept that this is an unusual matter to raise and I have no doubt that the Minister will tell me we do not require the banks to appoint a woman to such a position and that he will ask me why building societies should be obliged to do so. I appreciate that he may argue back to me that the closed nature of building societies will no longer apply in the new environment, that they will be more open, that the members will have more say and that there will be more controls as to voting patterns at annual general meetings. He may say that if building societies go public the shareholders will have a role to play. I understand all that but I do not believe that ten years down the road the pattern will necessarily change in the context of the board rooms of building societies being dominated by men. Women should have a role to play and the club atmosphere and arrangements that have excluded women from playing a role on the boards of building societies should be broken up. The House should be seen to be expressing a view on this issue.
The Deputy is catching me off guard in regard to this matter.
I know that the Minister is a chivalrous individual.
Going one way or another is fraught with danger when one starts mentioning females and their rights. I understand that two females have been appointed to boards of building societies. In my view it should be left to the members to decide and this is not a matter for legislation. At the risk of offending anybody I have to say that positive discrimination, even with the best intentions in the world, is still discrimination.
I support Deputy Shatter's call to the Minister to consider including such a provision on Report Stage. I should like to give notice that I intend to table such a proposal for the Minister's consideration. I am not trying to grab a headline but if one looks at the household formation of our society over the next 15 to 20 years one will see that the demand for houses will be from single people and, predominantly female. They are not adequately or properly represented. In fact, in many instances they receive outrageous treatment from some financial institutions. Only the raw winds of commercial competition have put manners on some of the banking institutions and taken away some of the sexist cobwebs that exist. The Minister should introduce a provision that will cater for the nontraditional sectors of the housing market who will be availing of mortgages in the future. I have no doubt that the housing section of his Department will agree with what I have said about housing formation and demand for housing in the future. If the Minister communicated with the female members of his staff he would be made aware of how difficult it has been for females to get loans, guarantees and so on for houses. The position is appalling.
I accept that the position has improved, that there has been a conversion on the road to Damascus, but there is no doubt that it has occurred because the institutions have to meet competition. I do not think we should depend on competition to change the position. There are various ways we can deal with this problem and one would be to make a recommendation to the Central Bank. However, the absence of females from senior management posts in building societies and from the boards of directors of these societies is a cause for concern. It amounts to discrimination against people who will be major market takers in the future.
In at least seven sections we have made explicit provisions on how directors are elected, their functions, how their operations should be monitored and their relationship to fees. I accept that they are good provisions and I agree with the intent behind them. I do not think it would take a lot more to include a provision that would cover the problem I have referred to. Undoubtedly, this has been a cause of great concern to the ordinary punter. Most of us were so lucky to get a mortgage, or felt so grateful to get one prior to the days of competition that we were prepared to turn a blind eye to what was the practice at that time.
The bad old days will not return.
They will not return. I endorse the remarks of Deputy Shatter in regard to one woman who has tried to break through the old practice. Having regard to the nature of the market that societies will be supplying — I hope they will continue to regard the provision of mortgage finance as their main activity — we should encourage a change in board structures. There is no doubt that there will be many changes in the formation of households and in the way property transfers from one partner to another after the break-up of a marriage. In years to come more females will be seeking house mortgages and for that reason it is important that there should be female representation on the boards of building societies. Deputy Shatter and I will endeavour to produce an acceptable formula between now and Report Stage to deal with this problem and I do not think there will be any disagreement about it. I appeal to the Minister to consider the formula that we will produce for incorporation into the provisions of the Bill between now and Report Stage.
I will think about this issue but I am not contemplating including any provision in the Bill. It may be that the pattern of those seeking mortgages will change but I must bring to the attention of the House that we have not had any complaints that females seeking accommodation by way of mortgage finance have been discriminated against. I concede that in the past they had difficulties but competition has got rid of that. There is no evidence of discrimination at this time. When that take-up of female membership escalates, as Deputy Quinn suggests it will, this will be reflected in the voting strength of the members in the society. If what Deputy Quinn said comes to pass it will be a self-adjuster and, with regard to providing for equal treatment right across the board in its finest sense, I would prefer it to happen that way.
