Select Committee on Enterprise and Economic Strategy debate -
Wednesday, 20 Jul 1994

SECTION 46.

Debate resumed on amendment No. 135:

In page 30, subsection (1), line 36, to delete "or any charge".

—(Minister of State at the Department of Enterprise and Employment).

Mr. R. Bruton

The Minister is proposing to remove the words "or any charge" from the remit of the Director of Consumer Affairs to challenge. Her argument is that this is tautological in that the cost of credit in any credit agreement includes any charge. That is an arguable case. It is incontrovertible that her proposal of importing the powers under section 28 of the Central Bank Act, 1989 and giving them to the Director of Consumer Affairs does not meet with the points made by the Opposition spokespersons that the exemption from challenge of banks and building societies is wholly unsatisfactory.

The proposal that at some future date we will see a dressed down amendment from the Central Bank Act to deal simply with transaction charges — the 18p charge for using ATMs, for example — is not getting to the heart of the cost of credit. If we want to give the Director of Consumer Affairs the right to challenge the cost of credit he must be able to challenge the interest charge and any associated charges of a credit agreement. He must be able to challenge that equally whether the lender is a bank, a building society or any other lending agency or a moneylender.

We should be providing for uniform legislation that gives the Director of Consumer Affairs the right to challenge any excessive charges regardless of their source. We would argue that the consumer should equally have that right to challenge. The banks and building societies deserve no exemptions from such provisions.

Mr. Rabbitte

The Chairman has tried to keep us to the particular amendments under discussion but it is difficult to make sense of a subsection or an amendment without referring to the section, or to how it interacts with other sections of the Bill. On reflection, Deputy Bruton is perhaps right on the question of the wording "or any charge", looking at it in terms of the more important phrase "the cost of credit".

Ultimately the net point relates to subsection (4) which excludes credit advanced by a bank or a lending institution or a mortgage lender. Since about 90 per cent of credit agreements are from banks or building societies the exclusion of those institutions from the remit of section 46 weakens the entire legislation. It is particularly serious that we are seeming to confer new powers on the Director of Consumer Affairs, where he considers there is excessive cost of credit involved in an agreement, to appeal to the High Court.

If banks and mortgage societies are excluded from the remit of that section, it will call the value of the entire section into question. This country used to enshrine the special position of the Catholic Church in the Constitution. We now appear to be enshrining the special position of the banks to such an extent that we appear to exclude them from the remit of serious legislation such as this Bill. This is the first major piece of legislation dealing with credit agreements between creditors and consumers, yet the main institutions concerned with that process are effectively excluded from its remit. I remain unhappy with this.

On reflection, amendment No. 135 is probably not as serious as it first appeared. Deputy Bruton referred to the phrase "transaction charges" and the Minister appeared amenable to using it for clarification purposes.

Minister of State at the Department of Enterprise and Employment (Mrs. O'Rourke)

For discussion.

Mr. Rabbitte

That is fair. However, it has nothing to do with the cost of credit and it is this that the Director may challenge. The main component of the cost of credit is interest charges. If these charges seem excessive to the Director, he has the right to make an appeal on behalf of a consumer to the High Court.

In relation to the importance of charges, I have not formed a conclusive view on the amendment. There may be substance to the Minister's argument in that regard. However, it would be interesting if the matter was contested. I am amused by a cutting from the Irish Press of 15 June in respect of a survey carried out by the Irish Bankers' Federation. Its purpose was apparently to explain to the public that the charges are not nearly as excessive as it believes. The article stated:

Most Irish bank customers are either unaware of the charges made by the banks for different customer services or have an inflated idea of what the true cost is, according to a recent survey by the Irish Bankers' Federation.

The example was given that 50 per cent of the 800 people questioned thought that the charge for use of an ATM was 31p when it is in fact 19p. Asked how much it cost to write a cheque, the average amount quoted was 30p, with 31 per cent of the correspondents saying that they did not know. The actual charge varies from 22p to 26p. I am not sure what point is being made and whether it is that the public does not know. However, the public knows that there is an array of hidden charges for every conceivable transaction and that this is an important element of the cost of money. It is immaterial whether the cost is 26p or 31p.

Charges are an important element. I presume that the cost of credit means that charges are included in the credit agreement and therefore that the cost of credit could only be as provided for in the credit agreement. There may be some basis for the Minister's amendment.

Mr. Sheehan

I too have reservations. Section 46(3) states:

The Director may apply to the High Court for a declaration that the total cost of credit or any charge provided for in any credit agreement is excessive.

If we agree to the amendment, I worry that it will completely weaken section 46 and muzzle the Director of Consumer Affairs in terms of applying to the District or High Courts for a declaration that the total cost of credit or any charge provided for in any credit agreement is excessive. It will leave the door open to banking and lending institutions to come up with hidden charges of many descriptions. I plead with the Minister of State to leave the section as it stands.

I ask the Minister of State to outline what has influenced her to remove that part of subsection (3). It will leave the door wide open and make consumers quite vulnerable to lending institutions doing what they like through hidden charges which may not yet have been declared. The interests of consumers, who are the people primarily involved and who will be paying the bill, should be safeguarded. There is no justification for removing that part of the subsection. I am highly critical of any attempt to do so.

Mrs. O'Rourke

I thank Deputies Bruton and Rabbitte for their comments. I refer them once more to page 12 of the Bill where it states:

"total cost of credit" means 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.

As I stated yesterday, the influence on me in this regard was the Attorney General who quoted superfluity. A more elegant word is perhaps tautology. This is the reason for the amendment. The total cost of credit is covered by the definition on page 12 of the Bill.

Amendment agreed to.

Mr. R. Bruton

I move amendment No. 136:

In page 31, subsection (3), line 6, after "Director" to insert ", a consumer or a person acting on the consumer's behalf".

The purpose of this amendment is to extend the right to challenge excessive charges for credit to the consumer or a person acting on the consumer's behalf. As the Bill stands, the only person who can take an action to deal with excessive rates of charge for credit is the Director of Consumer Affairs and even then, he can only take that action in the High Court. This is not a practicable avenue of redress for the typical consumer who feels that he is being excessively charged. He would first have to convince the Director of Consumer Affairs of his case and then persuade the Director to incur the substantial costs of a High Court action.

Most transactions which a consumer would deal with would be of a size which would not make it practicable for the Director of Consumer Affairs to go to the High Court to pursue cases of excessive charge. The Director would only use this in exemplary cases if he was trying to make a point.

It is reasonable to give the consumer, as well as the Director, the right to challenge under this section. This has been sought by the Consumers' Association of Ireland and by many groups which act on behalf of low income families. Many of these groups, which provide an advice network to low income families, would be in a position to take up the challenge on behalf of the consumer. If my amendment is accepted, people would act on behalf of low income families and they would be willing to challenge moneylenders or others engaged in credit, who are charging excessive amounts. That would be the practical effect of my amendment. One would not need to wait until the Director of Consumer Affairs, who has one office in Dublin for the entire country, is alerted to the many problems which consumers are facing in this area. One would also achieve the establishment of a practical network to defend consumers' interests in the area of credit.

An associated amendment, which we will discuss later, seeks to move consideration of the matter from the High Court to the District Court. Many networks trying to assist low income families would not be in a position to go to the High Court to challenge such moneylending charges. It would be more reasonable and practical to take such actions in the District Court.

The idea behind section 46 is an excellent one. For the first time, we are providing the opportunity to make a challenge against excessive charges on behalf of the consumer. If we leave this matter to the Office of the Director of Consumer Affairs and do not extend it to the consumer or someone acting on his behalf, we will miss the boat on an important opportunity.

I am not happy with the Minister's decision to remove the 39 per cent ceiling which we used to have in the old Moneylenders Act, 1933. Section 17 of the Moneylenders Act, 1933, states:

If it is found that the interest charged exceeds the rate of thirty-nine per cent. per annum, or the corresponding rate in respect of any other period, the Court shall conclusively assume for the purposes of section 1 of the Moneylenders Act, 1900, that the interest charged is excessive and that the transaction is harsh and unconscionable.

It would then be struck down. The Minister argued that such a provision was unnecessary or ineffective because the 39 per cent became the ceiling. However, if the Minister read the Combat Poverty Agency review or any other reviews on the activities of moneylenders, she would see that the typical charges were multiples of 39 per cent and that, in some cases, up to 1000 per cent was charged on moneylending agreements. There is no evidence that the 39 per cent was honoured as a ceiling. The evidence is that higher charges were being made.

The advantage of having a ceiling — it should be a variable ceiling and not a figure which remains the same for all time because interest rates rise and fall — set by ministerial order would be that the consumers would not have to go to court frequently to establish the case because there would be a legal ceiling and it would only be cases below that which would require a consumer to challenge it in the District Court. Other cases would be unlawful and would be automatically struck out. In many cases it would save the cost of litigation which would otherwise cause the Director, consumers or someone acting on their behalf to take a case to the courts.

I hope the Minister accepts this provision. It seems to have widespread acceptance among the groups which have written to us. No group has argued that this redress should not be available to the consumer. There seems to be a broad consensus and I expect it has the support of the Members.

Mr. Rabbitte

Are we discussing amendment No. 137 with amendment No. 136?

Chairman

No, because your amendment is related to amendment No. 148 and they may be discussed together. We are discussing amendment No. 136 separately.

Mr. Rabbitte

I refer to the last point raised by Deputy Bruton about interest rates and the abolition of the 39 per cent ceiling. I refer the Minister to the comment made by the Director of Consumer Affairs at a seminar, which I referred to yesterday. He said:

The question of excessive rates of charge also arises under Section 81 as regards the licensing of moneylenders. By contrast that Section does not give any statutory ‘guidance' but allows me to use my ‘opinion' in determining whether or not the rates charged by a moneylender are excessive.

The difficulty with this, however, is if I issue a licence to moneylenders and effectively ‘approve' a rate of charge for loans I might find it extraordinarily difficult afterwards to convince a court to review credit agreements of that moneylender under Section 46. Even in a case where the cost of a loan was higher than the rate given in the moneylender's licence the court might justifiably ask why I had not revoked the licence under Section 81 (9). One relevant factor would be that the consumer may get redress under Section 47 from the Court. I will not be in a position to give such redress by suspending a licence under Section 81.

I would like to hear the Minister's reasons for abolishing the 39 per cent ceiling because the submissions made to us by the various poverty organisations argue for its retention. That is also the Director's view. If the only argument advanced to the Minister for the abolition of the 39 per cent ceiling was that it would become the floor, it is not a strong argument for its abolition. In the few cases which have gone to court, and Deputy Bruton referred to this, the interest rates charged by people in the illegal moneylending sector were 800 or 900 per cent. If 39 per cent was established as the norm, then so be it, but at least there would a limit by order of the Minister. This would clarify the situation and the consumer would know where he or she stood.

The Director is not happy with this situation. Deputy Bruton's amendment draws attention to the fact that it is only the Director of Consumer Affairs who may challenge this in the High Court. I tabled a similar amendment but Deputy Bruton's amendment is stronger because he expressly requires that the legislation should provide for a situation where a person, acting on behalf of the consumer, other than the Director, could challenge this in court. That is important. My amendment refers to a person, who may be adversely affected, bringing the case to court. On reflection, of course, many people affected by this may not have the financial wherewithal to bring it to court anyway. However, a community or poverty organisation or a law centre, such as the Coolock Law Centre, could sponsor the consumer's case in court. Deputy Bruton's amendment is stronger because it would confer the right on an organisation like the Coolock Law Centre, FLAC or other such organisations to do this. Unless we give vast resources to the Office of the Director of Consumer Affairs, to believe that the punter will get access to the office and convince it to take cases for them is remote from reality.

The Director of Consumer Affairs said the following on this point:

I would have liked to have seen a right to raise this issue vested in any consumer who may possibly be adversely affected by such an agreement where the rate of charge is excessive. The other question which you might like to address today is whether voluntary groups might also be given such rights to assist low income households.

The Director made a compelling case in that statement. First, he pointed out that the powers conferred under section 46 are restricted to him and the case can only be brought to the High Court. Second, he said he would like to see those powers or the right to raise these issues vested in any consumer who may feel they were adversely affected. He went on to argue that an organisation acting on behalf of the consumer could sponsor the case in court if the consumer so wished. If that is the general view of the poverty organisations and the Director, I cannot see why the Minister cannot accede to it.

Mrs. O'Rourke

I never said I would not.

Mr. Rabbitte

I will shut up, Chairman, if the Minister will be overwhelmed by the cogency of the argument from both Deputy Bruton and myself. I welcome the Minister's agreement to take the amendment on board. It is in keeping with the spirit the Minister has demonstrated throughout the debate on the Bill——

Mrs. O'Rourke

Deputy Rabbitte has already gone to the barricades.

Mr. Rabbitte

——and I am delighted she has accepted it.

Mrs. O'Rourke

I still have to reply. The Deputy should never presume.

Miss Quill

I hate to strike a discordant note on what is emerging as harmony across the floor. I have a slightly different view on the matter, but I will wait for what the Minister has to say. Section 46, as it stands, and amendments Nos. 136 and 137, are central to the success of our consumer protection legislation. As the section is drafted, the strength of this legislation will be the powers to be vested in the Office of the Director of Consumer Affairs. Of course, if the Director is to adequately discharge the functions this Bill will put upon him, his office will have to be expanded enormously and an additional amount of substantial resources will have to be provided for him.

We are reaching an interesting point. We may, perhaps, be switching from reliance on the judicial system and the courts to a different way of dealing with consumers' grievances. Rather than the situation that applied hitherto when consumers with a grievance would resort to courts of law and engage in expensive litigation, they could, when this Bill becomes law and the Director is given the resources of which I speak, have their grievance redressed by the Office of the Director of Consumer Affairs at no cost. That is my clear understanding of the way we hope to frame our consumer law in future.

