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Dáil Éireann debate -
Tuesday, 23 Jun 2015

Vol. 883 No. 3

Credit Unions: Motion [Private Members]

I move:

"That Dáil Éireann:

agrees that:

— the Government has no clear policy to support the strategic growth and development of credit unions in Ireland;

notes that:

— the credit union movement is critical to the economic and social well-being of communities all over Ireland with almost 3 million members and nearly 400 offices nationally;

— the sector, offering primarily savings and loan services, employs 4,000 people and has almost 10,000 volunteers;

— credit unions have survived the crisis well with just 1% of credit unions needing State funding support since the financial crisis began;

— the not-for-profit and independent nature of credit unions is vital to the success of the sector;

— in other jurisdictions, the role and function of credit unions is clearly set out at a national policy level and credit unions have been able to develop and grow the products and services that they offer members; and

— with the necessary infrastructure development and support, credit unions could develop into a vibrant, not-for-profit and competitive alternative within the financial services sector in Ireland;

is concerned that:

— the sector is overburdened with restrictive limitations which are disproportionate to the nature of its lending and this is stifling the growth potential of credit unions;

— 35% of all credit unions have been operating with lending restrictions for a period of five years or more;

— current Government policies do not support credit unions developing additional products and services and not a single credit union has received approval for additional services since the banking crisis began;

— the approval process for credit unions seeking to engage in services such as debit cards is unclear;

— transfers of engagements and mergers seem to be the only solution being progressed at the moment with no clear view as to what the long-term positioning of these larger credit unions will be;

— section 35 of the Credit Union Act 1997 restricts the percentage of a credit union's loan book that can extend beyond a ten-year term, thereby restricting credit unions from engaging in any meaningful long-term lending, including mortgages;

— section 35 of the Credit Union Act 1997 further restricts a credit union from lending to any members for a period of one year who have altered their repayments, while no such restrictions apply to the banking sector, thereby placing credit unions at a disadvantage;

— mortgage customers in arrears are effectively forced to rely exclusively on banks or moneylenders for credit;

— recent legislative changes have had the effect of further disadvantaging credit unions and given a competitive advantage to the banking sector;

— the Personal Insolvency Act 2012 has had a disproportionately negative impact on credit unions vis-à-vis other financial institutions;

— the reclassification of credit union funds under Basel III rules has given banks a competitive advantage in attracting deposits;

— the European Bank Recovery and Resolution Directive, transposed into Irish Law in December 2014, offers no protection to credit unions;

— the proposed legislation in the most recent consultation paper, Consultation on Regulations for Credit Unions, on commencement of the remaining sections of the 2012 Act, CP88, issued by the Central Bank of Ireland, CBI, further diminishes the competitive position of credit unions;

— the proposed cap on savings has potential to cause reputational damage to credit unions, will drive funds from the credit union sector into the banking sector and distort competition between the banking and credit union sectors for new deposits;

— the proposed liquidity requirements for less than eight days will diminish any potential for earnings on those deposits for credit unions; and

— the combined effect of all of these factors, which are outside the credit unions' control, could seriously impair the credit unions' ability to grow and flourish and will ultimately lead to the weakening of the sector;

and calls for:

— the Minister for Finance to bring forward a White Paper on the role of the credit union sector within the broader financial services sector in Ireland;

— the establishment of an industry-led forum with representation from all stakeholders that examines the future growth potential of credit unions in Ireland;

— investment in infrastructure development within the sector that will facilitate the growth and development of products and services offered by credit unions;

— a review of section 35 of the Credit Union Act 1997 relating to restrictions on rescheduled loans and term limits on lending;

— a review of the process for the approval of additional services;

— financial impact analysis to be conducted on the extent of losses incurred by credit unions arising from the Personal Insolvency Act 2012;

— an examination of the Personal Insolvency Act 2012 by the Competition and Consumer Protection Commission;

— financial impact analysis to be conducted on any proposed future regulatory changes or additional guidance to ensure that such changes will not damage the sector's income potential;

— appropriate and timely consideration to be given to the impact on the credit union sector of decisions at a European level that affect them; and

— the CBI, in its consumer protection role, to engage directly with credit unions to establish the impact the current legislative and regulatory restrictions are having on communities."

I am pleased to move this motion on behalf of the Fianna Fáil Party on the subject of the challenges facing the credit union movement at this time. I acknowledge the presence in the Gallery of a wide range of members of the credit union movement, including representatives of the Irish League of Credit Unions, the Credit Union Managers Association and the Credit Union Development Association.

The motion is balanced and realistic. It is the result of an extensive consultation process we have engaged in with the credit union movement and I am grateful for the assistance we have received in drafting it. I place on record the Fianna Fáil Party's unequivocal support for the credit union movement. As a party, we are determined to support the continued development of credit unions.

The credit union movement has a proud tradition in communities throughout the country. With expert local knowledge and strong personal relationships with members, credit unions are able to make sound judgments about lending to individuals, small businesses, the self-employed and farmers. Credit unions have a particularly strong presence in rural areas. The significance of this is even greater in the context of branch closures and the decimation of the post office network. This is not to underestimate the importance of credit unions in cities and major towns.

The unique feature of credit unions is that they are rooted in the communities they serve. With 4,000 employees, almost 10,000 volunteers and approximately 3 million members, no one can dispute that credit unions have served the country well. They have a proud past and the purpose of this debate is to help secure their future.

The credit union movement is under attack from excessive and disproportionate regulation. The indifference of the Government towards credit unions is underlined by the lack of any clear strategy for their future.

Much has been made of the high-profile examples of credit unions that got into difficulty. Credit unions are not perfect and many were not immune to the excesses of the Celtic tiger and made mistakes. Some made bad lending decisions and there were examples of poor governance and a lack of robust of internal controls. It is inevitable that further examples of credit unions with serious difficulties will emerge. However, the not-for-profit, volunteer driven and independent nature of credit unions preserved the sector from the worst examples of group-think that prevailed elsewhere in the financial system. This structure reduced the risk of contagion across the credit union movement.

I will address a number of issues, the first of which is the assistance the State has provided the credit union movement to date. Speaking in the Seanad in October 2011, the Minister for Finance, Deputy Michael Noonan, stated the following.

If the movement was one large bank with individual branches, it would have no problems because the good ones would balance the bad ones, but individual credit unions have problems that are coming down the road quickly.... Some of them will need to be dealt with immediately, but we will not do it in one big bang. My advice is that this will cost between €500 million and €1 billion.

The Government frequently points to the €250 million fund available to the Credit Union Restructuring Fund, ReBo, for the voluntary restructuring of credit unions and the further €250 million available for resolution purposes. Let us first consider the €250 million available to ReBo. To date, ReBo has drawn down less than €6 million from the credit union fund, half of which was spent on its operating costs. Moreover, set against the €6 million spent, one must consider that €1.4 million has been collected from the ReBo levy meaning the net cost of ReBo's work so far is approximately €4.5 million. I accept the fund has done some good work.

On the resolution side, €35.4 million has been drawn down from the resolution fund by way of expenditure relating to incentives for credit union resolution, Central Bank resolution related expenses and interest expenses. Newbridge Credit Union alone accounted for €27 million of the total. However, over the same period the resolution fund generated income of €29 million, made up of €23.7 million in levy income, €1.4 million in interest income and €3.9 million in income estimated from the Newbridge Credit Union liquidation process. Therefore, the net drawdown from the resolution fund thus far is €6.4 million. Between ReBo and the resolution fund, the overall net cost to the State of supporting credit unions thus far is €11 million. When one considers that the Minister estimated almost four years ago that the cost could be up to €1 billion, one sees how wrong the Government has been on this issue.

Whatever other conclusions can be drawn, it is clear that the credit union sector has not been an undue burden on the financial resources of the State. This is a message that needs to be heard loud and clear.

I state unequivocally that our motion is not a call for lax regulation. I commend the work the credit unions have done in recent years by massively improving their internal controls and governance arrangements. The credit union movement has far more professionally qualified people among its employed and voluntary staff that it had previously. The sector has improved its overall reserve ratio without resorting to the types of tactics employed by some commercial banks which raised interest rates and charges at the expense of existing customers.

