Select Committee on Enterprise and Economic Strategy debate -
Wednesday, 6 Jul 1994

SECTION 16.

Debate resumed on amendment No. 84:

In page 20, between lines 41 and 42, to insert the following:

"(d) The Director may, at the request of a consumer require a lender who has negotiated a non-compliant credit agreement to apply to the Court to seek dispensation before any further sums be collected under the agreement.".

—(Deputy R. Bruton).

Mrs. O'Rourke

I wish to draw the attention of Members to our discussion on 19 May in connection with amendment No. 78 when I undertook to provide Members with a detailed list of the sections in which offences have been raised and details of them. I have copies of the statements which, with the permission of the Chairman, I will circulate to Members.

On section 16 Deputy Bruton has moved amendment No. 84. Section 16 provides that credit agreements which do not comply with the requirements of certain sections of the Act shall not be enforceable by the creditor unless the court is satisfied that the failure was not deliberate and that the consumer had not been prejudiced by the non-compliance. The section applies to the form and content of credit agreements generally as provided for in Part III and also the form and content of consumer hire agreements in section 77.

Deputy Bruton's amendment provides that a creditor must apply to a court before further payment may be collected in respect of an unenforceable agreement. The purpose of sections 16 and 49 is to ensure that collecting payments in respect of an unenforceable agreement is prohibited and by virtue of section 12, a person doing so is guilty of an indictable offence. Therefore, it would be incorrect and would be very odd in this Bill if we allowed a creditor to apply to a court for dispensation to collect payments under an agreement declared unenforceable by a court, because the creditor is already protected under the provisions of the section. For that reason I have given much thought to this amendment. The Deputy's amendment is couched in terms of the consumer applying to the court but the Bill already makes it an offence if it is non-compliant. To apply to the court might bring into play the fact that the court could, one way or the other, decide on what is already an indictable offence. I do not see any safeguard for the consumer in it.

Mr. R. Bruton

Like the Minister I am trying to pick up the pieces. While these agreements are not enforceable a person can continue to collect money. We should provide that the Director of Consumer Affairs would be an arbiter who would step in and stop the continued collection of moneys under an unenforceable agreement. I am not sure that making it legally unenforceable and saying that the person is guilty of an offence would necessarily mean the consumer has redress; whereas if the Director of Consumer Affairs was in a position to act on behalf of the consumer — he is the familiar face to whom the consumer can turn — it would strengthen the section. So far as I am aware a loan by a moneylender in excess of 39 per cent in unenforceable. The reality is that every day people are collecting on loans in excess of the 39 per cent. Simply stating in the Act that a loan is unenforceable does not give the consumer any redress because 99 per cent of moneylenders' loans are technically in excess of the 39 per cent, which is the enforceable test. I am not entirely happy with the provision concerning unenforceability of credit agreements.

In section 16 I am far from happy with the idea that an unlicensed moneylender, under section 82, could go the courts and establish that although he had been acting illegally in lending he could seek to make his loans legal on the grounds that he had not done so deliberately. It strikes me that it is open to smart lawyers to ride a coach and four through this legislation. The concept of what is done deliberately is very elastic. If an unlicensed moneylender lends he is out of bounds and there should be no way in which he could say he did not do it deliberately. It strikes me as a strange provision.

Many people dealing with low income families would see that although the section could be put in a context where it appears unenforceable and it is only if it is not deliberate there could be dispensation. The truth is that the balances are entirely tilted. The moneylender is likely to be in a much stronger position to take any legal action compared to the consumer. The consumer is much more likely to see legal rights go by default because of his or her inability to enforce them. Consumers should have access to the director and through him have their rights vindicated.

Mrs. O'Rourke

I understand what the Deputy is saying, but this amendment calls the section into question. It suggests that even if a lender fails to comply with all the regulations the consumer can approach the director to take the matter further. It is much simpler to lay out the offences and if a lender fails to comply with the regulations he will be deemed to be a non-compliant creditor. We do not need another avenue of redress which may not be in the best interests of the consumer given the various interpretations that may be put on the matter? The thinking behind the amendment is good but the amendment would give rise to confusion.

