Amendments Nos. 135 and 138 are related and both may be discussed together.
SECTION 46.
I move amendment No. 135:
In page 30, subsection (1), line 36, to delete "or any charge".
As the definition of total cost of credit encompasses all charges within a credit agreement, the words "or any charge" are superfluous.
I would like to contest that view. Much of this hinges on whether the Minister will accept the later amendment that seeks to apply this section to banks and building societies. Some time ago, the Irish Independent published a list of bank charges, totalling 40 in number, for all sorts of things——
On a point of information, is Deputy Bruton referring to charges, as distinct from rates of interest?
Yes. The implication of deleting the words "or any charge " means the Director of Consumer Affairs would not have the opportunity to challenge these side bets if they were operated by a financial institution. Some of these charges are commonly believed to be excessive and unfair. We have all fallen foul of such charges. For example, if a cheque goes through one's account and is slightly out of kilter in some way with a term of an agreement, one is then charged £3 for every time it goes through. There are many instances of these charges and the consumer is bewildered by them. I would like to see the banks' usage of these charges coming under scrutiny of this section. I do not want to see the Minister exempting other lending agencies, who now might be caught under the provisions of this section, deciding to go down the route taken by the banks by introducing these extraordinary charges on the administration of a loan or on the various arrangements a lender makes with a lending agency.
I do not see the case for this amendment. I hope the Minister will accept the wider argument that the banks should be open to challenge in the same way as any other lending agency. That is why this issue is so important. The Minister clearly stated that the Government intended to introduce controls of charges, in the wake of the banks increasing their charges. Here is a vehicle for clear control. I am not confident that any controls through the aegis of the Central Bank will be dealt with in a way that defends consumers' interests. We should not dilute this section, as the Minister proposes, but strengthen it considerably, consistent with the views expressed by the Taoiseach and several Ministers.
We have an obligation to protect consumers. If the consumer is well informed and is protected from excessive charging, we get better and more effective financial services. This is a test of the good faith of the Government on that issue. I would not accept, without considerable convincing from the Minister, that we should dilute what was first put into this section.
The Minister may well have advanced justification for this amendment, but I did not hear it. I thought it was presented as a drafting arrangement or that it was tautology. Presumably the Minister can tell us if this excision has come about at the behest of a lobby group — presumably it must be the banks. Although there may be a good argument for excising the term "or any charge", I cannot see it. Amendment No. 138, for example, relates to the powers given to the Director to apply to the High Court where he thinks the total cost of credit or any charge is excessive. The Director has expressed the view — we will come to it in a different amendment — that he is unhappy at the onus being solely placed on him in that regard. He would like to see an aggrieved consumer having the right to bring a case to the High Court. Although it is a slightly separate point, its importance is that the Director has the power conferred on him by this legislation to go to the High Court and challenge the decision of the lending institution in terms of the cost of credit. He also has the right under this subsection to challenge any charge imposed.
Deputy Bruton made the case with which every consumer of the banks will agree, that there is an extraordinarily baffling array of charges, sometimes amounting to quite a proportion of the ordinary bank statement. Sometimes it seems extraordinary that there can be so many charges on such a very small number of transactions. The banks get their pound of flesh in this area which is invisible and incomprehensible to many people. For every conceivable kind of transaction there is a charge.
I would have thought that this was a very important provision. It would appear that the Director of Consumer Affairs may go to the High Court, challenge a charge and ask the basis for that charge. The challenging of some bank charges could make new law here. The ordinary consumer will not do that. It may well be that the Minister has an argument as to why it should be taken out. She says that it is not because she has been subjected to any special lobbying.
Are we dealing with the correct section?
We are dealing with section 46. The term "or any charge" occurs twice and the Minister seeks to excise it twice.
The Deputy is talking about bank charges. I want to make the position clear when Members have had their say.
Deputy Quill has indicated that she wishes to speak.
What is the clarification, Chairman?
The Deputy should conclude his contribution. Then I will allow Deputy Quill to speak to be followed by the Minister.
I would hate to finish my contribution if it was without basis.
I will allow the Deputy to speak again.
Where this occurs in section 46, it relates to any charge other than normal interest or other cost of credit. It is a very progressive move in legislation. The definition of any charge seems to me to be very clearly any charge over and above normal lending interest rates. Is that not what it means?
I await the Chairman's direction to speak.
I want to afford every Deputy an opportunity to speak, if they so wish.
On a point of order, Deputy Rabbitte is making the point that there is no point in a debate going on at length on a false premise.
On the other hand, there are other Deputies who wish to make a contribution. I have to bear the Opposition in mind.
The Minister has never been shy of intervening when it suits her and you have facilitated her, Chairman. The whole purpose of these committees is that they are less formal than the Dáil Chamber. Is there some misapprehension in terms of what I am saying about the definition of any charge? If there is we should clarify it.
I have to allow other Members to contribute, if they wish to do so. They are entitled to have their say.