While the regulation of credit unions needs to be robust, it must also be fair, proportionate and based on a proper assessment of where the risks lie. In other jurisdictions, the role and function of credit unions is clearly set out at a national policy level and credit unions have been able to develop and grow the products and services they offer members. The Government has failed to implement a strategy in the past four years to underpin and develop the credit union sector. Reports in the Irish Independent today indicate there are plans to develop a plan to allow tens of thousands of families to avail of "hassle-free loans" of up to €1,000 as part of "Government moves to break the dependence on moneylenders". This has all the hallmarks of a sop to deflect attention from the failure of the Government to support the credit union sector over the past four years.

Despite having close to 3 million members overall, the credit union movement is effectively stagnant, with the amount of its funds on loan declining year after year. This is unsustainable. The bottom line is that credit unions can only make money if they are able to issue new loans. In too many instances, the ability of credit unions to do just that is being unnecessarily constrained.

Credit unions currently have €4 billion in loans to members, which is approximately 30% of their available funds. On paper, the sector has approximately €6 billion available to lend, with the potential for a massive shot in the arm for the economy.

However, 52% of credit unions are currently subject to restrictions on their lending activity imposed by the Registrar of Credit Unions. When I refer to the registrar, it is not to refer to an individual but, in essence, to the regulator. The restrictions include those on the size of individual loans as well as on overall levels of lending. Of all credit unions, 35% have been operating with lending restrictions for a period of five years or more. These restrictions are impacting the ability of credit unions to earn enough income to pay a competitive dividend.

Section 35 of the Credit Union Act 1997 restricts a credit union from lending to any member for a period of one year who has altered his or her repayments whereas no such restrictions apply to the banking sector. Credit unions are thereby placed at a disadvantage. This is unfair and is stifling the sector and in my view it must be changed. Section 35 of the Credit Union Act also restricts the percentage of a credit union's loan book that can extend beyond a ten year term, thereby preventing credit unions from engaging in any meaningful long-term lending, including mortgages. There is also a strong case for relaxing this restriction to allow the sector to engage in targeted mortgage lending. This could include such areas as tenant purchase from local authorities or where a family member needs to buy out a share in a home from a sibling after inheriting the home. Section 35 requirements increase the risk within credit unions as the average loan is currently repaid within two and a half years. Longer-term lending is critical to manage risk more effectively.

Many credit union members have built up their savings with their credit unions over an extended period. In some instances, members will gather large sums of money through pension lump sums and inheritances or through regular savings. While the majority of credit union customers have less than €100,000 in savings, consumers should have choice with regard to their preferred savings institutions. By limiting credit union customers to a maximum of €100,000 in shares or deposits, customer choice is being unnecessarily limited. The symbolism of this proposed restriction is also significant. It is a clear statement by Government and the registrar of their lack of confidence in credit unions. The underlying message is that credit unions cannot be trusted to hold savings in excess of the deposit guarantee limit. This is a ridiculous constraint on credit unions and I seriously question its validity in competition law. The proposed cap on savings, which has already caused reputational damage to credit unions, will drive funds from the credit union sector into the banking sector and distort competition between the banking and credit union sectors for new deposits.

The current regulatory structure does not support credit unions in developing additional products and services. Not one credit union has received approval for additional services since the banking crisis began. The approval process for credit unions seeking to engage in services such as debit cards is unclear. Credit unions need to be able to offers services such as debit cards if they are to be able to attract younger customers and compete with banks. They also need to be able to offer more products online. The message I get from credit unions is that they simply do not know where they stand with the registrar. I strongly believe that the current credit union regulatory framework is too conservative and is restricting credit unions from modernising their business model, which process is essential to the long-term survival and, hopefully, prosperity of the movement. There are a great many opportunities for credit unions if only they were allowed to pursue them. For example, credit unions have the capacity to play a key role in social enterprise funding as highlighted by Forfás and as is already the case in the USA, Canada and Australia.

Healthy credit unions are not being told that they are healthy and that they should continue to do what they are doing. Equally, credit unions that may be unviable on their own are not being given clear feedback from the Central Bank. That is a key problem which is raised time and time again. The question posed to me by credit union management is whether the regulator understands the ethos of the credit union movement and whether there is an agenda to wind it down eventually. People are posing that question in private meetings and it should be posed openly here on the floor of the House. Current research by the Credit Union Managers' Association shows that an estimated 20 credit unions have outstanding AGMs of between two and four years because they are not being allowed to hold them. This is despite the fact that section 78(4) of the Credit Union Act 1997 allows the registrar to direct a credit union, under certain circumstances, to postpone an AGM for a period not exceeding nine months. On the face of it, it would appear that the registrar is not complying with the very legislation it is supposed to police.

Despite the relatively poor take up of options under the personal insolvency legislation, including debt relief notices and debt settlement arrangements, credit unions are concerned that the law is weighted in favour of bank loans and results in the cost of losses arising from mortgage-related loans within the banking sector being transferred to the credit union movement. This must be examined and quantified. If the legislation is found to be defective, it must be amended to ensure a level playing pitch.

In addition to the items I have touched on, our motion also sets out a number of other practical measures to support the sector including the establishment of an industry-led forum with representation from all stakeholders that examines the future growth potential of credit unions in Ireland; requiring the Central Bank in its consumer protection role to engage directly with credit unions to establish the impact the current legislative and regulatory restrictions are having on communities; and the publication by the Minister for Finance of a White Paper on the role of the credit union movement within the broader financial services sector in Ireland. I look forward to hearing the Minister's reply on some of these points.

Since word broke of our motion a number of days ago, I have received many messages from credit union members and those involved in running them. I will provide the Minister with two examples of the responses I have received from those responsible for running credit unions. One person wrote:

To update you on the position of our own Credit Union: we are still in limbo with the Central Bank but at this stage the effects of the restrictions as we predicted have become critical, these restrictions necessary when introduced originally in, are leading us to a situation whereby [our] Credit Union will rapidly be in a very serious state. It is disappointing to note that despite a complete transformation of [our] Credit Union with among other things arrears on new lending for the past number of years averaging just 0.5%, cost cutting policy changes to include a large number of redundancies, changes to management, introduction of a new and vibrant board, it appears that either through negligence or an agenda the Central Bank are allowing this situation to develop.

Another credit union wrote to me in the past 24 hours to state:

It would appear that the RCU [or registrar] impose these sanctions [the lending restrictions] on an arbitrary basis like some form of sentence or penance for bad behaviour. It's sad to see this credit union 'withering' on the vine as we cannot lend. The demand is there but the restriction limits us. It's time that the RCU's role was reviewed independently. We have no recourse and their word is final in these situations. There must be an arbitration or review mechanism in this process.

Having researched this issue extensively over the past number of weeks, I have to say that unless something changes, I am deeply concerned about the future of the credit union movement. Credit unions need our support now more than ever. The last thing any of us wants to see is the gradual decline of a credit union movement which has served this country so well. What is needed is for the Government and the registrar to work with credit unions in a genuine spirit of co-operation. The Minister could start by postponing the commencement of remaining sections of the Credit Union Act 2012 until the impact on credit unions has been properly examined. Above all else, we need a plan that secures the future of credit unions. I look forward to hearing what the Minister has to say.

I congratulate my colleague, Deputy Michael McGrath, on his very fine exposition of the challenges faced by the credit union movement and the need to treat it differently. If financial difficulties in the credit union movement had been the only financial difficulties facing the financial sector, we would not have had a problem. Taken together, the credit unions in difficulty could have been more than supported by those that had acted prudently. As a sector, credit unions acted in a prudent manner during the boom years and represented a good example for the likes of the major banks as to how to conduct their affairs.

I have noticed that when a problem arises in this society we have a great propensity for imposing more and more regulation and not making a differentiation between big and small and between those who failed and those who did not fail. That is very evident in this case where more and more regulation is being imposed on this sector.