On moneylending, the Director of Consumer Affairs will be the adjudicator on the rate of interest. He has extensive powers in this regard. While the Deputy has tabled the amendment in good faith it would not work in the consumer's interest and would have the effect in some instances of toppling the offence of non-compliance.

Mr. R. Bruton

It is all very well to say that a person will be guilty of an offence and will be convicted but this will not benefit the consumer directly. Is it not the case that under the law a moneylender's loan in excess of 39 per cent is technically unenforceable but the reality, despite the protection provided in section 16, is that every moneylender is collecting money on technically unenforceable loans. I question whether this provision, under which loans will be unenforceable if certain conditions are breached, will be worth a candle to the consumer. The evidence suggests that the provision provides no protection. Under this section a consumer will have to go to court to have his rights vindicated.

Mrs. O'Rourke

This Bill, the 1987 directive and later directives deal with moneylending agreements. The purpose of this Bill is to update and consolidate in one Act all previous measures. In addition it will give the Director of Consumer Affairs much stronger and more defined powers; some would question whether we are going too far. The Government and the Oireachtas will have to provide him with the necessary resources to enable him and his office to carry out the task to which the Deputy has referred.

The Deputy is correct that in the past there was non-compliance with the provision set down. This Bill gives the director powers to ensure that illegal moneylending is brought to an end. That was the purpose of the 1987 directive, reinforced in 1989 and reinforced again here.

The Deputy's amendment may work against the consumer. I do not see any point of accepting it when a lender will be deemed to be non-compliant and the offences are clearly laid out.

Mr. R. Bruton

I have not been reassured. The reality is that unenforceable loans have been and continue to be collected. I question section 16 whether protection will be worth a candle to the consumer. The evidence suggests that it will not. The Minister of State suggests that the director will be in a position to ensure that unenforceability is a valuable concession, but if one looks at sections 46 and 47 where the Minister of State sees comfort for the consumer, they do not say anything about the director taking actions in respect of unenforceable loans on behalf of the consumer. They state however that the director may take action where some term is excessive. That is a different matter. If a moneylender issues a loan without a licence the consumer should not be the victim regardless of whether the terms are excessive and there should be someone to vindicate the consumer's rights. The Minister of State has not provided for this in the section. While she is saying that the loan will not be enforceable the consumer will have to go to court to have this established unless someone else does it. With one bound we are not free in this case.

Perhaps the Minister of State could deal with the matter by amending sections 46 and 47 under which the director may become involved so that he may act on behalf of the consumer whenever an agreement is deemed to be unenforceable. Under section 16 however a moneylender acting outside the law can pretend that he did not do it intentionally and claim therefore that he should get his money. On two counts this section is a less than convincing protection for the consumer against moneylenders trading without a licence outside the law. There should be a channel through which the consumer can have his rights vindicated without having to go to court.

Mrs. O'Rourke

The registration and licensing of moneylenders is to be centralised under the office of the Director of Consumer Affairs. Strict regulations have been laid down and these will have to be adhered to. This will give the director a strong tool in dealing with any offences committed by illegal or unlicensed moneylenders. The director must have such control rather than allow the registration and licensing arrangements be implemented in the various court areas throughout the country.

The Deputy's amendment would allow the creditor to escape the net and give him a second chance to take advantage of the consumer. I do not see the reason for that when he or she is already in the wrong for the offence committed and deemed to be non-compliant.

Mr. R. Bruton

What will happen if he or she continues to collect the money?

Mrs. O'Rourke

That cannot happen.

Mr. R. Bruton

Why not?

Mrs. O'Rourke

That is deemed an offence under the list of offences circulated, about which the Deputy asked at the last meeting of the committee. In effect, the Deputy is requesting that the creditor should have a second bite at the consumer even though it is deemed the creditor is acting incorrectly, that he or she has not complied with the regulations and, therefore, the consumer should not have to pay. The Deputy is suggesting the matter should go to court again where the offence may be interpreted differently by another judge.

