Select Committee on Enterprise and Economic Strategy debate -
Wednesday, 27 Jul 1994

SECTION 50.

Mr. R. Bruton

I move amendment No. 158:

In page 34, between lines 3 and 4, to insert the following subsection:

"(3) (a) A statement by which a consumer foregoes the right to a cooling off period shall carry in a prominent position:

‘WARNING

THIS DOCUMENT MEANS YOU ARE GIVING UP YOUR RIGHT TO A 10 DAY PERIOD TO RECONSIDER YOUR COMMITMENT TO THE CREDIT AGREEMENT.',

and

(b) This statement shall be signed separately at the lender's business premises.".

We are saying that a consumer will have ten days within which to decide he will not proceed with the loan. Then we go on to say that the consumer may forego his right to this cooling off period if he signs a separate statement to this effect. I question whether that is enough. I suggest we should require that the statement foregoing the cooling off period contains a clear warning to the consumer about what is involved.

Mrs. O'Rourke

What the cooling off period involves?

Mr. R. Bruton

About what he is signing away. It should not be set out in dense print so that he does not know what is involved. I raise the question in (b) whether a decision to give up your right to a cooling off period should be made on your doorstep. If someone is advancing you a loan and pushing on you the need to forego the cooling off period, should this be done on separate occasions and at the lender's business premises? It may be argued that it makes it excessively inconvenient if the consumer is forced to go to the lender's business premises but, on the other hand, we should make it known to the consumer that it is a serious matter to sign away the right to a cooling off period on the doorstep without giving it any real thought.

Mr. Flood

This is an important Bill, the provisions of which greatly strengthen the hand of the consumer. It is a serious step to sign away your right to the cooling off period and we would all be unhappy if that were the general practice. If a consumer urgently needs to complete an agreement and is acting under pressure they may be inclined to waive, much more easily than they should, their right to the cooling off period. Something is needed to bring home to them the enormity of what they are doing. In previous sections when dealing with advertising we spoke about making something stand out. Essentially that is what Deputy Bruton suggests in his amendment. I would like the Minister to look at something along those lines and see how to put it on a statutory basis. One needs to be cautious about signing away one's right to the cooling off period. We spoke at length about it and we see the advantages of having a cooling off period of ten days.

Mr. Rabbitte

The idea in the section is a good one. I am not sure I understand why the tail is attached to subsection (2), why it is considered necessary to insert that the consumer may forego this period. There is probably a logical explanation that escapes me.

Mr. R. Bruton

A quick election.

Mr. Rabbitte

I doubt it, but that might be so.

Mrs. O'Rourke

They must have funny elections in Galway West if they are that quick.

Mr. Rabbitte

Deputy Bruton's amendment is worthwhile. I am always amazed by people who go into shops and buy cigarettes even though it is stated on the packet that cigarettes will probably kill you, yet people continue to buy them with alacrity. In this case, the argument Deputy Flood has made is right. People do extraordinary things in extremis and people view the world differently. There are certain people for whom accumulating a certain debt is a matter of almost disinterest to them whereas for others it is a crisis. The ostrich syndrome applies, there are people who put their head in the sand and ignore the accumulating debt. The idea of a cooling off period is a good principle, it ought to be protected and spelling out the warning in this fashion, as is proposed in the amendment, would serve to bring home to people, even if they do consider themselves in a crisis and they must proceed with all despatch, the severity and seriousness of what they are doing. I cannot see any good reason it should not be incorporated and the addition to it, that they would be required to go to the lender’s premises to so sign, is proper. People have a habit, as has been said, when confronted with a particular unforeseen, or maybe foreseen, crisis, of signing anything in order to get over the hump.

Mr. McCormack

I have had experience of being the manager of a lending agency and was amazed what some people will sign to get an immediate loan. I would be very reluctant, in the interests of their wellbeing to reduce the ten day cooling off period or to have a document that one could sign which would eliminate the ten day cooling off period. There are occasions, however, in which time is of the essence in a loan application and this applies to loans for everything, including a car, a pub, a farm or whatever one might be buying, except a dwelling house. Maybe there should be some provision in that instance for a shorter cooling off period, in other words, that a person would sign a document opting for a three day cooling off period. I would like to retain a cooling off period because people tend to borrow money for extraordinary reasons. Being the week that is in it, in Galway, I took a day or two away from the races because of the temptation to borrow money to continue to attend the races. I had to get out for those two days and I am very glad to be at this meeting rather than at the races.