Coming from a co-operative background, I believe the idea of co-operation and that of community ownership creates a totally different situation from the idea of large corporate commercial ownership. To have the same type of rule for a credit union as for a commercial bank negates the reason that credit unions were set up in the United States in the first place. As the Minister knows, credit unions were set up on a mutual basis. In other words, people saved and the collective savings of all the savers were made available within the community for those who needed to borrow. They were not set up as major financial institutions operating under the normal rules followed by such institutions. They were devised as a mechanism for those at the lower end of society to access cash on the basis of mutual solidarity and trust. In other words, they were the ultimate community organisation. It seems the Minister, the Department and the regulators are trying to change them into something else, namely, major financial institutions with the same type of regulation that is imposed on such institutions, forgetting that the great strength of the credit union was mutual solidarity.

It is interesting to consider the basis on which credit unions throughout the country lend money. I note this Government wants to do everything on paper, whether it be a matter related to community welfare officers or any other sector, requiring an increasing number of forms, and more complicated forms, to be completed. It has taken personal knowledge and discretion out of the equation. That change falls hardest on those who are least well off. I have often pointed out that one of the biggest challenges that those with very limited means face when they hit financial difficulties is their inability to borrow money, even very modest sums. Those on a higher income with more assets find it much easier to borrow because banks are much more attracted to them.

Under the credit union tradition, credit unions operated on a common bond basis and personal knowledge of the community and money was lent to people who may not have had major tangible assets on the basis of their record and the lending committee's knowledge of them. If we take that ability away from the credit unions, if we move into having a much more regulated and straitjacketed system and destroy the common bond basis of the credit union, we will be in serious danger of pushing people back towards commercial moneylenders, some legal and some illegal, because people at crisis points in their lives have to access money and if they cannot get it legally, there is always a temptation they will go to people who would not act with the responsibility, solidarity and support shown by a credit union.

I have always been struck by the success of credit unions in the more disadvantaged communities in our society and their success in encouraging the habit of saving and in lending money to people and getting that money back. One of their incredible achievements has been to create a sense of loyalty among their customers regarding their duty to repay. I am stuck every day of the week when dealing with people in financial trouble by the priority they give to meeting their credit union liabilities and perhaps, at times, they list them above more pressing needs because they feel they have that obligation and they also believe that if they are honourable with their credit union that it will be there for them again in their hour of need.

Therefore, we must look at the big picture of why credit unions are different and the reason they were set up to be different and we must reflect on their history and their purpose. I have not been a great fan of the idea of amalgamating credit unions and making them into big commercial organisations because that moves us away from the common bond basis of the credit union and the personal knowledge aspect as those in the credit unions knew the people to whom they were lending.

If the credit unions are changed into big commercial entities, as the Minister seems hell bent on doing with all the regulation that has been introduced, that will force somebody to set up a new type of mutual savings and lending club that will fulfil the role that the credit union always fulfilled. Therefore, it is time to stand back and say that we need special rules. It is also time for all of us in this House to reflect that if the building societies had not been changed into public limited companies and had remained operating as mutual societies facilitating people who had saved to buy a house - with one person being given a loan to buy a house and the next person saving and then getting a loan and so on - we would not have run into some of the major problems we have had as a result of people viewing those societies not as a means of helping people to buy a home but as a means of making a great deal of money for the investors. If they had remained operating for the purpose for which they were set up, we would have avoided many of the problems people now face in regard to their home loans.

Coming from a co-operative background, the idea of mutual assistance and of living in a community and the members of it helping each other with a phase of saving followed by at phase of borrowing and then a phase of saving again, makes a lot of sense to me. It is time we moved back to the basic principles and ensure that the structures we put in place are conducive to this. That is in no way to say that credit unions should not be allowed to have new services, including debit cards and so on, which are part of modern living, with such cards being a device for withdrawing money. With the demise of the building societies operating on a mutual basis, the nearest thing we will now get to building societies will be if we allow the credit unions give mortgage type loans secured on assets.

There are many more things I could say about credit unions. We need to treat them differently because they are different. If we do not do so, the social fallout of that will cause great hardship for the most vulnerable people at the lowest end of our society.

I compliment Deputy Michael McGrath on tabling this motion, which highlights the manner in which credit unions are being stifled by lending restrictions and unfair competition from the banks. I was a member of the board of Enniscorthy Credit Union for a number of years prior to being elected to this House. I was asked to leave it then, which was fair enough from a political point of view. The credit union sector has a proud tradition of supporting communities across County Wexford. With expert local knowledge and strong personal relationships, credit unions were able to make sound judgments about lending to individual customers, small businesses, the self-employed and small farmers. We have credit unions in the four towns in the county and we also have credit union offices in rural areas of the county.

At a time when banks and post offices are closing, it is important they are allowed to continue on a smaller scale in rural communities.

The credit union was always known as the ordinary people's bank. It specialised in communions, confirmations, weddings, Christmas top ups and car loans, without the bureaucracy and red tape people would encounter if they had to go to a bank. The cap now being imposed by the Minister and the regulator is certainly not going to help credit unions.

I am involved with a GAA club which has a savings club. Approximately €800,000 a year is placed into the local credit union in Enniscorthy. Will the cap of €100,000 affect that? We probably have about 500 individual members. Will they be treated as individual members, or will we no longer be able to put that money into the credit union? Will we have to move to the banking institutions? The Minister might clarify this in his reply.

Unfortunately, the reality is that the credit union sector is effectively stagnant due to the current Government policy. Credit unions can only make money if they are able to issue new loans. However, in far too many instances, the ability of credit unions to do just that is being unnecessarily constrained by the cap and the restrictions about which the regulator and the Central Bank are now talking. As Deputy McGrath has pointed out, the credit union sector itself has undergone massive change in recent years. Its regulatory framework has been overhauled, and professionally qualified people can now be counted amongst its employed and voluntary staff. The financial position of the credit union sector has also been improved and, without this, credit unions would have to resort to the type of tactics employed by commercial banks that raise interest rates and charges at the expense of the existing customers.

We have a concern that various legislative and regulatory provisions collectively threaten the viability of credit unions as they very much allude to maintaining an "as is" format, which undermines the ability of the sector to innovate and expand. These include restrictions on the length of time for which a loan can be issued, the maximum amount credit union members can have on deposit, and the approved process for new products such as debit cards.

The role of the Central Bank has to be questioned. In my opinion, the way in which it treats credit unions is nothing short of a disgrace. Credit unions are unable to get information or clarification from the Central Bank. There is no dialogue or discussion, just the heavy hand of regulation on a continuous basis. While 100% of Irish banks have failed and have no restrictions, 1% of credit unions failed and that sector has 50% restrictions. I wonder how the Central Bank can justify that.

In other jurisdictions, the functions and role of the credit unions are clearly set out. Here, that is certainly not the case. We have no national policy on the future role of credit unions. It is important that we look at a new policy and a new way forward for them. We need a review of section 35 legislation relating to restrictions on rescheduled loans and term limits on lending; a streamlining of the process for the approval of additional services; a financial impact analysis to be conducted on the extent of losses incurred by credit unions arising form the personal insolvency legislation; and, as Deputy McGrath has said, a White Paper on the future role of the credit union sector within the broader financial services in Ireland. It is important that we recognise the great contribution the credit unions have made for ordinary people, who go to a bank and have the door slammed in their faces, are on small incomes and are seeking small loans. If they go to the credit union, 90% of the time they will be looked after.

The Minister should face up to his responsibilities regarding the future of the credit unions. The cap he is now talking about imposing on them should be lifted and he should clarify the position of the many penny bank clubs and saving clubs around the country which save with credit unions. If the €100,000 cap is applied, the credit unions will have no place for them.

I thank my colleague, Deputy Michael McGrath, for giving us this opportunity to put credit unions front and centre in political debate. They have not been discussed for some time. We should acknowledge their important role in the recovery of the country and, most importantly, in the recovery of trust in the financial sector. No matter how much financial engineering and investment goes on, trust in financial institutions will take a long time to be recovered after recent years. The financial institution model that enjoys the most trust is the local one - the community-owned, community-based organisations that are the hundreds of credit unions the length and breadth of the 32 counties. They have withstood the greatest pressure and the biggest regulation over the last years. As we speak tonight, there are probably tens of people across the country meeting their local boards, making decisions and ambitious plans for the development of their credit unions and communities, yet they are to be handcuffed by regulation.

