Credit Union Bill, 1996: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

The appropriateness of the nature and level of the limits included in the Bill has generated comment by the movement. The average shareholding of a credit union member is £1,000, while the average amount which such a member would have on deposit with a credit union is £100. The average loan to each member borrowing from a credit union is £2,000. When these are considered by reference to the £20,000 figure included for shares, deposits and loans in the Bill it is clear that substantial scope exists for credit unions to increase the level of share and deposit holdings of their members. The same holds true for the credit unions' loan book.

The third issue which had to be taken into account is the relatively favourable taxation regime which credit unions enjoy, almost uniquely, among financial institutions. They enjoy an exemption from corporation tax as a result of their non profit-making status. More relevant to the question of shares and deposit limits is the subject of DIRT. Savings in credit unions are not subject to DIRT, although members are required to declare dividend and interest income from their credit union savings in their tax returns. I have no idea how faithfully credit union members discharge their liabilities in this regard, but the figures I have given for their average share and deposit holdings suggest that, by reference to current experience, the average liability to DIRT is small.

In changing the limits the Government had to take account of the favourable tax status of credit unions at this time. In respect of corporation tax, this favourable treatment is fully justified by the social and mutual purpose of credit unions and the significant role they play in community life. However, it is also necessary to ensure that credit unions are not used as de facto tax avoidance schemes by unscrupulous individuals with significant personal wealth. Neither the Government nor, I am sure, the League of Credit Unions wants such individuals to play ducks and drakes with the system, as a recent correspondent on the subject of taxation and credit union accounts memorably puts it. Consequently, by raising the shares limit to £20,000 the Government has sought to strike a fair balance between giving scope for further credit union development while taking into account the experience to date. The Bill provides that these limits may be increased at a later date as circumstances require.

I would also draw the attention of the House to a number of modern legislative provisions to support the credit union movement. The Bill includes updated provisions relating to the arbitration of disputes between a member and his or her credit union and makes improved arrangements for amalgamations or transfers of engagements between credit unions. It also translates into credit union law the arrangements relating to winding-up in companies legislation, subject of course to appropriate changes, adopts the administration concept found in the Insurance Acts and allows for examinership. In the case of the latter, the Bill takes on board a number of the recommendations made in the Company Law Review Group report. Although these changes have yet to be implemented in company law, they are being included in this Bill as evidence of the Government's firm commitment to introduce state of the art credit union legislation. I will elaborate on these changes later.

A final significant feature of the Bill is the updating of the supervisory arrangements for credit unions. As I already indicated, this work is discharged by the Registrar of Friendly Societies and his staff, who are attached to my Department. The registrar already has certain powers in this area under existing legislation, and these are being maintained and updated as necessary in the Bill. In response to the desire of credit unions to expand the range of additional services which they may offer, the registrar will be given new powers to enable him to satisfy himself as to the capability of the credit union to undertake the additional services which it wishes to offer.

In conjunction with the wider scope of this Bill relative to existing legislation in such new areas as administration and examinership, the registrar will also be given a role in such areas to facilitate the orderly regulation of credit union affairs. The registrar's decisions are subject to appeal in the High Court, to ensure that he cannot overstep the powers given to him in the Bill. The registrar is the State's supervisory and regulatory watchdog in regard to this part of the financial and monetary system. The registrar is to Credit Unions what the Central Bank is to banks and building societies.

Part I covers the first five sections of the Bill and contains a number of standard preliminary provisions. Part II, comprising the next 20 sections, outlines the conditions for, and procedural provisions relating to, the registration of a credit union and its rules. It deals with amendments to a credit union's name and registered rules. It also establishes the conditions for membership of a credit union, and provision is made for a member's withdrawal or expulsion. A right of appeal to the courts is provided against specified decisions of the Registrar of Friendly Societies and the credit union.

A member may nominate in writing to the credit union a person or persons to become entitled to his or her property in the credit union on death, and necessary consequential and procedural provisions are stipulated. Where no nomination has been made, the board of directors has discretion within certain limits to distribute or make payments from a member's property in the credit union to the person or persons whom the board judges proper to receive it in the event of the member's death, mental disorder or disability.