Mr. R. Bruton

The Minister is pretending that unenforceability means the consumer stops paying the money. My understanding of the word "unenforceability" is that if the consumer went to court he or she could establish that the lender could not continue to collect money, but that would require an action by the consumer. It is unreasonable to expect consumers in the hands of unlicensed moneylenders to take such actions. We should lay down a provision that the Director can vindicate the consumer in respect of unenforceable agreements. I am not suggesting that my amendment sufficiently covers the matter. Perhaps the Minister might suggest a better one. In regard to section 16, is the Minister happy that a consumer can easily and cheaply exercise the rights she suggests such person will have? Is it reasonable to allow unlicensed moneylenders to go to court and say they did not commit the offence deliberately and that, therefore, the money should be collected as usual? On both counts, the position is not fair to the consumer.

Mrs. O'Rourke

The Director of Consumer Affairs, acting with the Garda Síochána, has the right to take immediate action against an unlicensed moneylender. That is the main thrust of the Bill and does not require an obscure clause.

Mr. R. Bruton

The Minister should examine the provisions of section 16.

Mrs. O'Rourke

We are seeking to outlaw unlicensed moneylenders who are the scourge of the land so that moneylenders who are properly and legally legitimised through the registration and licensing procedures are allowed do their business untainted by illegal moneylenders. The Deputy asked how consumers would plead their case under the non-compliant regulation. Section 49 states:

(1) A person shall not make a demand for payment or assert a present or prospective right to payment in respect of a credit agreement which is unenforceable by virtue of this Act.

(2) A person shall not, with a view to obtaining payment in respect of a credit agreement which is unenforceable by virtue of this Act—

(a) threaten to bring any legal proceedings,

(b) place or cause to be placed the name of any person on a list of defaulters or debtors or threaten to do so, or

(c) invoke or cause to be invoked any other collection procedure or threaten to do so.

In any proceedings for an offence under this section, the consumer is covered and, in effect, if money is sought and the person giving it does not comply with the provisions of the Bill, the consumer will not have to repay it and can rely on the provisions of this Bill to cover him or her.

Mr. R. Bruton

Section 49 (3) states that in any proceedings for an offence under this section, it shall be a defence for a person — a moneylender — to show that he had reasonable cause to believe there was a right to payment. That subsection provides a defence for a moneylender and a similar defence provision is provided in section 16 in that moneylenders can claim they did not commit the offence deliberately and believed they were acting fairly. A similar escape route is provided in sections 16 and 49, in that moneylenders could establish that because they were not familiar with the law or had not read this Bill from cover to cover they were not acting deliberately and, therefore, they had reasonable cause to pursue the money they had give out on loan. They would not be in breach of the provisions of section 49 and under section 16 they could establish that the money was properly due to them.

Mrs. O'Rourke

I am not convinced of the Deputy's argument and he is becoming less convinced as he proceeds. This matter will arise again under section 49 where the Deputy can re-enter his amendment and it can be discussed further. It does not fit easily or correctly under this section. The Deputy's arguments are not convincing.

Amendment, by leave, withdrawn.

Question proposed: "That section 16, as amended, stand part of the Bill".

Mr. R. Bruton

Under the escape clause in section 16 moneylenders who have given money on loan without a licence can establish that failure to comply with the requirements of the Bill was not deliberate. Is that not too wide an escape hatch?

Mrs O'Rourke

It does not apply to illegal moneylenders. Moneylenders will be required to register and pay a fee in order to be placed on the registered list of moneylenders compiled and kept by the Director of Consumer Affairs. The opt-out clause to which the Deputy refers does not apply to illegal moneylenders who are not registered.

Mr. R. Bruton

Section 16 (c) states a moneylending agreement which does not comply with the requirements of section 82 — which deals with moneylending without a licence — shall not be enforceable. That is acceptable, but the following paragraph in section 16 states, "Provided that, where a court is satisfied, in any action, that a failure to comply with any of the foregoing requirements was not deliberate ..." the court can dispense with the requirement. Surely that is an escape route for unlicensed moneylenders who plead they did not act deliberately.

