The Credit Union Bill, if suitably amended, can be a monumental milestone in the further development of the credit union movement, which is the success story of community service in our times. All sides of the House have paid tribute to its development over the past 40 years. No one has criticised it because it is not possible to do so. It is worthy of the highest praise. The service to the community which has resulted from the flowering of the credit union movement is obvious all over the country.
In an economy where profit taking is the motivating factor credit unions are the exception. They are driven by service rather than profit which makes them unique in the delivery of their services. It is necessary to look at the background of the movement to plot its course ahead. The extension of the range of services it provides is based on the express needs of its members, not on making a profit or competing with financial institutions. In another sense it is also a full expression of the principle of subsidiarity. Individual credit unions supply services to cope with the needs of an area, urban or rural.
As a result credit unions have earned the respect of the communities in which they operate. They have an enviable record of customer awareness and of the ultimate in consumer friendliness. The value of credit unions is measured by the fact that people need them, use them, own them and have a strong sense of belonging to them. In good times and bad they offered a range of financial services tailored to their members' needs. That is a co-operative movement at its best — people working together to build a better life for themselves, their families and their community.
We come to the Bill against that background, in which the movement has the full trust of all its 1.5 million members — there is no instance to date of any member having lost a penny as a result of the activities of a credit union — and the movement itself has sought the updating of the legislation. This Bill should be considered on that basis, not in terms of Government versus Opposition or party against party. This House should ensure that the framework being put together for the future development of the movement will provide whatever minimum regulation is necessary — all such institutions require some regulation — and allows that marvellous success story to continue to develop. That is obvious all over the country.
I should declare an interest, as one must. I am a founder member of Skibbereen Credit Union, one of the first credit unions in west Cork. There are now seven such bodies in the area — Skibbereen, Bantry, Bandon, Clonakilty, Berehaven, Kinsale and Dunmanway — all are successful. They have assets of upwards of £40 million and their combined membership is about 29,000. The overall vote in the next general election will not be much higher than that, which is an indication of how widespread the movement is, permeating every town, village, street and townland, fully owned and supported by virtually the entire population. The same applies throughout the country.
The cornerstone of the movement is its volunteer aspect, whose unquantifiable benefits may be a cause of jealousy among other financial institutions. There are approximately 12,000 members around the country, including a couple of hundred in my constituency, who are directors, supervisors and volunteers. None of them are paid for their services; it is the epitome of a community-based institution. Given this, we must be cognisant of the views of the membership.
The movement has worked well to date and it could be argued that if it works, do not fix it. While it seeks a new statutory framework, any changes must be made with caution. The onus of proof is on those who propose major change to show how it can help to achieve their objectives. Nevertheless, while we do not want to interfere with the formula of success of the movement, it has become so big that changes are necessary, including the creation of a regulatory framework.
I favour a light regulatory framework because I am aware of the benefits of self-discipline from the many bodies in which I am involved. A successful self-regulatory regime has operated in the movement, and while it should not continue to operate alone with the registrar, we should not cast aside the benefits of self-regulation nor interfere unduly with the formula for success.
We should be also aware of difficulties that have arisen in other countries. For example, the saving and loans institutions in the USA have been a cause of trauma and trouble in recent years. While there is no question of the movement proceeding down that road, we would be wise to consider international experience and contain any adventurism.
There is no suggestion that the movement has been anything other than above board, properly managed at local level with mechanisms for internal discipline and self-regulation and cooperating fully with the registrar and the Department. It is a perfect success story. The Bill must be judged and amendments suggested against that background. If properly amended this can be a great Bill which will help the development of the movement.
The Bill must reflect the philosophy and ethos of the movement, which is all Ireland in scope, with the league covering a wide range of 550 credit unions in terms of diversity and size, both north and south. For example, in my own area, one union has assets of £12 million and another has assets of £2 million, while one union elsewhere has assets of £55 million with another holding assets of £500,000. The framework to be put in place must take account of this diversity, which is representative of the strength and character of the movement. It should not be threatened.