Part III, which deals with the operation of credit unions, covers sections 26 to 52 inclusive, and sets out a number of the key parameters within which credit unions must operate. It specifies that a credit union may do anything consistent with its objects, subject to the right of a member or the registrar to apply to the High Court to restrain a credit union from doing any act or thing which it has no power to do. The general provisions relating to shares and deposits in the credit union include that the amount which a member may invest in shares and deposits may not exceed £20,000 in each case which is £40,000 in total savings; the dividend on shares may not exceed 10 per cent per annum; different interest rates on deposits may be set from time to time and the credit union may require minimum withdrawal periods of 60 and 21 days for shares and deposits respectively. Subject to certain conditions, borrowing by a credit union is permitted.

A credit union may also make a loan to a member, subject to a ceiling of £20,000, and a maximum interest rate of 1 per cent per month shall be charged on the amount outstanding. Certain limitations on the period of loan offered also apply. A credit union or a person acting under its authority may make, accept or endorse a promissory note or bill of exchange; make, vary or discharge contracts and acquire land for the sole purpose of conducting its business. A credit union may, in addition, invest its surplus funds in a specified manner and establish a special fund for social, cultural or charitable purposes, subject to certain conditions. It must also meet certain requirements with respect to, for example, the establishment of a reserve, its participation in a savings protection scheme and the maintenance of insurance against fraud by its officers.

Subject to the agreement of its members and the registrar's approval, a credit union may provide additional services to its members. However, under the Bill, a credit union is prohibited from offering loans, subject to a condition that a member shall avail of an additional service. A right of appeal to the High Court is provided against a decision of the registrar in this area.

Part IV deals generally with the management of credit unions and extends from sections 53 to 76 inclusive. It specifies, for instance, the general functions and duties of the board of directors, the supervisory committee and the other officers of the credit union, and outlines a number of associated procedural requirements. Provision is made for the manner of their election, appointment, resignation, suspension and removal, for the remuneration of the treasurer and the payment or reimbursement of expenses to other officers. A general prohibition is applied against any officer participating in a decision in which he has an interest and against any officer or voluntary assistant disclosing any information relating to the affairs of a credit union. Officers and voluntary assistants who have receipt or charge of credit union funds may be required to provide security and shall be required to account for their actions.

A credit union is also required to maintain a register and duplicate register containing certain specified information relating to its members and officers. It must also make available for inspection by its members an abbreviated register containing certain particulars from the register. On the application of 30 members, the registrar may appoint an accountant to examine the books and documents of the credit union.

Part V of the Bill sets out in sections 77 to 83, inclusive, the arrangements for the notification, convening and conduct of the credit union's initial organisation meeting, its subsequent annual general meetings and any special general meetings. The registrar, a body administering a savings protection scheme or a qualifying group of members may require the holding of a general meeting. The credit union's tradition of one member one vote, irrespective of the size of the member's shareholding, is confirmed and the right of members to demand a poll on the questions before a general meeting is protected. The registrar may also attend and be heard at a general meeting. The requirements for the adoption and commencement of special resolutions are also specified.

Part VI comprises sections 84 to 106 inclusive and contains a number of important provisions relating to the control and supervision of credit unions by the registrar. It specifies that the registrar's role is to protect members' funds and the financial stability of credit unions generally. To that end he is given power to require credit unions to comply with certain specified ratios and may also issue directions in regard to advertising by credit unions. In specified circumstances, the registrar may issue regulatory directions to a credit union in regard to the conduct of its affairs, subject to a right of appeal by the credit union to the High Court. The registrar may also invite the court to confirm a regulatory direction, prohibit a contravention of the Bill or cease the provision of the additional services offered under Part III.

While such regulatory directions are in force, winding up and other specified proceedings may not be initiated except by leave of the court. In addition, the registrar may appoint an authorised person to inspect the books and documents of a credit union. Under specified conditions he may appoint on his own initiative, or at the request of 30 members, an inspector to investigate its affairs or call a special general meeting. Matters relating to the conduct of such an inspection or investigation, the subsequent report and possible prosecution proceedings are also dealt with. On foot of an inspection or investigation, the registrar may appoint a director to the board of a credit union or suspend or remove from office one or more directors or members of the supervisory committee. The registrar may also suspend or cancel the registration of a credit union. In these cases, a right of appeal to the High Court is available to the person or persons concerned.