Mrs. O'Rourke

That is really stretching credibility. We will have a transparent system for the licensing of moneylenders, which is the purpose of the Bill. The Deputy is turning the Bill on its head. These provisions will be actively promulgated and advertised and potential moneylenders will be aware of the need to obtain a licence, to register and pay their fees which will be monitored by the Director of Consumer Affairs. If moneylenders did not comply with those provisions, it would not be accepted by any court as being non-deliberate. No court could condone people who claim they did not know they had to obtain a licence to become moneylenders when the purpose of the Bill is to license moneylenders and outlaw illegal ones. The Deputy is turning the Bill on its head.

Mr. R. Bruton

It appears the Minister is misleading fellow members of the committee. She has inserted a provision that people cannot engage in the business of moneylending without a licence. If people do, their loans will be unenforceable, but if they go to court to plead they did not do that deliberately the loans are no longer unenforceable. The Minister should read the provision. Section 16 (c) states that a moneylending agreement which does not comply with the requirements of section 82, in that it is unlicensed, shall not be enforceable by the moneylender, provided that, where a court is satisfied, in any action, that a failure to comply with any of the foregoing was not deliberate, the court may dispense with the unenforceability of the provision. They are the words in the Bill, not mine.

Mrs. O'Rourke

The Deputy's amendment is not correct.

Mr. R. Bruton

We are talking on the section. I am raising a concern made by the Combat Poverty Agency and if the Minister is not willing to answer it I do not know why she came into the House.

Mrs. O'Rourke

There is no need for Deputy Bruton to be offensive.

Mr. R. Bruton

The Minister suggested I was turning the Bill on its head, but I have read from the Bill.

Chairman

We have had an orderly debate so far and we should proceed in that manner.

Mrs. O'Rourke

Deputy Bruton is standing the Bill on its head. The thrust of the Bill is that there will be a licensing regime for moneylenders. They will be required to apply for a licence from the Director of Consumer Affairs who will deal with applications and approve such licences and they will be required to pay a hefty fee. Deputy Bruton has said that a court could rule that a moneylender did not know he had to be licensed, but the purpose of the Bill is to license moneylenders. In that case the words "not deliberate" would mean a technical or administrative act, not one of substance and significance. If a moneylender brought such a case to court and it ruled in favour of the moneylender it would have ruled incorrectly. The purpose of the Bill is to license moneylenders who must pay a fee which will facilitate differentiation between licensed and unlicensed moneylenders.

I had extensive negotiations through meetings and correspondence with the Combat Poverty Agency, but this issue was not raised. How can a moneylender bring a case claiming he or she did not know of the need to secure a licence when the purpose of the Bill is to license moneylenders? Unlicensed moneylenders will learn of the need to secure a licence from the strong lobby of licensed moneylenders who wish to differentiate themselves from those who are unlicensed. The purpose of the Bill is to make the operations of unlicensed moneylenders illegal and to legalise the operations of licensed moneylenders.

Mr. Lawlor

Will the Minister clarify if the Director of Consumer Affairs can take the initiative to deal with unlicensed moneylenders? Following the enactment of this Bill the vulnerable people will be those who secure a loan from an illegal moneylender. I understand Deputy Bruton's concern relates to the right of borrowers to bring unlicensed moneylenders to court. Such borrowers pay a higher interest rate than those offered by other lending institutions and they would find it difficult to bring an illegal moneylender to court. This matter could be addressed by way of confidential helpline set up by the Director of Consumer Affairs to enable borrowers to identify illegal moneylenders. The Director of Consumer Affairs could then bring the matter to court and resolve it. That is the main area of difficulty.

Mrs. O'Rourke

That was not Deputy Bruton's point. The unfortunate borrower, usually a woman, who becomes embroiled with an illegal moneylender can approach the Director of Consumer Affairs, who in turn will contact the gardaí. The director, in co-operation with the gardaí, can act on the consumer's behalf. An unlicensed moneylender could be identified immediately because a strict licensing regime will be in place on the enactment of this legislation. The provisions of the Bill will be advertised extensively. Community groups and activists will be notified about it. Community organisations and helplines will be set up by help women living in housing estates who are in the hands of illegal moneylenders. Borrowers may contact an agent or the Director of Consumer Affairs who, acting in co-operation with the gardaí, will identify the illegal moneylender, who has not complied with the regulations. There is an avenue of redress.