I agree with what has been said by the two previous speakers. If there is some reason why what has been said by him is not valid, if there is something that the Minister has to say that invalidates what they have said on bank charges, I am prepared to wait to hear what she has to say rather than delay this meeting. If what she has to say does not invalidate what has been said by Deputies Bruton and Rabbitte I will speak. At this stage I have nothing to add except to agree with what has been said by the other Deputies.
If any Member wishes to respond after the Minister makes her contribution they will be free to do so.
Yes, we understand that.
I have to have a balance so that everybody will have an opportunity to contribute and nobody monopolises the debate.
Thank you very much.
The Minister is saying that subsection (4) excises and excludes banks?
We will allow the Minister to respond.
We have all summer to finish this. I want to make the position very clear because we are talking at cross purposes. What Deputy Rabbitte has been referring to is the proliferation of bank charges and the complete mystery which has arisen in consumers' minds about the number, amount and range of charges and the fact that they do not have access to information on all of these charges. I share that point of view. I have spent 12 months talking about it, as have many people. I wish to be clear about this.
The Central Bank is not the place to deal with consumers' interests. The Central Bank has a role to play in dealing with the decorum of the banking sector, and in keeping the country in good economic condition. Section 28 of the Central Bank Act, which deals with the consumer, states that the Central Bank must have regard for the consumer. I have always felt that the Central Bank could not look after the nation's purse and look after Tom and Mary Smith's purse as well.
Last November I met with the Minister for Finance, the then Governor of the Central Bank and their officials. We discussed this matter at length. There was a tacit agreement at the end of that discussion that it was difficult for the Central Bank to look after the consumer in regard to bank charges and their proliferation. I was unrelenting in my assault upon the matter both to my colleague and through the offices of An Taoiseach.
We have now received permission in writing from the Minister for Finance to remove the appropriate section from the Central Bank Act and transfer it to this Bill. That is section 28 of the Central Bank Act, which will govern the setting of all the charges of which Members speak. It will give authority to the Director of Consumer Affairs to regulate these charges. Where it says "The Central Bank" in all the subsections of section 28 we will be inserting "The Director of Consumer Affairs".
I want to get that across but I did not want to be accused of cutting across people. That permission has been conveyed to me in writing. The transfer of the section — it is a hefty section — into this Bill necessitates inserting a new section. My representations on the matter took a long time but I was unremitting because I strongly believe that the Central Bank, admirable as it is, was not the place for the consumer to pursue his or her rights with regard to excessive charges or the proliferation of charges. A section has now to be added to this Bill. Anything to do with consumer bank charges will be transferred by the transfer of section 28 of the Central Bank Act to the Consumer Credit Bill. That section is being prepared. I met the body representing the banks and informed it of that fact. It did not like what I had to say but we had a civilised discussion on the matter and we are about to prepare our transposition.
In view of the Minister's remarks, which indicate a great deal of thought about this matter, the committee should cease its proceedings on the Bill and should proceed, to paraphrase Lady Macbeth, no further with this business, until the section which the Minister has promised regarding bank charges is included in the Bill.
It cannot be.
This is the biggest and most important consumer legislation since the foundation of the State. It must serve every consumer well for the next two generations. It is most important, therefore, that it be enacted correctly and that there be an integration of ideas running throughout the Bill, rather than addressing an aspect of consumer rights and protection in one section and tagging on another aspect of consumer rights on to another part of the Bill. In this respect, and given the importance or remarks made, it would be better if the full draft text of the Bill was before the committee before it proceeds any further.
A range of bank charges have crept up on consumers, in some cases surreptitiously. Most consumers have no clear understanding of the nature of the relationship between a new charge and any new service they may receive from the banks. They see no justification for the range and variety of charges which have been put in place and they do not have any forum through which to seek redress.
In the increased role and function which is being given to the Director of Consumer Affairs, including, hopefully, vastly increased resources, there is the promise of a forum through which consumers can vindicate their grievances, seek explanations for these charges and be sure that the proper checks and balances are put in place as between the rights of the lender, in this instance the banker, and the borrower. This is a major step forward for consumers.
Is the Deputy pleased that I am relentless?
I am not given to flattery, but I praise the Minister for being relentless on this matter. However, the Minister's achievement to date on this issue should be before the committee to enable it consider the matter in its entirely, thereby preventing it from proceeding in morsels and spoonfuls.
Much time and consideration is being devoted to the Bill, therefore getting it right in its totality is of fundamental importance. This includes ensuring that the intention behind the Minister's remarks is understood and included in the Bill. Subsequent sections of the Bill should not contradict early sections, and the Bill should not be loosely compiled. If the committee enacts legislation of this kind it is creating matter for lawyers and the Supreme Court because those concerned will contest sections of the Bill if they can find that a section contradicts or undermines a subsequent section. In view of this, the Minister's provision on the banks should be brought forward speedily, if not immediately.
I understand that Deputy Bruton's amendment No. 154 addresses this matter.
The committee is dealing at present with amendment No. 135.