I would prefer it to happen that way because it would epitomise everything so far as equality of the sexes is concerned as distinct from discriminating positively, as Deputy Shatter said, in their favour.
I do not think it will happen without encouragement and we should look at the form of encouragement.
I would not be out of sympathy with the principle of what my colleagues are trying to achieve here. If we are going to discuss, even briefly, the question of trying to ensure that there is what used to be called, and perhaps still is, "positive discrimination" in favour of women and trying to get a better balance, I am not clear whether we should discuss that in a broader context through a whole variety of legislation as opposed to targeting this particular Bill.
My preference would be to accept that this is a problem right across the economic infrastructure and try to deal with it in a Bill specifically on anti-discrimination or positive discrimination which would deal with the issue rather than dealing with it on an ad hoc basis but a very well intended basis, in terms of this Bill. There is a clear need to do this not just in relation to women but in relation to other categories of people who do not seem to have a proper weighting of their numbers represented at different levels of society. I include in this, women in semi-State bodies and other agencies.
The principle Deputy Shatter, Deputy Quinn and I are trying to establish is a good one, and I think the Minister accepts that. With regard to whether we should collectively try to do something about it by bringing in a Bill specifically designed to deal with this issue, and which would cut right across every other piece of legislation, is an option I am inclined to prefer.
With regard to this section and later sections which deal with the detailed systematic mechanics by which societies operate and select their boards, my party take the view that the more one gets into this kind of detailed refinement the less desirable it probably is. These kinds of proposals should ideally be reflected in company law and they should be the law of the land across the board in running public companies, semi-State bodies and so on. I do not see why — even though I know it is well intentioned — a Building Societies Bill has to lay down a law on how many directors there should be or why one director should do this, that or the other. I believe the thrust of the Bill is to free building societies, to provide a choice for the consumer and to provide efficiency, effectiveness and opportunities for people who operate in the financial market, and one should not regulate it unnecessarily.
Societies will operate, if they can, as freely as possible and maximise their efficiency, effectiveness and profitability. I do not know whether as a principle one should devote large sections of a Bill to the minute internal mechanics and ratios within a society. I do not want to make a big deal about this; I am just saying that it is not the kind of thing I would be in favour of putting into a Bill.
With regard to what the Deputy said, a company law check list would apply across the board. All this is paralleled in company law.
That is my point. If it is paralleled and already laid out in company law, I do not know why we have to put it in here. I am simply making the point that companies which operate in the free marketplace should be governed by a company statute of some kind. I do not think we should replicate that every time there is a Bill governing individual——
But legal practitioners like it that way.
They like incorporating it into an Act so that they can refer to it without seeming to be transient——
I do not think it is a good idea because the whole psychology of it is to tie people within companies. We may very well find that some tiny and fairly irrelevant subsection may ultimately act in a detrimental way to the operation of societies and, therefore, the borrowers, etc. later on. Then it would require new legislation to change this, whereas if it was not included in the Bill in the first place, it would not be necessary. The point I am making is that we should operate only with regulations necessary to safeguard the public interest rather than to over-regulate, which I think the State generally tends to do. I suppose this is a basic party political point in my case, if the Minister does not mind me saying so.
I have taken note of what the Deputy has said about equal treatment.
Question put and agreed to.
Sections 49 and 50 agreed to.
SECTION 51.
Amendment No. 39 is related to amendment No. 38. I propose, therefore, with the agreement of the House, to take both amendments together for the purposes of discussion. Is that agreed? Agreed.
I move amendment No. 38:
In page 53, subsection (5) (a), line 37, to delete "thereunder, and the rules" and substitute "thereunder and the rules,".
This amendment proposes to correct a printing error.
Amendment agreed to.
I move amendment No. 39:
In page 53, subsection (5) (b), line 45, to delete "at" and substitute "as".
Amendment agreed to.
Section 51, as amended, agreed to.
Section 52 agreed to.
SECTION 53.