This Part of the Bill also imposes obligations on the registrar. For instance, he is required to prepare and maintain a public file on each credit union, and the Minister may prescribe fees for the exercise by the registrar of his functions under the Bill. Certain administrative provisions relating to the classification of information and the delivery of documents are also included. The Minister may authorise assistant registrars to perform the functions of the registrar who is required to produce an annual report to the Minister which shall be laid before the Houses of the Oireachtas.

Part VII of the Bill covers sections 107 to 124 inclusive and deals with the accounts and audit of a credit union. It specifies the financial year of a credit union, the accounting principles to be followed, keeping proper accounting records and the maintenance of adequate control systems. It establishes the duties of the directors in regard to the format, content and audit of the annual accounts and the report to members and provides that the Minister may make regulations regarding such matters.

Provision is also made in this Part for the election, appointment, resignation and removal of the auditor of a credit union and for the notification, convening and conduct of general meetings relating to the auditor. His rights to obtain access to information and his duties to report to members on the state of affairs of a credit union are also included. The registrar may also require the auditor to report to him on specified matters. Officers and voluntary assistants of a credit union are required to give the auditor every assistance in the preparation of his report. In addition, the credit union is required to make available a copy of its annual report and accounts to the registar and to its members.

Part VIII, comprising sections 125 to 127, inclusive, deals with the resolution of disputes and complaints relating to credit unions. It provides that disputes between a member or former member and a credit union shall be settled in accordance with its rules, which decision shall be binding on all parties. In certain circumstances, a member may apply to the Circuit Court to settle the matter. Provision is made for the application of the arbitration Acts to the settlement of disputes and for making ministerial regulations relating to the establishment of a credit union complaints investigation scheme.

Part IX of the Bill from sections 128 to 132 inclusive provides for the amalgamation of two or more credit unions and establishes the necessary procedures for the approval of the terms of the amalgamation by special resolution of the members and for registering the rules of the successor credit union. The procedures include the preparation of an information statement by the credit union for its members, the application to the registrar for confirmation of the proposed amalgamation, the publication of the necessary notice and the subsequent distribution of any funds to members. Similar provisions are included in this Part where a credit union proposes in this Part where a credit union proposes to transfer its engagements to another credit union.

Part X sets out in sections 133 to 136 inclusive the arrangements for the winding up of a credit union. It provides that the registrar may, in certain circumstances, apply to the High Court for an order to wind up a credit union. It also provides that a credit union may be dissolved in accordance with the Companies Acts by members or creditors. An instrument of dissolution is required to contain specified information that shall be sent to the registrar for registration. The credit union shall be dissolved from the date of advertisement of the dissolution, subject to a right of application to the High Court by a member or other person having a claim on the credit union's funds. The registration of such a credit union may only be cancelled after the fulfilment of specified conditions.

Part XI, covering sections 137 to 141 inclusive, applies to credit unions the concept of administration which is found in the Insurance Acts. The intention is that a credit union administrator would be appointed where a credit union was being mismanaged rather than necessarily having serious financial difficulties. Provision is made for the appointment by the High Court, on the application of the registrar, of an administartor, or a provisional administrator, to carry on the affairs of a credit union as a going concern. The effect of an administration order on a credit union is stipulated, and various procedural matters, including the termination of administration in certain circumstances, are dealt with.

Part XII proposes to apply the option of examinership to credit unions and extends from sections 142 to 170 inclusive. Deputies will recall that the first 1990 Companies Act introduced the concept into Irish law, and it has since been frequently used to save companies which have found themselves in serious trading difficulties.

The Company Law Review Group, in its first report in 1994, made a number of recommendations to improve the examinership process. The principal recommendations made by the group which are now incorporated into this Bill are that (i) the petition to the court for the appointment of an examiner must be accompanied by the report of an independent accountant on the credit union's affairs; (ii) the court must satisfy itself that there is a reasonable prospect of the survival of the credit union as a going concern before it decides to appoint an examiner; and (iii) the general time period for examinership should be reduced from three months to 70 days.

The examinership Part of this Bill provides for the appointment by the High Court or, in certain circumstances, by the Circuit Court of an examiner to a credit union if it appears there is a reasonable prospect of survival. A petition to the court may be made by specified persons and must be accompanied, inter alia, by the report of an independent accountant containing certain information. In exceptional circumstances the court may allow the petitioner a period of no more than ten days for the submission of the report to the court before the petition is heard.