The Central Bank Act, 1971, and as subsequently amended, is well established. It is inexplicable, in view of the resources of the Minister's Department, that the relevant section, as amended, cannot be produced, given the Minister's advise that it will address the matter under consideration in the Bill and also in view of the possibility that the newspapers may well have access to the nature of these provisions.
If there is an eleventh hour conversion by the Government to what has been sought for some months, it must be welcomed. However, the committee should be advised as to the exact nature of the provisions of section 28 of the Central Bank Act, 1971. At present, it appears that the Act does not provide the facility for the consumer to challenge charges which the consumer believes to be unfair. If the section is enacted, as proposed by the Minister, there will still be only a half hearted protection for the consumer.
The issue remains that the banks should not have an exemption from challenge by the Director of Consumer Affairs if they are engaged in excessive charging. What is good for the goose is good for the gander and if other lending agencies are to have this obligation and right of challenge, so also should the banking sector and the building societies.
In addition, the consumer, which is the party directly concerned and whose interests are on the line, should have the right of access to redress in this area and should not, as my subsequent amendment provides, have to approach either the Director of Consumer Affairs or depend on the Director proceeding to the High Court, which is probably one of the most expensive ways of pursuing a case. A relatively simple system should be provided whereby a consumer can challenge a charge which is deemed to be excessive.
If the Minister's change to section 28 is accepted and she is allowed proceed with section 46 in its neutered form the matter will not have been addressed in a satisfactory manner. In addition, none of these sections should be voted upon without sight of the companion legislation which the Minister claims will persuade the committee that the matter is dealt with in such a manner.
Many people are worried about section 46 and in this respect virtually every submission I have received, such as from the Consumers Association of Ireland Limited, the European network dealing with poverty and low income problems, and the Coolock Community Law Centre, have all favoured the approach adopted by amendments I have tabled to strengthen the section.
The section is also to be criticised in that it removes a small right which existed in respect of moneylending where, under the old legislation, there was a ceiling of 39 per cent on legally enforceable money lending agreements. This ceiling has to be replaced by a provision allowing the Director of Consumer Affairs to engage in legal actions to challenge excessive charging.
The Minister is not, in one bound, free from the considerable weaknesses in the section. While the committee awaits sight of the amendments promised by the Minister, other amendments may be consistently pressed and in doing so turn the provisions of section 46 into proper and reasonable protection for the consumer.
I am reassured that it was in the Minister's mind to produce such a section and that this cannot be a reflection on those who were not to know that it was in her mind to do so. I do not know precisely for what section 28 of the Central Bank Act provides. I thought the Minister was going to rely on section 46 (4) which states: "This section does not apply to any credit advanced by a bank or a mortgage lender". I thought that that was going to be the reply as to why a discussion on bank charges would be inappropriate; because of that extraordinary let out.
I wish to refer to comments made by the Director on this issue at a seminar I attended on the Bill some time ago. Acknowledging that he is a public servant, I was struck by the trenchant nature of his remarks even in public servant language. On section 46 he said:
The most controversial aspect of this is the exclusion of banks and mortgage lenders from this provision. There will be much argument on this subject elsewhere [he said, meaning here]. It would not take a genius, however, to suspect that my view would be that these exceptions should not have been made. On the other side of the coin there may be an argument that the effects of competition and the role of the Central Bank make the application of this section to the excepted areas unnecessary. I would have to say that I have grave reservations about the general exception given to the rather vague category of mortgage lender.
I would like the Minister to clarify what precisely this new section will include when it is transposed for part or all of this section, I am not clear which. For example, will section 46 (4) — the exclusion of credit advanced by a bank or a mortgage lender — still survive? I am struck by the fact that at the same seminar — organised by the European Anti-Poverty Network — on the Bill, the question was discussed of eliminating the ceiling of 39 per cent in favour of giving the Director the right to initiate civil action in the High Court.
If he thought it was excessive.
If he thought it was excessive. A spokesperson for the British opposite number of our Director of Consumer Affairs said there had been only two such cases during almost 15 years that similar legislation has been in place in Britain. He made the point that our ceiling — albeit of 39 per cent — was something we ought to hold on to. The Director made the case that if he has the right to make such application in civil cases where he considers the cost of credit to be excessive, the aggrieved person should also have that right conferred by the Bill, if he or she was so minded or had the capacity to do so.
Is the Deputy referring to the 39 per cent ceiling for moneylenders under the Moneylenders Act?
I am talking about anywhere that the cost of credit is excessive, but it is stipulated in the Moneylenders Act that the ceiling is 39 per cent. We have now traded that in favour of giving the Director power to go to the court directly. I am not sure how we can proceed. I still do not understand how the term "or any change" gels with what the Minister said she was doing in transferring the powers conferred by the Central Bank Act on to the Director through this Bill. I am not sure if she is saying that in respect of charges — bank charges in particular — it will provide for that, or whether banks and mortgage lenders are still excised or not within the remit of this legislation. That is important and I find it puzzling as to how we can proceed unless we know precisely what the situation is.