With that in mind, I would almost insist that we attempt to give this system a good chance to hope that consumers with a grievance would move away from the culture of going to court, where they have often been exploited by legal practitioners. At the end of the day, the only people who stood to make money out of these grievances were the lawyers. The consumer seldom, if ever, benefited greatly. I hope we can move away from that kind of system and go instead towards a more modern way of dealing with grievances and complaints.

We should not try to keep the two systems in place in parallel. A consumer, for example, who felt he had a grievance, instead of going to the Office of the Director of Consumer Affairs and testing out that system fully and seeing if it met his needs and demands, may be tempted by an ambitious young solicitor or lawyer to go to court directly and bypass the Director. If that were allowed to happen, it would seriously undermine the Director's authority and what is at stake in the Bill and would be a retrograde step. After all, the Director will have at his fingertips, when this Bill becomes law, a clear and overall understanding of interest rates, charges and conditions. Since licences are issued annually, the Director will have to review the position of the areas where a consumer had a legitimate grievance in the past. There will be an annual requirement on the Director to review the position of every person or company applying for a licence. Over a period, the Director will build up a portfolio of substantial expertise in this field which will enable him to deal with the majority of the cases that would arise. That is the way I would like to see the business of dealing with consumer complaints developing.

I will hold my further comments until the Minister has spoken on the matter. However, I counsel caution with amendments Nos. 136 and 137. I cannot see where the consumer stands to benefit if either amendment were to be incorporated in the legislation.

Mr. Flood

First, on putting the removal of the 39 per cent ceiling in the legislation, I have listened with interest to the comments made on this; it seems that it is too high anyway. Such a move would give it a kind of legalistic stamp or legitimacy. If somebody comes in with a rate of 38.5 or 38.75 per cent, the courts may see it as a legitimate charge when in many cases it is not. Therefore, I would like to see the Director of Consumer Affairs taking action on rates charged at that level. I do not have any problems with the removal of that ceiling.

I have a lot of sympathy with Deputy Bruton's amendment. I see this legislation creating a tremendous workload on the Director of Consumer Affairs. I suppose he will eventually get the resources he requires to police and implement the legislation. There will be a time where an individual consumer or a voluntary group may take a different view from that of the Director of Consumer Affair as to whether a particular case merits going to the High Court. That is where I see the narrowness of leaving it to the Director of Consumer Affairs as weak in some respects. There will be differences of opinion about rates charged. The Director of Consumer Affairs may be of one opinion whereas the consumer or a group acting on behalf of the consumer may take a different view. I would be very interested to hear the Minister's opinion. I get the impression that she may well be prepared to consider the points we have been making on this matter.

I disagree with the statement by Deputy Quill in which she seemed to suggest that it should be left in the hands of the Director of Consumer Affairs. Others, particularly voluntary groups and so forth, are entitled to their own opinion and if they feel strongly about charges they should be entitled to go to court. There has to be a middle ground. I ask the Minister to consider that very carefully because it is important that it not be too constricted and placed solely in the hands of the Director of Consumer Affairs.

The Director of Consumer Affairs may be extremely busy in the early stages of the implementation of this legislation, which is very strong. Consequently consumers who are anxious to have their cases processed may find there are delays while the Director's office is strengthened. They may be aggrieved that it takes a longer time than they would reasonably expect before their case is heard. Maybe the benefit of having the case heard and being successful will have been dissipated by the length of time it may take in the early stages of the legislation to bring the matter before the courts. For these reasons I ask the Minister to look sympathetically at these changes which I feel would be important in gaining more widespread acceptance for this part of the legislation.

Mr. Crawford

I support my colleague, Deputy Bruton. The comments he has made on this amendment are very important. To require the Director of Consumer Affairs to deal with all situations seems impossible. It is important that others in a position to deal with such problems are allowed to get involved. The major issue is that the High Court is the only court in which these cases can be heard. It would not seem reasonable that all cases would have to go through that system, which would very quickly clog up.

I support Deputy Bruton's comment on this matter. I am not sure whether that came across clearly. If there is only one person or even a number of people working under the Director dealing with this issue, it could become very difficult for consumers to get their cases heard. The Minister has assured me that we will get around to the issue of the High Court being the only court to deal with this situation. That would surely clog up the system completely.

In my experience as a member of a voluntary organisation I had to deal with many problems of consumer credit. The nearer the person is to the consumer the more realistically they can deal with the situation. I would hate to see this tied up with bureaucracy in that only one person could deal with it. I hope from the indication the Minister has given that she has taken Deputy Bruton's and Deputy Rabbitte's amendments into account and that there will be a positive answer to their suggestions.

People who are in credit difficulties are being forced by organisations to sign credit forms. Banks are not being taken into account here but even banks can force individuals to sign up credit forms without having the details of charges or interest rates on those forms. Only last week I was contacted by a constituent who had been sent out totally blank forms with a mark indicating the place to sign. It did not give any indication of what interest would be charged or what charges would be made. When I insisted that they look for proper details these were not sent out on the form but on a separate piece of paper. The forms are still blank and still expected to be signed. This is wrong and I hope this Bill would deal with that type of thing.

Miss Quill

I am alarmed by what I am hearing. When we discussed this Bill on Second Stage in the Dáil we were given an assurance by the Minister that when this Bill becomes law it is her intention to set up regional offices of the Director of Consumer Affairs in cities like Cork, Limerick and Waterford.

Mrs. O'Rourke

And Athlone.

Miss Quill

She made the point that there would be an office in Athlone, to everybody's surprise. That was a clear commitment made by the Minister on Second Stage. This Bill will be a total nonsense if the Director of Consumer Affairs is to operate out of an office with one assistant. If that is to be the case, we can forget about the Bill. I have taken the Minister at her word that she will give the necessary resources to the Director from the outset to enable him to discharge all his responsibilities under this Bill.

In regard to the amendment, I still have reservations that a practice might grow up that ab initio a consumer who has a complaint would choose to go directly to the courts of law rather than go first to the Office of the Director of Consumer Affairs to have his or her complaint dealt with. If that process is undergone and a consumer feels that he or she does not achieve redress, that would be the point at which the consumer should be encouraged to go to the courts.

I would like to see a system developing where consumers would be educated to go first to have their complaints heard and their grievances redressed through the offices of the Director of Consumer Affairs. I would like if possible to build in from the start certain provisions to discourage consumers from engaging in expensive litigation when they could have their complaints dealt with at no cost to themselves through the Director of Consumer Affairs. Some provision has to be made, like an appeals procedure in the judicial system, where somebody whose grievances have not been addressed fully and speedily has another court to which he or she can apply.

If groups wish to take a case on behalf of the consumer they should be able to do so without any costs accruing to the consumer. The situation should not develop where individuals with serious complaints fall back on the old practice of getting a solicitor to take the case from the start because, apart from the other implications, it would undermine the authority of the Director of Consumer Affairs and the spirit and purpose of the Bill. It would only succeed in making money for members of the legal profession, something which has happened for far too long here. I hope there will be a move away from this and that much trust will be vested in this legislation and in the Office of the Director of Consumer Affairs.

Miss Coughlan

I do not share the concerns of Deputy Quill regarding the Office of the Director of Consumer Affairs. Some years ago, for example, the Ombudsman was a non entity and unheard of for many reasons. In addition, people have always had redress to courts which cannot be removed. Over recent years people have used the Office of the Ombudsman and in future it is likely that the Office of the Director of Consumer Affairs will also used by the consumer as opposed to the expensive option of redress through the courts.

In this regard, people will decide on their course of action with their pocket and their feet, and there is no need to legislate for this. What should be provided is choice for the consumer. This is available, and it is this matter which the committee is endeavouring to address today.

Regarding Deputy Bruton's amendment, apart from the fact that the Director of Consumer Affairs may have to wait a considerable length of time to address a specific concern outside his remit, others should have the right to represent a consumer. Such representatives have been successful in the past. In view of this the Minister should consider the amendment proposed by Deputy Bruton as it will copperfasten the consumer's ability to have their rights redressed.

Mr. Kemmy

The Office and staff of the Director of Consumer Affairs is similar to the Office and staff of the Ombudsman, with the exception that the former deals solely with consumer affairs. A balance must be struck between the availability of choice and protection for the consumer. The consumer needs protection because recently there have been a number of developments which are not endearing, such as the desire by some to make a killing on consumer's complaints. If many of those supplying consumer services and goods were satisfied to make a moderate profit on an ongoing basis there would be a better society. However, too many people are in for the fast buck and to make a killing.

Despite the fact that we pride ourselves on our Christianity, religious fervour and so on, this does not fit into the market place, where suppliers of consumer services are as sharp as people anywhere in the world and are concerned with making killings on a short term basis. In view of this, there is a need for protection.

Regarding the provision of offices for the Director of Consumer Affairs for the country, consumers living in provincial cities and towns do not have much choice as they have no local office that will examine abuses of local pricing of goods or of the sale of bad quality goods by shops. Sometimes consumers are careless and slovenly in their attitude to such products. They are often too lazy to take action and accept what they get. Irish consumers are the least educated and least quality conscious in Europe. This may appear to be an extravagant claim, but the attitude is take it or leave it and there is little demand for rights in this area. In this context the Bill is a good step forward as it will make people aware of their rights, offer them protection and ensure that there will be mechanisms in place to provide it.

There is too great an awareness of inter-county rivalries and competition at local level. In this respect, it would be impracticable to have an office of the Director Consumer Affairs in every village in Ireland. People must be expected to use their common sense in making complaints through the post or by telephone, and the staff must be available to deal with such approaches.

As a public representative I can report that only a small number of people make complaints to me regarding their rights as a consumer, so it will be beneficial if the Bill heightens consumer consciousness and awareness. In this respect the Minister must strike a balance between people's rights to have alternatives and options and the need for protection. There should be some network for the Director of Consumer Affairs throughout the country without having an office in all the locations mentioned by the committee this morning. Were such offices to be established, the domino theory would become operative and questions would be asked as to why, if there were to be an office in Cork and Limerick, there could not be one in Waterford, Galway, Athlone or Dundalk?

Mrs. O'Rourke

What about Athlone?

Mr. Kemmy

I mentioned Athlone, so the Minister should not become too upset. The resources are not available to provide such offices and it would be preferable to establish a good national service rather than have it broken up on a piecemeal basis with numerous sub-offices but none of them undertaking a good job. It is more important than any of the points made this morning to enact good legislation and ensure there is the strength and determination to implement it.

Mr. Sheehan

Choice should be available to consumers on this issue. In this respect confining matters to the Director of Consumer Affairs would not provide choice. While the Director may be of vital importance in allowing the consumer to have his or her grievance dealt with free of charge, a huge backlog of applications could mount up. This could result, for example, in cases in County Donegal or County Cork not being considered for two or three years. That should not be allowed happen.

The Minister should think again before proceeding to locate an office of the Director of Consumer Affairs in the major cities and towns because there are approximately 20 cities and towns——

Mrs. O'Rourke

What town does the Deputy consider to be the most central in Ireland?

Mr. Sheehan

The seat of Government is in Dublin, although arguably it should be in Athlone.

Mrs. O'Rourke

That is fine by me.

Mr. Sheehan

That is something the committee will have to live with it.

The amendments tabled by Deputies Bruton and Rabbitte appear to cover the situation fully in that they provide a choice to the consumer through which to process claims and grievances. It would simplify matters if the Minister accepted these two amendments. It would also, perhaps, clear up the backlog of applications to the courts for decision by the Director of Consumer Affairs. If we have a one way system it will not produce speedy decisions. In this respect, it is of vital importance that the consumer does not suffer any loss arising from delays in dealing with claims. They should have access to free legal aid throughout the country and the legal aid associations mentioned by Deputies Bruton and Rabbitte. Such organisations would be more than happy to take up the claims of the consumer. It would be a step in the right direction to accept these two amendments, if possible.

Mrs. O'Rourke

I want to reply to the various points raised which addressed the needs of consumers. I am certainly pledged to providing the extra resources the Director will need because this was contained in the Government decision on the matter. When this Bill was being drafted, I was concerned about the civil liberties angle because no matter how appropriate, responsive and respected the Office of the Director of Consumer Affairs is — and the Director and his staff are able and punctilious in attending to people — it is somehow wrong to take from consumers the right to pursue a matter themselves, should they so wish. I felt it was not correct to vest power exclusively in one agency because there should be a balance. While there will be decentralised offices and greater access at little or no cost to the consumer, we must guard against vesting too much power in any one office or body. In other words, we must always allow for the pro bono publico remit whereby a person may wish to bring a case in the public good.

I share the disdain for high fees charged by legal people. We are going to have an explosion in that regard very soon when we hear of further fees in all sorts of other arenas. On balance, the amendment moved by Deputy Richard Bruton is a good one. It is for the good of the citizen to have such rights — apart from the inherent right of the Director contained in the Bill — and to be able to express them if he or she so wishes. I therefore have pleasure in accepting Deputy Bruton's amendment.

It was a novel twist for Deputy Rabbitte to say he did not see why the Minister would not accept the amendment, before I got a chance to say anything. In future, could he just let me have my say beforehand?

Mr. Rabbitte

I want to apologise to the Minister. I am completely——

Mrs. Owen

He is humbled.

Mrs. O'Rourke

I am sure he is. That is the nature of the man.

Mr. Rabbitte

——humbled, and I will quit while I am behind.

Chairman

You have been upstaged. It would seem that the Minister may actually accept an amendment without all this dialogue. We could have saved ourselves an hour had I allowed the Minister to come in after Deputy Bruton moved the amendment.

Mrs. O'Rourke

Look at all the enjoyment we would have missed.

Mr. R. Bruton

I thank the Minister for accepting the amendment, and also the many Deputies from all parties who spoke in support of it. Although speed might be worthwhile, it is interesting to hear the first-hand experiences of Deputies from different parts of the country. This helps us to improve the quality of legislation.

Amendment agreed to.

Chairman

Amendments Nos. 137 and 148 are related and may be discussed together, by agreement.

