Dáil Éireann debate -
Thursday, 8 Nov 2012

Vol. 782 No. 1

Credit Union Bill 2012: Second Stage (Resumed)

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

Deputy Joan Collins

To follow on from the contributions of my colleagues, as the Minister noted in his introduction, all Members recognise the importance of the role of the credit union movement in respect of its volunteerism, its not-for-profit aspect and so on. I must declare my interest because I am a member of a credit union and have attended its annual general meetings in most years. Even in comparison with the annual general meetings of my union, such meetings are very robust. Everything is checked and questioned and such annual general meetings are open, democratic events that play a crucial role within credit unions nationwide, as each year they go to their members with their accounts, proposals, the dividend and so forth.

The role played by credit unions has been crucial. I refer to the small loans that play a crucial role in the community, such as €500 to pay for a communion day, €1,000 for a holiday, €1,500 to get some work done on the house and so on. Moreover, practically everyone is involved in the credit unions, which form a three million member movement. In my constituency of Dublin South-Central, on the basis of this legislation and the movement's concerns, a meeting was called recently in Sundrive Credit Union, at which ten credit unions, representing 65,000 people, were represented. It is a huge body of people who absolutely need that contact with credit unions and that access to money with which the movement facilitates them. I refer to the recognition by the loan boards of the credit unions of those people they know in the community and with whom they deal, year in and year out. They know that Anne, who borrows €1,000 every Christmas, will pay it back over time with a stash of money she has and who will then return the following year to borrow the same amount. It will now be questionable whether such people will be able to access that money because of the restrictions that are being introduced to regulate loans to people.

The concerns expressed by the Irish League of Credit Unions have been generally raised. The league's concerns are viable and should be taken seriously because they would not have been raised unless the league considered them in that light and it was a positive contributor to the commission. I believe it constituted one of the main groups to urge that this commission be set up, and throughout the nine month period, the league engaged constructively with the Government, the Department of Finance and other groups within that.

As for the nature of the credit union, as Deputy Daly has set out clearly, although some matters were agreed, the credit union representatives then went back to their membership and at the annual general meeting, the 1,500 members present disagreed with aspects of it. Consequently, that disagreement must be reflected in the Dáil and the concerns communicated to the Minister. Points have been made in respect of the Central Bank Acts from 1942 to 2011, and the credit unions are also concerned that they will be covered by future statutory instruments, the consequences of which are unknown. This is an important issue and, consequently, my group will table amendments to support the Irish League of Credit Unions to the effect that the six or so instruments specifically relating to them should be included. If, in the future, regulations or statutory instruments must be brought in with regard to aspects of the credit union movement, that can be done at a later stage. It would be an important and positive response on the part of the Minister to consider and accept such a proposal and to confer again about it with the Irish League of Credit Unions.

As for the Irish Financial Services Appeals Tribunal, IFSAT, I acknowledge it has been mentioned that credit unions would have the right to go before the High Court in the case of an emergency if they needed to deal with something urgently. However, a facility allowing this to happen also should be recognised and included in the Bill in order that they are not merely under the remit of the IFSAT. Other areas that were not covered by my colleague due to time constraints include those proposals that were agreed by the commission but with which many individual credit union members have issues, such as the imposition of the term limits. People within the credit union movement have developed vast experience over the years and I have seen this in my own credit union. People have participated in the credit union throughout their lives, having started as 20 or 25 year olds who went to the annual general meeting and learned how credit unions work.

In retirement they would be actively involved, and great wisdom and experience comes from these people, making the credit unions and the league what it is. There should not be any imposition in that regard. No harm has come to our credit union to date and I cannot see it doing any harm in future. That is reflected in many of the credit unions across the country. There is much experience and by pushing out to the voluntary sector, there will be a significant impact on the league's ethos and the role of the credit union in communities.

There are restrictions regarding who can be on the boards, which are also questionable. Many people, including employees, volunteers and family members, can play a crucial role, and there is accountability in the credit unions. Every year they are checked rigorously by the membership, and this has played an important role in the past number of years and lifetime of credit unions. We will be putting down amendments to reflect the league's concerns in that regard.

The Irish League of Credit Unions and everybody else agrees that there should be regulation but there are areas that must be tweaked to ensure the ethos of volunteerism in credit unions can be retained.

Deputy Seamus Healy

I welcome the opportunity to speak to the Bill, which is very important legislation. I am sure most Members in the House would have practical knowledge of this area. Like me, many are likely to be members of their local credit union. Many families have been long-standing supporters and members of credit unions and in my own case, my late father was a founding member of Clonmel Credit Union; I am sure that history is mirrored across the House.

Members of credit unions can be justifiably proud of the very successful, democratic and community-based organisation that has been put in place over the years. It is a major national organisation led by volunteers providing social finance for members and communities right across the country. In today's world, where we have recession and serious financial crisis, the movement has played and continues to play a very important role in supporting members and communities. It has been very innovative over the years in providing that service. For example, the current Money Advice and Budgeting Service, MABS, is effectively derived from the credit union movement and an innovation started by the Lough Credit Union in Cork some years ago. The credit union movement deals on a daily if not hourly basis with the MABS organisation and others such as the Society of St. Vincent de Paul in dealing with member and community difficulties across the country.

I broadly welcome the Bill, as does the credit union movement and the Irish League of Credit Unions. There must be regulation, which everybody accepts, but those in the movement believe a number of amendments are necessary. There is a very serious concern among credit unions and members that they are being treated, effectively, as commercial banks and being lumbered with years of commercial banking legislation that is not really relevant. It is important to say that credit unions are well operated, managed and capitalised, they are not banks, which is an important distinction. Banks have created the financial crisis we are in and bank workers continue to receive large salaries and pensions. Credit unions have supported members and local communities through the recession on a voluntary and not-for-profit basis. The saying goes that they are "Not for profit, not for charity but for service".

It is important to recall the history and ethos of the credit union movement and where it came from. It is very important to recognise that they are not banks, and the movement was started in 1958, with the first branch in Dún Laoghaire founded by public-spirited people like Nora Herlihy from Ballydesmond, a teacher based in Dublin. Mr. Séan Forde was a baker in Dublin and Séamus McEoin, from Kilkenny, was a civil servant based in Dublin. In the late 1950s these people recognised the difficulties which are mirrored to a large extent in our current position, where we can see unemployment, poverty, poor housing, emigration, etc. Those people started a movement that has blossomed and been very successful over the years.

The movement now has 2.9 million members, with a high percentage of credit union members economically active throughout the country. Savings amount to approximately €11.9 billion and there are 9,200 active volunteers, with 3,500 staff in approximately 500 credit unions nationally. It is a very important, successful and highly motivated volunteer-led organisation. It is supporting members, ordinary people and local communities right around the country. To some extent the movement is based on the old Irish meitheal, or co-operative self-help among a group of people gathered through a common bond. That common bond is there for support, ensuring there is social finance through the likes of small education, home improvement or special event loans. They help people through severe economic difficulties.