I call Deputy Flood, and Deputy Quill has indicated that she wishes to make a further comment.
The whole question of charges by lending institutions is obviously a very serious one and it is no surprise that this debate excites such passionate contributions. In our work as public representatives, many of us will be aware of the type of charges that people criticise. These hidden charges only emerge afterwards, rather than at the time of borrowing, and put people under pressure. The Minister is to be complimented on tackling the Central Bank in this section and on bringing the matter into a new arena which is a decided advantage. In this case, as regards section 28 of the Central Bank Act, no one can say that the Central Bank has done a tremendous amount for the consumer at large. However, we are trying to work for consumers through this legislation. The Minister has made progress in introducing the issue of credit charges in association with this legislation. It is a good thing and something we can work on.
Deputy Quill's suggestion that we should not give any further consideration to this legislation is unhelpful. We have been considering this Bill over a number of meetings. We have had excellent debates and have made progress. The Minister has responded in a good spirit to Opposition amendments and will come back on Report Stage to deal with a number of them. We have all been able to make practical contributions based on our experience. We should continue to consider this Bill during the summer recess because, as many speakers said, it is important.
Irrespective of how it turns out it does not necessarily mean that the whole Bill will fall. I am sure the Minister will not allow that to happen. Work is required on the legitimate issues raised by contributors on section 46. We should continue to deal with other issues that are not directly connected with section 46 and the particular matters contained therein. As we have said time and again in our debates, the question of credit charges is important. As a public representative, I am delighted that since she was appointed the Minister has tackled this issue in a very public way. For too long it was hidden away, and people using lending institutions of one kind or another were fearful to speak out. Now the issue is on the table the lending institutions have to defend their positions, though from what I have seen to date they are not making a very good job of defending charges which are indefensible in many cases. That is why one does not see the debate emanating from the side of the lending institutions.
Let us continue with our consideration of this Bill. I look forward to hearing from the Minister when she has teased out the changes that will arise from taking section 28 from the Central Bank Act. It will make a substantial contribution towards further strengthening this legislation.
Like other Members I welcome what the Minister is proposing although I would be more confident about how to proceed if I had her proposals in front of me so that I could study them. How can the Minister reconcile her amendment to delete "or other charge" with what she is proposing? It is one thing to give consumers rights in law, but it is another to make sure the form is there through which they can seek redress if they feel their rights need to be vindicated in any way. I do not understand that because the two things simply do not add up in my mind.
I am highly critical of section 46 (4). It is of paramount importance that the consumer's interests be safeguarded. This comprehensive legislation is of vital importance to consumers. Deputy Bruton's amendment proposes to delete subsection (4). We should support this because it is vitally important that consumers be protected from vultures. I am not referring to banks and legalised mortgage lenders. However, there are lenders who can make it almost impossible for consumers to meet their demands. There seem to be many hidden charges nowadays imposed by banks and other lending institutions. If they are to be given a carte blancheunder this Bill, I would greatly fear for consumers who will be caught in their web. Unfortunately, they may not understand the situation until they are trapped and have no way out. If the Minister accepts Deputy Bruton’s amendment——
We are not considering Deputy Bruton's amendment but the Minister's amendment No. 135.
When considering this Bill it is necessary for us to be vigilant on behalf of consumers. If we are going to rush through legislation without considering it properly, it will not benefit consumers. There may be a great deal of merit in Deputy Quill's suggestion that we adjourn the debate until proper wording is incorporated by the Minister in section 46.
I refer to the 39 per cent ceiling which was discussed at the European anti-poverty network seminar in Molesworth Street. The removal of this ceiling was of benefit even though the anti-poverty group did not agree with this. It was removed because what was intended to be a ceiling became the minimum floor rate. In advice we received from consumers and others, it was forcefully put to us that we were institutionalising 39 per cent as a minimum floor as distinct from it being an unfavourable objective which might be reached at some point. We felt that giving the Director the right to judge the fairness or unfairness of such a rate was directly in the interests of consumers. Could Deputies Quill, Bruton and Rabbitte clarify whether they are talking about the range, extent and accelerated increases in bank charges for cheque books, seeing the manager and so on? I am not quite clear what they are talking about.
I am talking about any charges related to the cost of credit. It is clearly envisaged by the drafters of the section that there could be a credit agreement with a facility built in for charges which may not be encompassed in the range of charges we know banks have at the moment.
That is exactly the information I wanted from the Deputies.
On the specific issue of charges, would Deputies like to respond to the Minister?
We are not talking solely about charges.
On the question of charges, the Minister has queried the reservations of Deputies on them and I would like a response.
Not so much their reservations as their point of view.
Charges by those who provide mortgages will also have to be looked at and brought within the ambit.