The regulator is not thinking outside the box in respect of the role credit unions can and will play, if we are to have an economic recovery that is fair and that is spread. As Deputy Browne said, in order for the recovery to be fair, the credit unions need access to those who will not get bank lending. In order for it to be spread, we need to give the credit unions the resources and power to become an essential part of SME lending. In 2012, we established a structure around Microfinance Ireland, which took a long time to get going. Only in the last 12 months, under the direction of a new chief executive, has it begun to make an impact. During that debate, we pointed out that the credit union sector is ideally placed to start a microfinance scheme to SMEs. It knew local business, local business conditions and the potential of businesses. However, the Department of Jobs, Enterprise and Innovation dismissed the idea and said the sector was not suited to that role. Despite that, credit unions came together with their local enterprise boards, in Kilkenny and a number of other places, and put together a scheme of assisted lending and support in partnership with the old enterprise board. The intention was to continue this with the local enterprise office, but that, too, in many cases, was hit on the head by the regulator and the Department.

We have had many discussions with the Minister for Finance and the Minister for Jobs, Enterprise and Innovation about the need for SME finance, particularly for start-up businesses. Here is an organisation that is willing to come up with ideas and products and that has the requisite knowledge and experience of lending, yet it is constrained from doing so because of a lack of willingness on the part of the regulator and the Government. Despite what the Ministers, Deputies Noonan and Bruton, say, it is still a big problem to get funding to start a business, particularly small-scale funding and especially for those not in the business of exports or IT.

In the last years, the credit union sector has trained up its staff as professional financiers with training programmes that are acknowledged independently as some of the best and toughest on the market. They have the professional and local knowledge. Why is the Government not willing to unlock that knowledge and potential and open up an opportunity not just for the credit union movement, but for so many would-be entrepreneurs and employers?

Deputy Twomey will be familiar with the fact that in many rural communities, the abeyance in Leader funding in the past few years has starved many local development organisations of their ability to bring a project to fruition, be it enterprise-related or a community development project. Although Clann Credo, the social financing organisation, does very good work, this is an area in which the credit unions have local knowledge and expertise. Many of those who are on the board of a local credit union are probably also involved with the local community development organisation and have that knowledge.

If we opened up their ability to do that, extended their lending range and gave them the chance to be the local social finance partner, it would open up so much opportunity not just economically but, most importantly, socially for local communities, local sporting organisations and local educational development, and for so many areas that have been starved of resources for so many reasons. However, these resources are sitting in a savings account in the local credit union or in its bank account, looking for investment and for a return on that investment, which would come were it given the opportunity.

There are so many opportunities and so many ways of thinking outside the box, yet what did the Government do? It forced the Irish League of Credit Unions to go to court to try to define what it was doing and what its relationship was with the regulator. That is not as it should be. This is an organisation that, for many decades, has been at the forefront of community development. We should not be dragging and forcing it to go to court to assert its rights and assert its identity. People like John Hume did not get involved in the credit union movement to see it go that way; they got involved in the credit union to keep it true to its community and to community development. That is what it wants to do.

While there are a few bad eggs, we do not see credit unions closing down local branches wholesale or withdrawing local services at a day's notice. We do not see them telling businesses or anybody else on what days they can lodge money and on what days they cannot, or how they can lodge the money or how they cannot. We do not see them upping their fees for doing business by 200% or 300% at the behest of shareholders who do not even live in or do business in the country. That is not the ethos. This is an organisation that is willing to do business but one that has been strangled by regulation for the sake of regulation, as Deputy Ó Cuív said. It has been strangled by a system that does not understand or, frankly, does not seem to want to understand the ethos. It does not understand why local people get around a table every month to run their credit union and develop their community, why they give up their time for free to do that or why they travel across the country to board meetings and conferences. They do this so their credit union can grow, so they can drive forward and so they can be ambitious for their community, yet we have a system that is trying to choke that ambition and drive, and nobody in government seems to want to do anything about it.

This morning's announcement is typical. This motion was tabled by Deputy Michael McGrath and, suddenly, we get an announcement with no detail and with no timescale for roll-out. The credit unions will be allowed to make available small-scale, regulated payday loans, and I am sure we will tie on the post offices as well to keep them happy. The Minister has had four years to develop a strategy to actually push the credit unions in terms of what they want to bring to the table and to challenge that perception, yet he has failed. So much attention has been given to rebuilding the financial system, yet we have left this very important element out of the discussion. The credit unions have been dismissed by the Department of Jobs, Enterprise and Innovation as not having SME experience even though each and every credit union is an SME in its own right. They are small businesses in their own right; they understand what it is like to open the door on a Monday morning and try to get through the week. They understand that pressure, and the people around the table as directors understand it more than anyone else. If we had had a little more of that understanding in our big banks in the past few years, we might not be in half the mess we are in.

The Minister has an opportunity. There is a ball there and what is needed is somebody to take that ball and run with it. This could open up so much opportunity not just for the movement but for communities, for small business, for ambition and for dreams throughout the country. This will result in employment growth, which will result in financial stability growth, which will ensure there are financial services in the many parts of the country that big business and big banks have given up on. We can depend on the credit union as a local organisation to stand by its community, even though our Government may not be willing to stand by the credit unions.

The Minister for Finance, Deputy Michael Noonan, Deputy Liam Twomey, Deputy Derek Nolan and the Minister of State, Deputy Kevin Humphreys, are sharing time. I call the Minister, Deputy Noonan.

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:

“notes that:

— the Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the report of the Commission on Credit Unions and recommendations;

— the safety of members' savings and the security of the credit union sector as a whole are priorities for this Government. The Government recognises the important role of credit unions as a volunteer co-operative movement in this country and also the importance of getting lending going in the economy;

— the credit union movement is critical to the economic and social well-being of communities all over Ireland with almost 3 million members and nearly 400 offices nationally;

— the sector, offering primarily savings and loan services, employs 4,000 people and has almost 10,000 volunteers;

— credit unions have survived the crisis well with just 1% of credit unions needing State funding support since the financial crisis began;

— the not-for-profit and independent nature of credit unions is vital to the success of the sector;

— this Government has:

— put in place a number of measures to ensure that credit unions can continue to provide vital services to their members and to ensure the stability of the sector into the future;

— established the Commission on Credit Unions, which reviewed the future of the credit union movement and made recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members’ savings and financial stability; and

— accepted fully the report of the Commission on Credit Unions and its recommendations;

— the Commission on Credit Unions participants agreed to the recommendations and that the membership of the commission included members of the credit union representative bodies and other stakeholders;

— over 60 recommendations from the report of the Commission on Credit Unions have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012;

— the Government established the Credit Union Restructuring Board, ReBo, which, to date, has assisted with 20 mergers involving a total of 48 credit unions; a further 121 credit unions are currently being assisted in ongoing merger projects and ReBo has met with 338 individual credit union boards since coming into operation;

— the Minister for Finance will conduct a review of ReBo this year to determine whether ReBo has completed the performance of its function;

— the Government:

— established the Credit Union Fund (Stabilisation) Levy Regulations 2014 to support credit unions that are undercapitalised but otherwise viable;

— has made available €250 million for voluntary restructuring of credit unions facilitated by ReBo. In line with recommendations of the Commission on Credit Unions, restructuring is being carried out on a voluntary, incentivised and time-bound basis; and

— has made available €250 million for resolution purposes. To date, the resources of the Credit Institutions Resolution Fund have been utilised to fund the resolution of four credit unions;

— in negotiating the bank recovery and resolution directive, BRRD, a decision was made to apply the directive only to credit institutions which were within the scope of the capital requirements directive, CRD. This was done in order to ensure that excessive demands were not placed on small credit institutions such as credit unions. If BRRD were to be applied to credit unions there would be a considerable cost in the form of yearly contributions. There would also be considerable additional requirements in relation to recovery and resolution planning which would take up a disproportionate amount of resources. Credit unions continue to be covered under the domestic resolution regime. The contributions associated with this are less than would be charged under BRRD;

— the Personal Insolvency Act 2012 applies only to a debtor who is proved to be insolvent. Credit unions and other creditors remain entitled to all other legal means of enforcing debts due to them, including bankruptcy, which is in practice the main alternative option for creditors holding unsecured debts. The Personal Insolvency Act 2012 seeks to provide an additional avenue for creditors and an insolvent debtor to reach agreement out of court on resolving unsustainable debts. This provides an opportunity for unsecured creditors to recover more of the debt due, than would be available to them via bankruptcy or other legal avenues for enforcement, by avoiding the need for enforcement, legal and court costs;

— the current Credit Union Advisory Committee, CUAC, was established in September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters the Minister may seek the advice of the committee on;

— the CUAC has met with all credit union representative bodies and other stakeholders since it was established; and

— the CUAC has carried out a survey of credit unions which will provide up to date information on the sector in terms of demographics and financial characteristics.”