A credit union shall be deemed to be under the protection of the court from the date of presentation of the petition. The effect of such protection on the status of a credit union is described, and the court may make such orders as it thinks fit where a reciever or provisional liquidator already stands appointed to the credit union.

The powers of an examiner are defined in this Part, and specified persons are required to cooperate with him in his work. In consultation with members and creditors, the examiner shall prepare for consideration by the court a report containing proposals for a compromise or scheme of arrangement. The court may also hold a hearing where evidence exists of a substantial disappearance of credit union assets. Various procedural provisions are included related to the appointment of an examiner and the court's adjudication of his proposals for a compromise or scheme of arrangement.

Part XIII deals with offences and civil proceedings in sections 171 to 179 inclusive. It outlines the general provisions relation to offences which may be committed by credit unions, their officers and other persons for contravening the provisions of the Bill.

The final Part of the Bill, Part XIV, provides in sections 180 to 188 for the maintenance of the statutory Credit Union Advisory Committee, the making of ministerial regulations under the Bill and various matters relating to records, documents and notices.

It is clear from this extensive summary that the Bill before the House is a lengthy measure. I said at the outset of my remarks today that the Bill's overall structure and content is attributable to the extensive consultation process which took place between Government and the credit union movement over a number of years. For my own part, I have had six formal meetings with the Irish League of Credit Unions representatives since taking responsibility for credit unions. In addition, I addressed each of the last two annual general meetings of the league. On every occasion the Bill was the main agenda item.

It is unique in my experience that any economic sector should have been given the freedom to develop the legislative blueprint for its own future. The movement has therefore had a major formative influence on the Bill.

After the heads of the Credit Union Bill were agreed by Government, the league sought the continued involvement of the registrar in developing the detail of the Bill. This in itself is a reflection of the interest and long-standing commitment of the league to the development of the Bill, and it is one which deserves a special mention by me today. These further consultations resulted in a substantial measure of agreement between the league and the registrar by mid-1995. While there were certain areas where both parties agreed to disagree, the thrust of many of the Bill's provisions will be recognised from that agreement.

Notwithstanding the agreement between the league and the registrar, it is the case that certain credit union interests have expressed reservations about various elements of the Bill. In part this is due to the fact that since the agreement with the registrar was concluded, the Irish League of Credit Unions sought the inclusion of new provisions which were not previously part of the credit unions' agenda. In some cases, I have not found it possible for policy reasons to accept the content of the agreement between the league and the registrar. In other cases the parliamentary draftsman, together with the Attorney General's office, has determined that the terms of the agreement between the league and the registrar, or of the new proposals which came forward to me from the league, were either inappropriate or unworkable.

It is also the case that in the movement's initial reaction to the Bill, misunderstandings and misapprehensions came to light as to the Government's intentions in one or two important areas. I would cite as a prime example section 41(4) dealing with the property of a credit union. This reads: "If the whole of a building held by a credit union ceases to be occupied for the purposes of the business of the credit union, the credit union shall dispose of its interest in that building as soon as it is practicable to do so." Apparently this has been read to mean that where any part of the building held by a credit union ceases to be occupied, the credit union is required to sell the building. The opposite is, in fact, the case.

The section is intended to mean that where the entire building ceases to be occupied, the credit union shall be sell the building. Nor does it mean that the credit union cannot take in a tenant, lease part of the building and so on. It is my intention to resolve such misunderstandings before the Bill completes its passage through the House.

I had the pleasure of attending, addressing and responding to questions and comments at the special general meeting of the Irish League of Credit Unions last month which was specifically devoted to considering the terms of the Bill. In this way I have been made aware at first hand of the views of the credit union movement on some of the Bill's detailed provisions. Since the league's special general meeting, officials from my Department have had lengthy meetings, at my request, with the registrar and the league over a number of days to discuss the league's particular concerns. I am pleased to report that all parties to the meetings felt the discussions were constructive in seeking to resolve a number of the league's difficulties.

I have also received advice in recent weeks from the statutory Credit Union Advisory Committee and from individual credit unions. In addition, representations have been made to my Department by other interests ranging from Government Departments to competitor savings institutions such as the banks and building societies. I should stress I have not yet met representatives of the banks or other savings institutions in relation to this Bill. The Bill, as published, arises entirely out of the consultation process with the movement and the advisory committee, the parliamentary draftsman's consideration and my own judgement.