Section 46 is very clear. It states that the Director of Consumer Affairs can challenge the cost of credit, which is predominantly interest, and the charges associated with it. It goes on, wholly unsatisfactorily, to exempt banks from this sort of challenge. It does not enable consumers to make any challenge. Banks should be open to challenge in respect of the spread of their interest rates and the charges they impose from both the Director of Consumer Affairs and aggrieved consumers, if they so wish. What is applied to any other lending agency should apply with equal force to banks and building societies. I have no time for the cosy exemption offered to them.
The same criteria should apply to banks and building societies.
I was glad to be provided with elucidation from the Deputies. Two clear issues are now emerging and I want to know exactly what the Deputies mean. I am talking about bank charges as distinct from bank interest charges. I thought this was also what Deputy Rabbitte was talking about. I am referring to charges which accrue to consumers on their bank accounts, cheque book accounts, visits to their managers, the times they go into overdraft and so on. I am talking about the numerous charges of which we do not have knowledge. Consumers are of the strong belief that there was on the part of the Central Bank a general nodding through of charges on consumers proposed by banks. It rightly had the macro-economic health of the country as its main concern but it is written into the Central Bank Act that it must have regard to the consumers. This is the thrust of my argument. I became concerned about this months ago because I thought the Central Bank did not see its main role as pursuing this. I am not referring to interest charges. Neither I, nor the Minister for Finance, have the right to influence what banks charge for housing.
We are talking about charges for services.
We are, as the Chairman pointed out, discussing amendment No. 135. What does the Minister mean by "or any other charge" in the amendment?
I thought the argument had become clouded. A later amendment, tabled by Deputy Bruton, relates to the Central Bank vis-�-vis the Director of Consumer Affairs, which is more or less what I am doing. I do not want to sound like a teacher, but could we look at page 12 of the Bill, the preamble which gives an explanation of the definitions throughout this complex legislation? On page 12, “total cost of credit” is defined as, “the total cost of the credit to the consumer being all the costs, including interest and other charges, which the consumer has to pay for the credit”. Therefore, when it came to drafting our amendments, the Attorney General said we were going into the realms of superfluity, having already laid out the definition of total cost of credit.
Super what?
Fluity — over done in words. The debate has become caught up in bank charges, and rightly so. All Members, including Deputies Flood and Sheehan, are beset, quite rightly, by consumers who do not understand the nature, scope and proliferation of bank charges and want somebody to take control and sort them out. The person I am recommending to be that knight in shining armour on a white horse — which I hope he will turn out to be — is the Director of Consumer Affairs and not the Central Bank.
Of all the explanations which I expected to hear, superfluity was not one of them. If we have a definition section of the Bill which includes the term, as the Minister has helpfully pointed out, "any other charges", why would the Attorney General — who is having his own superfluity problems at the moment — consider that we should excise "or any charge"? How does that fit in with the Minister's promise to import the terms of section 28 of the Central Bank Act as it relates to this——
The Deputy asked me.
I know, but if the purpose of the Minister's amendment No. 135 is purely drafting and that it is tautologous, I beg to disagree and to say that the Attorney General is wrong. If whoever drafted the Bill felt it necessary to include in the interpretation section that the total cost of credit was the cost of credit and any charges which the consumer has to pay for the credit, then it is important that any charges are expressly provided for in this provision because it is under this section that the Director may go to the High Court.
It seems clear, especially from looking at subsection (3), that not only may the Director go to the High Court for a declaration of the cost of the credit, he may also go to the High Court to say that any of the charges were excessive. I am fascinated that the Attorney General would stay up at night going through a Bill which has been published for so long and decide that some part of it is superfluous to requirements at this stage.
That does not address the question I raised at the beginning and to which Deputy Sheehan and others have referred and on which Deputy Bruton and I have a specific amendment, amendment No. 140. This relates to the extraordinary provision to exclude banks and mortgage lenders from the terms of section 46. I have given the Minister the views of the Director on this question where he says that he has grave reservations about the exclusion of banks and mortgage lenders. Banks and mortgage lenders account for more than 90 per cent of credit in the economy, and it seems fantastic to exclude them from the remit of this term whereby the Director can go the High Court and challenge the regime of costs. I do not think the Minister has made any case to support that.
The Minister's claim rests purely on the need for neat drafting, in other words that it ought to be tightened up and that "or any charges" is tautologous. Any bank punter would not think that it was tautologous. Sometimes, the charges can be as much as the interest for very small bank consumers. I am afraid the Minister has not made the case. I do not accept that it is superfluous and we have yet to debate subsection (4) which seeks to exclude banks and mortgage lenders.
I am very uneasy about proceeding with this section for a number of reasons. First, a very clear distinction must be made between interest rates and charges, which seem to be imposed at will by building societies, banks and other providers of mortgages. Most of us, even those of us whose knowledge of economics is abysmally low, understand how interest rates are arrived at. I do not think we can escape that information if we are living in the real world. However, most of us do not understand how some of these charges are arrived at.
And if one is waiting for the Central Bank to explain it, they will not do it.