Mrs. O'Rourke

The Deputy is very noble.

Mr. McCormack

From the little experience I had there already——

Chairman

The sacrifices he makes for his constituents.

Mrs. O'Rourke

They will see him tonight on the television.

Mr. McCormack

I am putting in a plug for the final two days of the races on Friday and Saturday. If this committee gets its work finished, Members can attend.

Perhaps we should consider a shorter cooling off period for loan applications where time is of the essence.

Miss Coughlan

I agree with what has been said. Many people are blasé about their affairs or they get into a fluster and put themselves under pressure, but if something goes wrong, they are not able to take the heat, even though it is they who have made that decision. I realise we should not be legislating for people's free will to do X, Y or Z, but at the same time, from a consumer's point of view, we have to have the means available to people to make proper decisions. When signing documents, especially somebody who would not be accustomed to this type of transaction, a person may not brief himself as to what he should know. A lender may be also under pressure and might say to the consumer that he or she does not have to take the loan within ten days. When everybody is under pressure, nobody thinks straight and then something can go very wrong. If there is a provision in the legislation that at least draws a person's attention to it, it will, in fact, get that person thinking about it.

I see merit in subsection 3 (b) where one is displaced from a situation to think about it. The Minister might consider what she could do in that instance. At the same time, there are certain situations where one almost needs a quick fix, but one's right should also be there to decide, as it is the consumer who makes that decision. Every effort should be made to help the consumer make the proper decison. Will the Minister consider something similar to this amendment?

Ms Keogh

The right to a cooling off period is very important in order to appraise one's needs. On a number of occasions I have come across cases where people needed the money instantly and, unfortunately, the benefit of a cooling off period does not accrue to them. We have to accept that fact and allow for it. Part II states that the consumer may forego his or her right to a cooling off period in any credit agreement by signing a statement to this effect separately. This provision is important. I do not know if Deputy Bruton's amendment is necessary. Having it in those terms might be better, but certainly we have to allow for cases where people need the money instantly. My fear is that people who in an emergency cannot borrow money, will then go to illegal moneylenders. Unfortunately, that is what would happen and we must allow for that.

It is important that consumers be protected, but it is also important that they are protected from the other angle also and what is important here is the correct balance. I do not know about paragraph (b). If I am making the argument that people need money now, to be consistent one cannot say they have to go 20 miles or to the lender's business or wherever, in order to achieve what they wish. I do not think I would be following through on the logic of my argument if I were to agree with paragraph (b) of Deputy Bruton's amendment. A sense of balance has to be achieved and we must recognise that in an emergency people need the money immediately versus the danger of people going to illegal moneylenders which we would all abhor.

Mr. Flood

Deputy Rabbitte queried the need for subsection (2) and suggested that we should protect consumers themselves. There may be a need for consumers to cancel the cooling off period. We have to be practical and accept that. We cannot tie the legislation up so tightly that we will protect the consumers totally from themselves. They must have some freedom of action. This must, therefore be inserted. What concerns me is that it might become the norm when a consumer looks for a loan from the lending agency, because the consumer might want the money in a hurry, to have all the relevant documents signed at once, including the one relating to the cooling off period. It is difficult enough for consumers to act rationally and to read all the documents carefully before making a decision and have the further advantage of a ten day cooling off period. The objectives of the Minister and Deputy Bruton are the same. I would be surprised if the Minister does not come up with some mechanism whereby the consumer is protected along the lines suggested by Deputy Bruton.

Mr. McCormack

The lender can often influence the borrower to proceed with a loan. Sometimes there is a vested interest. For example, many auctioneers are managers of lending agencies. A sale may depend on a loan, the lending agency might be inclined to try to persuade a consumer that the cooling off period does not apply to him because he is a very cool person and that that clause applies only to hot-headed people.

Mr. Flood

For people who go to the races.