There are 500 member unions, and we should compare that to the number of banks. Credit unions are expanding and cover significant areas around the country, not just in cities but in big towns, villages and local rural areas. We can contrast that with the banks, where we have seen a contraction of the services provided; only recently, 44 branches of AIB were closed, along with various other services. The credit union movement is filling the void that has arisen, particularly in smaller villages and towns throughout the country.

The credit union movement is the leading provider of social finance in Ireland, with €750 million provided. Banks are businesses that look to make money but credit unions exist to support members and communities, ensuring members can see their way through financial difficulties.

The credit union movement has a number of concerns with this legislation. For example, the movement's ethos is not effectively recognised and it is being lumbered with commercial banking legislation that is irrelevant to credit unions. It is important to put on record the amendments that the movement wishes to see to the legislation. I support these amendments and hope that the passage of the Bill through the House will see their acceptance.

The credit unions are concerned about the proposal to apply to them Central Bank legislation dating from 1942 to 2011. In their opinion, this is unfair and should not form part of the Bill. They are also concerned about the Central Bank (Supervision and Enforcement) Bill 2011 being applied to them. At a minimum, any regulatory direction must be appealable to the Irish Financial Services Appeals Tribunal.

The Bill should support the sharing of services among credit unions so that members can avail of a wider range of services throughout the country. This would be a practical amendment. The movement also believes that credit unions should lead the way in assisting the Government with its financial inclusion agenda and that the new Bill should enable them to offer electronic payment accounts.

In the opinion of the movement, the Bill should enable credit unions to provide funding to Government-guaranteed schemes and projects with a social benefit. The movement's emphasis has been and continues to be on the provision of social finance.

Acting Chairman (Deputy Joanna Tuffy)

The Deputy's time has concluded.

Deputy Seamus Healy

The movement is concerned about the term limits on directors of credit unions and the prohibitions on the membership of their boards. In its opinion, these are unnecessary and are an attack on its volunteer ethos.

I wish to raise three other issues briefly. A memorandum of understanding must be agreed between the unions and the Central Bank and the office of treasurer must be retained. In addition, the tiering of credit unions is too wide. The movement believes that tiers should not be based on size alone, but also on risk and complexity of business.

I welcome the Bill and hope that the amendments suggested by the credit union movement will be included in the final legislation.

Deputy Finian McGrath

I thank the Acting Chairman for the opportunity to contribute on this legislation. I welcome the debate and pay tribute to the excellent and valuable work carried out by credit unions. I was a founding member of the Irish National Teachers' Organisation, INTO, credit union and many of my extended family have been involved in the credit union movement for more than 50 years. My experience has been positive, as I have seen at first hand the dedication, commitment and compassion shown by those actively involved towards weaker members of society. This is particularly relevant, given the fact that more than 400,000 people are unemployed and many are finding the current environment difficult. It is essential that we commend and pay tribute to the credit union movement's valuable work of many years.

This Bill provides for a strengthened regulatory framework for credit unions and deals with four broad areas, those being, prudential regulation, governance, restructuring and stabilisation. The Bill amends the principal legislation governing credit unions, namely, the Credit Union Act 1997. Some of the main features of the Bill include providing a statutory basis for the sector's voluntary restructuring; changes to governance; requirements on credit unions, such as clarifying various roles and responsibilities; and the provision of stabilisation support to viable but undercapitalised credit unions. These are the key elements of the Bill and represent the core issues that must be addressed, including the regulatory framework. I welcome their inclusion and the fact that the Bill has many positive aspects, as they are relevant to the broader economic debate.

We must also consider the causes of some of the shenanigans that occurred for ten years. Two opposites were evident. On one side were rampant greed and incompetence, and on the other were people in the credit union movement who did their best to help everyone, including society's weaker members. This is the type of debate that our country needs. It is relevant to the Bill. It is important.

For the life of me, I cannot understand how people who were involved in financial services and banking could get bonuses after and destroying the State's financial circumstances. I worked in a disadvantaged school in the inner city for many years. If I was £3 over in my statements to the Department of Education, an inspector would have been on my back checking out my figures. I was required to account for every single penny of a disadvantaged grant of £5,800. However, the people in the financial services and banking sectors who destroyed this country were not accountable, yet they were still given bonuses and pensions.

I do not like to be critical in this instance, as I am broadly in favour of the Bill, but I watched Government Deputies jumping up and down last night regarding pensions and perks. They had an opportunity to vote for our motion, which would have put an end to many of the shenanigans in question. Why did they not vote with us on our Private Members' motion?

Acting Chairman (Deputy Joanna Tuffy)

That issue does not relate to the Bill.

Deputy Finian McGrath

I am referring to finances and the broader economic issues.

Deputy Frank Feighan

The Deputy should mention the €42,000.

Deputy Finian McGrath

If Deputy Feighan wants me to respond, I will tell him about the staff I employ with that money.

Acting Chairman (Deputy Joanna Tuffy)

No. We are going off topic.

Deputy Finian McGrath

I will tell Deputy Feighan about the extra people and how I pay VAT and taxes.

Deputy Frank Feighan

The €42,000 is tax free.

Deputy Finian McGrath

We do research and development. I put the information on my website. The Deputy should look at it this evening after he leaves the House.

Deputy Frank Feighan

I am looking forward to it.

Deputy Finian McGrath

I believe in accountability and transparency. I will not take any guff from Deputy Feighan.

Deputy Frank Feighan

I do not want to excite the Deputy.

Acting Chairman (Deputy Joanna Tuffy)

Deputy Finian McGrath must keep to the subject matter.

Deputy Finian McGrath

May I move on to the legislation?

Deputy Frank Feighan

Only the Independents can excite the Deputy.

Deputy Finian McGrath

If I were Deputy Feighan, I would watch Roscommon hospital. Will the Acting Chairman protect me from the heckler on the Government side? He is upsetting me.

Acting Chairman (Deputy Joanna Tuffy)

Yes.

Deputy Paul J. Connaughton

Tell him to stay on topic.

Deputy Finian McGrath

Another one is starting.

Acting Chairman (Deputy Joanna Tuffy)

Deputy Finian McGrath should be allowed to speak, but he must keep to the Bill.

Deputy Finian McGrath

I was dealing with the regulatory framework and governance issues before I was rudely interrupted by Deputy Feighan.

That the Irish League of Credit Unions, ILCU, had two representatives on the commission does not mean that everything decided by the commission is set in stone. How many recommendations were made to which everyone did not agree? The ILCU has the future of the credit union at heart. The credit union movement has campaigned for many years for radical reform of the regulatory structure of credit unions and advocated the establishment of the Commission on Credit Unions, which I strongly supported. Let us address these points in our debate on credit unions.

The ILCU participated in the commission and has actively supported the recommendations for reform produced by same. It has taken issue with some matters that are either not reflected in this Bill or exceed the conclusions in the commission's final report.

It has taken issue with certain things, and I support it. Will the Minister look at this?