I agree with the Minister. Most people do not see any direct connection in many cases — perhaps not in all cases — between the value of the service given and the amount of the charge which is levied. It is a fundamental flaw in this major Bill to tie the two together and to treat them as one. It undermines a great deal of the work which has been done to date. It certainly seriously undermines this section and calls for a great deal of further clarification in this and the definition section.
Second, I still await the Minister's justification of that amendment—why she should seek to exclude charges. I do understand how that can be usefully related to other sections of the Bill, in relation to what she has promised to put in the new section she hopes to include.
On the words, "or any charge provided" in section 46, my concern is that a policy might emerge from lending institutions to lump them together.
Does the Deputy mean in a composite way?
That is right. They will find a way, with all of the great skills at their disposal, to put them together rather than having the charges set out separately where everybody can see them and we can have constant debates in committees such as this to eventually achieve proper change with regard to charges. Whatever about the Attorney General and his use of big words——
Tautology.
——which tend to confuse most of us and certainly a great number of people outside of this room, I do not think it is a good idea to remove it. The Minister should find a way of having that charge separately included in the legislation as a constant reminder to us that charges have to be separate and shown separately and that it is not acceptable for lending institutions, large or small, to lump them together as will happen when the Bill is passed. Regardless of the explanation given of the total cost of credit, we must be conscious that this is our only chance to review this matter for the foreseeable future. It is, therefore, up to us to get it right and those of us who have contributed to this debate undoubtedly want to do so, as does the Minister. I ask her to consider carefully the deletion of these words, for whatever reason.
We are getting mutton dressed up as lamb today.
How dare the Deputy be so sexist.
Essentially the Minister is refusing to accept reasonable Opposition amendments which are of the same tenor as conscious statements by Government members from the Taoiseach down.
Deputy, we are considering the Minister's amendment.
We are considering the Minister's amendment No. 135 and the associated provision, section 28 of the Central Bank Act, which we have not seen.
That is not under consideration here. We are discussing amendments Nos. 135 and 138 and I ask the Deputy to confine his remarks to them.
I always accept your rulings as best I can but one cannot discuss this in a vacuum. One has to consider it against the background of what the Minister said is the alternative, which is section 28 of the Central Bank Act, as amended.
It is not the alternative. The discussion necessarily entered the realm of bank charges and that legislation was mentioned.
The reason I believe we are being offered mutton dressed up as lamb is that the Taoiseach recently said there must be an explanation as to why the gap between interest on larger demand deposits and interest on loans to small business and farmers has widened from a mere 2.75 per cent in 1975 to 10.7 per cent now. He also queried the interest charges levied on borrowers. Section 46 of this Bill provides the Director of Consumer Affairs with the opportunity to challenge that gap in charges. However, far from doing what the Taoiseach said was necessary, the Government is exempting banks and building societies from this challenge.
The other point made by the Minister is that the phrase "or any charge" is being removed because it is tautological. I can accept that point if she has firm evidence that the Director of Consumer Affairs will be able to challenge any side charges. However, I cannot accept that the Minister should continue to exempt banks and building societies from these provisions. The Minister was reported by the Irish Independent as saying that she was “very disturbed" by the new charges. She went on to say that AIB’s new low rate of 24.26 per cent on its credit cards was clearly excessive at a time of 2 per cent inflation and a 2 per cent deposit rate.
That was said in the context of the controls which were to be introduced under this Bill. She is now side stepping the issue and saying she did not intend controlling these excessive charges lenders have to pay. The only matter she is now dealing with is the automated transaction fee of 18 pence, which may now be open to assessment by the Director. That does not deal with the issue, which goes far deeper than that.
We believe banks and building societies should be open to challenge if they are charging excessively. The Minister said the credit card charge was excessive, the Taoiseach said the spread in interest rates was excessive and we thought those problems would be addressed. They are not being addressed in this Bill; they are being sidelined. That is why we are frustrated. We are asked to accept another amendment which we have not seen and which is supposed to satisfy us but we are not satisfied.
On a point of information, are we speaking about bank charges or interest charges? I would like that clarified.
We are talking about both; we are talking about any charge. The Minister is saying that the cost of credit includes charges. Like Deputy Bruton, I do not accept that the amendment simply deals with a tautology. It does not matter what we intend as legislators; what matters is how a judge will interpret the section if it comes before him. As it is worded at present, section 46 (1) is perfectly clear that it deals with the total cost of credit or any charge. These cannot be the same. I believe this is being excised because it is envisaged that there could be litigation against the clause "or any charge", not because this is tautologous. The two are materially distinct and separate and the definition section of the Bill similarly treats them in that way.
Amendment No. 135 in the name of the Minister is fraught with danger for the consumer. What influenced her to make this change? If the words "or any charge" are deleted, the section is null and void.
I am discussing amendments Nos. 135 and 138 and I have taken specific steps to see that responsibility for bank charges will be removed from the Central Bank to the Director of Consumer Affairs. I do not want interest charges to be within the remit of the Department of Enterprise and Employment or that of the Department of Finance. We cannot dictate interest charges on this island. Would Deputies accept that?