I move amendment No. 40:
In page 55, subsection (7), line 28, after "days" to insert "(not including a Saturday, a Sunday or a public holiday)".
This is a minor amendment.
Amendment agreed to.
Section 53, as amended, agreed to.
Sections 54 and 55 agreed to.
SECTION 56.
I move amendment No. 41.
In page 58, subsection (5) (b), lines 30 and 31, to delete "(jointly and severally with any other person liable under this subsection)" and substitute "jointly and severally with any other person liable under this subsection,".
This is a drafting amendment.
Amendment agreed to.
Section 56, as amended, agreed to.
Sections 57 to 67, inclusive, agreed to.
SECTION 68.
I move amendment No. 42:
In page 68, subsection (3), lines 44 to 46, and in page 69, lines 1 and 2, to delete paragraph (b) and substitute the following:
"(b) with the consent of the Central Bank given where the Bank considers it proper in the circumstances, by publishing in at least 2 daily newspapers published in the State and circulating in the area in which the chief office of the society is situated a notice in such form as the Bank may direct.
(4) Where notice of a meeting is given in accordance with subsection (3) (b), any other requirement under this Act to send to members with the notice of or in connection with a meeting a proxy instrument, notice or other document shall be satisfied as respects it if either—
(a) it is published along with the notice, or
(b) the notice under subsection (3) (b) states that it may be obtained at all offices of the society during normal office hours,
as the Central Bank may direct.".
Amendment agreed to.
Section 68, as amended, agreed to.
SECTION 69.
Question proposed: "That section 69 stand part of the Bill."
This is the section whereby all the resolutions which have to be voted on to take on powers come into effect. Perhaps we can slow down for a moment, although I am loathe to lose the opportunity.
Is everybody who has £100 or more entitled to vote in all of these resolutions? Is that what this section means?
Question put and agreed to.
Sections 70 to 78, inclusive, agreed to.
SECTION 79.
I move amendment No. 43:
In page 78, lines 11 to 23, to delete subsection (6) and substitute the following:
"(6) A copy of the summary financial statement and, where it includes a qualification, a copy of the auditors' report under section 88 shall, not later than 21 days before the date of the annual general meeting at which the annual accounts and directors' report are to be considered be sent by the society to every member who is entitled to notice of the meeting and to the Central Bank, which shall keep a copy of the statement in the public file of the society.".
Amendment agreed to.
Section 79, as amended, agreed to.
Sections 80 to 82, inclusive, agreed to.
SECTION 83.
I move amendment No. 44:
In page 80, between lines 23 and 24, to insert the following subsections:
"(10) An auditor of a society who decides not to make himself available for re-appointment to the office of auditor shall serve notice of his decision on the society at least 35 days before the annual general meeting at which his term of office is to expire.
(11) Where notice is given by an auditor under subsection (10) the provisions of subsections (2) to (5) of section 85 shall apply with necessary modifications.".
Amendment agreed to.
Section 83, as amended, agreed to.
Sections 84 to 89, inclusive, agreed to.
SECTION 90.
I move amendment No. 45:
In page 86, subsection (3), line 37, after "days" to insert "(not including a Saturday, a Sunday or a public holiday)".
Amendment agreed to.
I move amendment No. 46:
In page 86, after line 46, to insert the following subsection:
"(5) In this section ‘officer', in relation to a subsidiary or other associated body of a society, includes an auditor."
Amendment agreed to.
Section 90, as amended, agreed to.
SECTION 91.
Question proposed: "That section 91 stand part of the Bill."
Do I understand that a person who may have a complaint vis-à-vis a building society under this section cannot go to the Central Bank but must have access to the civil courts?
Is the Deputy talking about a dispute or a complaint because complaints are dealt with in the next section?
Question put and agreed to.
SECTION 92.
Question proposed: "That section 92 stand part of the Bill."
In a sense this takes us back to an issue I raised previously as to whether we should have a form of building society ombudsman or what should be the structure. This section provides a discretionary power and in subsection (1) provided that:
The Minister may, by regulations, made after consultation with the Central Bank, require a building society to establish or join in establishing a scheme or schemes for the investigation of complaints against the society or any of its subsidiaries or other associated bodies in relation to a prescribed matter of complaint.