Mr. Rabbitte

I move amendment No. 137:

In page 31, subsection (3), line 6, after "Director" to insert "or any person who may be adversely affected by any such agreement".

The arguments are very much the same as those on amendment No. 136. I said that Deputy Bruton's wording in amendment No. 136 was superior to mine in so much as not only did it give the aggrieved person the right to take the action, but it gave the right to a suitable organisation to take the action on behalf of the consumer who is not in a position to do it. I do not know if Deputy Bruton has a similar wording on this occasion.

Mr. R. Bruton

I did not insert a similar wording, though it may be appropriate. Section 48 (2) states that:

The High Court may decide [I do not think that it should be the High Court] in any case coming before it, whether by way of proceedings by the creditor or by an application to it under subsection (3) [the Director] or otherwise...

I presumed that the words "or otherwise" meant that the consumer was guaranteed the right. However, maybe we should spell it out and say that the consumer or someone acting on their behalf should also have powers under section 48.

Mr. Rabbitte

In section 48 (3) I am seeking to make it clear that the consumer or aggrieved person would have the right, in their own right, to take such action. I think the phraseology that we have just agreed in respect of section 46 (3) is superior. At this stage, I do not know what the facility is for changing horses. In any event, the idea is the same. In respect of this, the Director of Consumer Affairs said:

There are similarities between section 46 and section 48 which deals with the use of terms in a credit agreement which are not fair and reasonable. Again, I am the only person who can apply to the High Court and, again, there are exemptions for banks and mortgage lenders. Once again I have reservations about these exemptions.

The Director goes on to argue that consumers should have the right to go to court if they feel so motivated. I do not wish to rehash the arguments because the point is the same. The precise wording is something that, presumably, the Minister has a view on. I do not wish to presume what the Minister's view is because she may have an entirely different view of this section.

Mr. R. Bruton

When I looked at this originally, I thought the phraseology "or otherwise"— in line 29 of section 48 (2), on page 32 — was offering the consumer or anyone acting on their behalf the right to take an action against terms that were unfair or unreasonable. However, having listened to Deputy Rabbitte and what he quoted from the Director of Consumer Affairs — who did not see such a right falling on consumers — it may be necessary either now or on Report Stage to formulate an amendment. I would hope the Minister might at least accept the spirit of what we are doing, and we could draft the amendment for Report Stage.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 137a and 144a are related and with your permission and agreement we will take them together. Is that agreed? Agreed.

Mr. R. Bruton

I move amendment No. 137a:

In page 31, subsection (3), line 6, to delete "High Court" and substitute "District Court".

The purpose of this amendment is to allow actions which will now be taken both by the Director and by the consumer or someone acting on behalf of the consumer to proceed to the District Court rather than the High Court. I am not a lawyer, nor am I 100 per cent familiar with legal proceedings, but I do know that the cost of High Court actions is prohibitively high. There is a long delay in having hearings in the High Court. I do not think it would be suitable for the sort of challenges we have in mind here. The District Court would be much more accessible. My understanding is that if such cases were heard in the District Court, the small claims procedure would be an option for consumers. This option would not be available in the High Court. There will clearly be instances where people will want to take cases. A study of moneylending showed that there was a huge number of loans outstanding; over 300 of these loans were taken out by 100 families. Only 4 per cent of these came within the 39 per cent ceiling provided for in the Bill. Some 96 per cent of moneylenders' loans were in excess of the rate described in the Bill as harsh and unconscionable. There is plenty of meat for challenge here. We should try to make the procedure as accessible as possible for consumers. I recommend that we opt for District Court challenges with the possibility of consumers using the small claims procedures.

Mrs. Owen

I support Deputy Bruton's amendments. I am familiar with the functioning of the Small Claims Courts because there is one in Swords. It should be the aim of consumer legislation to be as consumer friendly as possible. This Bill should make available to consumers the option of going to their local court where they can feel more comfortable and make their own case. The lowest denominator of the legal system at which consumer claims can be triggered the better. I hope the Minister can take on board the spirit of this amendment, particularly in view of the success of the Small Claims Courts.

Mr. Crawford

I strongly support this amendment. Going to the High Court for such cases is not on. Many consumers would be completely put off by the idea of having to go to this court. Any of us who have had dealings with High Court procedures know that there will be inordinate delays and people will not have their cases heard. I ask the Minister to accept the amendment. We appreciate the positive way she has dealt with other amendments in the past.

Miss Quill

It is imperative that the Minister takes this amendment on board. It is preposterous and unthinkable that consumers would have to go to the High Court as the court of first redress. In the light of the amendments the Minister has accepted, it is imperative that she puts in place a system whereby consumers who have complaints and wish to advance them though the courts can first have them heard at District and Small Claims Court level. If complaints fail at this level, other action would then have to be considered.

Mr. M. McDowell

I have an interest to declare in this matter. I have advised the Consumer Credit Association of Ireland on this Bill.

Mrs. O'Rourke

In fairness to Deputy McDowell he told us this before.

Mr. M. McDowell

On the last two occasions I referred to this but it did not stop some of the Minister's party colleagues from flinging immense amounts of opprobrium at me on a subsequent occasion.

Mr. Rabbitte

The Deputy is obviously rehearsing for discussion on a Bill which is being resumed at 6 p.m. today.

Mrs. Owen

He is oiling his voice.

Mr. Rabbitte

I had intended asking you, Chairman, before the committee adjourns, if you would consider a plea from those of us involved with the two Bills that the afternoon session be adjourned at a respectable time.

Chairman

We will adjourn around 4 p.m.

Mr. M. McDowell

I agree with Deputy Quill that, if we say applications to the courts for declarations that interest rates are excessive can be made by consumers or on their behalf, we are faced with the dilemma of how we say to ordinary consumers that they must go the High Court to obtain a particular remedy. This underlines a big problem with Deputy Bruton's amendment, which was recognised by the Minister. If its logic is followed through, every court will be able to open every consumer credit agreement and say that charges are excessive. As I understood the Bill up to now, cases were to be heard in the High Court and the Director of Consumer Affairs was to examine complaints and bring applications to a court which was to be a serious one. He was to act with the authority of his office. The complete reversal which is now being proposed may seem liberal and a great boon to everyone but I do not believe that the statute which will emerge from this process will be beneficial.

The question of whether interest rates are excessive is highly subjective. If District Court Judges are given the role of determining whether the poor hapless men or women before them were charged too much, there will be chaos and a totally different pattern of decisions across the country. One District Judge will be a softie and another will be a like a Manchester school of economics hardliner. In different parts of the country there will be different approaches to standard consumer agreements. I am sceptical about taking the initiating role in these kind of applications away from the Director of Consumer Affairs. This office has a good knowledge of what is and is not excessive, bearing in mind everything in the market. Knowing the District Court Judiciary as I do, there will be huge variations in approach to these matters. The statute is giving them no real guidance and there is no uniform pattern implicit in it as to what is or is not excessive interest.

I counsel strongly against having a system in which any court can set aside any agreement on a subjective criterion of a judge. This would mean that in different parts of the country different judges will arrive at different views on identical agreements. One judge may think an agreement is too harsh. A judge in Donegal may think similar agreements are perfectly reasonable and that consumers knew what they were doing when they signed them. It is unsatisfactory that agreements of the same kind should be decided on differently throughout the country on what are essentially subjective criteria. By the same token, it is desirable that a business which engages in furnishing credit should know, having consulted with the Director of Consumer Affairs——

Chairman

May I interrupt you, Deputy? We have a problem with the microphones this morning. It will not be possible to deal with this until we take a sos. Could you move to another microphone?

Mr. M. McDowell

I may be carrying the disease with me. The problem may not be with me.

Mr. Rabbitte

A Geiger counter.

Mr. M. McDowell

It sounds like a Geiger counter all right.

Mrs. O'Rourke

The Deputy is too modest.

Mr. M. McDowell

I ask the Minister to consider this carefully. Although everybody wants to be Santa Claus on occasions like this and to say that every court should have the right to set aside an agreement if it thinks rates of interest are excessive, there must be some system of uniformity. What I believed was satisfactory about the previous arrangement was that the Director of Consumer Affairs would know the consumer credit industry and could intervene and make the relevant application in any court. It was too restrictive to confine it to the High Court. However, I do not believe it is wrong to confine it to the Director of Consumer Affairs.

We should not have Mr. and Mrs. Bloggs going into the District Court saying they are very hard up and are applying all the criteria set out in section 46 (2) and asking a judge to set aside their agreement. The judge might feel that as it was coming up to Christmas and the couple were in terrible trouble that the agreement was a bit excessive. Therefore, because in one case the district judge is a softie and gives in on something, the company furnishing the credit is left not only with the uncertainties involved in having its agreement set aside, but also with the difficulty that it is being found in some courts in the country to be charging excessive interest and not in others. I am deeply sceptical about making such a subjective measure available to the Judiciary to apply as they see fit. I would much prefer to see a uniform approach.

I agree with Deputy Quill that it cannot be confined to the High Court, in logic, especially if consumers are allowed to be personally represented in court. However, the Minister should not abandon the previous logic of the Bill which was that there was a director who was going to take an overall view right across the country. Say, for example, somebody is charging 44 per cent, he will go to court with them but if somebody is charging 33 per cent he will not. I think that is a fairer law.

Mr. Rabbitte

What I do not understand about Deputy Michael McDowell's submission is that if the lack of uniformity which he fears derives from different courts having jurisdiction, why should that reflect on who has the right to initiate the case? If the Coolock Law Centre wants to sponsor an action on behalf of a consumer who does not have the means to do it himself or herself, why should it not be permitted to do that?

Can one not rest assured that what Deputy Michael McDowell describes as a serious court — that is, the High Court — will find as it would as if the case was initiated by the Director of Consumer Affairs? The Director argued very much that the aggrieved person, or an organisation on his or her behalf, should have the right to initiate the action. However, he did not argue for the jurisdiction of the District Court. Deputy McDowell's point may be well made there.

I have not commented on this amendment from Deputy Richard Bruton one way or the other. It appeals to the unfortunate, oppressed consumer. The prospect of going to the High Court is absolutely daunting and, therefore, there is an attractive case to be made for the District Court. However, if, on the other hand, the case is being brought on her behalf by the Director of Consumer Affairs, FLAC or some sponsoring organisation, I do not see that there is much hardship involved and one could expect uniform case law to be established. I would like to hear Deputy Michael McDowell's views on that point — whether the point is not the uniformity of jurisdiction but rather who has the right has to initiate.

Mrs. Owen

Every law could be different.

Chairman

There are two other speakers, Deputy Sheehan and Deputy Richard Bruton. I would prefer if Deputy Bruton spoke just before I call on the Minister to reply. If Deputy Sheehan spoke first, Deputy McDowell could respond to the point raised by Deputy Rabbitte. Then Deputy Richard Bruton, as the mover of the amendment, could reply.

Mr. Sheehan

I fully support Deputy Richard Bruton's amendment No. 137a. It gives an opportunity to organisations, such as those which Deputy Rabbitte outlined, to take up the cases of individuals who have grievances in this respect. While I admire the case put forward by Deputy Michael McDowell on behalf of his own profession, I think the way should be open for District Courts to deal with the matters involved. I have great confidence in the ability of our District Court Judges. They are eminent and highly responsible people——

Miss Quill

There is a backlog of about three years of cases in Cork.

Mrs. Owen

It is four years in Galway.

Mr. Sheehan

That is through no fault of the District Court Judges but is the fault of the administration. I see no reason there should be any opposition to allowing the district judges to deal with these situations as they occur.

Chairman

Does Deputy Michael McDowell wish to clarify the point?

Mr. M. McDowell

I am not making a case for the High Court. I think there is a strong case to be made for the lowest tier of the judicial system dealing with the smallest cases and we are going to be mostly dealing with small cases here. However, I am concerned that there should be uniformity of justice throughout the country.

The point is that the law of contract is ordinary law and everybody is bound by their contract. In the average contract case the judge does not have to say to himself that if he had been one of the parties to this contract he would never have entered into it. There is nothing subjective about this. One is bound by one's contract and one either signed it or one did not, except in special circumstances where there are unfair terms or whatever and in consumer agreements and so on where there is a limited opening for subjective criteria.

However, I believe it is desirable to have an objective yardstick as to what is reasonable. I do not believe it is desirable, for example, if an ordinary litigant comes to court wanting to set aside an agreement under section 46(2) and puts those criteria before the judge, that in an individual case a particular contract is set aside as excessive. It is undesirable to take two identical contracts on the one day and to use such subjective criteria of "age, business competence and level of literacy and numeracy of the consumer" to decide that one is fair and the other is unfair.

I accept the point that in virtually every aspect of the administration of justice there is leeway for a court to decide and discretion is given to the Judiciary. However, I do not accept the point that in matters such as this very different attitudes should be taken in different parts of the country as to whether people will be bound by consumer credit agreements.

If we envisage what will happen here, because of the amendment which the Minister has taken, activist organisations such as consumer protection agencies, charities or whatever, will be taking up the cudgels on behalf of particular classes of consumer or people from particular areas. They will come to court and say to a district judge that an agreement is excessive.

I believe that the Director of Consumer Affairs should come to court and participate, much like the DPP does in certain matrimonial rape cases. He has to come to court and say he is the only person competent to decide this case or, at the very least, it should be mandatory that the Director of Consumer Affairs comes to the court and gives an objective view as to whether he approves of a particular kind of contract, right across the country.

We are only storing up trouble and chaos here. It is undesirable to go down the road of allowing different district judges to decide that the charge provided in a credit agreement is excessive by reference to the consumer's age, numeracy and literacy or because it is a small consumer dealing with a large company. It is a slippery slope which will lead to chaos. Everyone wants to be generous and to believe district judges are capable of administering this but I do not accept that. They are not uniformly stern or uniformly soft; they approach every case with an open mind and some are notoriously more soft than others. Similar agreements will be treated differently in different parts of the country; this is not desirable.

