The purpose of this Bill is to make suitable legislative provision for the registration of societies known as credit unions. It originated with the report of the Committee on Co-operative Societies, published in February, 1964, which contained a special chapter on credit unions. A credit union is defined in section 2 of the Bill as a co-operative society consisting of individuals having a common bond and formed for the purpose of promoting thrift among the members, creating a source of credit for them at a fair and reasonable rate of interest and using and controlling their savings for their mutual benefit. This kind of financial institution is well known in other parts of the world as a special form of co-operative effort and there has been widespread demand for a suitable charter for it in this country.
The first co-operative credit society was founded in Germany in 1849 for the purpose of combating usury. Societies of this kind became very popular on the Continent and in 1900 the first North American equivalent was set up in Quebec. Enabling legislation was enacted in that province in 1906 and the credit union idea quickly spread in Canada. The pooling of financial resources through the medium of credit unions played a significant part in arresting the economic depression in certain Canadian provinces in the 1930s.
By 1934 Credit Union laws had been passed in 39 of the United States and a Federal Credit Union Act became law in that year. The United States credit unions also promoted in that year the Credit Union National Association and a mutual insurance society with the object of providing suitable services for credit unions. The Credit Union National Association now promotes the Credit Union movement all over the world and one of its representatives visited Ireland in 1959 to give evidence before the Committee on Co-operative Societies. In the credit union movement it is the practice for each country to have its own national league and, accordingly, the Credit Union League of Ireland was set up around this time and it was admitted to membership of the Credit Union National Association in November, 1961.
By the end of 1964, as indicated by the Yearbook of the Credit Union National Association, there were credit unions in all of the United States, in all provinces of Canada, in Central and South America, in certain Pacific countries and also in several European, African and Asian countries. The movement now has a total membership of about 30,000,000 persons and assets in the region of £5,000 million. The total number of individual Credit Unions is about 50,000, so that the average asset for each unit is about £100,000. Impressive as these statistics are the movement is by no means static and continuing annual advances of striking dimensions seem to be inevitable.
There have, of course, been loan societies of one kind or another in this country for a very long time. Under the Friendly Societies Acts special provision was made in the last quarter of the nineteenth century for the registration of societies formed for the purpose of creating funds by monthly or other subscriptions to be lent out to, or invested for the members of the society. From the point of view of administration and finance, societies formed for this purpose were on the whole extremely unsatisfactory, particularly in the case of non-agricultural loan societies. In 1917 the authority for the registration of loan societies was withdrawn and replaced by a new one which was limited to societies formed to grant loans for agricultural purposes. Since that time, therefore, it has not been permissible to register non-agricultural loan societies, but those which were established prior to August, 1917, were allowed to continue in business and there are now 23 of them on the register with total membership of about 20,000 persons.
As regards agricultural credit societies, the first of these was formed in 1894 and was quickly followed by a large number of others. In 1914 a Commission on co-operative credit drew attention to a number of inadequacies in the operations of these societies. They put forward certain recommendations to rectify the position, but war broke out before any action could be taken on their report. A later Commission on Agriculture endorsed these recommendations in an interim report on credit which was issued in 1923.
In 1927, however, the Agricultural Credit Corporation was set up under the Agricultural Credit Act of that year and this seemed to create in the minds of many people the idea that there would be no point in establishing further societies of this kind in the private sphere. No new agricultural credit societies have been registered under the Friendly Societies Acts since 1928 and there are now only seven such societies actually operating.
In paragraph 125 of their report the recent Committee on Co-operative Societies stated that having considered the whole question they were of opinion that savings and loan societies conducted on the credit union plan, with proper safeguards, would be a useful form of co-operative effort. They pointed out, however, that with the withdrawal of the statutory authority in 1917 for the formation of loan societies other than those in the agricultural sphere, various legal difficulties stand in the way of the formation of credit unions in this country. They recommended, accordingly, that the Industrial and Provident Societies Acts should be suitably amended in order to make provision for the registration of credit unions. In paragraph 128 of their report they set out in some detail the kind of provisions which they feel should apply to Credit Unions and this Bill follows generally the lines indicated by the Committee.
The Committee recommended that in any legislation to deal with these societies provision should be made for supervision by some authority other than the individual societies. This should involve, they felt, surprise inspections and also instruction and organisational assistance. The aim should be to have supervision provided by a representative organisation as soon as possible but in the early stages the cost might, they thought, have to be borne by the State. Since the report was published the credit union movement has expanded rapidly in this country mainly through the work of the Credit Union League of Ireland. There are, at present, about 140 credit unions here with assets of about a million and a half pounds. Individual unions which wish to become affiliated to the league must comply with the League's requirements. It is the intention of the League to employ suitably qualified personnel whose job it will be to make the kind of inspections which were envisaged in the report of the Committee on Co-operative Societies. The need for interim supervisory arrangements on the part of the State has, therefore, been obviated as the ideal form of control by a representative organisation on the lines which the committee had in mind is now developing.
For these reasons I have drawn up this Bill on the basis that the credit union movement should be allowed to regulate its own affairs as far as possible. I have no doubt that the Credit Union League of Ireland with the assistance of the international credit union organisations will keep a watchful eye on all credit union activities in this country and that it can be relied upon to take all necessary steps to protect the interests of the public.