The subsection (2) continues that, "the regulations may make provision in relation to any one or more of the following ....." Then there are listed a number of things such as the establishment and administration of a scheme, the manner of appointment of an independent adjudicator to conduct investigations including the publication of the adjudicator's findings and so on. I would ask the Minister to give us a further insight into his thinking as regards how he envisages the provisions of this section operating. How soon would he envisage regulations being put in place? Does he envisage the establishment of a building society complaints procedure for each individual building society or does he intend—as can happen under this section — that there be some sort of group of building societies providing a joint scheme to investigate complaints?
In the context of the processing of claims would the Minister say what information would be made available to the general public? Will we have an annual report published indicating the number of complaints that arose under the section 92 procedure and the decisions taken in relation to them? Will we be given any insight into the generality of the problems that have emerged? I am not suggesting one should necessarily publish the names of complainants but will we have an insight into the generality of the problems investigated and adjudicated upon in the context of the procedures provided for in this section? What will happen if a complaint is investigated and there is a finding made? Of course, the individual will be left to his or her legal rights to go to court, as is provided for under the provisions of section 91, but will it be part of the scheme that — where the Minister requires a building society, or a number of building societies to join together in a scheme — where a complaint is found to be valid, the building societies will be required, by regulation, to make some redress to the individual for any damage done to them, any loss suffered by them or any distress caused them by virtue of the conduct which gave rise to the complaint?
Would the Minister clarify how he envisages this working? Again, I assume that the regulations that will provide therefor will be subject to a negative resolution of this House. Perhaps the Minister could set out his thinking in this area, indicating what discussions, if any, he has had to date with building societies with regard to the type of scheme he envisages coming into being as a result of the provisions of this section coming into operation by way of regulation?
The details of any such scheme have not been discussed but the principle has been discussed with the building societies. I should like to think that a voluntary approach would be attempted first in this matter, that it would apply in a group fashion; that we would have a group approach first, hopefully, in a voluntary fashion. If they can establish a complaints scheme voluntarily I think that would be the best way to do it. Failing that, the Minister has the power, under the section, to require them to establish the scheme. I envisage the building societies establishing a type of building societies ombudsman — that is the way I would envisage it — who would investigate and resolve consumer-type complaints. I expect that the volume will increase with the number of new activities in which the building societies might become involved.
The question of redress is catered for in subsection (2)(f) which says "the circumstances in and the extent to which determinations are binding and so on. I would see that as constituting an effective way of making it mandatory on whichever side has to do what is required if that should be deemed to be necessary in the circumstances. It will be binding on both parties. I would hope that that would progress fairly speedily. The principle is agreed but the details have not yet been finalised with the building societies. It might take a little while but, hopefully, it can be attempted and satisfactorily concluded on a voluntary basis.
I thank the Minister for his explanation. It seems that, although on an earlier section I raised the issue of a building society ombudsman, it did not elicit a supportive response from the Minister.
No, I said a type of building society ombudsman.
The Minister is now talking about a type of building society ombudsman. I would ask the Minister to clarify what is the difference between a building society ombudsman and a type of building society ombudsman.
I am not setting up another office.
Perhaps the Minister would further clarify a number of things. First, does he envisage that there will be an individual put in place to do a job for which he will either be paid by the State or the building societies, who will, in effect, be a filter for complaints about building societies, all building societies; who will process complaints; who will have the co-operation of the building societies in having those complaints investigated?
One might consider this for a moment in the sense of how the parliamentary ombudsman would work at present. It required an Act of the Oireachtas to give him a right of access to all sorts of departmental files and information in the context of Government Departments, or in the context of duties of local authorities, so as to ensure that the parliamentary ombudsman was not inhibited in his investigative role and was able to have access to documentation and freely report. Is the Minister saying that the building societies have had no discussions at all with him about the detail of this? Or is he saying that, in principle, they have agreed to an individual acting in the position of a building society ombudsman; that, in principle, they have agreed they would give this person general access to either talk to staff members of a building society, or access to files, so that that person is in a position to fully and properly adjudicate on complaints?