I agree these matters should be brought into what are called the inferior courts but the Director of Consumer Affairs should be able to intervene. If one cannot get his backing, permission or certification for a case one should not be allowed to proceed, otherwise people will simply decide agreements are unfair and will take a case, based on the literacy, competence and business ability of the person involved. This is a recipe for chaos.

Miss Quill

I was of the belief that this Bill would put in place a system to respond speedily to consumer complaints. Because of changes made today it seems that consumers who go to the District Court will not have their complaints heard speedily. In every city and town there is a backlog of two to three years of cases waiting to be heard. This will leave us with poor consumer law and poor procedures to deal with consumer complaints.

The Minister has already promised in the Dáil that she will ensure that the Office of the Director of Consumer Affairs would be adequately staffed and properly resourced, which gave me some confidence that the system would work. However, if a good deal of the complaints arising under this Bill go through the courts, she is not in a position to say additional staff would be provided to enable hearings to take place speedily.

Mrs. O'Rourke

I have no power there.

Mrs. Owen

One would have to ask the Minister for Justice about that.

Miss Quill

If she is not in a position to do that, there will be a chaos and the Bill we are putting through is a nonsense. I am talking from the viewpoint of the average consumer, hundreds of whom live in my constituency——

Mrs. O'Rourke

Thousands, I hope.

Miss Quill

Hundreds of them have complaints; the numbers would run into thousands if we were talking about the banks.

Mrs. O'Rourke

Yes, but one needs thousands of people to get elected to the Dáil.

Miss Quill

From time to time these consumers have a complaint and want it dealt with speedily. If they have to wait two or three years to have the complaint dealt with, this Bill is a nonsense.

Mr. R. Bruton

I am reluctant to take on Deputy McDowell on his turf but both he and Deputy Quill are being somewhat theatrical about the potential catastrophe which could befall our courts if we agree to allowing these cases in the District Court. If justice is inaccessible one might as well not have it and the Deputies accept consumers would not be well served by having to go to the High Court — that is not viable.

As Deputy Rabbitte said, the Director of Consumer Affairs does not share the view of Deputy McDowell. The Director will have sanctioned the APRs charged in these cases when he issued the licences. To provide that the only redress against the activities of a licence holder is to the director is not consistent. The consumer should have a voice and a right to challenge excessive charges.

This provision would make the Director's role more effective in that there will be a right to proceed to court in cases where he has decided, perhaps on marginal grounds, to allow a moneylender to obtain a licence. If the moneylender is operating his licence in an excessive way the consumer will have access to the courts. He will not be dependent on the director going to court or taking the drastic step of putting the moneylender out of business by withdrawing his licence rather than dealing with the one involved.

The 1933 Act — which considered 39 per cent charges excessive and unconscionable — did not lead to a flood of actions or inundate the courts. What happened was that consumers did not get an opportunity to challenge and virtually all licensed moneylenders were charging in excess of the rates deemed harsh and unconscionable under the Act.

If the consumer fails to honour the agreement the moneylender has access to the District Court. It would be unusual if the outcome of this debate was that the moneylender could pursue the consumer in the District Court for unpaid amounts but the consumer would have to go to the High Court to challenge cases which he thought unfair and unconscionable. That cannot be considered reasonable. Presumably an aggrieved lender could pursue his case to the High Court if he felt the District Court's decisions were unfair.

I have confidence that our District Courts will deal with this in a fair and reasonable way. They will examine the licence given to the moneylender, which describes the APRs and conditions and terms of agreements. They will also have guidance. If the Minister accepts my amendment No. 141, she will have a role in setting ceilings, which would clearly be a guide and would reduce the need to go to court to decide these matters.

Mr. Rabbitte

I have a point in relation to Deputy McDowell's contribution and I ask the Minister to respond to it. Deputy McDowell posited a case where someone comes to court before Christmas in manifestly desperate circumstances and a soft district judge——

Mrs. O'Rourke

Full of good cheer in the week before Christmas.

Mrs. Owen

Never.

Mr. Rabbitte

No, that is unheard of. A decision will be made based on the age, business competence and level of literacy and numeracy of the consumer, according to section 48 of this Bill. Is it not conceivable that a District Judge ought to make different decisions in relation to different litigants with similar agreements?

A hard nosed businessman may enter into a contract in full knowledge of the circumstances and be prepared to pay more than the going rate because he needs money quickly since other imperatives are pressing on him, whereas a consumer may enter into an agreement and be threatened with eviction from his home but not know certain matters before entering the agreement because he did not have the skill, literacy, numeracy, competence or business knowledge that a different litigant might have. Why should the judge not make different decisions in those two cases if he thought circumstances warranted it?

Mrs. O'Rourke

The debate has become interesting. I accepted Deputy Richard Bruton's previous amendment to which Deputy McDowell and his colleague took exception to, that is, allowing another body or group other than the Director of Consumer Affairs to challenge if they wish to do so. When I studied that amendment, I decided to accept the next one also because they are related.

Deputy Quill spoke dramatically as if suddenly the Director would not have these powers. The Director will still have these powers, but we are extending them to the consumer or a group acting on behalf of the consumer to provide another form of access. Deputy Quill mentioned the huge backlog of court cases in her native city as if the consumer was prepared to docilely wait in what seems to be an inordinate queue. We are giving the consumer another opportunity to deal with this matter. Deputy Michael McDowell also expressed an opinion on that. Without being dismissive, we have passed that point because we accepted that amendment earlier. However, I know it has a bearing on what Deputy McDowell is now saying in relation to amendment No. 137 (a) tabled by Deputy Bruton, which seeks to make the District Court the first port of call, so to speak.

There is also another court — the Small Claims Court. I spent a day in that court listening to cases. Deputy Owen is familiar with the Small Claims Court because there is one in Swords, and I hope there will soon be one in Athlone. The Minister for Justice gave it the remit to extend nationwide and I understand this is gradually being done. It was an interesting experience because one saw ordinary consumers putting their cases.

The day I visited the Small Claims Court, District Justice Hogan was presiding and he was properly garbed, which is right because there should be an air of authority, although there were no barricades. Five cases were heard that day and it was interesting to see justice at work at close quarters.

The first case was put by a woman who had a grievance about two articles she had purchased for her grandchildren in a Dublin store. She was not represented and she told her tale simply while a clerk took notes. The woman was also was accompanied by a friend. The District Justice sat near her, while I sat to one side listening as an observer. The District Justice looked at the articles, which were clearly faulty. The woman said she was an office cleaner and had worked extra hours so she could buy these items for her grandchildren. They were expensive items for anybody, but came within the remit of the Small Claims Court. The judge made a decision there and then.

Mrs. Owen

Was the judge a softy?

Mrs. O'Rourke

He was from Athlone. Justice was done, but it did not have the paraphernalia of attendant accolades floating about. I am not casting aspersions on anybody. The man representing the firm put his point of view, obviously he did not agree with the woman concerned, but the judge made a decision and that was the end of it.

Five cases were dealt with between 10 a.m. and 12.30 p.m. The Minister for Justice has given permission for the Small Claims Court to be extended throughout the country; they were originally located in Swords, Sligo, Dublin and Cork. The ceiling is to be raised from £500 to £1,000. It is an effective and simple way of bringing justice to the doorstep of the citizen or the citizen to the doorstep of justice, whichever way one wants to look at it.

The District Court is referred to in Deputy R. Bruton's amendment. While I will accept this amendment, I warn Members that this honeymoon phase will not last. I am coming to the end of my largesse. This amendment is a logical follow on from the previous one.

Deputy McDowell spoke about the need for uniformity. Uniformity sounds like an admirable trait and if everything could be done in a uniform fashion, we would have justice. However, it does not work like that. This case was put strongly by groups which visited me in relation to — I will put this delicately — the vagaries or variety of interpretations of District Court judges throughout the country. The law is the law and a person has the right to have recourse to it. If they are not satisfied with the District Court, they may appeal to this higher echelon. A decision of any court may be appealed to a higher one because we have a hierarchical system of justice.

I accept the amendment, but it is the end of my largesse.

Mr. M. McDowell

I do not agree with this amendment, although I agree it follows on from the last one to some extent. This is an important issue. The Minister is creating a jurisdiction for any person to go to a court anywhere in the country to argue about a consumer credit agreement made by him or her, or to an organisation acting on behalf of classes of people, charitable or beneficent organisations or otherwise, to intervene in any contract. The consequence of this will be that people will take out loan agreements with moneylenders and will go to a local information centre or charitable organisation and tell them to challenge the agreement because the rate is too high.

As Deputy Quill said, this is not simply a case of walking into the Small Claims Court the next day. It will be six or eight months before the lending company can get to a hearing of the case. The lending company, which would need lawyers, would be brought to court to argue about its excessive rates. It would need to prove what prevailing interest rates are. As Deputy Rabbitte said, it is implicit in section 46 (2) (b) that the identity, the nature and the capacity of the borrower will be an issue.

The lending company would have to appear in court before a District Court Justice in whatever place the challenge is made and bring their legal team and defend its interest rates. It must investigate and reinvestigate a case based on the nature and the characteristics of the borrower; it must then deal with issues, such as the degree of risk and their costs and it must justify the deal merely on the application of a borrower. We are creating a right for somebody who has signed an agreement to have it reopened so their circumstances and those of the company may be examined and the interest rate justified.

I am looking at this from the perspective of a lender because if we do not, we a codding ourselves. I know there are fewer votes on the lending side than on the consumer side, but that does not mean one can abandon balance in this matter. This will cripple lenders. If the local St. Vincent de Paul Society, which I admire greatly, tells somebody to challenge the agreement because District Judge McDowell is a softy——

Mrs. O'Rourke

I challenge that.

Chairman

Canvassing disqualifies.

Mrs. Owen

Will the Minister's Government or our Government appoint him?

Mr. M. McDowell

They might say District Judge O'Rourke is a softy.

Mr. Rabbitte

That takes the bottom out of Deputy McDowell's argument.

Mr. M. McDowell

The lenders will have to go to court on a succession of occasions where they will be dealing with small sums of money, often just £50 or £100. They will have to choose between writing off the loan or spending £300 to go into a District Court to justify their charge. They may even decide to abandon the battle altogether.

Mr. Rabbitte

This could be a wealth distribution mechanism.

Mr. M. McDowell

I am curious——

Chairman

May I interrupt the Deputy? The point has been well made. I do not think anybody is in doubt as to your reservations. This is your third contribution.

Mr. M. McDowell

Now is the time for voicing reservations because if we do not——

Chairman

The record will show you have given ample warning.

Mrs. O'Rourke

There is a point I want to bring to Deputy Bruton's attention. He specified the District Court. Will the Deputy accept the words "court of competent jurisdiction"? The financial limit in the District Court is £5,000 and in the Circuit Court it was recently increased from £15,000 to £30,000. There is no limit in the High Court.

Mr. M. McDowell

May I make another point? I am entitled to participate.

Chairman

That is not in dispute but I have allowed you to participate freely until now. The Minister has indicated that she will accept Deputy Bruton's amendment. You have warned the Members as to your reservations about this amendment and its likely effect. Nobody has any doubt about it at this stage.

Mr. M. McDowell

May I make one point which may be of interest to the Minister?

Mrs. O'Rourke

It is all of interest to me.

Mr. M. McDowell

The District Court has no declaratory jurisdiction of any kind.

Mrs. O'Rourke

I am talking about money.

Mr. M. McDowell

The District Court cannot make declarations unless the law is changed. One cannot seek a declaration in the District Court because at present the District Court has no power to make declarations. The Minister will have to do something else because the District Court has no jurisdiction to make declarations.

Mrs. O'Rourke

Deputy Bruton has put the case to me. I will accept the amendment if he is agreeable to the substitution of the words "court of competent jurisdiction" for "District Court" because of the financial limits in each court.

Mr. M. McDowell

The District Court cannot make a declaration.

Chairman

Is Deputy Bruton prepared to accept the Minister's amendment to his amendment?

Mr. R. Bruton

I am prepared to accept that. I do not share the view that charities and law centres will be foolishly or recklessly reopening agreements. When it comes to deciding who is better equipped to take court cases, it will not be consumers who will be streaming to the court armed with legal teams to take their cases.

Mr. M. McDowell

I reiterate my point that a court of competent jurisdiction making a declaration does not include the District Court.

Mr. R. Bruton

I accept that.

Mr. M. McDowell

The Minister had better take legal advice from the Attorney General's Office. I think I am right.

Mrs. O'Rourke

I have taken much advice taken from that gentleman.

Amendment, as amended, put and declared carried.

Mrs. O'Rourke

I move amendment No. 138:

In page 31, subsection (3), line 7, to delete "or any charge".

Amendment agreed to.

Chairman

Amendment No. 140 is an alternative to amendment No. 139 and the two amendments will be discussed together. Is that agreed? Agreed.

Mrs. O'Rourke

I move amendment No. 139:

In page 31, lines 9 and 10, to delete subsection (4) and substitute the following:

"(4) This section does not apply to any credit agreement relating to credit advanced by a credit institution or a mortgage lender.".

Amendment No. 140 in the names of Deputies Bruton and Rabbitte is being discussed with amendment No. 139. As I said, my largesse is at an end.

Mr. R. Bruton

This is an important amendment as the Minister is proposing to exempt from challenge excessive rates of charge for credit by the banks, the building societies, the Trustee Savings Bank, life assurance companies, ACC, ICC and any institution making housing loans, that is, a mortgage lenders. I recall Deputy McDowell making a convincing case earlier to the effect that including mortgage lenders could provide a way out for moneylenders. I think his argument would also apply here.

Mr. M. McDowell

Yes.

Mr. R. Bruton

If 5 per cent of someone's activity is housing loans and the other 95 per cent is moneylending, they are exempt from the section. The Minister has not advanced any argument for exempting any credit institution from rules that apply to others. It is difficult to find an argument for it. The same transparency and rules of accountability should be applied to all credit givers.