The Irish League of Credit Unions is a membership based organisation and it represents the views of the 3 million members of credit unions. That is some organisation and some group in society. We have a responsibility in terms of inclusiveness and a democratic responsibility to listen to its views. It is entirely appropriate that views of the membership of the Irish League of Credit Union, as expressed in open forums and discussions, are reflected even if those views are contrary to, and at variance with, the recommendations of the Commission on Credit Unions. As the representative group, the ILCU reflects the views of its members as expressed in meetings throughout the country.

This Bill, which represents the most fundamental reform of legislation for the credit union movement in a generation, should be fully debated in the House and all Members' views should be listened to. Many of the stakeholders and many Members of different political parties have a major contribution to make to this debate. The perspective of the members I represent should be reflected in the position advanced in this debate. Nobody's interest is served by stymying the debate on this issue or by seeking to present some form of social partnership around the issue when there are different views and concerns which should be considered. We should listen to the different angles put forward, and there were some excellent contributions to this debate today.

The debate on the Bill will set out the parameters for the future development and operation of the credit union movement. There is widespread agreement on the way forward for the credit union movement. There are still issues of disagreement on how reform proposals will be implemented and I hope these issues will be dealt with by amendments. No one should attempt to foreclose on the debate and, in that vein, I am happy to put on record my views and concerns in regard to this legislation. The Minister should listen to the views of the people involved in the credit union movement, who have made a massive contribution to this society and who represent 3 million people, and take on board the points and concerns I have raised. This Bill is progressive but it could be tightened up and reflect the views and concern expressed by the Irish League of Credit Unions.

Deputy Noel Harrington

Political amnesia is an awful thing. Deputy Finian McGrath was one of the main crutches holding up the last crippled Government which signed off on those pensions and contracts.

Deputy Finian McGrath

I do not know from where Deputy Harrington got that.

An Leas-Cheann Comhairle

Please, Deputy McGrath

Deputy Finian McGrath

I voted against the last Government. I stood up to it.

Deputy Noel Harrington

It is sad to see such amnesia.

I welcome the Bill and congratulate the Minister on bringing it forward. The credit union movement has the largest membership of any organisation in the State, with more than 3 million members out of a population of 4.5 million and with approximately 400 individual credit unions. It has an extraordinary number of members, with 72% of the population being members of a credit union. The European average is 3.5% and the average in the UK, with which we are often compared, is 2.4%. There must be a message there in that the citizens of this country recognised the value of the credit unions and became members. It would be fair to assume that with such a large membership, they are not just membership clubs where members would have a forensic knowledge of the rules, regulations and responsibilities of that club. It has such a large number of members that it is, effectively, a financial institution and millions of members probably do not differentiate between the credit union and other financial institutions in terms of where they lodge their cash or where they go to access small loans and loans for house improvements etc. It is worth noting the not-for-profit ethos of credit unions and their role in attaining the economic and social goals of members, which make the movement unique.

The credit union movement in Ireland is relatively new and was founded in 1958. Credit unions are hugely important social and economic institutions with unique characteristics. The characteristics of credit unions in urban areas may be very different from those in more rural areas. Even in rural areas, one might get credit unions offering different types of expertise or supports. Credit unions have extended their appeal beyond their historical role of serving the financial needs of disadvantaged communities and individuals. Many members are likely to be members of other financial institutions and, indeed, some members of credit unions are members of more than one, such as the INTO credit union, which Deputy Finian McGrath mentioned, or the Garda credit union.

The legislation is a balancing act designed to protect the interests not only of the 3 million plus members of the credit unions but the unions themselves which, incidentally, manage approximately €15 billion in assets. Credit unions are a viable and attractive alternative to exorbitant rates charged by moneylenders, albeit licensed ones, operating throughout the country.

The vast majority of those involved in running credit unions do so on a voluntary basis. Without that valuable voluntary contribution, they could not operate and provide such valuable services to their members. We recognise that all our financial institutions have come under intense scrutiny in recent times because of the behaviour of some, so it is timely and appropriate that legislation is introduced which imposes new rules in the governance and operation of credit unions.

I am aware that the Irish League of Credit Unions has reservations about certain sections of this Bill but one must strike a balance. The Minister carefully considered this in order to strike a balance between all the various interests to create a proper code of prudential regulation in the best interests of everyone involved, which also takes into account that credit unions do not, and will not, cause any liability for the State unlike the financial institutions which have raked in approximately €120 billion in funds just to be recapitalised.

While credit unions are considered the small fish or the minnows of the finance world, it should be noted that almost half of these unions manage assets of more than €20 million and it is, therefore, only right that these assets should be placed under a proper regulatory regime. The four main pillars, which have been outlined, to improve and bring best practice to the operation of credit unions include prudential regulation, something with which we have only recently become familiar - it was as distant to some institutions as doing the right thing; governance; restructuring; and stabilisation. Some of these pillars, in particular governance and restructuring, will cause some difficulties for many credit unions.

The credit union of which I am a member is a smaller one. It has approximately 4,800 members, of which 1,200 or so are active. Under the new governance regime, it will be almost impossible to get people to become involved in committees or to get people who have the financial experience or expertise required under the legislation to carry out duties. I predict that as a result of this legislation, many areas will see mergers of maybe five, six or seven credit unions with one CEO or manager, the relevant committees and officers. That is not a bad thing if it protects the members of the credit union, the citizens and the State and results in a more efficient service. However, it will remove some of the community-based ethos and democracy from credit unions, and that needs to be noted.

I expect it to be teased out further on Committee Stage.

Credit unions in other countries such as Australia have gone through a similar process of creating a proper regulatory regime. This led, in the short term, to the closure of some credit unions. I hope that will not happen here and that they will become associated unions or that they merge or amalgamate. In the long term the process worked in Australia through mergers and amalgamations, and it made it a stronger, albeit leaner, movement which is going from strength to strength. Most of the sections in this Bill are based on the report of the Commission on Credit Unions which was published in April this year. The Minister stated that the Bill includes 60 recommendations from the report.

As I said in my opening remarks, I welcome the Bill. It reflects what we are doing in this House, which is trying to create an environment, in a balanced and delicate way, for the credit union movement to operate and to go on to greater things while protecting the interests of the 3 million members and, indeed, the interests of all citizens. This means providing €250 million initially and ultimately up to €1 billion in State funding to support the credit union movement. Clearly, we cannot do that and allow things to continue the way they have been continuing. The credit union movement obviously cannot be blamed in any way for the mess in which we find ourselves, but operational difficulties have been highlighted and these are being addressed in the legislation.

I look forward to the issues we have discussed and others dealt with in the Bill being teased out further on Committee Stage in order that we can produce legislation with which all of those involved in credit unions can work. I hope when the Bill is passed that we can say we have improved the operation and running of the credit union movement, not just for the members of the unions but for all our citizens.

Deputy Frank Feighan

I welcome the opportunity to speak on this important Bill and I thank the Minister for bringing it to the House. I recognise and pay tribute to the contribution of the credit union movement and its members over the years and the valuable work they have done in this country.