Mr. Lawlor

Through the courts?

Mrs. O'Rourke

Yes.

Mr. Deenihan

As the word "deliberate" is causing so much confusion, could it be deleted? It is open to interpretation. Perhaps the word should be omitted if a case is to stand up in court. Moneylenders will bring their clients to court to reclaim the money they consider they are owed. The provisions in the Bill will be examined closely in court. If we are disrupting the relevance of the word here, one could imagine the debate about it in court. Could the word be omitted and substituted by a more appropriate wording? The Bill legalises moneylenders, but the inclusion of the word "deliberate" provides a way out for illegal moneylenders.

Mrs. O'Rourke

It does not.

Mr. Deenihan

Illegal moneylenders can justify misleading their clients or some wrongdoing on the grounds that they did not do it deliberately.

Mrs. O'Rourke

If moneylenders are required to be licensed under law, how can it not be deliberate if they do not apply for a licence?

Mr. Deenihan

The Bill provides for the licensing of moneylenders, but it also provides a way out for unlicensed moneylenders. Following the points made by Deputies Bruton and Lawlor, there is confusion about this matter. The credibility of the Bill hinges on the word "deliberate" in the section.

Mrs. O'Rourke

One of the main purposes of the Bill is to license moneylenders. How can moneylenders go to court and claim they did not know they were required to secure a licence when the main requirement is that moneylenders be licensed? That claim would be deemed by a court to be deliberate flouting of the law. Deputy Deenihan's point turns the Bill on its head when its purpose is to license moneylenders who must pay a fee to conduct their business legally. We hope there will be a diminishing band of illegal unlicensed moneylenders.

Mr. Hughes

The section is satisfactory in that one must presume that where there are legal moneylenders there are also illegal ones. The clause should be left in the Bill as moneylenders will make every effort to comply with the Act and carry on legitimate businesses.

Where a moneylender is licensed on an annual basis, there may be some delay in issuing a new licence albeit an application was made before the expiry date of the old licence. A person who is familiar with the provisions of this Act, or more particularly his solicitor, could take advantage of an innocent situation. Section 82 refers to a person not having a licence, failing to display a licence, or not carrying on the trading name under which he is licensed. Minor and innocent mistakes, which are not fraudulent or intended to mislead the consumer, are made by well intentioned moneylenders, if there is such a category — and I am sure there is, although I have no dealings with moneylenders. This clause is a saver for those people who are doing their best to comply with the terms of the Act. It leaves discretion with the courts to decide whether or not a person is endeavouring to comply with the terms of the Act.

Mr. Kemmy

It is often members of the legal profession who play on words like the word "deliberate" and interpret one word in different ways. However, I am satisfied that the Bill and the section are well intentioned and should be supported fully.

Money lending, whether by banks, building societies or anybody else, should be as transparent as possible and should be regulated. It is illegal money lending that we must try to control. Recent court cases in Limerick have shown a remarkable and bizarre amount of payments made mainly by women to moneylenders and there is often fear and intimidation. I am pleased, therefore, that the Minister intends to engage in a widespread publicity exercise to reach as many people as possible. We are working in a twilight area where people do not know their rights and are afraid to insist on them. It is very important, therefore, that the Minister do everything she can to reach as many such people as possible, people who are not well educated, who are living in fear of intimidation, and make sure those people have the opportunity and the framework to assert their rights. It is more important than some of the points Deputy Bruton made to enable people to use the powers of the Act to get out of the clutches of illegal moneylenders.

Mr. R. Bruton

There may be a way out of this. Is it not the case that the Minister has already accepted that unlicensed moneylenders will not be permitted this escape hatch? Did the Minister not accept amendment No. 82 in my name which provides that the group under the heading of subsection (c) will not have the chance to plead this exemption?

Mrs. O'Rourke

Unlicensed moneylenders will not have the defence that their omission to licence or register was not deliberate.

Mr. R. Bruton

Is it not the case that the Minister has accepted amendment No. 82?

Mrs. O'Rourke

Did we deal with that when the committee last met?