The area of moneylenders is one where excessive charges continue to be the order of the day and I can understand why we would want these powers enforced against moneylenders. I spoke earlier about an interesting report on moneylending and low income families. While there is a 39 per cent rule, the reality is that moneylenders were charging rates far in excess of that; only 4 per cent were charging 39 per cent or less and the majority were charging in the region of 300 per cent to 399 per cent — one was charging as much as 12,217 per cent — and these were licensed moneylenders.

I see the argument for a power to challenge moneylenders but equally there are cases where other lending institutions should be open to challenge. The Taoiseach clearly holds a similar opinion as he has spoken about the manner in which the banks specifically had their margin widened from the 2.75 per cent they used to add to deposit rates for certain categories of lenders. That 2.75 netted their cost and they increased it a little over ten years from 2.75 to 10.75 per cent. The Taoiseach was clearly arguing that the banks can also engage in excessive charging and he was demanding explanations as to why this was happening.

The Minister was quoted in the newspapers as saying that she was very disturbed by the rates charged on credit cards and that the AIB new low rate of 24. 26 per cent on its credit cards was clearly excessive at a time of 2 per cent inflation and 2 per cent deposit rate. The Taoiseach and the Minister made the argument as cogently as I could as to why the banks and other credit institutions should be open to challenge if they engage in excessive charging. This section would look strange if we decide to make fish of one type of lender and flesh of another. We should put in place a law that will be consistent. What will happen is that if the banks are complying with reasonable margins and charges they will not be open to a flood of challenges by the Director of Consumer Affairs or by consumers. Their margins will become settled and accepted over time if they adjust them to a reasonable level and they will not be open to challenge. I do not see why we should exempt the banks and building societies, and the Minister has not advanced a case for doing so. I do not understand why the Government should decide to have this cosy exemption for the banks, building societies and other credit institutions. I await cogent argument.

Mr. Noonan (Limerick East)

I support Deputy Bruton's argument. Many of our insights into these matters come from our constituency work and I have been dealing with a case for the last 24 hours which involves the Bank of Ireland and illustrates Deputy Bruton's point. The circumstances are tragic; both parents were killed in a traffic accident in England and foster parents in Ireland raised the only child and sent him to boarding school. While the insurance claim was being settled they borrowed money. One of the lending agencies was the Bank of Ireland. They drew down the first amount four and a half years ago and in four tranches up to 12 months ago they drew down sums totalling £10,700. The amount was not all drawn down together — the original tranche was about £2,500.

The insurance claim has now been settled and, in accordance with the undertaking given by the solicitor, the bank's liabilities will now be cleared. The bank's demand is £24,800. I want to stress that it is not a capital sum of £10,700 extending over four and a half years; it was drawn down in four tranches, the most recent of which was 12 months ago. There was no doubt at any stage about the undertaking from the solicitor; there was no doubt that an award would be granted in the case. There was little or no risk to the bank given the circumstances of the case, yet it has charged an interest rate which is penal. I do not know what the rate would be computed at over the years but it is extravagant on the face of it.

Many of us would know of cases here and there where the banks seem to be acting in a way in which they would not have acted in the past. The Minister should look at this again. If we are to have competition in the market among lenders then the same rules should apply. It is not absolutely correct to say that there is an end of the market which must be regulated by law down to the finer points and that there is another end of the market which, because of its background and reputation, is above suspicion. Those days are gone.

Mr. Rabbitte

The point advanced by Deputy Noonan shows in a graphic way why banks and other lending institutions ought to come within the scope of this section. The Minister has taken on board certain amendments but we are talking about the one before the committee. The exclusion of banks and building societies means we are excluding the majority of credit in the economy. There are 88 different financial institutions listed by the Central Bank and Deputy McDowell's fear about uniformity of case law seems to me to be diminished somewhat if we restrict the scope of this section merely to moneylending.

I cannot understand why the Minister should have rethought the original framing of section 46 and come up with an amendment which says: "This section does not apply to any credit agreement relating to credit advanced by a credit institution or a mortgage lender.". What is a credit institution? There does not seem to be any doubt but that it removes everything except moneylending. Is there a definition? There are pages of definitions in the Bill but I could not find a definition of "credit institution".

Mr. R. Bruton

It is in the amendments.

Mr. Rabbitte

Not in the original Bill?

Mrs. O'Rourke

We dealt with it earlier.

Mr. Rabbitte

Which amendment?

Mrs. O'Rourke

Amendment No. 11.

Mr. Rabbitte

It seems a comprehensive list to me. The fear which Deputy McDowell raised is now limited in scope to the area of moneylending alone. I do not know what would be required of a moneylender to cause himself to be listed as an institution under the Bill. To remove banks and building societies seems wrong. I do not know why this was done, in most cases people know the going rate. I cannot see room for frivolous actions or anybody wanting to bring frivolous actions because people know the banking institutions' going rate. Surely there ought to be a remedy in the case instanced by Deputy Noonan, for example, and in the far less dramatic and striking examples advanced by the Taoiseach to which Deputy R. Bruton referred.

I cannot see the argument for giving the banks a special position in Irish society. I referred yesterday to the view of the Director of Consumer Affairs at a seminar when 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. 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.

The Director of Consumer Affairs is saying that there may be some argument for the banks following some kind of regime that is known and broadly, if reluctantly, accepted.

However, this vague category called "mortgage lenders" is in subsection (4) which Deputy Bruton and I sought to excise and remains in the Minister's amendment. Who is a "mortgage lender"? Why should not person in the money lending business organise his affairs so that a small proportion of this portfolio goes to lending mortgages for the purposes of house purchase and, thus evade, this entire section which we have spent so long discussing and which Deputy Quill has described as the centrepiece of the legislation? If I was a moneylender I would have no problem organising my affairs thus. The safest possible loan one can advance in this economy is one to buy bricks and mortar. If one has a small proportion of one's portfolio so organised, this section does not apply. The Minister should reconsider that; amendment No. 140, which seeks to delete this subsection, is the correct approach.

There is no reason banks, building societies and other credit institutions should be excluded. If we are introducing consumer legislation, why should the consumer not have the freedom and the right conferred by this Bill to challenge excessive charges or the cost of credit where he or she believes there is a good case? It is not a case for frivolous action. Why would one bring a frivolous action when one's chances of success are virtually nil? A person should have the freedom where the cost of credit is claimed to be excessive to challenge any bank or building society.

Mr. Broughan

I am most sympathetic to the views expressed by previous speakers in relation to this amendment. This legislation has been made necessary by the total failure of the banking sector to provide adequate credit to large sections of the population. This legislation has been introduced as a result of that abysmal failure. A similar position exists in terms of the other major initiatives the Minister has taken in relation to providing credit and finance for small business. There is a lot of ráiméis about the role of the Central Bank. Its role has been relatively weak and is still evolving, given recent appointments to the bank regarding the management of credit and currency. There is no reason the sectors mentioned by the previous speakers should not be included.

Mr. M. McDowell

I strongly oppose the Minister's amendment. It flies in the face of logic to single out moneylenders as the object of this so called protection and exempt the banks. One does not have to listen to Deputy Noonan's graphic example to realise that if one is saying that credit agreements can be set aside, they should be set aside irrespective of the parties involved. It is most unfair and invidious to tell somebody who sets up a business to lend money to sections of the community, which the banks will not touch with a barge pole, that they are subject to a regime but that ordinary people who can deal with banks are not given the same protections. It is invidious and wrong.

Deputy Bruton mentioned that the rate of interest charged by moneylenders was occasionally well over 40 per cent. This is correct in the vast majority of cases, and for a simple reason. If one decided to buy an office in Molesworth Street or a less salubrious venue, put a desk in it, arranged one's affairs to deal with those sections of the community that a bank would not touch, advanced them £100 over six months and said that one would go to their house every week during those six months to collect their repayments, bit by bit, and if one stipulated that over the six month period one would collect £120, that is of itself, on a declining balance basis is an interest rate of 80 per cent per annum. It is on this basis that District Judges will say they never saw such an outrageous charge. It is 80 per cent per annum because it is £20 over six months on a declining balance as one is collecting the principal back every week. It seems outrageous and unconscionable if put in terms of 80 per cent.

However, which of us would lay out £100, go every week to get it back over six months from a poor credit risk and say at the end, having got £120, that we were excessively remunerated or that it was — to use the words of the 1933 Act — harsh and unconscionable? It is not and that is why the 1933 Act was changed. One should contrast this with the 24 per cent credit card ratings, which exist at present and about which the Minister has protested. Then it is said that these paragons of virtue are to be exempt from the same regime that is to be imposed on moneylenders. This is unconscionable.

The definition of "mortgage lender" is set out on page 11 of the Bill.

Mrs. O'Rourke

All the definitions.

Mr. M. McDowell

We said that it should be amended. Was it amended or did we agree to do it on Report Stage?

Mrs. O'Rourke

We discussed it. Perhaps it is to be dealt with on Report Stage.

Mr. M. McDowell

We should be aware of it because there was an agreement in principle that the definition of a mortgage lender would be changed. As the definition stands, anybody who arranged 95 per cent of his portfolio in conventional moneylending and 5 per cent in mortgages which, as Deputy Rabbitte said, is the most secure form of lending, would qualify for this exemption.

Sitting suspended at 12. 45 p.m. and resumed at 2.15 p.m.

Mr. M. McDowell

I would like to hear what the Minister has to say about the necessity to exempt credit institutions or mortgage lenders from the protections set out in this Bill.

Chairman

Deputy Quill has indicated her intention to speak.

Miss Quill

I would like to hear what the Minister has to say before I make my contribution.

Mrs. O'Rourke

I want to correct a misapprehension which some of the Members brought to my attention at lunch time. Building societies, banks and mortgage lenders are not exempt from a range of prohibitions in the Bill, such as the form and content of advertising, the need to clarify the types of lending, what is being loaned, etc. Deputy Rabbitte said this was related to this section.

We should look at what Deputy Bruton's and Deputy Rabbitte's amendments seek to do, although I am not able to accept them; that is why I said this morning that my largesse was at an end. They are seeking to give the director or the consumer the right to challenge inter alia the interest rates charged by a bank or credit institution and to clarify what these institutions borrow and sell at, their credit product.

The Taoiseach and I are ad idem in criticising the banks for their procedures. The Minister for Finance is also aware that explanations must be given. The Taoiseach, the Minister for Finance, the Minister for Enterprise and Employment and the Tanáiste recently met representatives from the banks. I understand they are to conduct meetings at regular intervals so that matters, such as the margins of buying and lending, which have been exciting the minds of people, will be clearly explained.

It is not my role to exercise, through this Bill, a control on the interest rates charged by financial institutions. I want to put to bed the confusion about charges. Deputy Bruton mentioned transaction charges, and that is the best description I have heard. As an amorphous term, "charges" can mean interest rates or transaction charges. I am putting into this Bill a considerable section — Deputy Quill has her ideas about not proceeding until that is done — which will greatly transform section 28 of the Central Bank Act vis-�-vis the role of the consumer, which is a most dramatic leap forward. The consumers association, among others — some of them are in the Public Gallery today — have told me about the impenetrable fog surrounding bank transaction charges. I will make this clear for the first time when I transpose this section of the Central Bank Act.

I cannot, nor would I see it as the role of a Consumer Credit Bill to allow for the challenging of bank interest rates through this legislation. Banks should be challenged strongly about their interest rates. I am glad we are discussing the transaction charges. The more people speak about them, the clearer the view we will get on the matter. However, it is either within my remit or my Department to challenge these interest charges through this Bill.

Part IX of the Bill deals with housing loans and matters referred to earlier. Many speakers gave the impression, I am sure unwittingly, that these are not subject to advertising or any of the other regimes; they are. I do not have the power to intervene on interest charges, much as I would like to do.

Mr. Deasy

If it is not the Minister's role to challenge the banks as regards their interest rates, whose role is it? The Minister said the Taoiseach and the Minister for Finance have been continuously speaking to the banks in recent months in an effort to bridge the gap between their lending and deposit interest rates. However, nobody has seen any significant change as a result of these supposed representations.

Mrs. O'Rourke

Representations to whom?

Mr. Deasy

The banks. The Taoiseach and the Minister for Finance — it has been highly publicised on several occasions — have supposedly confronted the banks on this issue. However, there has been no response. I asked a question in the Dáil some weeks ago as to whose responsibility it was to control the commercial banks. Was it the Minister for Finance or the Central Bank? The Minister for Finance would not respond and my question was not allowed. Therefore, I am as much in the dark as the public. It would be illuminating if we did get a reply.

I would have imagined the main role of the Central Bank was to control the commercial banks on behalf of the Government. The Central Bank is a governmental agency. Who will protect the consumer? As matters stand, a person with a current account in any of the commercial banks would be charged a lending rate of between 12 and 13 per cent; that is the going rate but people who put money into the bank on deposit will be lucky to get an interest rate return of 1 per cent. In some cases it is even less than that; it may even be .5 per cent. There is a huge disparity between the rates banks are charging to lenders and those given to depositors. It is the Government's job, directly or under the aegis of the Central Bank, to see that gap is bridged. It is immoral and sinful — the general public also look on it in that way — to see the banks making massive profits, especially since they curtailed their losses in the United States and elsewhere while they continue to have this disparity between their lending and deposit rates. It should not be allowed.

I do not know if the Minister can answer that but if she can, she will have done something no one else has attempted to do. The Taoiseach and the Minister for Finance have huffed, puffed and blowed, but have achieved nothing. However, if they have achieved something, I would like to hear it. The discrepancy between the lending and deposit interest rates is too large. There is a need for some transparency and we should be told why they are allowed to get away with it. Is it in the interest of making huge profits for their shareholders and executives?

Mr. Sheehan

What else?