The two-month period since the publication of the Credit Union Bill has proved to be beneficial in helping me to review a number of the Bill's provisions, and it is my intention to meet shortly with a number of the interested parties to discuss some of the details of the provisions.

I said on its publication that the Bill is in good shape, primarily because of the expert contributions the Registrar of Friendly Societies and the credit union movement have made in its preparation. I would like the House to be aware, however, that arising from ongoing consultations, I expect to table on Committee Stage a number of amendments to the Bill following contacts with the offices of the parliamentary draftsman and the Attorney General. I have no doubt that new issues will arise during the course of our debate on Second Stage which will give further cause for reflection on my part. I assure Deputies opposite that I am open to considering all of the views and comments which may be made on the Credit Union Bill.

I want this Bill to maintain the fundamental ethos of credit unions as community self-help institutions. In addition, I want to see them remaining as important providers of personal finance to their members. Correspondingly, I do not want to see them becoming banks or building societies. This of necessity implies that some differentiation between credit unions and other financial institutions must be made in the Bill. I am also anxious that the registrar should have appropriate supervisory controls over credit unions as they develop and expand their range of services. Credit unions have an excellent track record of security for their members' savings, and I want the registrar to be able to act where necessary to resolve any emerging difficulties arising in any individual credit union, thereby preserving their excellent reputation as sound, community-based financial institutions. I commend the Bill to the House.

This Bill is dear to my heart and the Minister of State's comments have not impressed me. A series of meeting have taken place about this legislation. The Minister of State said he attended a special meeting in Limerick. At that meeting a motion, requesting the meeting to instruct the league board to convey to the Minister that the Bill as published is unacceptable and to engage in negotiations with him with a view to securing amendments in line with the views expressed by the movement, was passed. The meeting dealt with many of the Bill's provisions, including the restrictions on credit unions, recognition of the league, pension schemes and new services under section 48.

The Bill has given rise to a great deal of discussion among credit unions. The Minister of State described it as a state of the art Bill. I challenge that view because there is nothing new in it. It merely erodes the influence of credit unions and the voluntary concept established over many years. It also erodes the worthwhile provisions of the 1966 Act.

The credit union movement has a successful national profile. There are approximately 432 credit unions here with in the region of 1.6 million members. Savings through credit unions amount to almost £2 billion and loans to approximately £1.5 billion. There are approximately 600,000 borrowers and 10,200 volunteers working in credit unions. The credit union movement operates on a voluntary basis. It employs approximately 172 full-time and 583 part-time employees and this legislation attack the ethos of that organisation.

I have first hand knowledge of what a credit union means to a local community. It permeates every fabric of Irish life, it transcends the ruralurban divide and the political, religious, cultural and social life of our people. Credit unions have lifted local communities out of poverty, unemployment and the hands of moneylenders. They have given hope and dignity to people whose futures were very bleak.

Twenty years ago Tallow, a small town in east Waterford, had a high unemployment rate and very little going for it. It got its first lift when a credit union was set up in the town. An unoccupied building was purchased, an enterprise centre was set up and approximately 100 jobs were created in ten years. While 100 jobs may not be great in national terms, they are crucial in Tallow.

I do not want to appear parochial, but I must refer to Mitchelstown Credit Union, one of the largest and most successful credit unions in the country. It developed, not due to a marketing campaign, but because of the service it provided to its members. It is owned by members, run by members and sets out to serve their needs. It has 4,000 young members and is one of the most innovative in the country in terms of new services, but they will be eroded by this legislation. It operates an ATM system and issues travellers cheques and foreign currency without commission. It also operates a children's savings scheme and was the first credit union to introduce savings stamps. Its members travel to schools in the area to organise saving schemes among school children. That credit union is community based and promotes many projects in the area.

There is a strong commitment to the co-operative movement in Mitchelstown. The success of the credit union was probably based on the philosophy of Horace Plunkett. It is basically and agricultural area and in recent years the credit union established an agricultural committee. Mitchelstown credit union is innovative, it operates on a voluntary basis and is well managed, but all its good work will be destroyed by the provisions of this Bill. That credit union also operates a direct savings scheme for workers who can have their cheques paid into the credit union by their employers. It also operates general and motor insurance schemes and has succeeded in eroding the urban-rural divide in the area.