Credit unions have a key role to play in providing access to credit and other important services in local communities throughout the country. They are an integral part of communities and the Government has put in place a number of measures to ensure that credit unions can continue to provide these vital services to its members and to ensure the stability of the sector into the future. These measures include the establishment of the Commission on Credit Unions; the publication of the Credit Union and Co-operation with Overseas Regulators Act 2012; the establishment of the Credit Union Restructuring Board, known as ReBo; the availability of €500 million to support the stability of the credit union movement; the introduction of the stabilisation support scheme; and the establishment of the current Credit Union Advisory Committee, CUAC, in September 2014.

The safety of members' savings and the security of the credit union sector as a whole are priorities for this Government. I have, on a number of occasions, highlighted the Government's recognition of the important role of credit unions as a volunteer co-operative movement and also the importance of getting lending going in the economy. Credit unions provide a unique and trusted service to their members. The Government has a clear policy to support the strategic growth and development of credit unions in Ireland, as set out in the Commission on Credit Unions report and recommendations.

The Government established the Commission on Credit Unions in May 2011. The Deputy will recall we entered government in March of that year, so there was no delay in addressing the issues around credit unions. We asked the commission to make recommendations in regard to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and their community focus, while paying due regard to the need to fully protect members' savings and financial stability. The commission report was agreed and co-authored by key stakeholders, including credit union representatives. The commission worked intensively over a nine-month period to address and deliver on ambitious terms of reference. The process was a participative one, with wide representation from the credit union movement. The agreed commission report sets out the blueprint for the viability of credit unions in Ireland into the future and its constituent elements are interrelated and mutually reinforcing.

The commission published its final report in March 2012, one year after we went into government. The Government fully accepted all the recommendations in the commission's report. Over 60 of its recommendations have been implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012. The legislation contains measures which will reform and strengthen credit unions and deals with four broad areas: prudential regulation; governance; restructuring, including the establishment of the Credit Union Restructuring Board, or ReBo; and stabilisation.

Recognising the vital importance of the credit union sector, €500 million has been set aside to support credit unions in difficulties, to protect members' shares and to keep credit union services in communities. The Government has made available €250 million to the credit union fund for the voluntary restructuring of credit unions being facilitated by the Credit Union Restructuring Board, ReBo. This board was established to work with the credit unions on a voluntary, incentivised and time-bound basis. The Government has also provided €250 million to the Credit Institutions Resolution Fund for resolution purposes.

The Credit Institutions Resolution Fund was established by section 10(1) of the Central Bank and Credit Institutions (Resolution) Act 2011 (as amended) - the 2011 Act. Under section 10(2) of the 2011 Act, the resolution fund is to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of, an authorised credit institution. This definition includes a credit union. To date, the resources of the resolution fund have been utilised to fund the resolution of four credit unions. In the case of three of those credit unions, the resolution action taken was a directed transfer under the 2011 Act, and the resolution fund funded a financial incentive for the transferee. The remaining case was a liquidation, and no financial incentive was paid from the resolution fund in respect of that action.

In each of the four cases, the Central Bank discharged its third party resolution related costs against the resolution fund. In each case, I am pleased to say that arrangements have been reached with neighbouring credit unions to maintain credit union services in the area.

The European Bank Recovery and Resolution Directive, BRRD, does not apply to credit unions. A decision was made to apply the directive only to credit institutions which were within the scope of CRD. This was done in order to ensure that excessive demands were not placed on small credit institutions, such as credit unions. If BRRD was to be applied to credit unions, there would be a considerable cost in the form of yearly contributions. There would also be considerable additional requirements regarding recovery and resolution planning which would take up a disproportionate amount of resources which, from the perspective of the proportionality principle, could not be justified.

Credit unions continue to be covered under our domestic resolution regime and this has operated successfully to fund the resolution of four credit unions. The contributions associated with this are less than would be charged under BRRD.

The credit union fund was established under section 57 of the Credit Union and Co-operation with Overseas Regulators Act 2012, and the Government contributed €250 million to it. Its purpose includes provision of financial support for restructuring of credit unions and to meet the expenses of ReBo in discharging its functions under the 2012 Act. To date, ReBo has drawn down €5.9 million from the credit union fund. Approximately 50% of ReBo's operating costs are recoverable in the form of a ReBo levy on the credit union sector. This levy came into effect in December 2014.

The Credit Union and Co-operation with Overseas Regulators Act 2012 provides the statutory basis for the restructuring of credit unions and placed the Credit Union restructuring board, ReBo, on a statutory footing from 1 January 2013. ReBo is currently in the process of overseeing and facilitating restructuring on a voluntary, incentivised and time-bound basis, and is working towards the timetable set out in the report of the Commission on Credit Unions, with a view to completing the process by the end of 2015.

The Government has made available €250 million to the credit union fund for the voluntary restructuring of credit unions. ReBo undertook a high level assessment of all credit unions based on financial data from the Central Bank and engagement with each credit union. To date, 48 credit unions have been assisted in ReBo approved mergers. A further 121 are currently being assisted in ongoing merger projects. Based on these figures, ReBo estimates that it will assist up to 169 credit unions in achieving a voluntary restructuring solution. This represents a significant number of credit unions, given that approximately 376 credit unions are currently in operation. ReBo is continuing to engage with credit unions to provide an opportunity for those credit unions to merge on a voluntary basis.

The Commission on Credit Unions in its report recommended the introduction of a statutory stabilisation scheme funded by mandatory contributions from credit unions. In November 2014, I announced the introduction of the stabilisation scheme. The target level of funding for the stabilisation fund is €30 million to be built up over ten years, with the levy rate being reviewed after three years. To be eligible for consideration for such support, a credit union must have a regulatory reserve ratio equal to or greater than 7.5% and less than 10% of the credit union's total assets and must, in the opinion of the Central Bank, be viable as a credit union.

Deputy Michael McGrath referred to the imposition of lending restrictions, which I will now deal with. It is the responsibility of the Registrar of Credit Unions, who is the independent regulator for credit unions. Within her independent regulatory discretion, the registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. As Minister for Finance, my role is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

I have been informed by the Central Bank that it has been necessary to put lending restrictions in place in some credit unions where there are regulatory concerns and resultant risk to members' savings. The Registrar of Credit Unions informs me that currently about 51% of all credit unions are subject to lending restrictions. Lending restrictions are, in most cases, intended to be short-term in nature and kept in place until the credit union has addressed the issues giving rise to the particular concerns.

Almost all credit unions with lending restrictions in place have a maximum individual loan size restriction. For those credit unions with an individual loan size restriction, the level at which the limit is imposed ensures that the vast majority of these credit unions can continue to make loans of significantly more than the average value for gross loans outstanding for the sector of just above €6,000, with the majority of restrictions enabling credit unions to lend amounts of between €10,000 and €30,000. The Registrar of Credit Unions informs me that only four credit unions have a maximum loan size restriction of less than €10,000.