Mr. Deasy

If this is the case, it should not be allowed. I do not wish to be confrontational with the Minister, but could she answer my question?

Mr. Sheehan

I am at a loss to understand why the Minister cannot accept these amendments. If subsection (4) is not deleted, it will make the Bill null and void. Why are the banks and mortgage finance agencies exempt and made sacrosanct by the Minister? It is well known that they have done their fair share of penalising their creditors. There was an incident late last year when the Central Bank reduced the cost of money by .5 per cent; the banks also reduced their rate. However, some of the finance agencies did not think it fit to do likewise. These anomalies must be corrected.

I still fail to see why the banks and lending institutions are sacrosanct under subsection (4). It is diabolical to allow that subsection to be part and parcel of this Bill. It gives carte blanche to those institutions who have a monopoly over our other lending agencies. They must all be treated equally. If we are to divest ourselves of the power of bringing the banks and lending agencies under control, they will have the power to put any hidden charge they like on the consumers. It is very unfair and especially where the lending agencies have refused to reduce their rate of lending to their customers although the Central Bank reduced the lending rate to them. I am amazed that they did not follow suit.

Deputy Noonan quoted a case of glaring injustice perpetrated by the banks but we have no powers to apprehend them. The Minister would be doing a good day's work for the Consumer Credit Bill if she accepted the amendments in the names of Deputy Bruton and Deputy Rabbitte.

Mr. Rabbitte

: I agree with Deputy Sheehan's sentiments. He has said what I wanted to say. I apologise to the Minister for being absent for her reply; it was not entirely my own fault. I understand that she said she cannot interve in interest rates. That is not a reply to the request from Deputy Bruton and myself to excise this section. We are not asking the Minister to intervene in interest rates; we are not asking the Minister to take over the powers of the Central Bank; we are not asking the Minister to impose an interest rates regime for the country; we are asking the Minister to allow the consumer, where he or she believes that an excessive cost of credit has been imposed on them as a result of any agreement they have with any bank or lending institution, to challenge it. I cannot see any logical explanation why we ought not allow that right to the consumer.

We have spent a good deal of time today streamlining an important section of the Bill. As a result of the Minister's co-operation and kindness in accepting amendments, it is now a better section. However, there is an escape hatch at the end of it which makes a nonsense of the entire section. It confines it to the narrow area of the moneylending sector. We have already explained how a moneylender can now contrive to have himself described as a mortgage lender. I do not see what the point is or why we should be so protective.

Why can the Minister not intervene? The question is whether the person thinks the cost of credit has been excessive. Deputy Sheehan has brought up a typical anecdote. There is no point saying that the case mentioned by Deputy Noonan this morning was exceptional or that none of us has ever heard about it before.

With a higher degree in mathematics, which I do not hold, it might be possible to understand some of the calculation schedules that are appended to this Bill. I do not care what they are, none of them could explain why a young person whose parents were killed in England, who borrowed £10,500 in four different tranches, the most recent only 12 months ago, is now requested to pay back £28,500 for that £10,500. There is no calculation, no rate of interest, that warrants that from a reputable lending institution.

In most cases this will not apply but where excessive credit is levied, or where the consumer believes excessive credit is levied, why not treat the banks and building societies the same as any other creditor? Why not allow the consumer the right to challenge it? I do not see what the argument is. Serious damage has been done in this section of the Bill by excising banks and building societies from its remit. I plead with the Minister to reconsider her position.

Miss Quill

I spoke about this yesterday and I will be as brief as I can today. I find it very hard to accept that the Minister would in the context of new legislation try to create two different categories of credit consumers. It seems as if the provisions and the safeguards that are in section 45 of this Bill will apply only to a limited number of consumers of credit.

The majority of adult citizens in this country use credit every day. We all use credit cards daily to settle most ordinary everyday transactions, whether paying for a meal or petrol. These are the times and the world in which we now live. Very few of us, for security reasons among other things, carry sizeable amounts of cash with us any more. We settle our everyday transactions by using a credit card of one kind or another. More sizeable purchases, such as a fridge or other household appliances or a car are bought by the majority of people on credit. The biggest single transaction most of us make in our lifetime is buying a house and almost all of us do that through a mortgage arrangement.

If the Minister continues to exempt banks from this section of this Bill it means that those of us who use credit do not have the protection of the Bill and can never have the protection of the Bill. That makes for very faulty consumer protection legislation. Deputy Rabbitte is correct when he says that only in a small minority of cases will consumers need to challenge the rates or charges. Surely the law is there to protect the minority, to protect people who find themselves in that situation. A law that does not make such provision is very poor law indeed.

The majority of citizens looking at this Bill as it is now beginning to evolve will feel there is nothing in it for them, that they do not rate as consumers at all. If they have a complaint they will have to have recourse to the old system and the only system of expensive litigation. The no cost system that is at the disposal of a small number of consumers will not be available for them. That makes this Bill very limited.

At the outset and on Second Stage we were promised that we would get a comprehensive Bill that would give all of us consumer protection in the event of our needing it in any of our transactions that involve credit at a future date. That is not now happening. I appeal to the Minister even at this late stage to reconsider her decision and withdraw her amendment.

Mr. R. Bruton

Like Deputy Rabbitte, through unforeseen circumstances I was delayed getting back but I understand the Minister is unwilling to accept this amendment. She is presenting it as if we are asking her, like Neptune, to turn back the tide. That is not what we are doing. We are asking her not to give an exemption to what, for many families, are the predominant sources of credit available. The exemptions listed by the Minister cover the finance houses, the associated banks and all other financial institutions licensed by the Central Bank. These are predominantly very high cost sources of credit which people end up using.

The Minister acknowledged yesterday her belief that the Central Bank does not have the interest of the consumer as its primary consideration.

Mrs. O'Rourke

With regard to transaction charges.

Mr. R. Bruton

This Bill deals with consumer credit, not transaction charges.

Mrs. O'Rourke

I am referring to my comments yesterday.

Mr. R. Bruton

If the Minister would not interrupt continually I would be able to make my point. The Minister's line of argument applies with even greater force to the costs of credit which is the subject of the Bill. The Bill attempts to provide protection for consumers regarding consumer credit. It is welcome that the Minister should decide to grant a modicum of consumer protection to consumers regarding transaction charges levied by financial institutions. However, this does not give the Minster a reason for rejecting the issue at the heart of the Bill, which is the attempt to give consumers a right of redress where they are excessively charged. This right of redress should apply whether the person or the institution imposing the excessive charges is a mortgage lender, a finance house, a bank licensed by the Central Bank or whatever. The Minister is missing this point.

The Central Bank, which oversees the margins between lending and borrowing rates does not see itself as defending the consumer's rights, and it took the Taoiseach to address this issue. It was the Taoiseach who alerted us to the failure of the Central Bank and the banking system to maintain a proper and fair margin between lending and borrowing rates. The Director of Consumer Affairs, whom the Bill is granting the power to act on behalf of the consumer, should have the power to pursue the banks and in this respect there should be no special exemption.

The Minister is not her own master in respect of the debate by the Committee today. The Minister for Finance is unwilling to break up the cosy relationship he has with the banks, and this is at the heart of the reason why the Minister will not accept a case whose logic stands on the same grounds as she has argued elsewhere in the debate. In this respect, the Minister is attempting to wash the hands of the Director of Consumer Affairs of responsibility to deal with the main type of credit provider.

Protection is offered whereby moneylenders will be caught regarding charges under the licensing arrangements. At the very least the Director of Consumer Affairs will have a say about the functions of a moneylender when he provides a licence. This is not sufficient and it is welcome that there is this additional power of challenge to the moneylenders.

However, it is impossible to understand why an exemption should be granted to all of those institutions who have at no stage come under the eye of the Director of Consumer Affairs in order to ascertain if their charges are equitable. The Director of Consumer Affairs has never licensed them and the banks have never taken a consumer survey to ascertain whether proposed charges by finance house or others would be equitable from the consumer's viewpoint.

Perhaps the committee is engaged in a debate where the Minister does not have the power to accept the weight of argument, but the committee should create a situation which will enable the banks to undertake much of the work previously undertaken only by moneylenders. There should be a bank system which is more willing to consider the needs of low income families and provide for them. Low income families who become involved with the banks should have the same rights regarding the banking system as they have regarding other money lending institutions.

The committee will not encourage the banking system into this area by its exemptions, and the banking system is one that should be open to challenge in the same way as any other institution. In this respect, there should be the level playing field that Ministers in other contexts are continually pressing upon us. The logic of the argument is entirely on the side of the amendments before the House today.

Mr. M. McDowell

The definition of "mortgage lender", as amended by the Minister means: "...a person whose business is the making of housing loans;". This may appear acceptable until consideration is given to the definition in the Bill of "housing loan", which is "an agreement for credit" where, effectively, the money is for the purpose of buying the house or improving it, or, alternatively if the house is to be used "as the principal residence of the borrower or his dependants;".

Transactions such as providing somebody with a mortgage to buy a business premises or, in some circumstances, a second house do not fall under the definition of a "mortgage lender" and therefore the exemption being conferred on a mortgage lender is confined only to people who carry on the sole business of making housing loans.

While amending and improving a Bill as the committee proceeds is to be welcomed, it appears that the definitions are changing and the targets are moving in front of the committee. There is now an exemption for a class of people whose business is the making of housing loans. Does this include a building society? The business of a building society is not confined to housing loans as defined under section 10 of the Bill. Is a building society therefore caught by this?

Mrs. O'Rourke

It is included within the credit institution.

Mr. M. McDowell

Is a mortgage lender who lends both to buy business and housing premises included within the definition of "mortgage lender"? The situation now reached by the committee means that such a lender is not so included unless a lender is solely carrying on the business of making housing loans, which are restrictive mortgages for two purposes, to finance the purchase of a house or to finance the purchase of a house which is to be used as a principal residence.

It is easy to envisage a situation where somebody was hard up, borrowing £20,000 on security of their house or of another house, a farm or an out farm in order to pay college fees, as mentioned by Deputy Noonan. In those circumstances this is not a housing loan within the meaning of the Bill, as it is not taken out on one of the relevant assets. The question then arises as to whether the term on which borrowing on a farm falls within the protection offered by this section of the Bill, while the terms on which borrowing may be made on a principal residence do not. Does it follow that if borrowing is made on a holiday home there is no exemption in respect of the mortgage lender, or what would be termed the mortgage lender, but there is an exemption if borrowing is made on the borrower's own house?

The Minister should explain this situation as the policy of the Bill as it is emerging is becoming increasingly puzzling. How is it correct to assert that the provisions of this section, which are protective of the consumer, will not apply where the security offered is the consumer's home, but they will apply if the security offered is an asset other than the home, such as farm, business premises and such like? I am becoming increasingly mystified as the logic behind that distinction.

Mr. Rabbitte

I am also concerned with the policy implications of the Bill. The Minister would repudiate the title if the Bill was described as being one to regulate the money lending industry. She would argue that the provisions of the Bill extend beyond this. In the society in which we live credit is a luxury, to which most of us who are employed have access. There is another group of people who are denied access by the very lending institutions the Minister wishes to exclude, and who, therefore, must resort to the moneylending sector. The fact that the banks are treated differently from the money lending sector is only going to exacerbate that division. Rather than exempting the banks, I would have preferred to see a situation where banks are levied and that money devoted to building up the network of credit unions so that if the banks do not want to service this market they should pay a price for it. Then we would see them demonstrating some interest in the area. As it is, they are secured on all fronts, do not have to bother with bad credit risks and are not subject to the provisions of this section. I cannot see the policy argument for excluding them.

Mrs. O'Rourke

I can only repeat what I said twice yesterday and already this afternoon. I am willing to do so, seeing that Deputy Rabbitte has had the opportunity of repeating his point a number of times. We can keep it up all afternoon if we wish, at the discretion of the Chairman. I would like to answer Deputy Deasy——

Mr. Rabbitte

The purpose is to try to convince by argument, not to reiterate set piece speeches.

Mrs. O'Rourke

That is right.

Mr. Rabbitte

What we are trying to do is convince the Minister, and we are entitled to do that.

Mrs. O'Rourke

Of course. I said I am willing to keep on here all afternoon.

Mr. Rabbitte

No. The Minister said she was going to keep on repeating the same speech that she has made three times already. With all due respect, I do not want to hear it again.

Chairman

Due to the importance of this legislation and how it will affect people's lives, nobody is in any doubt that I should give a certain amount of latitude. I know that people have contributed on two or three occasions, but that is necessary if we are really serious about dealing with this. It is important legislation and it is only right and proper that we should give ample time to Members to discuss it in full.

Mrs. O'Rourke

I agree, Chairman. That is the point. I wish we could sit tomorrow, Friday and all next week if possible. I can make myself available every day, and throughout August, to see this Bill through.

Mr. R. Bruton

Hear, hear.

Miss Quill

On a point of clarification, does that include the August Bank Holiday?

Mrs. O'Rourke

Yes, if you would like to.

Mr. M. McDowell

The banks are having a holiday with this Bill anyway.

Mrs. O'Rourke

Deputy Rabbitte said that I was delivering set speeches, although I do not think I have ever delivered a set speech in my whole life. Maybe that fact is the bane of some establishment figures, but I do not deliver set speeches. Furthermore, he has stated his facts, in various ways, several times, and so I try my best to give it a different flavour and colour. However, for me, the facts remain the same, as his facts have remained the same. He has not presented any very different viewpoints in any of the submissions he has made.

I want to answer Deputy Deasy, who asked me who was responsible for setting interest rates. In the short term, monetary policy is operated by the Central Bank. I do not know why the Deputy's question was not allowed because it has a very straightforward answer. While the Central Bank, in the context of operating monetary policy, has a role in relation to the management of interest rates in the short term, we realise that no Central Bank can operate outside the milieu of both domestic and international financial matters. To answer the Deputy directly, the Central Bank operates monetary policy in the short term, in consultation with the Department of Finance. I do not think there is any mystery about it and I am sorry that the Deputy’s question was not allowed, but that was not within my remit.