Is the Minister saying he hopes that the building societies may agree to such a person coming into being or is he suggesting that each building society will have its own personal ombudsman nominated by it who might be an employee of the society and who would be given a role to respond to complaints that are made? I am anxious that we tease out this matter a little further. More than likely the regulations will be made without this House debating them unless a negative resolution is tabled. It is only fair that we should have some insight as to how the Minister would see it operating. I know he says it would be his intention — I welcome this — that any decisions made would be binding. When he said that he pointed to section 92 (2) (f) which merely says that the regulations and their provisions may state the circumstances in and the extent to which determinations are binding. Determinations of necessity are not binding. The regulations may say they are binding or they are not binding or that in particular instances they will be binding if particular procedures are accepted by either the complainant or the building societies. Paragraph (f) allows the Minister to make provision, by way of regulation, for determinations to be binding. It does not indicate that all determinations necessarily will be binding. If it is the Minister's intention that they be binding I welcome it. It is right if you have an ombudsman type person — to use the Minister's reference — and if someone submits their complaint to him that the determinations will be binding where both parties agree to it.
Subsection (3) seems to suggest that where both parties agree that the determination will be binding, neither party will have resort to the courts. I presume there is a possibility for something to be investigated with both parties — the building society and the complainant — agreeing that it be investigated, without necessarily accepting in advance that whatever decision is made will be binding on them. The idea is that they would accept the binding nature of it and that a procedure under section 92 would be used instead of invoking section 91 of, indeed, the general law to bring any general legal action. Perhaps the Minister would further clarify some of the provisions in this regard.
I do not want to go into too much detail — as I stated, the question of the details has not been gone into to any great extent — except to say that the building societies have agreed in principle, so far as the investigation of complaints is concerned, that there should be such a proviso.
Would that apply to one individual client or to building societies?
No, the group approach is the one that I see as the proper one. I would think that a responsible person would be appointed who would be paid for by the building societies. It does not prevent people from going through the section 91 route if they so choose. They can have their dispute determined under section 91 as provided for in the rules of the society. If the complainant and the society agree to have a dispute decided by the scheme, established under this section, they can do so and the decision would be binding on both parties. We are not closing off any alternative options the individual might have. I would go for the group approach and the responsible person appointed by the society.
Question put and agreed to.
Section 93 agreed to.
SECTION 94.
Question proposed: "That section 94 stand part of the Bill."
Section 94 enables the Minister by regulation to apply to building societies provisions of the Central Bank legislation for the establishment of a savings protection scheme. It is correct to say that the regulations can incorporate certain modifications arising mainly out of the different legal status of a shareholding in a society. Can the Minister explain those modifications and say exactly how they will work and what is intended here?
Subsection (2) refers to that.
It gives a general regulatory power.
As Deputies will be aware Part II and Chapter 5 of the Central Bank Bill, 1988, proposes to provide for the establishment and operation of a deposit protection account. This account will be funded by the banks and will be used to provide a partial protection of deposits held by the banks for their depositors. That scheme is in line with the European Commission's recommendation of 22 December 1986 concerning the introduction of deposit guarantee schemes in the European Community. The purpose of the section is to enable the Minister for the Environment to introduce regulations extending the proposed scheme to building societies. This is quite appropriate as societies are also deposit taking institutions. There is no reason to differentiate between depositors with banks and depositors with societies. I would point out that depositors with banks and depositors with societies, in this context, will include shareholders. This will give rise to certain modifications in the details of the scheme as it will operate in relation to societies and these will be dealt with by regulations.
Subsection (2) indicates what might be included in the regulations. The list is not conclusive. I would like it to be seen as a guide for explanatory purposes. The regulations, among other things, provide for the transfer of a society's deposit under section 93 to the account maintained by the Central Bank for savings protection. The level of the deposit would continue to be governed by section 93 fluctuating in line with any changes in the level of a society's shareholding or its deposits. The treatment of shareholdings as deposits for the purpose of the scheme will be necessary. If only societies' deposits were covered there would be little point in extending it to societies as deposits for only 2½ per cent of the total funding. The reality is that shareholdings in societies are savings by their very nature and as the scheme is designed to protect savers the exclusion of societies' shareholdings would be inappropriate.