In February 2015, the Central Bank commenced a lending restriction review initiative, whereby credit unions that are subject to a lending restriction, but are satisfied that they have made the necessary improvements and have embedded these improvements in robust risk-sensitive lending practices, may apply for a review of their lending restriction. A communication has been issued to all relevant credit unions outlining the process for the review of lending restrictions and requested them to indicate by 31 March 2015 whether they intend making an application for a review of their lending restrictions. The closing date for receipt of the applications to review lending restrictions under this initiative is 30 September 2015.

We had a situation where credit unions, like all lending institutions in the country, were under severe threat when we came into government four years ago. We have taken a range of initiatives and have provided funding to reconstruct the credit unions individually and as a movement. We appreciate that lending restrictions can irk certain credit unions and, in their view, inhibit them from doing business to the best of their ability. A review process is now in place, and any credit union that is unhappy with the lending restrictions may look for a review and must submit an application before 30 September 2015. I will ensure that Deputies receive information if they table questions to me in the next session of the Dáil.

Separately, I have introduced a legislative change whereby, as of 1 August 2013, regulatory directions are appealable to the Irish Financial Services Appeals Tribunal. Some Deputies made the point that the Registrar of Credit Unions was acting in an arbitrary fashion and there was no system of appeal or recourse. Such a system has been in place since the legislative changes introduced from 1 August 2013 and I will repeat regulatory that directions can be appealed to Irish Financial Services Appeals Tribunal. I ask the wider credit union movement that where there is a communications problem to communicate such information to its members.

The Credit Union Advisory Committee, CUAC, was established on 22 September 2014 for a period of three years to advise the Minister for Finance regarding the improvement of the management of credit unions, the protection of the interests of members and any other matters that the Minister may seek the advice of the committee on. The committee is chaired by Professor Donal McKillop, the former chairman of the Commission on Credit Unions.

The CUAC has met a number of credit union stakeholders, including the ILCU, CUDA, CUMA, NSF, Central Bank, ReBo and individual credit unions. It has carried out a survey of credit unions and over 100 responses have been received to date. I have been informed the responses will provide a profile of individual credit unions in terms of demographics and financial characteristics, and assist in exploring the competitive pressures they face and their views on potential challenges in the future.

I look forward to receiving the findings of the survey in due course.

The Government has a clear policy to support the strategic growth and development of credit unions as set out in the report and recommendations of the Commission on Credit Unions. The commission report was agreed and co-authored by key stakeholders, including credit union representatives. The safety of members' savings and the security of the credit union sector as a whole are priorities for the Government. The Government recognises the important role of credit unions as a volunteer co-operative movement and in getting lending going in the economy. I am always open to considering new proposals on credit unions, particularly those that would see the development of the credit union business model and an increase in income for the sector. I have met with credit unions to examine the opportunities for collaboration with An Post. All proposals to date have been at an early stage and we await further details as the projects progress.

I note the six-point policy programme from the Irish League of Credit Unions, ILCU, which was presented to us recently. It includes a range of proposals to support credit unions going forward. I welcome ongoing engagement with the ILCU and other credit union representative bodies, including the Credit Union Development Association, CUDA, the Credit Union Managers' Association, CUMA, and the National Supervisors' Forum, NSF.

I recognise the importance of credit unions in the economy. Credit unions have almost 3 million members and nearly 400 offices nationally, employ 4,000 people and have almost 10,000 volunteers. Credit unions have gone through a period of considerable change since the commission report, and the movement has risen to the challenges it posed. The Government has worked closely with key stakeholders in the credit union movement to reach agreement on the report of the Commission on Credit Unions and its recommendations. The Government will continue its ongoing engagement with the movement to ensure the safety of members' savings, to support credit unions in broadening the range of services to members and to safeguard the credit union sector as a whole into the future.

I thank Deputy Michael McGrath and the Fianna Fáil Party for putting down this motion. There is not much difference in our objectives. I have no problem in taking advice from the Opposition if there are any lapses in our policy approach to ensure we can lend a hand and move forward. Historically, the credit union movement has provided great services in different communities across the country. I hope it can continue to thrive and prosper as well as extend its services as the economy grows.

I have met with many representatives of the credit union movement in County Wexford. Like many Deputies, I admire the commitment of volunteers and workers in the credit unions. The support that members give to the credit unions is fantastic.

Deputies are under no illusion about where we were just before we came into government, when we almost had a total financial collapse of our economy. Significant concerns were raised then about the credit unions. When one considers whom the credit unions represent, one has to be careful about how we deal with this. We did not want to create a crisis in the credit unions, as they are vital to our local economies. They serve an acute need in our local economies, whether it is small loans for small businesses or educational loans for people going to third level. They serve a defined purpose within our communities.

It has been remiss of the Joint Committee on Finance, Public Expenditure and Reform not to have a more open discussion about credit unions and the role of the Registrar of Credit Unions in recent times. This should be corrected as soon as possible, even maybe as soon as September, with the committee hearing from the ILCU, the registrar and individual credit unions to go through some of the issues raised in this debate. Over the past several years, the committee has brought in representatives of the banks every six months. It might be time to focus particularly on credit unions and how they are managed and regulated.

As the Minister pointed out, not all of these issues are his responsibility. None of us wants to throw out the regulator or radically change the legislation governing the sector. However, we want to examine how credit unions operate in our communities. It is vital that we take the opportunity to examine this. From my recent meetings with credit unions, it is quite obvious that some of them are very well capitalised with significant assets available to them, and not just for the traditional lending that is associated with them. They have assets that could be pooled together and used on bigger projects. While the movement is keen on what it calls community and social lending, there are other sectors to which it can lend, such as the housing sector. However, we do not want to go back to a situation in which some credit unions ran into difficulties because they acted like banks for major developers. Large numbers of people have made regular savings with credit unions which have accumulated into significant assets that could be used for the betterment of society on a much greater scale.

The finance committee will have to deal with the smaller issues that have been raised tonight. While this Chamber can often be adversarial, we can trash it out better in the finance committee. Like Deputy Michael McGrath, I have concerns and would like to see them resolved.

I am delighted to have the opportunity to speak on this Private Members’ motion, and I thank Fianna Fáil for bringing this important topic to the floor of the House tonight.

The credit unions are so familiar to people that they are almost like a member of the family. One goes to see the credit union as often as one goes to see one’s uncle. There is a warm personal relationship. Credit unions get to know who people are in the community and understand their trustworthiness and credit risk. When we talk about the credit union, we should be careful to differentiate it from the banks and other financial institutions. While credit unions deal in money, they are often the buffer when the banks will not lend and the other option is a moneylender or someone more grievous. The vital social role that credit unions play needs to be protected and enhanced.

The credit union sector faced its greatest possible threat in recent years, with the possibility of some of them going under. The risk of reputational damage that could have affected the entire sector if one or two credit unions got into trouble was very stark. Over the past several years, financial security and certainty were a concern for people. Any hint of instability could have damaged the sector. It is a credit to the sector that it has managed to pull itself through difficult reforms and still have community support and its reputation intact while maintaining its exceptional services.

After so much change and adjustment, we need to review how we can best support credit unions. In Galway, I am familiar with several credit unions, such as Naomh Padraig and St. Anthony's & Claddagh. St. Columba’s credit union, based in the east of the city, offers an innovative model for where the credit union movement can go. Having established a subsidiary company called St. Columba’s Credit Union Limited, it has set up an enterprise centre which supports business incubation and mentoring, as well as funding voluntary organisations involved in social work and social care. This is all achieved through the resources and financial assets that come from its members’ savings. This represents a whole new model for credit unions with regard to what they can do with their members’ money. Credit unions do not seek profit but serve their communities, an ethos on which they were founded originally by their voluntary members and which keeps them so grounded in their communities today.

The pioneering work done by Liam Bluett and Michael Smith in the centre and its reputation in the community, and bringing this back to its own credit union and building up such a strong brand, is very powerful.