I would but the cost of credit——
The Minister to continue, without interruption. I have allowed the Deputy to contribute on this section on two occasions. The Minister may be provoking his response by seeking an answer but I ask the Deputy to let her develop her point and I will allow him to reply.
I cannot influence bank interest charges, nor can any Department. Confusion has arisen because bank charges have become part of the discussion. When I talk about bank charges I mean charges for services rendered by a bank, whether that means a cheque book, meeting the manager, standing charges, etc., which are not understood by the consumer nor explained by the bank. The banks believe if they say something everyone is supposed to understand it and agree with them but clearly that is not the case. Two years ago I asked banks to put charges on the front of their loans, etc. and they are now doing so but, as Deputy Flood said, these charges should be constantly brought to our attention.
I also shared that worry. It was a point of discussion this morning that when this became open and transparent, the banks would decide it was too much because people could see charges for everything and that instead a lump sum would be charged for services for 12 months. The Director of Consumer Affairs will deal with that when it comes within his remit. I have nothing to do with interest charges in banks because they relate to macro-economic policy and the health of a country. Some members are mixing it up——
I am not.
Deputy Sheehan is talking about bank charges.
I am interested in the view, which I hope the Minister is not ascribing to the Minister for Finance, that no Minister or Department may influence the level of interest rates in the economy. I do not accept that because to a greater or lesser extent we are expected to be able to influence them. I accept the Minister's point that it is not the task of her Department.
It is envisaged in section 46 that interest rates will be part of the cost of credit, which the Director of Consumer Affairs may challenge. It is clear that interest rates are included in the term "cost of credit". In the subsequent phrase "or any charge", we, by agreement on this side, mean any additional charges on top of that. There may be other charges.
Interest charges.
No, not interest charges. I do not understand "or any charge" to relate to interest charges. I understand that to be included in the term "cost of credit".
Why are we having this discussion if the Minister insists on retaining subsection (4)? Does the Minister intend to agree to my amendment and that of Deputy Bruton which would delete subsection (4), the section which excludes banks and mortgage lenders?
In their interest charges.
They should not be excluded from the remit of section 46.
Does Deputy Rabbitte mean in their interest charges?
They should not be exempted because the credit agreement referred to could be with one of these banks or mortgage lenders.
Is Deputy Rabbitte talking about interest charges?
In so far as they relate to the cost of credit. The Director of Consumer Affairs would go to the High Court if he believed a particular credit agreement extracted an excessive rate of interest. That is the significance of the 39 per cent. If the Director concluded that an excessive price was charged for lending money, he would, in those circumstances, seek to bring that to the High Court.
Deputy Rabbitte wants the Director of Consumer Affairs to have the right to challenge the rate of interest charged by a bank.
If the consumer was being charged the rate of interest of the day, the Director would have no action. However, if he arrived at the conclusion that an excessive rate was being charged, he could possibly posit an action, otherwise action would lie.
Does Deputy Rabbitte accept the macro-economic point which I put forward?
If the bank was manifestly charging the going rate of interest, no action would lie, but if the Director of Consumer Affairs concluded that the rate of interest or the cost of the credit was excessive, then he could go to the High Court.
The spread of interest rates is determined by domestic factors. International factors determine the base line interest rate. The Taoiseach was of the view that banks were loading particular consumers and extracting excessive profits from them by the structure of interest rates which they drew up. He observed that the margin between international rates and what Irish banks charged had widened dramatically. That is an issue of concern. If banks decided to load costs on consumers rather than business, decided to up consumer borrowing rates at the expensive of other borrowers or decided to up consumer rates compared to international rates to enhance profits, it could be an issue which the Director of Consumer Affairs could challenge.
If there was an imbalance.
If they sought to widen their margins. The Taoiseach indicated that they have done this to particular borrowers in the past ten years. I envisaged that the Director would have a role in protecting the consumer against banks systematically deciding to up the rates against them. The Director would rightly have a role in that regard. The Minister in an article in the Irish Independent on 23 October 1993 reportedly spoke about being disturbed by the new charges.
Bank charges.
She went on to say that the new 24.6 per cent interest rate on credit cards was excessive. I understood that she recognised that interest rates contained an element which is at the discretion of banks and that if banks charge excessive amounts on credit cards, it would be considered under this provision to be excessive rates of charge for credit and would be open to challenge. She clearly flagged that this was the direction of Government thinking. We understood that this Bill would have a ministerial amendment to ensure that these powers would be available against any lender. I do not see why banks should be treated differently from any other lender. If the Director believes that a particular charge is excessive, he should have the right to challenge it.
Is Deputy Bruton talking about bank charges or interest charges?