The credit union in my home town started operating in a small room 30 or 35 years ago. It received the support of the community of which it is now a part. It is an organisation of people who saved together and loaned money to each other. It is owned by the members and was run by volunteers. That brings challenges but the community knows it is one of their own. I come from a business background and over the years I have seen many credit unions helping out businesses when access to funding from banks was not forthcoming. I do not think that has been recognised. Certainly, when the crash and the downturn occurred five years ago and the banks effectively closed up shop, the credit unions were available to give a helping hand to many businesses. Those businesses would not have survived without that capital injection, albeit small, from the credit unions. I appreciate that many credit unions got caught when the banks were under pressure, but they have played a role in assisting the banks.

This legislation amends the 1997 Act and provides a framework for the governance of credit unions. As Deputy Harrington mentioned, this might negate the role of the volunteer because the credit unions must move into a system of governance that is different from the somewhat voluntary system of the past. I saw this happen many years ago with a football club in my home town. In the 1980s we were fund-raising to buy a pitch and provide dressing rooms. We had a very loose arrangement whereby the secretary talked to the chairman and he talked to the treasurer. There was no huge accounting system. There was nothing wrong and everybody was honest and upfront, but we were advised by the league body that we had to put governance in place. We did that but it was a great deal more difficult because one was obliged to provide minutes of meetings and various other things. That governance deterred the voluntary aspect because it meant one was responsible for the funds and people's money. If somebody wishes to get involved in a voluntary organisation now, as a result of events that have occurred in recent years they must certainly be able to - I will not say cover their backs - live up to the expectations set down by the Central Bank.

There will be mergers of many of the smaller credit unions, and that will bring its own difficulty. I have no doubt that dialogue and consultation are ongoing within the credit unions and I expect all the views from the smaller unions will be taken on board. The protection scheme of €100,000 is quite reasonable. The credit unions have done a great deal to deter the prevalence of loan sharks in areas of poverty and deprivation because they are of the people and have worked extremely hard to represent the people. I believe many of the views of credit unions have been taken on board, although one cannot take every view on board. I commend the Bill.

Deputy Paul J. Connaughton

I welcome the opportunity to speak on this Bill. The economic crash of recent years was the perfect storm in financial terms, with repercussions that were felt at global, national and local levels. While many families in urban and rural areas of Ireland might not have felt what they were doing would have been impacted upon by the collapse of Lehman Brothers in the United States, the chain of events set in train by the collapse of that bank has had an effect that is being felt by thousands of hard-pressed families throughout the State who are juggling huge household debts, high household bills, unemployment or under-employment and reduced access to credit.

The banking collapse of recent years has caused huge uncertainty in banking circles which has necessitated conducting stress tests on banks across Europe. This has produced quite disastrous results for Irish banks and has highlighted the need for greater regulation of lending. The increased financial regulation has required that financial institutions hold greater reserves. The necessity to increase reserves has created a situation in east Galway whereby many families who regularly get over particularly difficult financial times, such as a child starting college or the expense of Christmas, with the help of a loan from their credit union now find that the loan is not forthcoming and there are no other options available to them.

This Bill arose from the final report of the Commission on Credit Unions. The report was agreed over a nine month period between June 2011 and March 2012 by all members of the commission, including the Irish League of Credit Unions. The Bill covers 60 of the recommendations in the commission's report. I am pleased to note that as part of this process, submissions were sought from members of the public and interested parties. Despite facing huge budgetary difficulties, the extent to which this Government is committed to supporting credit unions was demonstrated by the fact it put aside €500 million to deal with the problems in that sector. This is a very significant injection of funding into the sector at a time when the nation's coffers are empty. It underlines the fact the Government understands the crucial role credit unions play in every community in the country.

The success of the credit union movement in Ireland to date is based on the fact that local volunteers have been willing to give their time to a worthy local cause. The Bill recognises the voluntary nature of the movement but provides greater clarity about the roles of all involved, as well as enhanced training for volunteers and especially for directors. There are four main provisions in the Bill and these deal with prudential regulation in terms of reserves, liquidity and risk management; governance and the roles and responsibilities of various figures; restructuring via transfers, mergers and amalgamations; and stabilisation through the provision of the aforementioned support to credit unions that are under-capitalised.

I am glad to note the Irish League of Credit Unions has given a broad welcome to the Bill although it has outstanding concerns in the number of areas. In recent weeks, I have had contact with many credit unions in Tuam, Ballinasloe, Athenry and Mountbellew in the Galway East constituency to discuss issues raised by the Bill and its possible ramifications. I met the managers of a number of credit unions to hear their concerns. A concern raised on a number of occasions is that although electronic payments were included in the recommendations of the commission, they have not been provided for in the Bill. Many credit union members believe this is as a result of the banks trying to stymie the credit union movement. The imposition of term limits on board members is another element of the Bill that worries many credit union members. They feel smaller credit unions will find it particularly different difficult to find the necessary number of volunteers in a small local area to ensure the regular turnover of board members.

With hundreds of thousands of members, the credit union movement is embedded in communities throughout the country. The credit union often provides the economic lifeblood for families in communities and it is imperative that the Government continues to support the movement and the ideals it represents. Credit unions did not make the lending mistakes of many banks. The voluntary co-operative movement should not suffer for the sins of the banks. The distinction between banks and the credit union movement should be to the forefront of everyone's mind as the debate continues. As the Bill is enacted, we must ensure credit union members and volunteers do not find themselves in a more difficult position because of the irresponsible lending of bankers operating in a loosely regulated and solely commercial venture. Rather than placing obstacles in the way of local credit unions, we must continue to support the movement so that families continue to have access to funds to tide them over difficult periods. We should also continue to support the ideals of the movement, namely, local communities helping themselves.

Deputy John Browne

I welcome the opportunity to speak on the Bill. Over the past number of days, we have received many e-mails from the Irish League of Credit Unions questioning some aspects of the Bill. There is a wide debate outside of the House in the credit union movement, which is a good thing. We all recognise the importance of the credit union sector, which has provided a valuable social and economic service to the people of the country for many years. The credit union is very prominent in Ireland, with approximately 3,000,000 members. For some unknown reason, I had to vacate my position as director of a credit union in Enniscorthy when I became a politician. Seemingly, politicians are not entitled to be on boards of credit unions. I recognise the importance of credit unions and the valuable service they provide to people.

In recent years, they have taken on a different role. In the past, they were seen as the poor man's bank. Credit unions provided a valuable source for people who could not get a loan in the banking sector, such as people on low incomes, those who were unemployed and those in receipt of social welfare income, who found difficult to comply with loan requirements in banking institutions. It is not just now that people cannot get loans from banks. On many occasions, I contacted credit unions to seek support for people in financial difficulty, who needed moneys for different situations. I always found the credit union management to be supportive of, and helpful to, less well-off people.

In recent years, credit unions have broadened their bases substantially. GAA clubs and sporting organisations acquired loans for development. Sporting organisations in receipt of lottery funding received loans from the credit union based on ability to repay the loan. My GAA club is involved in that aspect of the credit union. The credit union was very helpful in the development, which was valued at €1.5 million and employed many people in the provision of new dressing rooms and a sports hall and in developing playing pitches. The credit union provides a service for small businesses and organisations seeking to create and hold onto jobs and expand business. At a time when banks were not very helpful, the credit unions stepped into the breach and offered their services.