The basic investment in a credit union is by way of shares. At present there is a limit of £6,000. The Bill proposes a limit of £20,000. This is too low; the limit should be approximately £30,000. Those who invest beyond the shares make deposits, where essentially no monetary limits apply. While there should be some limit, it must be set to ensure that unions will not be restricted in attracting the necessary funds to enable them continue with the fine service they provide. It should be relatively high and should, because of the diversity within the movement, relate also to the total shareholding within the union. A sum of £50,000 or 2 per cent of the total shares, whichever is the greater, is reasonable.
While approximately 90 per cent of shareholders are within the share limit, the credit unions need the investment of depositors to enable them provide their range of services. It is also important to ensure that shareholders at the upper end of the savings bracket should continue to be restricted to one vote and that the limit set on deposits should reflect a percentage of the credit unions shares, not simply a monetary limit.
There is no monetary limit on loans, which has never been a problem. The onus must be on those proposing monetary limits to explain why they are necessary. While a limit of 10 per cent of assets applies, this has never been reached. The proposed limit of £20,000 in the Bill is far too low. It should be approximately £30,000 and should also be fixed as a percentage of the total assets, although a limit of 10 per cent is probably too high given the growth in the movement. A percentage of this kind would reflect the involvement by members in something substantial in the context of their areas.
The vast majority of credit unions loans are for small amounts over a short duration. At present only 132 credit unions have loans in excess of £20,000. However, given the surge in growth of the economy, the demand for loans in excess of £20,000 will increase. The absolute limit could seriously impede the development of the potential of credit unions, especially the larger unions. It could serve to discourage investment if the facility for members to borrow to even the level of their own savings is not available. Given the diversity in size and the lending capacity of the unions, it is logical to set the limit as a percentage of total assets.
To a large extent, self-regulation has worked well to date with the savings protection scheme having funds of £28 million or £29 million which represents over 1 per cent of total savings. Self-regulation has never been a problem. Fidelity bonding is available for all employees and volunteers. I am not saying we should focus exclusively on self-regulation but we should make the best use of it, working in consort with the Registrar. That type of control is what is needed rather than anything that would stifle the growth of the credit union.
Many Deputies referred to the question of new services. Why not have new services if they are of benefit to members? The existing additional services have a proven track record and should continue. Why would the movement not offer new services, for example VHI group schemes, on an agency basis at no risk to the credit union? An open, encouraging approach is needed in relation to new services, one that is not affected by unnecessary bureaucratic delays.
The restriction on the ownership of property seems odd. Why is there a need for this restriction? Section 41 (4) states:
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.
Surely it is a matter for the credit unions who have managed their affairs responsibly so far to make decisions concerning their property. If nothing else, this would seem to be a constitutional right. Why should there be such a restriction? If restrictions are being imposed, the onus is on those seeking them to give the reason for them. I see no reason for such restrictions. I do not agree with the suggestion that buildings could be leased in certain circumstances. That is not my reading of the provision.
We have a wonderful credit union movement that has captured the support of a huge proportion of the population. It has proved itself in towns and villages in urban and rural areas. It has been the outstanding success story of the second half of this century so far as community driven enterprise is concerned. We salute that success and want to support the movement. That is why the final shape of this Bill is so important as we head into the next millennium. We want to see that success story continued in the coming years and to ensure that the framework being put in place will be such as to allow that movement to flourish.
The basic framework of the Bill is good. It has the potential to be a great Bill and a monumental milestone in the further development of the credit union movement. The Minister has had consultations with the Irish League of Credit Unions which has made certain proposals. Deputies on all sides have made proposals as to how the Bill could be improved. The Minister has been open in his consultations both inside and outside the House. It is a big Bill and many Deputies wish to contribute. Unlike other Ministers he has taken the trouble to sit in and listen to virtually the entire proceedings. I compliment him on that and I have every expectation he will take on board many of the suggestions made on all sides and that on Committee Stage various amendments will be made, the consequence of which will be that this Bill, as amended, will be an enormous success in the years ahead.