I am talking about interest charges and bank charges. Charges which are not related to a loan should be open to challenge. Deputy Rabbitte rightly made the point that the words "any charge" could reasonably be construed as giving the Director the right to challenge the transaction charges recently introduced. The Minister suggested that she would deal with transaction charges as opposed to credit charges through section 28 of the Central Bank Act, which we have not yet seen. The article in the Irish Independent on 23 October read: “At present the banks only have to notify the Central Bank of changes in charges. The Central Bank cannot, however, intervene to prevent the changes.” Whether the authors of that article, Matt Cooper and Stephen McGrath, were correct, they had read section 28 of the Central Bank Act and recognised that the Central Bank could be informed of these transaction charges but could not challenge them.
It will be of little reassurance to find that section 28 of the Central Bank Act is now being lifted and included in this Bill if, at the end of the day, the Director will only be consulted about the charges.
Section 28 (2) (b) states that the bank may direct the holder of the licence — it will be the Director of Consumer Affairs in the case of banks — to refrain from imposing or changing a charge, term or condition applying to the provision. It is actually not fair to read from the Act.
The Minister is fortunate to have a copy of the provision. I cannot allow a discussion on it. I do not want to restrict the debate in any way but I have to be even handed in my application of the Standing Orders and allow other Members an opportunity. Other Members do not have a copy of the Act in their possession. I ask the Deputy to refrain from quoting from it.
The credit charged imposed by a bank should be clearly open to challenge by both the consumer and the Director of Consumer Affairs. The Minister is suggesting that she will do something about controlling——
Transaction charges. It is a better word.
——fees and the charges for services rendered by the banks. That is not sufficient. It does not fit in with what both the Minister and the Taoiseach have said in statements about their concern in relation to the wide margins being charged by banks. The Government is reneging on promises.
I agree with the sentiments expressed by Deputy Bruton. Both Deputy Bruton and Deputy Rabbitte have outlined the situation thoroughly. If the Minister's amendment is accepted, it will make a mockery of this Bill. The charges imposed on consumers by lending organisations throughout the country can be exorbitant at times. We have to address this problem on behalf of the consumers. I urge the Minister to withdraw her amendment to section 46.
I note that the Chairman is slow to allow any reference to the amendments in the names of Deputies Bruton and Rabbitte.
That is because we have not reached them yet. I assure the Deputy that in time they will have a sufficient opportunity to put forward their amendments.
I realise that, but you should have grouped them together. I should not be telling you what to do but——
The committee agreed to take amendments Nos. 135 and 138 together as they are related. Deputy Bruton's and Deputy Rabbitte's amendments will be taken in due course. I ask you to refrain from addressing those amendments at this stage.
It is of vital importance that the Director have a role to play in relation to the charges imposed by the banks and lending institutions——
Is the Deputy talking about the transaction charges?
——or any other hidden charges appertaining to the lending of money to the consumer. It is of paramount importance that the Minister accept that.
We all agree that the Minister is concerned about this area and will when the legislation is enacted be competent to deal with the level of transaction charges through the Director of Consumer Affairs. We should not be side-tracked in the expression of our concern. Within the framework of this legislation, we do not have the power to deal with interest charges. We are concerned about excessive interest charges.
The dogs in the streets know about the Central Bank guidelines, treble A ratings and how standard interest is affected both domestically and internationally. However, we do not want to get embroiled in that area. We are concerned that if Seán Citizen goes to the Director of Consumer Affairs with evidence that he is being charged a penal interest rate, the Director should have some power. At present nobody has power to act, which is the concern being expressed in this discussion.
The Minister should address the potential for institutions to charge excessive interest and enable the Director to take some action. As Deputy Rabbitte said, the Director of Consumer Affairs is not going to waste his time taking cases against any institution when he sees that the level of charges is normal. There should be concern when the levels are above normal such as in small institutions where people deemed to be high risk.
Obviously much research was done before increasing the rate from 2.9 per cent to 10 per cent. Somebody in the Taoiseach's Department researched his statement on the concern about the build up of charges. This can be addressed. I do not know the legalities of the situation and how we can reconcile the concerns. The Minister is equally concerned. We are discussing excessive interest which is above the accepted level in normal commercial situations for all types of borrowers.
I suggest that the Minister respond tomorrow morning. I also suggest that Members be circulated with a copy of section 28 of the Central Bank Act because it has taken on an increased importance during the course of discussion. Does the Minister have a draft of the proposed new section?
No, I do not have that. I have entered into consultations about it. We envisaged a complete new section and the transposition of this section.
What exactly is it being transposed for?
"Director of Consumer Affairs" will be substituted for "Central Bank".
I appreciate that, but which part of section 46 will it replacing?
It will be a new section.
Just to import that term from section 28 into this Bill.
It is three pages.
The entire three pages?
Yes. We are putting it in as an additional section in the Bill.
Section 28 will be included in this Bill except that "Central Bank" will be replaced by the "Director of Consumer Affairs".
It seems very unwieldy.
I suggest that a copy of that section be circulated. I thank the Minister, her officials and Members of the committee for their participation and contributions.
The Select Committee adjourned at 4.55 p.m. until 10.30 a.m. on Wednesday, 20 July 1994.