However, we cannot ignore the fact that the history of credit societies in this country in the past has been unhappy. Senators will, I think, agree that any legislation dealing with organisations of this kind which handle money should be tightly drawn and should provide ample powers to deal with any undesirable situation that may arise. This Bill does, in fact, contain many such provisions. There are many detailed safeguards and restrictions of one kind or another interspersed throughout the Bill, but I should like to refer in particular to the specific provision in section 12 for the establishment by each credit union of a supervisory committee. The function of this committee is to oversee the activities of the directors and other officers, and the manner in which this function is to be discharged is set out in section 17. There are ample clauses designed to ensure that the supervisory committee will be be independent of the other officers of the credit union and will be in a position to carry out its duties adequately. It will be necessary, of course to maintain some public supervision also and I should like to draw attention in this connection to section 27 of the Bill which provides for the establishment by me of the Credit Union Advisory Committee. This will be a body of persons having a knowledge of matters of significance in relation to credit unions, who will keep an eye on general developments in this field and advise the Minister for Industry and Commerce as to any action he should take to safeguard the interests of the public. Senators will also notice the power given by section 33 of the Bill to the Registrar of Friendly Societies to petition the High Court for an order to wind up a credit union if it is unable to pay its debts or wilfully violates the provisions of the law.
It should not be forgotten, of course, that the Industrial and Provident Societies Act, 1893, into which this Bill is being written, already contains a number of provisions which will assist in ensuring proper supervision of the activities of credit unions. Section 20 of that Act will require each Credit Union to submit to the Registrar of Friendly Societies an annual return in the prescribed form. Under section 18 of that Act there is provision for the inspection of the books of a society by an accountant or actuary appointed by the registrar, while section 50 provides for a full investigation of the affairs of the society. Finally, the Industrial and Provident Societies (Amendment) Act, 1913, requires every society to have its accounts audited by public auditors appointed by the Minister for Industry and Commerce.
To a substantial extent the Bill is modelled on the legislation prevailing in other countries where the credit union movement has been a success and where failures have been rare. A considerable amount of technical drafting difficulty was encountered in fitting legislation on these into the Industrial and Provident Societies Acts. This has given rise to some delay in producing the Bill, but I am satisfied that we now have before us a set of provisions which will give a suitable basis for regulating the affairs of credit unions in accordance with the principles accepted internationally in relation to these bodies. It is hardly necessary for me to mention that the Bill has already been examined in detail in the Dáil where many amendments were made to meet points put forward by the Credit Union League of Ireland and other persons involved in the credit union movement, and also to give effect to suggestions offered by Deputies representing all parties in the House.
The figures which I have mentioned earlier in dealing with the magnitude of the credit union movement will give some idea of the economic significance of this particular kind of financial institution. It would be very hard to forecast just how rapid the growth of these societies will be in Ireland, but perhaps it is not unrealistic to contemplate the possibility that we will have 1,000 credit unions here in a reasonable space of time, bearing in mind especially that the urge amongst the public at large to become involved in this kind of co-operative endeavour has already lead to the establishment of 140 societies even in the absence of suitable legislation. Taking even half the world average and assigning an asset value of £50,000 to each credit union, we would arrive at a figure of £50,000,000 in total assets of these societies. Even in this age of noughts and millions this would be quite an important statistic in our economic tables.
It has been suggested that, in general, savings are a residual and that it is well-nigh impossible to extract more of them from the public even if new media and new institutions are established. If we adopted this defeatist attitude, I suppose we would not bother at all with legislation in connection with credit unions. From my own knowledge of rural affairs, however, I am quite convinced that the promotion of credit unions will give rise to a substantial volume of new savings that would otherwise not come into being, apart altogether from bringing into useful circulation idle funds at present rather uselessly hoarded in all kinds of strange places. I gather from remarks made by my colleagues in the Dáil that something similar can be expected in the case of urban and suburban credit unions.
Some time ago the Minister for Finance found it necessary to establish a working party on savings in the hope of turning up something that would help to restrain the propensity to spend which has been causing us so many aches and pains in recent years. This Bill was already in existence at that time and did not come within the terms of reference of the Working Party. I am satisfied, however, that a well-run credit union movement can do more to rectify this kind of problem than almost any other device that can be thought of. I say this because education is the very basis of the credit union movement, which sets out to demonstrate to the public the meaning and purpose of money and how to manage it better. People who have had any worthwhile contact with credit unions are unlikely to be taken so easily by the inducements to spend, even the "easy" way, with which they are being constantly and sedulously bombarded; the basic financial arithmetic which they will learn from their credit union will, rather, impress upon them the need to spend their money as wisely as possible, to have funds available for normal contingencies, to save for the rainy day, and to procure credit at the lowest possible terms when it is necessary for them to borrow. And, what is more important, it will provide them with the means to achieve all these things.
The Credit Union League of Ireland, whose representatives I have had the pleasure of meeting, would be the first to remind us that credit unions also have a very important social purpose. Their object is to provide machinery by which people can help each other. It is not a form of business activity which will enable the few to make profits at the expense of the many, but rather a co-operative enterprise in which all concerned can participate for their mutual benefit. We have all heard of the unfortunates who have suffered at the hands of moneylenders and hire-purchase companies of the less reputable kind. We all know that, for one reason or another, a large part of the population cannot gain access to normal banking facilities. And those of us who have any volume at all of letters from the public will know that when a poor man really needs money he must often pay through the nose for it. These are all social evils and we can, I believe, hope that the credit union movement will help to eliminate them.
