Vol. 527 No. 2
7 Mr. Bell asked the Minister for Finance when he will publish the promised legislation to deal with dormant accounts in financial institutions; the proposed terms of reference in this regard; the membership of the body to disburse surplus funds; and if he will make a statement on the matter. [27984/00]
At a meeting held on 21 November, the Government approved my proposals for draft legislation on dormant accounts and it will now be finalised by the parliamentary counsel. Officials will also consult with the credit union movement in relation to arrangements that could apply to dormant accounts in credit unions on an agreed basis. I expect that legislation, which will apply to all financial institutions, will be published early in 2001.
The legislation will define "dormant accounts" as being any account with no customer initiated transactions in the previous 15 years. The underlying objective of the proposals is to ensure that the funds in these accounts are returned to their rightful owners. Credit institutions and insurance companies will be required to take all reasonable steps to identify the beneficial owners of such funds with a view to repayment. It is only where the owners cannot be traced that the funds will be taken into the care of the State with a right being guaranteed to the beneficial owners or their successors of those funds to seek a refund at any point in the future.
The legislation will not affect the right to privacy which currently exists between a financial institution and its customers. This will be fully protected under the proposals as no information regarding the original ownership of dormant accounts will be made publicly available or passed on to the State.
A board of trustees, nominated by the Minister for Social, Community and Family Affairs in consultation with the Minister for Finance, will be set up with a remit to disburse any surplus funds which will be those over and above what will be required to meet possible refunds to owners for charitable purposes, or purposes of societal and community benefit. It is proposed that an independent chairperson will be appointed, along with representatives of community and other groups as well as a senior official from the Department of Social, Community and Family Affairs. The funds will be managed by the National Treasury Management Agency on behalf of the trustees.
Why did the Minister settle on 15 years as the appropriate term? This matter was discussed on a few occasions in the past and I understood from the Minister's previous responses that he was inclined towards a shorter term than 15 years. Will he define what he means by "surplus funds"?
A number of factors convinced me to set the figure at 15 years. It is the lowest figure in the EU for dormancy. Other countries have similar legislation where accounts are considered dormant if there has been no activity for 30 years or more. The lowest figure we could find was 15 years. Another consideration was that we did not want to apply what could be deemed uncompetitive restrictions on Irish bankers. My initial figure was ten years while the Irish Bankers' Federation wanted it set at 20 years and we settled on 15 years.
If the period of dormancy is short, the administrative costs will be higher. Many more thousands of accounts will arise with a limit of ten to 15 years than if the limit was 15 to 20 years or more. This was a consideration in settling for 15 years because I want the banks, under the legislation, to bear the administrative costs of dealing with these accounts. They will only remit the total to the National Treasury Management Agency. If a person turns up in time and wants to claim back his or her money, he or she will not apply to the National Treasury Management Agency but to the local bank branch. It will give him or her back the money and that will be subtracted from the sum in the annual return the following year. If I opted for a lower figure, the banks would still have to comply with the legislation but they would not be as co-operative.
Regarding surplus funds, the NTMA will have all the money that is given. A small amount will be deducted for administrative costs and a small sum will be set aside to cover situations where people turn up looking for their money in banks but the amount of refunds is greater than the amount coming in. The rest of the funds will go to the trustees who will disburse them.
Is it a case of guess work? Will most of the funds be available for distribution?
Some 99.99% of the money that goes to the NTMA will be transferred every year to the trustees. A small amount will be withheld in case a situation arises the following year where the banks do not have sufficient money to meet refunds. However, this will be a small proportion of the funds. Over time, all the funds will be disbursed by the trustees. It is a precautionary measure. I hope the legislation will be introduced early in the new year and it can be debated further at that stage. However, all the funds will be disbursed.
What obligation will be placed on financial institutions to search for possible beneficiaries and notify them?
That will be clearly laid out in the legislation and there will be a long list of criteria with which they must comply. They will be subject to strict penalties if they do not comply with the criteria. I am sure that during the debate on the Bill Deputies will have some ideas about how it can be improved. However, there will be strict rules with which the financial institutions must comply. They must be satisfied that accounts are dormant and if they do not follow the rules, they will be penalised. The rules will be set out in the legislation.
Relevant criteria will be also laid out in the legislation regarding the disbursal of the funds by the trustees. It will be for the trustees to disburse the money. They will be appointed by the Minister for Social, Community and Family Affairs in consultation with the Minister for Finance. However, it will be up to the trustees to give out the money. It was described recently as another lottery type fund, but that will not be the case.
Will post office accounts be included?
Yes. They will be included in the dormancy definition as will unclaimed life insurance policies. However, prize bonds will not be included.