Question put and agreed to.
Section 95 to 97, inclusive, agreed to.
SECTION 98.
I move amendment No. 47:
In page 94, subsection (6) (b), to delete lines 11 and 12 and substitute the following:
(ii) in the case of an amalgamation or in the case of a transfer which was the subject of a special resolution,.
Amendment agreed to.
Section 98, as amended, agreed to.
SECTION 99.
Amendment No. 40, and as amendments Nos. 49, 50 and 51 are related, these four amendments may be taken together.
I move amendment No. 48:
In page 95, line 7, to delete "(4)" and substitute "(3)".
Amendment agreed to.
Section 99, as amended, agreed to.
SECTION 100.
Question proposed: "That section 100 stand part of the Bill."
There is a certain difficulty in dealing with Part XI. Perhaps I could ask the Minister a general question. It might assist us to complete the Bill speedily. Section 100 is the definition section. Part XI sets out the conversion to public limited company process, in other words, how a building society can convert itself into a plc. There are various definitions in section 100. The procedure to be applied is dealt with in the later sections of the Bill. What I am now raising could, perhaps, be more appropriately raised under section 101 but perhaps you will forgive me because they are interconnected. I would ask the Minister to set out something that in the conText of this Bill is not totally clear. I am not being deliberately obtuse about this. If a building society wishes to convert to a plc does the procedure set out to provide for the holding of a meeting for notification and for voting to take place? If it converts itself to a plc who are the members of the building society who are making decisions in the context of voting on the question? From earlier sections in the Bill it seems that a building society has a discretion to regard someone to whom it lends money as a member or it may not, that a depositor may be a member or he may not, that he may be an investment shareholder or he may simply be a depositor. It seems that the building societies are given some degree of discretion as to whom they regard as members although there are procedures here for clarifying that. This next question may be more appropriate to ask under section 101 or one of the later sections. However, it might be helpful to clarify exactly who the members are.
I trust that the Deputy will not ask the question again under section 101 if he gets an answer to what he has asked.
I do not ask the same question twice. Who are the members? Who actually will benefit when a building society is converted to a plc? Who will hold the shares? In what proportion? If you are regarded as a member, will it be left to the management of the building society to make a general proposal to the membership? Will the Minister set out clearly, in layman's terms as opposed to the legalities of the Act, the actual methodology of operating to convert a building society into a plc? I accept that to be a general question. We could try taking it on an individual basis in each of the sections. I am trying to be helpful. Would the Minister clarify that position as we head into dealing with Part XI, so that we are clear as to how this will operate in practice? I raised this matter on Second Stage. There is some concern here that the manner in which a conversion may take place may result in major financial gains being made by those who control the building society directors, to the detriment of the members. I know that there is a procedure of 100 members petitioning the High Court, but I want the Minister to set out in general the way this will operate.
This is all set down in the legislation as to who have the right to vote, when they have the right to vote and what procedure and framework must be applied before a building society can convert. It might be useful to say that there are basically two types of members of a society. There is a member by virtue of holding shares — they will be commonly known as investing members — and a member by virtue of having a loan from the society under the repealed enactments secured by freehold and leasehold estates, or interest on a housing loan under the Bill. They are known as the borrowing members.
Investing members will, under this Bill, be entitled to certain rights. These are, the right of notice of a meeting, the right to vote and so forth if they meet certain minimum requirements such as holding £100 in shares for at least six months. Borrowing members will not be entitled to these rights by virtue of having a loan from the society but they will have the right to vote in the conversion resolution if they owe at least £500 to the society at the end of the last financial year preceding the date of the vote and continue to owe that amount under a mortgage at the voting date. Both will be involved as long as they meet those minimum requirements as far as money is concerned — £100 and £500. They are the people who would be involved in the conversion.