In national terms most people's lives have been improved by the credit unions. Approximately half the country's population are members and in an election year it is important that we cater for those members.

It would be great if the Government could claim credit for the good work of credit unions. We can be proud of what the credit union movement has achieved. It is the most successful co-operative movement in the country. It has enabled many people to become self-reliant and has created a community spirit among our people. The co-operative concept is strong in the Munster area.

I am pleased that people and can be motivated by something other than material gain. Credit unions do not make profits. They are owned by members, run by members and are for the good of members. Anybody who wishes to join can do so. They are fundamentally different from other financial institutions and levelling the playing pitch should not impact adversely on the credit union ideal.

If we are to believe the contents of the explanatory memorandum, the Bill has two main purposes, to provide for the development of credit unions and for increased regulation of the movement. In the past each credit union regulated its own affairs. We tend to go overboard with regulations. We should model ourselves on North America in this regard where there is very little regulation in a free market society that has large scale development and job creation. If we over-regulate our credit unions we will simply kill the goose that lays the golden egg and destroy the voluntary concept that has developed in the credit union movement over many years. Who will give up their free time to work in credit unions if they are subject to regulation by a faceless person in Dublin who has little interest in his or her local area?

How can the Minister of State claim the Bill provides for the development of credits unions when they will be restricted in what they can do for their members? The Bill restricts the amount of savings a member may have with a credit union, but there is no reason for such a restriction. Under current legislation people may save as much as they like with a credit union. Is such a restriction a good development? I do not believe so, and I will elaborate on that matter further if I have time. The Bill also restricts to £20,000 the amount a credit union may lend— up to now the only restriction was the provision relating to 10 per cent of assets. I understand the Minister's position, but in this day and age £20,000 is considered a very small loan and would not buy a 1200cc car or a new kitchen for the home. Many credit unions have undertaken developments. One credit union in the greater Dublin area grants substantially higher loans than that provided for in the Bill. How can we regulate for what was done in the past? The restriction is ludicrous and, instead of helping to develop credit unions, will retard their development.

Up to now a credit union could invest in property or otherwise to benefit their community, but under this Bill they will be unable to buy property or invest funds over and above 0.25 per cent of surplus funds in the social and cultural aspects of their community. Is that development? The Minister indicated his intention to bring forward amendments and I urge him to apply commonsense in doing so. The limit on loans should be based on a percentage, taking into account the size of credit unions, and members should have the right to decide what they wish to do with surpluses. The credit union in the Rosses in Donegal, with 250 members, would be considered a small credit union while the credit union in Tullamore has in the region of 25,000 members. It is unacceptable to apply the samelimit in all cases. Lending by credit unions should be based on their membership and asset value.

The Bill is modelled on the operations of the Central Bank, which controls the banking system. The Minister said he received several submissions, but it seems as if he only met people from banks and other financial institutions, otherwise somebody in his Department favours the banking system. The banking ethos is evident throughout the Bill. As a member of a credit union, I believe it is not in the interests of banks and other profit-makers to operate on a corporate basis.

In recent days we saw the results of the privatisation of a building society. I support privatisation and believe in the free market, but people should not be allowed to earn £500,000 per year. Those people claim they deserve large salaries because the success of their companies depends on their management, but nobody is worth that amount of money. In addition, many of those people have shares in the equity market, which have grown enormously. We must curb the granting of such large increases in salaries, which is evident not only in the financial area but in all sectors of industry. It is not good for society to see a small number of people getting such large salaries and it is very annoying to people who work hard and receive a mere 3 or 4 per cent increase each year. We must legislate to prohibit the granting of very large increases in salaries because it has a bad influence on the community. While that practice is allowed in other areas, credit unions, which are voluntary organisations, are being restricted under the Bill. There is a clear message there and we must take up the challenge in that regard.

The 48 per cent provision relating to new services is ludicrous because it would take more than two years to introduce even the smallest service. Is the Minister seriously suggesting such a procedure is necessary for a credit union to, for example, make available a bus ticket to its members? Surely there is a difference between the development of a major service and meeting the simple needs of members. Many credit unions have not considered introducing new services. Will each credit union have to apply to the registrar to put a new service in place? In that event the registrar would have to examine the accounts, which could take up to two years as there is a huge backlog in the office of the Registrar of Friendly Societies. If additional staff are necessary to do that job, who will pay them? Will that be a further cost on credit unions?