I understand we have the credit union advisory committee, but just because we have a regulator and regulations in place it does not mean things are soft. All of these matters need to be kept under constant review to ensure we do not attempt to regulate credit unions into being banks and we do not turn them into places with no flexibility which are completely cold and guideline driven. We must also keep under review the ability of the State to produce an environment in which credit unions can go outside their traditional role and use their pioneering methods, but at the same time never forgetting their incredibly important role of being there when people are in trouble and need a few bob, such as when the car breaks down and there is no money to repair it or when there is an emergency for the kids. It is a lender of resort people can trust which has the flexibility and ability to meet this need in an environment based on the community and the ethos it serves.

I thank Fianna Fáil for tabling this motion because it is overdue. Deputy Liam Twomey suggested sending the issue back to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform for a prolonged engagement. I was on the committee the last time the credit unions came before it and Deputy Michael McGrath and I played an active role during the engagement.

The credit union movement has always been at the heart of the community. My first car was financed through a credit union loan, as was my first election campaign in 1999. I do not know how one would do this now with SIPO. These examples show the credit union has always been ready to help in many different ways. I went through a period of illness and the manager of Sandymount Credit Union at the time was extremely helpful to my wife. I will never forget this assistance, which the credit union movement gives to members of the community who find themselves in difficulty. Credit unions are far more flexible than any financial institution, that is, the banks, we have ever dealt with in this State. As Deputy Nolan said, they know their customers' creditworthiness. They may be going through a particular period of financial difficulty but there is a level of flexibility. I will be a great friend to the credit union movement.

Sandymount, Pearse Street and Ringsend credit unions are at the heart of sustainable financial support for the people of the area. Children and young adults learn how to save through the credit union. On a Friday evening in my area one sees cars pulling up and families walking up to do their business in the credit union. This social network and interaction used to be found at the post office. The role of the credit unions in financing borrowings for cars, college or for the small businessman looking to get a small loan to get started is one of the key elements and major strengths of the credit union.

I do not want to misrepresent Fianna Fáil's motion because I do not believe Fianna Fáil is advocating we go back to easy lending. Society and families have learned lessons in a very tough way about unsustainable borrowings. This was mainly through the banks and not credit unions. I accept Deputy Nolan's point there were one or two rogue credit unions, but they were very much in the minority and developed more into banks than credit unions instead of being at the heart of the community.

I listened to the Minister's contribution on the Registry of Credit Unions and its independence in regulating credit unions. Appealing decisions should be examined. This option is there and was outlined by the Minister. People on this side of the House are not by any means the font of all wisdom which is why Deputy Twomey's suggestion to go back to the committee and have a long discussion has strength. In the last campaign credit unions spoke about microcredit for low and middle income families. I hope we will be able to run a pilot of this scheme in the autumn. The credit union movement has provided assistance and suggestions in this regard as have the Citizens Information Board, Social Finance Foundation, MABS and the Society of St. Vincent de Paul. The credit union could have a key role and be at the very forefront of microcredit. It is something for which it has campaigned. I hope in the autumn the Department of Social Protection, in partnership with the credit union movement, will be able to put in place microfinance for families who are extremely stressed and often forced to go to moneylenders rather than credit unions with a good reputation which are at the heart of many urban and rural communities.

I thank the Deputy for the opportunity to have this discussion by tabling the motion. The discussion needs to be taken much further and examined in detail by the committee. I look forward to the outcome, if the Deputy is willing to push it there. One group or party in the House is not the font of all wisdom so we need to examine what is the best model. The credit union movement is vital for the Irish economy and local communities. I certainly will be very supportive of it.

Cuirim fáilte roimh an rún seo ó Fhianna Fáil. Is eagraíochtaí den scoth iad na comhair chreidmheasa sa tír seo. Tá siad lonnaithe i mbeagnach gach baile agus sráidbhaile sna 32 contae. Is fíor-eagraíochtaí Éireannaigh iad. Is sampla iontach iad den phobal ag obair ar son an phobail agus iad ag tabhairt aird ar mhaitheas an phobail seachas brabús príobháideach. Tá cáineadh le feiscint sa rún seo agus tá sé tuillte ag an Rialtas. Tá cleachtadh leanúnach ag an Aire Airgeadais le fada anois maidir leis an rud seo. Tá sé ina phost le ceithre bliana anuas agus tá easpa ceannaireachta léirithe aige. Tá easpa teagmhálacha leis na heagraíochtaí seo. Feictear é seo arís agus arís eile, go háirithe maidir le IBRC.

Níl na polasaithe atá ag an Rialtas soiléir ar chor ar bith. Níl polasaí sonrach ann maidir leis na comhair chreidmheasa. Níl uaillmhian ar bith ag an Rialtas seo ó thaobh a dtodhchaí. In ainneoin an teip uafásach a tharla in earnáil na mbanc, d'éirigh leis na comhair chreidmheasa teacht chun cinn gan an iomarca damáiste a dhéanamh dóibh féin nó dá gcustaiméirí, gan an iomarca fiach á chur ar an Stáit agus gan an iomarca costais á chur ar na híocóirí cáin sa tír seo. B'fhéidir gurb í an fhadhb ná gur coiméad na comhair chreidmheasa go léir a n-aghaidheanna glan agus, dá bharr sin, níl an Rialtas sásta aird ar bith a thabhairt dóibh. Tar éis tubaiste uafásach, tá na comhair chreidhmheasa thar timpeall na tíre seo fós ag tabhairt seirbhísí iontacha dá gcustaiméirí.

The critique contained in the motion may seem harsh at first, but when one goes into the detail of the experience of credit unions in this country it is well warranted. The Minister has for the past four years become known as the hands-off Minister for Finance with regard to the impact he has made on the credit institutions in this country.

It is no different with the credit unions. He has a serious lack of ambition with regard to this sector in society. It is an excellent institution and an example of what volunteer communities can do for the good of communities around the country. As I have stated, it is a 32-county organisation.

Despite the failure of the banking system over the past number of years, credit unions have, through very difficult circumstances, still managed to provide a vital service to people. The Minister has indicated the number of engagements he has had with credit unions around the country. There is no doubt that the Government talks a good game when it comes to credit unions but actions speak louder than words, and it is time that the focus and priority is on these organisations. In our submission on the consultation regarding credit unions, we tried to impress upon the Government that it cannot simply treat credit unions like banks. The Government has argued that it understands this but its actions have not reflected that argument.

I hope we are moving to an age of proper regulation of financial institutions. I fear from what I have seen that the Government is being dragged that way instead of leading in that direction. Last year I asked the Minister for Finance for his views on whether the cumulative effect of the lending restrictions on credit unions and the lack of clarity in the use of discretion by credit unions is leading to a negative impact on the credit union movement. The heart of this issue is the cumulative effect on all these lending institutions; these organisations are being disempowered from carrying out their potential function within Irish society. In response to my question, the Minister told me that section 35 limitations are not working. I asked him to allow a common sense approach to discretion afforded to credit unions when they seek to extend or restructure loans or offer further loans to those who can pay. Shockingly, the Minister told me at that stage that I should move along and there was nothing to see here, as everything was fine the way it was.

The truth is there are swathes of this country where the talk of recovery is read about in newspapers, listened to on the radio or seen on television. These areas have very little economic activity and very few net new jobs are being added to particular economies. They are experiencing bank closures at the moment, with the flow of and access to credit being reduced in communities. The ability to deal in cash, as well as other activities associated with banks, is also being reduced. Footfall in towns is becoming smaller because the attractiveness of coming to those towns for a customer is lessening because the credit facilities no longer exist in them.

These forms of no-man's land are starting to appear around the country, and I know of the likes of Delvin in my constituency, which lost its bank recently. People must now go 15 or 20 miles to the nearest banks. They must travel on bad roads on reducing public transport to get to those banks. They are told to use the Internet to access other banks but many of these places are devoid of basic broadband infrastructure, so people cannot use the Internet to gain access. In many of these areas, however, there are credit unions that are well-staff and energetically managed. They also have capital. In the credit crunch we have seen throughout Europe and especially in this country, the lack of capital has been at the heart of the problem. We have these institutions, many of them rich in capital, but they have not been utilised or leveraged by the Government, which is quite shocking.