Let me take the Minister a stage further. In a normal conversion operation of a business into a plc, there would be a share allocation at the time of the conversion taking place. What happens here in practical terms? Who would hold the majority of the shares? Who would hold the shares of the company, or who would benefit if there is a public flotation? Will some moneys be paid to the investor who has been able to vote? If you have £100 in a building society will you get a premium, or if you have £500 will you get an additional sum of money, or will you simply be entitled to take up shares in the society at a particular price? How will this operate with a particular credit? Building societies are a strange, hybrid legal animal in this area. Would the Minister respond to those queries?
Is it clearly a question of a building society management presenting a scheme? Could a scheme be presented which would secure for the directors of a building society a 51 per cent controlling interest in the shares and that because there is an extra amount of money floating through the investors, they will automatically vote yes to get that money? At the end of the day, will the management of the building society get a massive windfall gain by virtue of the fact that they will control the way the building society is being run? I am aware of the position about 100 members petitioning. I am not clear on what presentation a building society need to make to their members in the conversion process.
These will be regarded as the details.
Of course they are, I agree.
They are the details that make conversion to a plc very attractive to some people on a monetary basis.
It is all pretty well set out on page 95 in so far as conversion is concerned. All those details will have to be given; particularly, the details will have to be set out in the scheme for conversion. It would have to be made quite clear as to who had the right to vote in the conversion process. It is interesting to note that it will be members and borrowers, but the ratio is somewhere in the region of 6 : 1 in so far as members against borrowers are concerned. Both will be involved in the conversion process if and when that should come to pass. It will be set out in the scheme as announced by management. This is stated very clearly in section 101, subsections (2) and (3).
I am not at all taking a view as to whether a society should convert or not convert. I do not think that I should be targeted in that way. I do not propose to go into the arguments for or against conversion. All I want to do in this Bill is to give societies the opportunity, if they so wish, to convert to plc status, if the members consider that to be the best way for the society to go forward and develop. Without wanting to put forward an opinon on the matter, I am not so sure that many will see it as a way forward in their own particular circumstances. At least, the opportunity and the framework in legislation will be provided whereby it can be done.
The main feature of the approach that we are adopting is to provide the framework within which a society can convert and to ensure that the members of a society are fully informed. That is really what Deputy Shatter is getting at, that they would know what is afoot, what is involved and what the effects or implications are if they should go down the particular road of converting. That is the approach to which I am gearing this legislation, and also to ensure that the Central Bank have a central role in the whole process, by virtue of its supervisory responsibilities in relation to the country's financial system generally. All those things will have to be in place and the scheme will have to set out precisely what is intended so that there will be no quick conversion just to satisfy the will of a few. Both are involved, members and borrowers.
Do I understand the Minister to say with regard to the borrowing member that somebody who perhaps is slow in paying off his mortage and so maintains a higher debt over the £500 can make decisions with regard to conversion, whereas somebody who is a regular payer and gets his mortgage down below the £500 cannot? That would mean that the person who was less thrifty or slow about paying would have an interest in what the building society would do, as against somebody who actually paid his bills.
As a borrower, yes, but do not forget that they are in the minority.
They are a very small minority.
The more we travel this route, the more I realise that my questions would be more relevant to sections 102 and 103. However, I wished to introduce the subject at this stage. I accept section 100. Perhaps we could go into section 101. There are one or two detailed matters that I want to raise at that stage and I think it unfair to prolong this discussion on section 100.
Question put and agreed to.
SECTION 101.
Question proposed: "That section 101 stand part of the Bill."
While there might be a passing reference, I hope there will not be a continuation of the contributions made on section 100. Deputy Shatter to give the good example.
In the context of your passing reference, Sir, let me direct the Minister to section 101 (3) (f). This forms part of the nub of what I am trying to get at. I accept that a scheme being presented by the management of a society would have to be accepted by the members if there is to be a conversion to plc, but that paragraph (f) is curious. I quote:
(f) specify, in the case of persons or classes of persons who are members of the society and who will be members of the proposed company, by reference to the shareholding of those persons or classes of persons in the society—
(i) their entitlement to shares in the proposed company, and
(ii) their rights (if any) to subscribe for shares in the proposed company, and in either case, the rights attaching to the shares,
This comes back to what I am trying to clarify. I do not think it is enough to say it would be for the society to present their proposals. The only cohesive group within a building society are the management and the directors. The individual members do not know each other. Confidentiality of names is preserved in the context of the Bill as it is. It is unlikely, prior to a conversion meeting, that all the building society members will be able to get together and have a preconversion meeting to discuss the management's plans.