We must also recognise the 10,000 volunteers who operate credit unions across our country. These people give up their time for meetings, including board meetings and credit committee meetings. Some 5,000 members of staff are employed by the credit union sector, providing a valuable source of employment.

Regulation is very important and is a buzzword nowadays but it is equally important that the credit union should not be over-regulated. It is important the Bill is fit for purpose for credit unions because people have very little faith in the banking system. We do not want to have over-regulation or to destroy the ethos and concept of credit unions and their manner of operation. It is also important to recognise the social aspect of the credit unions and their services so that credit unions are not tied to severe regulations being laid down for banks. In such a scenario, credit unions might find themselves unable to operate.

The Central Bank was mentioned in the Minister's speech and in the Bill. I am concerned about the heavy hand of the Central Bank. Perhaps it was not heavy enough in the past but now it will be very heavy, which will impinge on how credit unions operate in the future. The credit union movement is popular with ordinary people. Credit unions exist in every town and major centre of population. In my county, there are smaller communities where people give their all on a voluntary basis. Where they are no longer able to survive, smaller credit unions will be amalgamated into larger ones. That may be a good thing because then we can have more regulation and accountability on the amount of money collected, held in reserve and allocated. The only way credit unions can survive in the future is on the basis of loans and income from loans. In any amalgamation, it is important to take into account all elements.

The credit union movement is a voluntary movement. The credit union sector has concern about some regulations and aspects of the Bill concerning the restructuring of boards and the length of time people can remain as directors. Some credit union people believe there is too much interference in how this Bill has been framed. Those who have given a lifetime of service to credit union boards should be allowed to remain rather than turfed out because people want to do things differently according to the Bill. Perhaps the Minister can re-examine this when he is replying on Second Stage and when it comes to amending the Bill.

Public representatives have received literature, e-mails and statements from the Irish League of Credit Unions. This surprises me because the Commission on Credit Unions has reported and the Oireachtas committees have been in dialogue with the Irish League of Credit Unions and others involved in the credit union movement. I felt that agreement had been reached, but new issues have been raised in e-mails to Deputies.

I received an e-mail today from Mr. Kieran Brennan, chief executive of the Irish League of Credit Unions. He said:

We broadly welcome the Bill and the reform provisions it advances. There are some specific areas that we believe should be addressed in the Bill. First, items that were not agreed by the commission are now being proposed for implementation in the Bill, for example, the application of Central Banks Acts and the Central Bank (Supervision and Enforcement) Bill to credit unions. Second, matters agreed by the commission have not been included in the Bill, for example, facilitation of shared services, electronic payment accounts and basic payment accounts. Third, there are some proposals agreed by the commission which many individual credit union members have issues with, such as the imposition of term limits and prohibitions on membership of boards and board oversight committees.

The league, as a representative body, is duty bound to represent the views of its members, even if some of these views may be at variance with the commission's recommendations in a number of small aspects.

When the Minister is replying to the debate, he might respond to some of the issues raised by the Irish League of Credit Unions in its communiqués to Members.

We all want the Credit Union Bill to be relevant to the day-to-day needs of credit unions in the future and, most important, that ordinary people who want to avail of loans or invest in credit unions will be able to do so freely, easily and without the excessively bureaucratic systems that now seem to be operating within banking circles.

Deputy Dara Calleary

I welcome the publication of the Bill and the work done by the Commission on Credit Unions earlier this year, which led to the Bill. It is important that we recognise and acknowledge the importance of the credit union movement in Ireland. We have more credit union members per head of population than any country in the world. On a relatively small island, 2.9 million people have accounts in 403 credit unions. At a time when banks are alienating local communities by closing branches and restricting services, the credit union movement in uniquely placed, with a footprint as deep and wide as it has, to fulfil some basic savings needs. While most of our discussion has focused on lending, the credit union traditionally was also a place for savings. It was a trusted broker and we felt we were saving our money locally. The organisation has done outstanding work.

I acknowledge and support what Deputy Browne said about those who serve on boards of directors and give significant time in assessing loans and running an institution. At a time when we criticise directors of financial institutions, it is important that local people are willing to step up and do this in the full glare of their communities. Some of the proposed rules and restrictions on directorships may have the opposite effect from what is intended. In any organisation, whether the GAA or a credit union, it is difficult to get people to volunteer. If we place restrictions, for the sake of doing so, on people serving as directors we may restrict credit unions from growing and we may throw the baby out with the bath water.

I agree with Central Bank supervision. Clearly, this is needed. The fact that 51 credit unions have reserves of less than the required 10% and another 25 are classified as seriously under-capitalised illustrates the need for supervision. This, however, is not the supervision needed for the pillar banks or the big lending institutions. It must be fit for the type of organisation a credit union is, and getting rid of experienced directors while introducing this new element of supervision is not the way to go. I ask the Minister to look at this issue on Committee Stage and also to address it in his concluding remarks.

The credit union movement has issues regarding its ability to facilitate shared services and electronic payments. The Department is investing considerable State resources in assisting the league in this regard. That is to be welcomed. The more services credit unions can provide, within their remit, the better. In the last number of years, however, some credit unions have gone beyond their remit and ended up in situations such as we saw in Newbridge and in other unions that did not maintain the 10% reserve. The Central Bank acted properly and very quickly. I commend the Minister on the way the Newbridge situation was dealt with so efficiently. Had it been allowed to develop, it would have affected the entire movement and therein lies the problem. A few bad eggs cannot be allowed to ruin the entire movement. Many directors kept their heads, maintained respect for their institution and did not go down the same road as those few. In framing this legislation, which will be on the Statute Book for many years, we must respect the institution and allow for some element of flexibility.

Deputies received a note from the Whips office this morning reminding us that the legislation must be finalised quickly in order to allow the €250 million to proceed. While we need to see the money going into credit unions, I hope the Minister will give time, as we debate the Bill, to consider some of the concerns regarding directorships.

The Personal Insolvency Bill will be a threat to the credit union movement. While that Bill is welcome and needed, credit unions will be in the vanguard of many of the small settlements covered by the Personal Insolvency Bill. As well as lobbying on the Credit Union Bill, the Irish League of Credit Unions needs to focus its energies on readying its unions and briefing them on what is coming with the Personal Insolvency Bill. It would be interesting for the league to provide members of the Oireachtas with a briefing on the projected impact of settlements under personal insolvency legislation, so that we can understand its impact on the credit union sector when it is enacted and begins to take hold. When anyone with a personal loan of less than €20,000 from a credit union avails of the new arrangements, it is the credit union that will take the biggest hit.