Credit unions present a major opportunity but they are currently being restricted by the Government. Some people argue that they might be hamstrung because the Government is confused about its policy but many others believe the truth is worse, as the Government has an antipathy for the sector because of its historical close relationships to the banking elite in this country. If that is the case, active damage is being done to these communities. Credit unions could fulfil the needs of first-tier microfinance very easily, and, in fairness, the Government has organised Microfinance Ireland, with a location in Dublin. There is no reason these credit unions could not be utilised, in part, to support that. The Government needs to carve out - not in a confused fashion but in a clear way - a sustainable, responsible and dynamic role for these societies.

The Government is on its last legs with respect to the length of time it has left in office, and as has been seen until very recently, it is struggling from crisis to crisis. I implore the Government not just to offer platitudes on the issue but to focus on the job at hand, using the credit unions as a catalyst for economic recovery right through provincial Ireland.

The Private Members' motion before us this evening lays out the size and importance of the network of credit unions across the State. With just under 3 million members and 400 offices, it employs 4,000 people and counts 10,000 volunteers among its anchor number. It is instantly comparable to the Gaelic Athletic Association, a very important organisation that exists for the betterment of friends and neighbours, with a strong volunteer effort. Reference is made in Fianna Fáil's motion to the fact that only 1% of credit unions needed State funding since the beginning of the crash. It is most unfortunate that the banks were not prudent enough or controlled well enough to be as wise as credit unions.

I am thankful that our local credit unions represent a more wholesome and helpful body. They are faced with challenges, however, and almost half of credit unions have lending restrictions and lending is decreasing, putting the long-term prospects of the sector at risk. The Irish League of Credit Unions indicates that the sector has approximately €5 billion to lend but that it is unable to do so due to restrictions. We must remember that credit unions are not-for-profit democratic co­operatives. They are governed by the Credit Union Act 1997 and the Credit Union and Co-operation with Overseas Regulators Act 2012. The Registrar of Credit Unions, Ms Anne Marie McKiernan, registers and oversees the credit unions. Controls such as those that ensure funds of members are protected are certainly necessary but, seeing as credit unions have shown themselves to be mature and prudent when it comes to lending, I and my party feel that they must be freed to achieve more.

The Registrar of Credit Unions invited those unions that had limits put on their lending to apply to have these removed but according to her, those unions had yet to adopt adequately robust financial practices. I am not suggesting that all control be removed but credit unions can and should be given more responsibility. Some credit unions are particularly limited, with five restricted to lending under €10,000 and a further 50 that cannot go above €20,000. This Private Members' motion highlights the 35% of credit unions that have had lending restrictions in place for five years or more. The motion indicates that other countries have improved national policy to set out the role and function of credit unions. I ask the Minister to outline whether he has conducted an examination of these approaches and what he now proposes to do.

The credit unions are a good and viable alternative to the avarice and shameless greed of the institutions that brought this State to its knees.

The fact that not a single credit union has received approval for additional services since the banking crisis began is a disgrace. Despite proving their worth and robustness, they have been granted no increased role. Credit unions are also effectively restricted from engaging in mortgage lending due to section 35 of the Credit Union Act 1997. This means that anyone who needs a mortgage will have to use a bank. Why does the Government decide to push our citizens only in that direction? Impím ar an Rialtas teacht ar réiteach agus comhair chreidmheasa a cheadú le tabhairt faoi bhreis dualgais. Tá siad tar éis a chruthú go bhfuil siad ann ar mhaithe an phobail. Is gá iad a spreagadh agus cabhrú leo iasachtaí a chur ar fáil don phobal.

The Private Members' motion calls for a White Paper and a forum, investment in infrastructure, a revisiting of the limits on lending and the provision of additional services. These measures must be examined and introduced in a prudent way to allow credit unions to reach their full potential. Credit unions are a positive force for customers and communities across the State. I record again, as I have done on many occasions throughout my years in this House, that I am hugely supportive of credit unions and believe that they now have, as they have had in recent years, a crucial role in supporting the well-being of people and families as they struggle to emerge from this financial crisis.

I welcome the opportunity to contribute to the Private Members' Business tonight and pay tribute to Fianna Fáil for organising a discussion on a very important issue in respect of the future of our credit unions across the country. It was very interesting to listen to the contributions of Members and of the Minister of State regarding the importance of the credit union movement to everybody across society. There is so much goodwill among Members of the House towards the credit union movement that one wonders why there is no positive engagement or positive policy regarding the growth and development of credit unions. The only answer one can come up with is that the banks call the shots and are driving policy.

The policy of this Government has been to push big finance over the options the credit unions can provide. This policy pushes the for-profit sector and the banking sector and looks after them. I have no doubt that for many years the banks would have loved to see the end of credit unions, or to see credit unions being forced to become like banks, so that the banks would be in a position to take them over and subsume them into their business model, which would be a disaster. Credit unions have been a lifeline for many communities across the country. Hundreds of thousands of people have depended on them for finance, and the banks pale into significance compared to the trust people have in the credit unions.

We need - although it is belated and probably will not happen in the lifetime of this Government - a positive policy towards credit unions. We need to examine the restrictions in section 35 of the Credit Union Act 1997 to ensure that credit unions can develop and we need to look at how credit unions can provide services for people across the country. There are so many people across the country who are unbanked and who are penalised financially because of that. The credit unions can provide that role. The idea of credit unions and post offices working together has been raised here before. These two institutions are vital across our society and are very trusted. They could come together to provide financial services for citizens that are solely for the benefit of citizens and not the benefit of private equity investors. That is why we have not seen any positive engagement or any move to develop credit unions and allow them to invest in our communities: they are for the benefit of our citizens and, unfortunately, the thrust of Government policy is to benefit the banking sector and forget about the citizens.

The principal focus for all credit unions is on providing services to their members in their own communities. The onerous burden being imposed on credit unions by the current fitness and probity regime is driving many otherwise relatively strong credit unions into unnecessary mergers, without any consideration, in many instances, for the maintenance of local services into the future. If a credit union becomes part of a bigger organisation, it ceases to be part of the community, and it will be only a matter of time before the local credit union office closes and the services it provided will be lost forever to that community. Currently, there is a drive away from local personal service provision in many sectors of the economy, and the impetus to rationalise credit unions is yet another example of this. If the same energy and resources that are currently being expended by both the regulator and the individual credit unions on the implementation of the fitness and probity regime were diverted into developing and expanding services and assisting credit unions in growing and developing organically, the credit union system would be in a far healthier state.

Over recent years, credit unions have experienced declines in their loan books, and while this could be attributed to a lack of credit demand generally, it is clear that the economy is slowly improving, which in turn is leading to a growth in loan demand. Many credit unions are not in a position to respond to this increase in demand as a consequence of the imposition of restrictions. It is imperative, therefore, that the Central Bank review its policy relating to these restrictions so as to give credit unions the necessary additional flexibility to deal favourably with new loan applications. Stringent regulation in recent years has meant that credit unions are now extremely reluctant to lend to disadvantaged members who have no other source of credit apart from moneylenders. It is extremely regrettable and, indeed, shameful that the moneylenders' loan books have expanded enormously while the loan books of credit unions have been diminishing at the same time.

The regulator has acknowledged that credit unions are extremely well reserved. However, the issue of credit union viability remains the focus of attention. Write-downs in the value of premises have been used as a mechanism to weaken the reserve position of many credit unions so as to force a merger or a resolution upon them. The not-for-profit ethos of the credit union has been forgotten.

The proposal to impose a ceiling on the level of savings a member may hold will have enormous reputational implications for credit unions. Members will be forced to withdraw their savings and place them in rival institutions. Credit unions will also be put at a disadvantage in trying to attract new deposits.

The regulator is currently advertising information on interest rates and terms of loans. However, there is very little oversight in evidence when it comes to more general advertising, particularly in respect of car purchase agreements. In a recent survey, it was found that many people who had availed of these arrangements were not aware of the interest rate or the amount financed under these agreements.

Debate adjourned.
The Dáil adjourned at 9.08 p.m. until 9.30 a.m. on Wednesday, 24 June 2015.
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