I appreciate the time you are giving to this debate, Chairman. Within the power and scope vested in me, I am not at liberty to take on board the amendments moved by the Deputies in this sphere. The viewpoints put forward on the operation of interest rates and how they are managed, inter alia, have also been reflected in my dealings with constituents, though perhaps not with the same poignancy as in the case mentioned by Deputy Michael Noonan. No Deputy is exempt from hearing about hardships inflicted on people. We all deal with such cases, otherwise we would not be here. Although I share the thrust of many of the points raised, it is not open to me to become involved, seek to influence or to provide a conduit for challenging what banks do with interest rates or with the money they buy and then lend out. Following the Taoiseach’s remarks a strong debate has begun on these issues. The Taoiseach played a fine leadership role in bringing that matter out into the open. It is quite a while since I heard anyone in the Taoiseach’s position challenging the banks about anything, and I welcome that.

Mr. Rabbitte

Perhaps we should have had him as Taoiseach earlier.

Mrs. O'Rourke

By pushing his door, which I knew was receptive, and that of the Minister for Finance — Deputy Bruton was kind enough to acknowledge it — I have been able to make a dint as regards transaction charges which we will address at a later date. I repeat — though I will, of course, try to vary it each time I repeat it — that I am not able to accept the amendments as offered.

Chairman

Deputy Deasy, briefly, because I would like to put the amendment at this stage.

Mr. Deasy

I will try to be as brief as possible, Chairman. I would like to ask the Minister whether the Taoiseach achieved anything when he chided the banks on the disparity between the rates at which they lend money and the rates they pay to depositors. Did he achieve anything? There does not appear to have been any change. I will give a succinct example. A constituent of mine bought a house, the mortgage on which is operated through one of the major banks. It is a bank that was in big trouble about ten years ago. When we were in Government we actually bailed it out because its insurance company ran up debts of hundreds of millions of pounds which put the whole financial situation in jeopardy. The constituent has a mortgage with that same bank, and when interest rates were at almost 20 per cent two years ago he was paying a certain mortgage repayment figure. However, now that interest rates have come down considerably, he is paying £1 a month more than he was paying two years ago. He wants me to find out why, although I cannot tell him and neither can his local bank manager. He is paying more than two years ago, despite the fact that interest rates are now 7 or 8 per cent less. How can we get to the bottom of this? It can only be a racket.

There must be a logical explanation. It is not enough to challenge the banks or even ask the Central Bank, as the licensing authority, to request an explanation. If people who have a licence — whether it is a driving licence or a public house licence — infringe upon what is right and proper, the licence can be rescinded or withdrawn. It is not enough just to question or challenge the banks. If they are not playing the game they should be threatened with the withdrawal of their licences and their licences should be endorsed. The second time round it should be withdrawn.

Chairman

How does one take them off the road?

Mr. Deasy

The Taoiseach has apparently taken on the banks but we do not see any result. Can the Minister tell us if anything transpired from this?

Mrs. O'Rourke

I was not at the meeting which took place between the banks, the Taoiseach, the Tánaiste, the Minister for Enterprise and Employment, Deputy Quinn, and the Minister for Finance, Deputy Ahern. It was agreed that they will have regular meetings. Results are not achieved overnight. This Bill will not achieve overnight everything we want it to do. The fact that the Taoiseach publicly questioned and will continue to question the financial institutions is significant because heretofore there has been a reluctance by everybody to do so.

I became involved with this issue two years ago when I was moved from the Department of Health to the position of Minister of State at the Department of Industry and Commerce. The then Minister, Deputy O' Malley, suggested I should consider drafting a consumer credit Bill. At the time bank transaction charges were an issue. I appeared on the radio programme "Morning Ireland" with a representative of the standing committee of the banks. He told me not to worry about such charges as they were a matter for the Minster for Finance and that the banks would not be answerable to me or to any section of my Department. I continued to be involved in consumer and bank matters and was treated most courteously when I met the banks to talk about transaction charges.

During the last 12 months many of the main banks have displayed information on charges more prominently on bank statements as distinct from showing indecipherable rigmarole on the back of pages which one could not make out. Although my efforts may seem minimalist, I feel I have come a long way. At 9 a.m. last Monday I queried a clause in a bank mortgage lending charge, which was highly incorrect and irregular. By 4 p.m. it was removed. This may seem small but to me it seems we have come a long way over the last two years. Deputy Deasy asked me what the Taoiseach achieved. By putting the matter up front and challenging what nobody had the gumption to challenge before, he has made clear to the banks that he is not going to let the matter drop.

Mr. Deasy

Will he withdraw a licence or two?

Mrs. O'Rourke

I am not saying that. He has seen fit to challenge them. No other Taoiseach in my memory——

Mr. Deasy

There has not been any action.

Mrs. O'Rourke

During the term of office of the Government of which Deputy Deasy was a member, there was a bail out of a bank which went into difficulties. The then leader of the Opposition, Charles Haughey, brought his Front Bench into negotiations with the Government on the matter and we agreed that probity and prudence dictated that this should be done.

Mr. Rabbitte

They were all wrong.

Mrs. O'Rourke

I have always felt that people have a strange reluctance to talk up about banks. They may feel that some day they will be looking for money from banks. We seem to have a reluctance to challenge.

Chairman

I do not think there is any such reluctance here. All the committee's members must be solvent and do not need any assistance from banks. The Minister has indicated she is not prepared to withdraw her amendment in favour of the alternative tabled by Deputy Bruton and Deputy Rabbitte.

Mr. R. Bruton

I admire the Minister's willingness to joust with the banks but she has come back with the wrong prize. She has won control over ATM charges, which is a trivial element, but she has missed the big fish, which is the overall charge imposed on borrowers. She has acknowledged that the consumer has the right to go beyond the licensing authority for moneylenders, the Director of Consumer Affairs, to challenge charges. She is denying this right to borrowers from banks. She said it is good that people stand up and challenge the banks but in this instance she is saying that they cannot do so. She is not being consistent with the logic of her position. She has come back with half a loaf but we have missed dealing with what the Bill was designed to tackle and we will not have another chance to do so.

She spoke of the clause which the bank thankfully decided to withdraw. Had it not done so this Bill would not have given anyone the power to challenge such a clause. The Director of Consumer Affairs, whom one would expect to challenge it, is explicitly under section 48 exempted from challenging the banks. It was bad public relations and not a legal obligation which persuaded the bank to withdraw the clause. The only outcome I saw from the meeting with the banks was that the Minister, Deputy Quinn, announced within days that the Government was considering subsidising the banks in order to help them take on certain lending. That was totally at variance with what we expected to result from the meeting.

Mr. M. McDowell

I do not know how we have become caught up in a discussion as to whether the Taoiseach is right or wrong to take on the banks.

Mrs. O'Rourke

Deputy Deasy asked about this.

Mr. M. McDowell

I believe the Taoiseach is in a unique position to know how extortionate the banks' rates are given that he has access to cheap money from foreigners at 5 per cent for five years. I have no doubt the margin shocked him so much that he decided he, more than any other Taoiseach, had to make an issue of the matter.

Mrs. O'Rourke

The Deputy should vary his tune.

Mr. M. McDowell

I will be back to that tune again and again and I will never give up. I asked the Minister the straightforward question of what is a mortgage lender. Section 2 of the Bill describes a mortgage lender as "a person whose business includes the making of housing loans". The definition of a housing loan shows that it is a very restrictive form of mortgage. Its purpose is to finance the purchase of a house or its extension. The house is to be used as the principal residence of the borrower. Is a mortgage on a place which is not the borrower's principal residence or a mortgage to cover school fees, as might have been the case in Deputy Noonan's example, covered by this exemption?

Mr. Noonan (Limerick East)

The committee will be interested to know that the Bank of Ireland knocked £2,000 of that interest bill which I was speaking about this morning.

Mrs. O'Rourke

Did the Deputy threaten them?

(Interruptions).

Mr. Noonan (Limerick East)

If any Members were wondering about whether these committees have any effect, they are fairly good for processing constituency work.

Reference was made to the Taoiseach's intervention with the banks. He seemed to hit the target better than Deputy O'Rourke's senior Minister, Deputy Quinn, who is so embarrassed at the moment about his socialist background that he has become more Catholic than the Pope. He is now a bigger capitalist than any of us in the pro business parties in this House. The Taoiseach had his own reasons for taking on the banks, judging by the recent history of his own company. He had to have recourse to schemes other than the banks to get money at a lower interest rate. I am not going to pursue that but I would like the Minister to comment on something.

Mr. Ellis

Who introduced that scheme?

Mr. Noonan (Limerick East)

Fianna Fáil, actually.

Chairman

If the Deputy has a question for the Minister he should put it to her.

Mr. Noonan (Limerick East)

I am wondering if the Taoiseach was really coming at the situation from another direction. All the legislation in the world, whether it is penal or otherwise, for the lending institutions will not really achieve the kinds of ends which we all want. The only way to make sure there are controls over the lending institutions is to have real competition. There is not real competition, despite the licensing of extra lending institutions arising from legislation over the last five or six years. The two main banks still have arrangements of a cartel like nature and there is not full competition across the range of business.

It seems that the Taoiseach's intervention coincided with a Government decision not to proceed with a third banking force because he did not see that as a viable runner. In order to fill out the debate, I would like to hear the Minister's comments on whether the proposed third banking force is now a live proposal or has been dropped. Is it to be replaced by the Taoiseach on the sidelines hurling straws at the players and the associated banks?

Chairman

I think that the Deputy is trying to provoke the Chair more than the Minister, so I would ask her to ignore that question. That would be a question for the Minister for Finance. Could the Minister reply to Deputy McDowell and Deputy Noonan? I then intend to put the question.

Mr. Rabbitte

I think Deputy Noonan should revert to trying to get another £2,000 off that interest bill.

Chairman

Perhaps if we had a third banking force he would get it.

Mrs. O'Rourke

You asked me to reply to Deputy McDowell's precise question about the mortgage lender and the interpretation on page 11 which states that mortgage lender means "a person whose business includes the making of housing loans". I think it was Deputy Michael McDowell who spoke about that earlier.

Mr. M. McDowell

Yes.

Mrs. O'Rourke

We took the amendment and the word "includes" is excluded from that.

Mr. M. McDowell

I do not think the Minister is following my question, which refers to the housing loans aspect of it. I am saying that if it is restricted to housing loans it is to specific kinds of mortgage and not any other mortgage — one to either buy or improve a house and one which is related to one's principal residence. It does not relate to a mortgage on a business premises——

Mrs. O'Rourke

No, it does not because it is a consumer credit Bill.

Mr. M. McDowell

——a farm or a secondary house or a loan taken out on any premises which is not one's principal residence, for example, to pay school fees.

Mrs. O'Rourke

I was asked to define mortgage lender and what I said was that earlier we took an amendment removing the word "include" so that the definition of mortgage lender reads "a person whose business includes the making of housing loans". The Deputy asked me that specific question and I am answering him. He also asked about farms and businesses but this is a consumer credit Bill and not one dealing with the wider arena of business.

I want briefly to take up the point made about Deputy Quinn, the senior Minister in our Department. I am not doing this out of loyalty but quite straightforwardly. The whole area of moneys being given by the IDA and various institutions by way of grants, loans, soft loans and so on needs to be looked at. That was the purpose of his discussion with the banks. I can tell Deputy Noonan that the consideration of the third banking force is alive and well and very active.

Amendment put.

The Select Committee divided: Tá, 19; Níl, 11.

Tá
Ahern, Michael.	Kemmy, Jim.
Ahern, Noel.	Kenneally, Brendan.
Broughan, Tommy.	Killeen, Tony.
Byrne, Hugh.	Kirk, Séamus.
Costello, Joe.	O'Keeffe, Batt.
Coughlan, Mary.	O'Rourke, Mary.
Ellis, John.	O'Sullivan, Toddy.
Fitzgerald, Brian.	Ryan, Seán.
Flood, Chris.	Smith, Brendan.
Haughey, Seán.

Níl.
Ahearn, Theresa.	McDowell, Michael.
Bruton, Richard,	Noonan, Micheal (Limerick East).
Connor, John.	Quill, Máirín.
Crawford, Seymour.	Rabbitte, Pat.
Creed, Michael.	Sheehan, P. J.
Deasy, Austin.

Amendment declared carried.

Amendment No. 140 not moved.

Mr. R. Bruton

I move amendment No. 141:

In page 31, between lines 10 and 11, to insert the following subsection:

"(5) The Minister may by regulation set a ceiling on the total cost of credit or any charge provided for in any credit agreement or particular class of credit agreements, which would be enforceable.".

The purpose of this amendment is to question whether the Minister is correct in abandoning section 17 of the Moneylenders Act, 1933, which provided for a ceiling of 39 per cent. If an interest rate was found to exceed that or a corresponding rate in another period, the court would conclusively assume for the purposes of section 1 of the Moneylenders Act, 1900 that the interest charged was excessive and the transaction was harsh and unconscionable. That finding was without prejudice to the court finding that a rate not exceeding 39 per cent was excessive.

Under that Act, therefore, there was a ceiling and the court had discretion beneath that ceiling. That was not a bad formulation and we should question whether it is right to abandon it. The problem with the provision was that there was no Director of Consumer Affairs and no right to go to court. The only way to exercise one's rights was if the consumer was willing to go to court and produce evidence against moneylenders but that was exceedingly difficult. Most moneylenders were acting illegally and the law as it then stood was ineffective in dealing with illegal moneylending.

The intention of the legislators in enacting section 17 of this Act was sensible but the provision became a dead letter. The Combat Poverty Agency studied moneylending to low income families and surveyed 100 families who were dealing with 96 different moneylenders. Only 21 of those had licences and only 4 per cent of all loans from the moneylenders, including those who were licensed, had an interest rate of 39 per cent or less, so the legislation would specify the rest as excessive. Common APRs were 100 to 199 per cent and 300 to 399 per cent. The highest recorded case was of 12,217 per cent on a loan of £100.