As banks withdraw from more and more areas, the credit union will be the only financial institution left in many communities. Deputy Browne mentioned the growing role of credit unions in supporting social projects. We need to work with credit unions and give them some space to do that. Many businesses cannot get funding for small projects that would generate employment. That is what each of the 166 Members of this Chamber should be about. We should give credit unions some element of business lending capability. We do not want to see credit unions having huge business divisions, but a small retailer or a SME owner who wants to buy a piece of machinery and previously might have been able to get a grant from an enterprise board of Leader company should now have the capacity to deal with a credit union. Again, this keeps the business local and there are restrictions on what can be done. The Bill gives us a chance to promote credit unions in doing this.

The role of treasurer is to be abolished and responsibility for accounts and their preparation moved to the manager. This is to be welcomed. Someone will be fully legally responsible for the preparation of accounts. However, the Bill piles new responsibilities on volunteer directors. I would like to think some of the money being pumped into credit unions will be ring-fenced for briefing directors and staff of credit unions on their new responsibilities. This is happening very quickly. The legislation will be enforced in the next few weeks and people's attention will be diverted to the budget.

I hope a couple of hundred thousand euro from that €250 million will be spent on ensuring directors cannot say they were not fully aware of their new responsibilities. Work must be done with the Irish League of Credit Unions and the credit union development group around that funding.

Overall, much of this Bill is welcome but a little fine-tuning could be done to make it more flexible so that it will make a real difference. Let us not get rid of the good experienced people who have done their jobs properly to tick boxes and turn over boards. We must allow some element of flexibility because if we do not, at a time when it is impossible to get people to volunteer, we might get rid of experienced people who have a lot to bring to the table.

Deputy Joe O'Reilly

At the outset, I congratulate the Minister for Finance on bringing forward this legislation. It allows for fundamental reform of the credit union sector, reform the sector campaigned for itself over a number of years. It is a radical reform and is part of an overall reforming agenda the Minister has embarked upon in the financial services, banking and credit union sectors.

As the Minister pointed out, this Bill arises from the deliberations of the commission that sat for nine months and included representation from the Irish League of Credit Unions. From the representations I have received on this Bill, however, there must have been a communications difficulty somewhere. Many of the people coming to our clinics to discuss this are not ad idem with the commission's report and do not see it as reflecting their views. That is not the Minister's fault but there is a divergence there based on the representations.

One could not overstate the impact of the credit union movement on this country over the years. There are 494 credit unions with 3 million members. We are top of the European league for credit union participation. That is a good place to be. Credit unions have had an impact on people's lives, particularly poorer people, but everyone latterly in every village and town has felt the positive impact of the credit unions. The credit union is a self-help organisation based on the co-operative model and I congratulate the volunteers involved in them. They can be proud of what they have done and we should applaud them today, affirming their good work.

It is worth noting the Government is putting aside €500 million to address liquidity issues in the sector. At a difficult time for the economy, that is an enormous input by the Government in the sector and an affirmation of its good work. It merits mention that this is the case. It is endemic of the malaise that affected the country that this is necessary and we must do it. Someone mentioned to me on my way to speak on the Bill today that the figure going into the credit unions is the same as the money that will be needed to build the children's hospital.

There will be restructuring under ReBo but in my conversations with people from the sector I have noted that we should not always see big as beautiful. Many of the problems in the banking sector down the years suggest that big is not always beautiful; it was big banks that brought us to our knees. It is not necessarily always the right thing. While the facility to restructure might exist, I am glad to report that in Cavan, in my part of the county - Bailieborough, Shercock, Cootehill, Kingscourt, Ballyjamesduff, Virginia and Cavan town - we have very good, functioning credit unions. They are all doing their business very well and responding to local needs. Amalgamations are not always appropriate and while the potential should be there for such amalgamations, it should not necessarily be the default policy position.

It is right to draw a distinction in the legislation between the role of the management team in a credit union and the voluntary directors, with the latter drawing up broad policy while the management execute that policy. Concerns have, however, been relayed to me by voluntary personnel. They are concerned they will have to engage in 15 to 20 hours per year of continual professional development in the financial services field. Professional development and lifelong education is meritorious, but only when we buy into it on a voluntary basis and it suits our personal circumstances. For a number of volunteers, however, it will not always be possible. Flexibility and common sense must be applied in this area, so volunteers would not be under too much sanction.

Furthermore, I appeal to the Minister on Committee Stage to look at sections dealing with the turnover of directors and the three year movement of officers. In the towns I mentioned, which caught Deputy Tóibín's attention, and the successful credit unions in them, I could cite individual directors for whom the credit union has been a passion and lifelong commitment. I appeal to the Minister to look at this on Committee Stage to see if he can moderate that. I know the objective and theory behind it is excellent but it might not be possible in a small town to have sufficient volunteers for that level of rotation. That should be reconsidered and I ask the Minister to revisit that. It would be inappropriate to go through names but I can think of directors who have been in some of the credit unions for a lifetime. They are needed because they have a corpus of knowledge that is beyond reproach and they are recognised for their probity. The objective is to get rid of the opposite but we do not want to throw the baby out with the bath water so this should be revisited.

The prudential requirements and Central Bank regulations are fair enough. It is wrong to describe the credit union as the poor man's bank but it did provide that service, in addition to a multitude of others. In recent years, it was everyone's bank. I would not want the credit unions' capacity to make small loans based on local judgment removed. I am concerned the Bill will regulate the degree to which that role at local level might be removed. All of us know and can identify people in our community who would rather starve than leave a bill unpaid, people of the highest integrity, but they might not have a good script through no fault of their own with the dislocation of traditional industry and the construction sector. They might not have a script to match their character but the local directors and management would know their calibre. I welcome the regulation in the legislation that the Central Bank must consult with the Minister and the credit union movement when drawing up regulations, but I appeal to the Minister in dealing with the Central Bank on this element not to lose the capacity of the credit union to respond to a local need and local person of quality who should be supported at different stages.

That is worthy. It is also correct and a good thing that the Central Bank will modulate or supervise investment by the credit unions. The fact that many credit unions may have had an involvement with Anglo Irish Bank in the past cannot be avoided. We need regulation of credit union investments and I welcome that.

I welcome the legislation in its totality, in particular its reforming nature. I appeal to the Minister to consider three areas. First, the Minister should act to modulate the volunteer sector in order to achieve his objectives but also to deal with the situation whereby excellent personnel of high calibre are necessary in a small town for the purposes of continuity. Second, I ask him to consider restructuring as an option rather than as an imperative, where a good local credit union is operating. Third, I ask him to ensure, through his Department, that the ethos and the traditional function of the credit union, namely, helping out families in need at critical times in their lives, is not lost in the midst of new regulation.

Deputy Regina Doherty

We have very good reason to be proud of our community based co-operative savings institutions. There are over 500 credit unions across the country and they have helped to promote the values of thrift in neglected communities, saving many from penury in the process. In the current crisis, banks are withdrawing from poorer areas and they are leaving credit unions as the main linchpin for ordinary people. Credit unions offer finance at competitive rates to members who have a history of saving with the credit unions in question. However, as with so many of our financial institutions, they were hit hard by the recession and I do not consider it an exaggeration to suggest our credit union movement is at a crossroads.