Mr. R. Bruton

My amendment sought to insert an explicit provision that that defence would not apply to those people mentioned in subsection (c). Has the Minister not accepted that already?

Mrs. O'Rourke

If that is the case, why is the Deputy pursuing this?

Mr. Creed

Why is the Minister arguing against it?

Mr. R. Bruton

The Minister seems to be arguing against her own case.

Mrs. O'Rourke

The thrust of Deputy Bruton's and Deputy Deenihan's arguments centred on the word "deliberate". What I said was that any moneylender who did not license or register himself would be clearly acting in a deliberate fashion and would not be entertained by any court; he could not say that it was a non-deliberate omission on his part. The word "deliberate" refers to the type of situation mentioned by Deputy Hughes, for example, an administrative overlap or a delay in the post. It certainly does not allow a moneylender who is not licensed to say in court that he did not know of the requirement to obtain a licence and that it was not deliberate.

Mr. R. Bruton

Is it not the case that under amendment No. 82, which the Minister accepted, we have explicitly excluded moneylenders and that this is not a question of the interpretation of the word "deliberate"? Is that agreed by the Minister at this stage? Will it be in the Bill when we next see it?

Mrs. O'Rourke

I do not have the notes on that but, if the House has passed it, it is on the record. Why, therefore, is the Deputy pursuing this?

Mr. R. Bruton

The Minister is responsible. She is the one with the army of people behind her. Has she accepted that and will it be in the Bill when we next see it? Is this debate unnecessary?

Mrs. O'Rourke

I am asking the Deputy.

Mr. R. Bruton

It is the Minister who is telling us how this is to work.

Mrs. O'Rourke

I am asking the Deputy.

Mr. R. Bruton

If the Minister wants me to go over there, I will be quite happy to do so.

Mrs. O'Rourke

What is Deputy Bruton at? We have spent 45 minutes debating an issue which he now says has been passed and which there is now no need to put forward.

Mr. R. Bruton

The Minister has been arguing against me the whole time.

Mrs. O'Rourke

Opposition is a very worthy cause, and long may the Deputy be in it, but I do think he is carrying opposition to strange lengths if he spends 45 minutes arguing about something that has accepted.

Mr. R. Bruton

The Minister is casting personal slurs here. I made the point that it is the Minister who has an army of civil servants with her. If the knock-on effect of amendment No. 82 is to make this debate redundant, it is the Minister who has the obligation to point that out to the House, not the Opposition who do not have the army of support that she has. I strikes me that the Minister does not know the knock-on effects of one amendment on another.

Chairman

I must intervene. It is obvious that we will not reach agreement. As there is an element of doubt as to what transpired on amendment No. 82, I suggest that on Report Stage Deputy Bruton will be in a position to put down a further amendment if he so desires. That is the only way we can now resolve this problem.

Mrs. O'Rourke

If Deputy Bruton wishes to put forward an amendment which he now says is redundant he may do so, but I hold to the point——

Mr. R. Bruton

We are on the section.

Mrs. O'Rourke

The Deputy may produce his redundant amendment again if he so wishes.

Mr. R. Bruton

I seek clarification from the Chair. Are we on the section or on the amendment?

Chairman

We are dealing with the section and the debate is on the word "deliberate."

Mrs. O'Rourke

Exactly. The Deputy is certainly hoist with his own petard.

Chairman

Could we have order, please?

Mr. Sheehan

Perhaps the Minister could clear the air on that section 16.

Mrs. O'Rourke

Have we a Deputy Sheehan amendment?

Mr. Sheehan

Perhaps we could have one again today.

Mr. Creed

The Minister has a gallery to play to today.

Chairman

We have debated this section for 50 minutes.

Mr. Sheehan

The Minister stated that certain credit agreements would be unenforceable except in particular circumstances. Does that not leave a loophole which moneylenders could use?

Mrs. O'Rourke

That is what we have been debating for the last 45 minutes.

Chairman

Let me inform the Deputy that before he arrived this matter was discussed at length.

Mr. Sheehan

I want clarification.

Chairman

I ask the Minister not to respond because there is no way we can go back on what we have already spent 50 minutes discussing.

Question put and agreed to.

Section 17 agreed to.