Dáil Éireann debate -
Tuesday, 10 Apr 2001

Vol. 534 No. 3

Adjournment Debate. - Bank Practices.

Mr. Flanagan

This matter is of considerable concern not only to my constituents, but to many workers and pensioners throughout the country. A new system introduced before Christmas means that the banks will only deal with people who are properly registered account holders. Anyone who does not have an account in the bank has no business in expecting to engage in the transaction of any business because he or she will not succeed. His or her cheque will be non-negotiable unless he or she has an account to which to lodge the cheque. This change of practice is completely unacceptable. It is causing anxiety, upset, hardship and grave inconvenience for thousands of families throughout the country. I urge the Minister of State to use his undoubted influence with the banking industry to dissuade it from proceeding with this policy. Students, pensioners and public sector workers are worst hit.

Many social welfare recipients and pensioners do not have bank accounts. I challenge the Minister of State or anyone else on any side of the House to state otherwise. These people are now being told the only way their cheques are negotiable is by way of lodgement directly to an account. By forcing people to open accounts in the way the four main banks now do, the banks cream off further profits which, in effect, is little short of exploitation of the weaker sections of the community. This highhanded practice, accompanied by the widespread closure of the rural bank network, is anti-social and motivated exclusively and solely by profit margins.

Thousands of public sector employees may now seek to be paid in cash, which would be an administrative headache as well as being an unsafe practice. Twenty years ago cash payments were discontinued when deemed a security risk, resulting in armed security officers of the State offering protection to private banks and private financial institutions. That has continued to this day. That bank security is still provided by the State should be acknowledged by the banks, in return for which they should meet the needs of their consumers by agreeing to the simple transaction of cashing a guaranteed cheque.

There are 250,000 State employees and tens of thousands of pensioners who may well be justified in seeking a cash payment from the State if their cheques are to remain non-negotiable and are not cashed. The Government has a clear, legal and moral obligation to facilitate payment to its workers and the Minister for Finance needs to address this matter urgently. The Government must ensure that its mode of payment is honoured and that remuneration by way of guaranteed Government cheque is delivered to the appropriate person, namely, an employee of the State, who can negotiate and receive cash for that cheque. Current bank practices mean the cheque is of little or no value. It is merely a piece of paper and not a negotiable instrument.

Banks have continued to return record profits in recent years earned by increased charges and higher interest rates and made mainly on the backs of vulnerable consumers. The Minister, Deputy McCreevy, and the Minister of State, Deputy Cullen, have a duty to assist in the resolution of this problem and both should act firmly and speedily.

Minister of State at the Department of Finance (Mr. Cullen)

The two largest banks, Bank of Ireland and Allied Irish Banks, introduced a restriction on the encashment of cheques in bank branches towards the end of last year. The new procedures require, in general, that cheques be lodged to an account rather than be fully or partially cashed over the counter. The banks implemented this restriction for all private sector cheques, with some few exceptions, but the application to various categories of Government payments differs.

Regarding social welfare payments, those made by way of a cheque are drawn on an account in the Bank of Ireland. The Department of Social, Community and Family Affairs has been assured by the Bank of Ireland that the bank will continue to encash those cheques as before. That Department is not aware of any particular difficulties encountered by its clients in cashing payments.

Almost all other Government payments are either made electronically or by way of payable orders drawn on the Office of the Paymaster General, which is part of the Department of Finance. The exception among Departments is the Office of Public Works, which issues its own payable orders drawn on an account in the Central Bank.

Bank of Ireland introduced the new procedures with effect from 13 November 2000, stating that the changes were necessary to ensure the bank complied with accepted European banking practices. In December 2000 Allied Irish Banks introduced similar procedures. However, AIB decided not to apply the restriction to Government payments and it continues to cash payable orders from the Office of Public Works and those drawn on the PMG. Pending discussions with the Department of Finance, Bank of Ireland postponed the application of this restriction on payable orders drawn on the Paymaster General's office and on the Office of Public Works.

The Department of Finance with a number of others had discussions with Bank of Ireland about aspects of its proposal, including the timing of its introduction, availability of funds for withdrawal once lodged and the exemption of payments to certain groups. In those discussions, Bank of Ireland made a number of alterations to its proposed procedures. It exempted payments to pensioners where these are made on a distinctive payable order form distinguishable from others. This means pensioners paid by the Paymaster General, which includes all civil servants, as well as those paid by other Departments, such as retired teachers, gardaí and Army personnel, may cash the pension payment over the counter if they so wish. That answers the point made by Deputy Flanagan.

As for all other Government payable orders, Bank of Ireland insists the order be lodged in full to an account, but it does not require that the customer wait for the normal clearance period of several days for access to the funds. The bank has committed to making the money available by 9 p.m. that day at the latest for withdrawal through an ATM. This delay is for technical reasons relating to the bank's system and processes. Bank of Ireland decided to operate the new procedures on this basis for PMG payable orders from mid-March and for Office of Public Works orders from the end of March.

The position with the other retail banks is as follows: AIB does not propose to apply the restriction to any PMG payable orders, Ulster Bank and TSB require the customer to lodge the payable order and await the normal clearance period of five days, and NIB will encash payable orders, but only for customers of the particular branch.

The difficulties a number of staff have experienced since in cashing Government cheques was raised by the Joint Industrial Council Group of Unions, representing State industrial employees, at a meeting of the council on Tuesday, 3 April 2001. The council, under the chairperson of an industrial relations officer nominated by the Labour Relations Commission, advised that a meeting be arranged between trade union representatives and employers to discuss the difficulties involved. A meeting has been arranged for tomorrow, Wednesday, 11 April, between employers and trade union representatives to discuss the matter further.

The changes in encashment procedures have no effect on anyone whose salary is paid directly by electronic transfer into an account in a bank or building society. In that case, the funds are available from 7 a.m. on the payment date. This is increasingly becoming the norm, and in general it is desirable the banks utilise technology to improve retail payment systems. However, this should be done in partnership with the customers and the wider community and should take account of their wishes and concerns.

The banks jointly made proposals in 1999 to the Taoiseach and the Minister for Finance regarding improvement of the retail payments systems. One of these related to the payment of the bills of utility companies and another to the establishment of what has been termed a "universal" account which would provide electronic payment options for people who do not have a payment account. Discussions have proceeded since between the banks and An Post to develop these proposals further, and an announcement is imminent on the first of these. I hope those discussions will be successful in devising a solution that meets both the need to harness technology to improve efficiency and to address the concerns of the public.

The report on strategic issues facing the banking sector, which reported last year, recommended among other things that the banking industry develop a strategy to address the issue of maintaining appropriate mechanisms for and levels of access to banking services. It also recommended that the regulatory authority for the financial services sector should monitor and report on this from a customer perspective. Since that report, the Government has decided to establish the Irish Financial Services Regulatory Authority as a single regulatory authority for the financial services sector. It will be appropriate for the new authority to consider the recommendation of the report on access to banking services. As it will combine the different aspects of regulation in one organisation, it will be in a position to consider the matter both from the customer's perspective and in terms of the overall banking system. It is the intention that the new authority will be established as soon as possible. I hope it will be the beginning of 2002.