At the end of last year, 51 of our 404 credit unions were under-capitalised, 25 of them seriously under-capitalised. The publication of the Credit Union Bill strengthens the regulatory framework for credit unions and provides the basis for a restructuring of the sector over time in a way that is stable and that protects the credit union members. The Minister, Deputy Michael Noonan, said recently that credit unions are essential to our society and, while they had been hit by the financial crisis, he felt they had fared much better than some of our household banking names.

The Bill will bring about radical restructuring and closer Central Bank supervision. The process will be overseen by a restructuring board, ReBo, ensuring that the timetable for restructuring is delivered upon. Restructuring will not apply to all credit unions, however. Some will continue to operate successfully on a stand-alone basis provided they have a viable business model and meet regulatory requirements.

The Government is putting €500 million into this process to make sure it is effective. Crucially, the Bill affirms the power of the Central Bank to calibrate its regulation of the sector according to the nature, scale and complexity of the register of credit unions as the supreme word on questions of solvency, systems and controls. Effectively, the regulator now has unambiguous backing to treat credit unions as it treats banks, as Newbridge Credit Union learned in January when the Central Bank appointed an administrator to run it. The idea behind the new legislation is to create an incentive structure that persuades credit unions to merge into bigger, stronger entities, develop new expertise, sophistication and products, and overcome the systemic difficulties posed by the accumulated loan losses and asset write-downs that have ravaged their balance sheets in at least one of every eight institutions.

With at least 50 of our 404 credit unions holding less than the minimum amount of capital, reform is an urgent issue for their survival. This is a once-off opportunity for the credit union system to take steps that should probably have been taken 20 years or more ago. The process will develop structures and a business model that will make it sustainable for future generations.

The Irish League of Credit Unions, ILCU, has criticised elements of the legislation, particularly term limits on directors and other membership restrictions, as anti-democratic and an attack on volunteerism. I do not believe there is anything volunteers should be afraid of. The Credit Union Development Association, CUDA, has not objected to any of the new governance standards and has actually been lobbying for similar changes for many years. The Bill is about how we can have the maximum number of sustainable credit unions with the maximum presence possible. There are two main drivers for consolidation. On the one hand, it is a way of addressing the current weaknesses in the sector while, on the other hand, it is a business strategy for credit unions that want to achieve the scale necessary to move to a more efficient and sophisticated business model.

The credit unions are especially worried, as unsecured creditors, that they might be at a disadvantage to mortgage lenders with regard to the new Personal Insolvency Bill, where secured and unsecured debt are both at play. They are bracing themselves for heavy losses that could threaten their viability and thus perhaps force them into marriages of convenience with larger institutions. If ReBo begins its work this quarter as planned, the process should be well under way before the losses begin to mount.

The new rules are necessary. The local credit union is part of the financial mainstream these days and looks after millions of euro of members' cash up and down the country. However, greater sophistication and oversight will be better for savers and credit unions alike. It is imperative that the valuable work of credit unions continues at a time when ordinary people have rarely been more bereft of financial support and guidance.

Deputy James Bannon

I welcome this Bill, focused as it is on amending and updating the Credit Union Act 1997. It is, of course, self-evident that the economic landscape in 2012 is vastly different to that of 15 years ago, not that this is, or should be, the prime motivator for such amendment. Natural shifts within the financial sector would be indicator enough that change must be ongoing. In a struggling economy, with confidence in banks at an all-time low, credit unions have a very important role to play throughout the country, particularly in rural areas.

The credit union movement has a place in all of Irish life, so much so that it is considered by many to be very much a national institution. This, however, is to limit the scope as credit unions operate in 96 countries worldwide. I believe the inclusion of the element of volunteerism in the running of these unions creates a valuable social as well as economic ethos, with a unique character. It is this element that increases trust and brings the credit unions into an important position in the communities they serve. This is not in any way to reduce the professionalism of the sector and the diversity of the members.

In many ways, it could be considered that the credit union movement has come full circle. While initially set up to serve the financial needs of disadvantaged individuals and groups, credit unions are now in pole position to update their focus, while retaining their initial modus operandi and incorporating an important lending element to what one could refer to as disadvantaged small and medium-sized business. By this, I mean "disadvantaged" in the financial sense, given the securing of essential start-up and operational funding has been virtually closed to this sector.

While the current economic downturn ensures that disadvantaged individuals are still well served by credit unions, the credit unions also have a strong role to play in the funding of small and medium businesses. It is my strong contention that the credit guarantee scheme, which facilitates €450 million of additional bank lending, should be operated through the credit union network. This scheme empowers the Minister for Jobs, Enterprise and Innovation to give loan guarantees to a designated lending institution, and the obvious candidate in terms of facilitating local small and medium-sized businesses would be the credit unions. As enterprise boards and the Minister's own Department oversees the progress of the scheme, this should be more than possible.

The credit guarantee scheme is targeted at providing temporary funding to projects to address specific market failures that prevent banks from lending to some commercial enterprises or businesses by providing a level of guarantee to credit unions against losses on qualifying loans. Likewise, the microfinance fund, which is aimed at start-up, new or growing enterprises with no more than ten employees, provides loans of up to €25,000 for those who do not meet the risk criteria of commercial lending institutions. This fund is an exciting development as it will generate €90 million in lending to 5,500 micro-enterprises and support 7,700 new jobs. Again, this service should be provided through the credit unions.

It is essential, however, that any changes proposed under this Bill will create a blueprint for the sector that will ensure a structure that is planned and coherent.

Under these criteria, any potential merging of credit unions should be driven by pre-emptive action by weak or failing entities, which should not be allowed to jeopardise the interests of members in the future. In other words, while this Bill delivers on over 60 of the recommendations of the commission report, it is up to the credit union movement to maintain a sustainable credit union sector.

I was interested to hear of an initiative that very much illustrates the power of credit unions to impact in a positive way on communities. I understand that Mercy secondary school in my constituency of Longford-Westmeath, which I previously attended, will from next September offer first year students the option of replacing heavy textbooks with iPads. While, as reported prior to the start of the school year the cost of this initiative was a concern for parents they are now hopeful of purchasing the iPads by way of loan from the local credit union to be repaid in instalments of €5 per week. The elimination of heavy schoolbags will be a huge benefit to the well-being of students. Such community activity is a demonstration of the small but powerful benefit of a credit union presence in local areas.

I welcome the Government's commitment to the credit union sector in terms of the €500 million set aside to address problems therein, despite difficult budgetary constraints and competing needs for scarce resources. This puts the onus on the credit unions to undertake the necessary changes to honour their commitment to the taxpayer, whose funding they have accepted, to deliver a viable sector.

Deputy Peadar Tóibín

Cuirim fáilte roimh an deis labhairt ar an ábhar tabhachtach seo.

I welcome many of the Government's proposals with regard to the credit unions, which have been discussed by the Commission on Credit Unions. This legislation offers an opportunity for further support for the credit union movement throughout this State. It also offers us an opportunity to create a world-class movement here, one which will be an example not alone for Northern Ireland but for the international credit union movement. The success of the credit union movement has been a particularly Irish story. Credit unions are part and parcel of every community in Ireland, North and South. Whether one lives in Dunboyne, Derry, Ballivor or Belfast one has access to a credit union. The credit union movement is an all-Ireland body developing and delivering for people.