My amendment provides the possibility for the Minister to set by regulation a ceiling on the total cost of credit or any charge provided for in a credit agreement or a particular class of credit agreement which would be enforceable. In other words, the Minister could step in from time to time to set ceilings. Such ceilings would have to be in some way related to the going rate of interest of other lending. It cannot be fixed at 39 per cent forever; it must vary. My amendment is more flexible in that it allows the Minister to vary rates.

The merit of setting a ceiling by regulation will be that moneylenders or other lenders will know they cannot hope to succeed with a rate in excess of that. It will not necessitate consumers going to court and incurring the expense of a court action to challenge a rate which is excessive. It would be preferable if we set such a ceiling because it would reduce the need for litigation.

The flexible formula which I propose does not impose an unenforceable straitjacket on lending because the Minister can provide for rising and falling world interest rates, but it would mean that moneylenders would have to have a certain relationship with prevailing interest rates and could not provide loans at a 12,000 per cent rate of interest. The Director of Consumer Affairs is of the view that it would be desirable to retain this feature. He has the power, when licensing moneylenders, to sanction certain rates of interest. The Legislature should offer guidance through the Minister as to what would be a reasonable rate. This would be a useful complement to the powers which are to be provided in this Bill.

Mr. M. McDowell

From experience, I found the 39 per cent interest rate was a joke. It was difficult to operate and I had to go the courts on several occasions to work out precisely what the regulations meant. It was impractical from the point of view of being fair. Deputy Bruton, in support of his argument, referred to the survey carried out in relation to moneylending. The first thing we must grasp is that an unlicensed moneylender will never go to court to recover his or her money. They will break legs, windows or threaten people rather than go to court. If this provision became law, it would not effect an unlicensed moneylender.

Is it necessary to make this provision for licensed moneylenders? The answer is no because the Director of Consumer Affairs, when fixing their licences, may put limits on the interest rates which they may charge. Would there be any advantage in doing what Deputy Bruton suggested, that is, to have the Minister fix limits through delegated legislation? The answer is no because Ministers would be loath to fix a maximum rate in relation to collected credit.

A person who cannot borrow money from a bank will borrow from a licensed or an unlicensed moneylender. If they borrow from an unlicensed moneylender, they have no protection so nothing will be achieved by forcing them in that direction. If someone borrows £100 from a licensed moneylender to be repaid in 26 weekly instalments over six months, someone will call to their door during that period because paying at the office is not practicable for the majority of these borrowers. Someone will collect £4.61 each week, totalling £120, including £20 interest. If anyone says to me that any member of this committee would lay out £100 over six months, with 26 visits and take back £120 and consider themselves well remunerated, they are living in cloud-cuckoo-land. It is not a vast sum of money but if one looks at it in terms of a declining balance, it is, as I said earlier, a rate of 40 per cent over six months or 80 per cent over one year.

We are codding ourselves if we believe that the Minister or this committee will fix a statutory instrument stating that 80 per cent is all right in certain circumstances. Politicians will not do that. They will not sign documents saying that an 80 per cent annual rate of interest is reasonable because it is bad politics. It does not matter whether the rate goes up or down, as Deputy Bruton suggested, because when dealing with sums of money of that kind, the cost of the money to the lender is not the crucial issue, the real issue is the risk and the cost of collection and administration. That is what one is remunerating in the case of licensed moneylenders. There is no need for such an arrangement because we are only dealing with licensed moneylenders, not the cases which Deputy Bruton referred to relating to unlicensed moneylenders who will never be controlled.

Mr. R. Bruton

One third were licensed moneylenders.

Mr. M. McDowell

One could not operate under the 39 per cent limit. It could not be done because one could only charge £9 for laying out £100 over six months.

Mr. R. Bruton

None of them was under 100 per cent.

Mr. M. McDowell

I appreciate that. I would like to give Deputy Bruton £10,000, set him up in office and ask him to collect at people's doors and for him to tell me those figures are unreasonable.

Mr. R. Bruton

The mean was 500 per cent. Is Deputy McDowell saying that is reasonable?

Mr. M. McDowell

That was not the mean of the licensed moneylenders.

Mr. R. Bruton

That was the mean of the moneylenders, one third of whom were licensed.

Mr. M. McDowell

I assure Deputy Bruton that the licensed moneylender would be at the bottom. Unlicensed moneylenders charge interest on interest each week. They ratchet up huge collection charges.

From my experience of these agreements, it is impossible to carry on a business, including collection charges, and stick within the 39 per cent limit. One cannot expect the Minister to set a limit of 80, 100 or 120 per cent. She would be laughed at if she fixed those figures. The right way to do this is for the Director of Consumer, when licensing moneylenders, to set out the maximum return. We are codding ourselves if we believe a politician will put his or her hand to a statutory instrument stating that 110 per cent is all right for those who are most vulnerable in society. That is what those figures amount to when one talks about the ordinary rate of return.

The 39 per cent interest rate was never rigidly enforced in this country. It did not exist in England, which has as tender a conscience as we have in relation to people being exploited by moneylenders. It was ignored in this country because it was impractical from day one. There is no point putting a measure on the Statute Book which will be broken yet again or, alternatively, a measure which involves Ministers making an embarrassing and unnecessary gesture. The political pressure will be to bring down the maximum rate. The licensed moneylenders will be wiped out and more people will be driven into the hands of loan sharks.

Mrs. O'Rourke

I agree with Deputy McDowell. I will not accept this amendment even though I know it is well intentioned. We are all working for the consumer. The 39 per cent limit was never used or called into question because it was not relevant. There is a clear understanding that when one stipulates a minimum figure, it becomes the only figure and later the bottom figure. I certainly do not intend, nor I am sure do any of my ministerial colleagues intend, to set what we would consider to be the correct rate for a moneylender.

I draw the attention of Members to the definition section on page 11 of the Bill which provides that a money lending agreement is one where the total cost of credit to the consumer expressed as an annual percentage rate of charge is in excess of 23 per cent of APR. One of the main thrusts of the Bill is the licensing of moneylenders and the elimination of unlicensed moneylenders who are preying on people, charging exorbitant rates and, as Deputy McDowell said, using extortion methods rather than the courts.

The licensing arrangement is such that when a person goes to the office of the Director of Consumer Affairs, he will set the rate according to prevailing conditions. One cannot operate legally unless one is a licensed moneylender. This process will take time and much monitoring. I hope the end result will be that, with the provision of adequate resources for the Director of Consumer Affairs, the management of the moneylending arena will change. People involved in the business should be providing a proper service for those who need it.

The amorphous word "moneylender" should not be heaped on those who are conducting their business correctly. It has become a term of derision which calls into question those people who are legitimately operating as moneylenders. The area was clouded previously as people had to go to the District Court and through a complicated process. However, the new licensing regime will be set out clearly. Powers will be vested in the Director of Consumer Affairs to make him the arbiter in these matters.

I believe we will put legal moneylending on a proper footing and that illegal moneylending will be ridiculed as time goes by and eventually banished. Furthermore I do not want to be the person who sets the rates.

Mr. R. Bruton

I can understand why the Minister might not want to be the person setting the rates. However, we cannot evade the point that we expect someone to set the rates. The Minister expects that the Director of Consumer Affairs will set the rates. The Director of Consumer Affairs comments that the section does not give any statutory guidance as to what constitutes an excessive rate but allows him to use his opinion in determining whether rates charged by a moneylender are excessive. He goes on to say that the difficulty with this, however, is that if he issues a licence to a moneylender and effectively approves a rate of charge for loans, he would find it extraordinarily difficult afterwards to convince a court to review credit agreements of that moneylender under section 46.

I believe he is making the case that setting maximum charges should be a function of some body other than the director as he takes cases on behalf of the consumer. Otherwise he will be in the rather difficult position of setting the maximum charge which he then challenges under section 46. There is a case for maintaining some maximum and I am not entirely persuaded that the political head of the Department of Employment and Enterprise should not set those limits.

I ask the Minister where she expects the director to get guidance as to the ceiling at which he should refuse a licence. He is trying to stand up for the consumer and is also effectively being asked to stand up for the moneylender. There is a difficulty about doing the two jobs in the same office. He cannot fight two causes at the same time.

I am impressed by the strength of Deputy McDowell's argument and I know section 17 was not a dead letter. However, to be fair, it was wrong for different reasons. I ask the Minister to tell the House how she expects the director to do two jobs at the same time — defending the consumer's interest and trying to set an equitable rate of return for moneylenders. The two are uneasy bed fellows and cannot be run from the same office.

Mrs. O'Rourke

They are uneasy bed fellows if one uses the word "moneylender" in its amorphous context. We are setting up a licensing regime for legal moneylenders who will operate according to legal strictures. The Director of Consumer Affairs is fulfilling his role because he is making clear that he represents the consumer who will now have access to a properly licensed moneylender. We do an injustice to ourselves by not realising that properly licensed moneylending is a necessary requisite for many people.

We want to work to the benefit of the consumer and the person lending the money also has to make a living. We are dealing with consumer credit. The Deputy asks how the Director of Consumer Affairs can fight the case for the consumer if he also has to fight the case for the moneylender. In fact, he is fighting the case for the consumer by having an accountable licensing regime.

The Deputy asks where the Director of Consumer Affairs will get guidance as to the prevailing rates. We recognise this issue in the Department and there have been preliminary discussions with the director about this point. When this legislation is enacted, the director will get staff with a financial background to help him to implement the Bill; he has built up expertise on previous legislation. This Bill is of such a strong financial nature that he will clearly have to recruit people will a financial background.

I could not envisage a situation where a Minister from any party in any Government would like to set the rates individually for licensed moneylenders.

Mr. R. Bruton

The Minister has misunderstood me slightly. I am not suggesting that the Minister would set the rates individually for moneylenders; I am suggesting that the setting of a ceiling is a political role appropriate to a Minister. The director would continue to license but the ceiling set by the Minister would determine who could apply for a licence and anyone applying for a licence who was not operating within that ceiling could not continue in business.

The only issue about which I remain uneasy is that one should not ask the one office to determine the equitable rate of return to licensed moneylenders and what charges are unconscionable and should be challenged in court. The director is asked to do the two things from the one office. In a way the Central Bank is a good example of this; it, as the Minister and others have clearly recognised, has fallen entirely on the side of determining equitable rates of return and it wants to see the financial soundness of the lending system which it supervises.

The Minister is asking the Director of Consumer Affairs to do two things; he has to police the financial soundness of the moneylending industry and stand up for the consumer. There is a slight schizophrenia creeping in there as the director will have to look in two directions at the one time. While there is a function for setting ceilings, perhaps that could be done by someone other than the Director of Consumer Affairs because it concerns equitable rates of return to moneylending and financial soundness of moneylending, which are not primarily what the Director of Consumer Affairs is concerned with.

Mr. M. McDowell

If a ceiling was fixed by a Minister it would tend to be the benchmark to which everyone adheres.

Mrs. O'Rourke

The floor.

Mr. M. McDowell

Or the floor. The moneylenders would then say to the Director of Consumer Affairs that since the Minister has set a rate of 112 per cent, for example, as the maximum, how can he then say it is unconscionable or wrong to select a figure which a political person has fixed as a ceiling.

Mr. R. Bruton

That is not fair.

Mr. M. McDowell

That is the logic of it.

Mr. R. Bruton

Look at all the elements the court can take into account.

Mr. M. McDowell

That is another day's work. In practice, once a Minister put his or her hand to a particular figure that would become the norm and it would be hard for the Director of Consumer Affairs to say that he will not licence somebody to that amount. When dealing with the individual person and the related criteria in section 46 a court might say on some occasion that in respect of one individual it was excessive but, nonetheless, there would be the difficulty that the Minister would have fixed it as a maximum and it would be waved around in court as such.

The curious thing about collective credit is that the example I gave of getting £120 back for £100 advanced does not seem disproportionate, but if one applies APR to it, it goes through the roof. These loans are made to people who, as the Minister readily acknowledged, will not get them anywhere except from an unlicensed moneylender. I accept what Deputy Bruton says, that there is an element of give and take and of burning the candle at both ends in this legislation insofar as the Director of Consumer Affairs has to look at the needs of the lender and the borrower. In truth, that difficult task has to be done by somebody and it is better out of the political domain. I would be horrified to see Deputy Rabbitte in a job where he had to fix the maximum which could be taken back.

Mrs. O'Rourke

Fine Gael loves the Deputy now.

Mr. M. McDowell

I believe he would refuse point blank to make such a statutory instrument if it was put to him. From that point of view, this is in large measure something which would not do any good and could do a lot of damage.

Chairman

Is the amendment being pressed?

Mr. R. Bruton

I will turn tail and keep my powder dry on this issue until Report Stage. I recognise the validity of some of Deputy McDowell's arguments.

Mr. M. McDowell

I should say that at a select committee a negative vote does not prevent an amendment being moved again on Report Stage.

Mr. R. Bruton

I will withdraw the amendment at this stage and I will consider it further.

Amendment, by leave, withdrawn.

Section 46, as amended, put and agreed to.

Chairman

When is the Minister available next week?

Mrs. O'Rourke

I am free on Wednesday and Thursday, and Friday if need be.

Mr. R. Bruton

Are there plans to take the Casual Trading Bill and the Competition Bill next week?

Chairman

I think we should continue with this Bill.

Mr. R. Bruton

It is better to take a Bill right through rather than chop and change.

Mr. Flood

Is there a meeting of the Committee of Public Accounts on Thursday?

Mr. Rabbitte

No.

Chairman

Is Wednesday and Thursday of next week agreed, with a 10.30 a.m. start on Wednesday? Agreed.

The Select Committee adjourned at 4 p.m. until 10.30 a.m. on Wednesday, 27 July 1994.