I do not know who advised the Minister, but the provisions to be introduced by regulation are very offensive to credit unions. Not alone does the Bill provide for the proper regulation of credit unions, it seeks to take over the entire movement. It dictates who shall sign cheques, who shall be paid, from where a credit union may borrow, how much it may lend to an individual and for what duration and who can be appointed to and removed from the board. If the voluntary board member fails to comply with the provisions, he shall be guilty of an offence. Beleaguered credit unions seeking release from the State will have to find considerable funds because their only right of appeal is to the High Court. An amendment is necessary in that area and we on this side of the House intend to put forward such an amendment on Committee Stage.

The impact of the Bill will be to frighten credit union volunteers. That is of concern to many people whom I and my party have met. A large number of representations have been received about this matter, including one received yesterday by Deputy Liam FitzGerald from Trinity Credit Union Limited, Donaghmede, Dublin 13.

The strength of the credit union movement lies in the autonomy of each credit union and the fact that responsibility for the proper management of funds rests with the members. Under the Bill that position will be changed. There will be many empty buildings because the members will be frightened away, and the drive, philosophy and ethos of the movement will be killed.

The following letter appeared in The Examiner of 13 February 1997, headed “New law will hamper credit unions' ethos”, written by Paddy Candon, Raheen, Rosbercon, New Ross, County Wexford, who, I understand, is a very influential man in the credit union movement, a sincere individual who believes in what he says:

The Minister of State for Commerce, Science and Technology, Mr. Pat Rabbitte, has rightly and laudably acknowledged the self-help and mutual character of Credit Unions and is concerned that its ethos be preserved.

The ethos of Credit Union is, of course, the ethos of co-operation, a distinct socio-economic system based on a set of well-defined principles.

These principles underpin three fundamental. strands in the social and economic development of persons and groups:

They uphold the dignity of the individual.

They ensure fair sharing of the fruits of labour.

They promote subsidiarty, encourage self-reliance and empower people to provide for all their needs through their own efforts.

This is the real Credit Union ethos, which was uppermost in the minds of the founders of the movement in Ireland in the 1950's. We tend to overlook the motives which promoted the pioneers to introduce Credit Union to Ireland.

They were concerned that, having provided a mechanism — the Credit Union — for people to control their financial destiny, they would then begin to provide their other needs — food, housing, work, education, health-care etc. for themselves.

Credit Unions have now reached a point in their development where this "second-phase" development can begin in a structured way.

Legislation which arbitrarily and without good reason, hinders or frustrates this development is damaging the "ethos" which is of such concern to the Minister.

If people, through their credit unions, supported by enlightened and enabling legislation, can achieve this independence, the pressure on Government agencies will be progressively lightened. The benefits to society are limitless.

The unnatural "caps" on shares, deposits and loans, the excessively intrusive regulatory regime, the frustration of the organic evolution of the Movement through Chapters and League, limitation on the right — a natural right — to own property, all of which are features of the proposed legislation are anti-social.

The overall thrust of the Bill is intrusive, tending to centralised control which is unwarranted in a movement which, founded on principle of self-help, self-regulation and self-responsibility — principles which should be encouraged in other areas of economic and social activity — has demonstrated the value of the co-operative approach to solving our problems.

In a society notorious for over-centralisation, and attempt at centralised control of a social movement which has demonstrated brilliantly for over 40 years the value of genuine decentralisation is politically misguided and an insult to the intelligence and humanity of the 1.65 million voters and their families who have created the movement.

This Bill takes away from the ethos of decentralisation. It will have a retarding effect on the movement because of the way it has been regulated over the years under the supervisory authority of the Irish League of Credit Unions. This Bill has not recognised the role of the Irish League of Credit Unions, which has done great work since its foundation. Were it not for it, we would not be debating this Bill. The Irish League of Credit Unions should be the regulatory authority, rather than the friendly societies. Its supervision, control and interest in this area must be admired. Not one penny of members' money has been lost over the years and I am not aware of any volunteer having been charged in court for mishandling moneys.

What registrar of friendly societies will do the work of 13,000 volunteers? The last report the Registrar of Friendly Societies produced was for a number of years up to 1993. He inspects credit unions only and it takes him up to two years to process their annual returns.

Debate adjourned.