Financial institutions across the globe have collapsed around a business model that created elites that were bound together by greed and financial gain. During the past couple of days there have been many discussions about the pensions awarded to board members of banks. The amounts paid to these individuals is shocking, in particular at a time when the Government is enforcing cuts on the poorest in society. Contrast the pay that is received by people such as former Deputies Dick Spring and Alan Dukes and the damage done by Allied Irish Banks and Anglo Irish Bank to the community of Ireland with the voluntary and unremunerated effort by the boards of credit unions in places such as Navan and Clonmellon and their contributions to families and communities. Credit unions are a central part of Irish life.

The Irish League of Credit Unions represents the interests of almost 500 credit unions, 103 of which are based in the North of Ireland. The movement has 3 million members, savings of €11 billion and assets worth more than €13 billion. Credit unions are available to the people of Ireland during periods of hardship, including in September when children are returning to school, at Christmas time or when small businesses need a loan to keep them afloat for a short period or to start up a new business. In these times of increased unemployment, increased costs and reduced earning power, credit unions are needed more than ever. Where the banks failed, the credit unions stepped in. They are critically vital in sections of our rural and disadvantaged areas which the banks refuse to service.

In addition to the impact of credit unions on the communities they serve they also provide a different business model, one which is not held together by greed and financial gain. It is a business model that is held together by a common bond of mutual support and trust. It is often forgotten, when we speak of financial institutions or businesses in this State, that there are many successful models that include the not-for-profit model, the main objective of which is the common good of society. We must ensure we help such organisations to grow.

The core values of the credit union movement represent the way forward for a sustainability in financial institutions that has been heretofore unseen. I accept that the credit unions are operating in a difficult and challenging environment and that the economic downturn has increased unemployment, leading to difficulties in respect of the repayment of loans. Sinn Féin and the Irish League of Credit Unions fully support the need for enhanced regulation for the benefit of credit unions, their members and society. We believe that the majority of the proposals in this legislation, as developed by the Commission on Credit Unions, are good and sensible. However, I am concerned about the inclusion in this Bill of provisions which were not discussed by the commission, in particular the application of Central Bank legislation from 1942 to 2011 to credit unions and the consequences for them in this regard. These proposals and their impact were not discussed, developed or agreed by the commission. The Department maintains that they will have no real impact on the operation of credit unions. However, this is not the view of the credit union movement. It is not clear from the legislation what aspects of this considerable body of law will be applied to credit unions.

I am also concerned about the application of the Central Bank (Supervision and Enforcement) Bill 2011 to credit unions, which also was not discussed or recommended by the commission. The application of this legislation needs to be clarified by the Government or removed from credit unions until a reconvened commission can discuss these issues, following which subsequent legislation can be drafted. I believe a number of other issues need to be addressed in this legislation, which would ensure a strengthening of it. The credit union movement is looking to the future. The people need progressive and forward facing modern financial services. Essential to this is the provision of shared services across the credit union movement, in particular the development of electronic payment systems. The legislation as drafted is silent on this matter. It is hoped the Minister will reflect on this matter and will at a future date include a provision which enables and promotes the development of such shared services. It has been suggested that the Government is opposed to this out of concern for other financial institutions. I hope this is not the case and that the Government simply omitted to include such a provision.

The Bill is also silent on enabling credit unions to use their resources to invest in socially progressive schemes that would provide a return for their members and deliver for their communities. As I stated earlier, the credit union movement currently has assets worth approximately €13 billion. A fraction of this money could be invested in local communities, thus creating jobs and delivering real change at a time when real change is sorely needed. Surely it is better to borrow from the credit unions than it is to pay exorbitant rates to banks and bondholders. It is hoped the Minister will include a provision in legislation to enable this process.

As I stated, the credit unions embody how a financial institution should operate. They hold true to the core values of working on behalf of members and the wider community. Credit unions reward savers, support members in their needs and invest in business. We need to ensure this legislation does all that is required to progress these core values. Tá súil agam go ndéanfaidh an Rialtas macnamh géar ar na pointí a luaigh mé agus go gcuirfidh sé leasuithe isteach chun déileáil leo.

An Leas-Cheann Comhairle

I call Deputy Michael McNamara who is sharing time with Deputies Ann Phelan and Dominic Hannigan. I advise the Deputy that the debate will adjourn at 2.15 p.m., and he can continue his contribution when the debate resumes.

Deputy Michael McNamara

I am glad to have an opportunity to contribute on this very important matter which affects rural and urban communities throughout the country. Earlier today I read parts of the judgment in the N. & anor. v. Health Service Executive & ors. case in light of the upcoming referendum. I was struck by the reference to the Book of Kings and the exercise of wisdom required by decision makers in certain circumstances. Wisdom of this nature is required of the Minister for Finance as we come towards the conclusion of Second Stage and move to Committee Stage.

The credit union movement is of tremendous value to all sectors of society but there are problems because, like almost every other sector of society, credit unions got carried away during the boom. Clearly, there is a requirement to regulate credit unions to ensure at a fundamental level that members whose moneys are saved with credit unions are able to receive interest, their moneys are safe, and those who volunteer and participate in credit unions can do so safe in the knowledge that what they are participating in is properly regulated and above board.

There is an expression that one can see what everybody is wearing when the tide goes out. The tide went out in 2009 and many financial institutions appeared increasingly naked. It became evident the investments made by many financial institutions were insufficient and that in many instances there was not enough money to meet the needs of these institutions. To a large extent this is why the State is in the position it is. Unfortunately, credit unions were not immune from this. The Irish League of Credit Unions report of 2009 made clear that problems existed in some credit unions. Nevertheless I would not like to see all credit unions banded with those which were overly flathúlach with the money of others during the good times.

In these more difficult times the need for credit unions is greater than ever. In 2002, during the boom, 240 new people experienced financial difficulty and 200 existing clients received assistance from Clare money advice and budgeting service. These numbers jumped dramatically to 640 new and 600 current dependants last year. Along with the Minister for Social Protection, Deputy Joan Burton, two weeks ago I had the honour to attend in Ennis the launch of a new information leaflet on saying no to doorstep credit. It is part of a joint initiative between MABS, the Citizens Information Board, the Society of St. Vincent de Paul and the credit union to assist people in financial difficulties. The leaflet points out that borrowing €500 from doorstep credit can cost approximately €650 six months later. It is exactly to prevent this type of practice that credit unions were set up, and to enable people who, before the advent of credit unions and before they became widespread, were reliant upon loan sharks and moneylenders to finance their day-to-day activities. While acknowledging the need to regulate credit unions, we should not lose sight of the very important social function which they carry out in society. Ironically, as we realise in these difficult times the necessity to regulate credit unions, the function they carry out is becoming more important than it ever was when they were not regulated.

Debate adjourned.