There is a possibility that the management of a building society can in a sense make individual depositors an offer they cannot refuse, in other words, offer them some premium on their deposit or throw in a few shares in return for the vote for conversion to plc. This may give the individual depositors some small financial gain while at the same time securing for the management of a building society a 51 per cent or higher shareholding, a controlling interest in the plc by virtue of the specifications required under this paragraph which could result in the controllers of the building society, the directors who control them, increasing substantially their wealth on the back of the members of the society.
I am not happy that we are teasing this out sufficiently. This is a very important issue. I accept the Minister's statement that he is not trying either to encourage or discourage building societies converting to plcs, but he is providing the legal mechanism whereby such conversion can take place. We must ensure that where such conversions take place there is adequate protection for the individual members of the building society and that people cannot by virtue of what is in this legislation abuse their managerial positions by abrogating to themselves large chunks of the shares of the company which is going to become a plc.
We are not dealing with an ordinary business or private limited company controlled by one person or two people who are going public where the position as regards the flotation is quite clear and they can make decisions. We are dealing with a completely different type of legal animal, and I am not sure that this Bill provides protections against abuse of their position in the sense of persons in a directorship seeking to obtain large shareholdings worth substantial sums of money. I can see the Minister's argument as to why some building societies should not go public; they may end up being swallowed up and taken over before they know what hit them, and that would be easier if they were public than if they were the sort of legal animal we have here.
I want the Minister to clarify the thinking here, particularly in the context of paragraph (f), the right, if any, of the members to subscribe for shares in the proposed company. Normally if we were dealing with a private limited company the shareholders would have a right to subscribe to shares and their right to subscribe may be related to the proportionate holding of their shares in the private company. Here it is quite different. Here some people who are borrowing money are regarded as members, some people who have money on deposit are regarded as members, one depositor may have £100,000 in the building society and someone else may have £50 in the building society. How does the Minister envisage this working?
May I ask two questions? Does the Minister hope that we might get the Bill finished by 7 p.m.?
That is what I want please.
I want to clear that. I accept that the section outlines how the conversion to plc takes place. Are the arrangements for the internal convening and decision making apropos of that process explicit somewhere or will they be in the regulations?
Deputy Shatter raised a number of very valid points, his suggestion being that unless this is explicit and clear in the Bill or the regulations you may have a cabal of people within a society shifting the whole thing in favour of their interests. Is that feasible? I think that is the nub of the matter.
Much of Part XI of the Bill was given to this item because it is so fundamentally important and that is why it was gone into at considerable length. The protections outlined there are quite considerable. We have gone to great pains to protect members, but let us be clear on one thing: depositors are not members; the shareholders are the members.
But you may have a deposit book or a shareholding if you put money into it.
There is the overview that if members feel they are being discriminated against in any way they are not going to vote for the same thing. Let us not forget that. There is nothing to stop members getting together if they so wish. Nothing can be rushed. I refer the Deputy to section 101 (4) which provides that at least six months' prior notice must be given before the conversion resolution is taken on at all, bearing in mind that all the members must be notified of the conversion resolution and they must be provided with a statement in relation to the conversion, the contents of which must have been approved by the Central Bank.
The bank must confirm a conversion scheme and aggrieved members, if they wish, can petition the High Court against the conversion. I think there is no great fear that a management can orchestrate a conversion that is blatantly designed to enrich the directors of a society. That is not a realistic proposition, and is not the thrust of this legislation. I ask Deputy Shatter to accept that particularly, the certain elements of Part XI which go some distance towards making sure members are protected.
Question put and agreed to.
Progress reported; Committee to sit again.