Mr. McCormack

The Minister may have referred to a shorter cooling off period. If there is a form to be signed which exempts the consumer from any cooling off period which could be signed the next day and not on the day one is appplying for the loan when under pressure negotiating it and is eventually accepted for it, then that would be a day's cooling off period. If one is told one will not get the loan for ten days, which would be good in the normal course of events, the person might be so desperate for the money that he would sign anything on the day but, having gone home and talked to his spouse or family, he would probably cool off a little. If there were a cooling off period of at least 24 hours after negotiation of the loan I would have no qualms about a person then being allowed to sign away his right to the longer cooling off period but I would have qualms about a person signing off his rights to a cooling off period immediately on the negotiation of a loan.

Mrs. O'Rourke

We have had a very interesting debate today. It recalls the compiling of this Bill the first time around. It is as well to read this section 50 (2), innocuous as it is:

A consumer may forego his right to a cooling off period in any credit agreement by signing a statement to this effect separately from any other term of the agreement.

We talked about this for some time, discussed it with various groups and again in the Department. To answer Deputy McCormack's question, we have tried to limit the cooling off period to ten days throughout the Bill. We accept that the consumer has a right to a cooling off period but he also has a right to get the money immediately. It would be anticonsumer not to allow the consumer the right to get the credit or purchase he is making if he wanted it urgently. It would be wrong to deny the consumer the right to get his instant credit purchase.

Deputy Flood asked if it would then become the norm to get the consumer to sign a form relinquishing the right to a cooling off period in order not to have to wait for the money. That would be an attractive procedure as well and would negate the cooling off period in the provision. It was a knotty problem which we discussed for so long. We should have a cooling off period. Yet consumers should have the right to make their purchase on the button, so to speak, if that is what is wanted. I was afraid that, as Deputy Flood pointed out it would become the norm to sign the documents and get one's money immediately. I do not agree with subparagraph (b) of amendment No. 158; I agree with Deputy Keogh on that, I will explain why. Subparagraph (b) of amendment No. 158 provides that statement by which a consumer foregoes the right to a cooling off period should carry in a prominent position a warning to the effect that the document means giving up one's right to a ten day period to reconsider one's commitmen to the credit agreement. Who then would decide how long the cooling off period should be? Neither I nor the Director of Consumer Affairs will decide that. We have to have a precise cooling off period for the purpose of the legislation.

Mr. McCormack

The Minister said that the form foregoing the cooling off period has to be signed separately.

Mrs. O'Rourke

Yes. That is in the Bill.

Mr. McCormack

That is fine, but when a person looks for a loan there are many forms to be signed. One form after another is produced which the person has to sign. Finally a form is produced and the person is told if he signs it now he can get his loan the next day instead of in ten days time. All the forms become part of the same signing. The only matter the person is concerned about is getting the loan and he will sign anything to get it. What is signing separately? Should it consist of leaving the building and coming back again? It is sometimes a very good idea if a husband and wife go out for a cup of coffee and come back in again. That could be called signing separately rather than doing it when they are all sitting down at a desk under pressure and wondering whether they are getting the loan. Can we define signing separately?

Mrs. O'Rourke

Signing separately means signing on a separate sheet of paper. Subparagraph (b) of amendment No. 158 states that the statement shall be signed separately at the lender's business premises. I will not be able to accept that part of the amendment and I will explain why in a moment. Amendment No. 3 is a very good amendment. On the question of signing at the lender's business premises, I am thinking of a person who is going to a licensed moneylender where there is no business premises of that moneylender or lending agency in a particular town. As Deputy Keogh said, they may have to travel 20 miles or more, even 50 or 60, which negates the whole purpose.

Mr. McCormack

That is a cooling off period.

Mrs. O'Rourke

We are dealing with circumstances in which a consumer wants to exercise his or her right to get the money or product immediately. He or she has to have that right. We cannot circumscribe a consumer who wants to purchase a product and tell them they cannot; we cannot fetter them to that extent. However, now we are imposing a journey on them which they might be unable to undertake for domestic, monetary or other reasons. I would be glad to accept subparagraph (3) (a) of Deputy Bruton's amendment but not subparagraph (3) (b).

Mr. Flood

I wanted to raise the issue of premises. As the Minister correctly pointed out, there is not always a suitable premises, within easy reach of a consumer who may want to complete a transaction. What the Minister said covers that issue. As she pointed out it may well be that a consumer has a need to complete a transaction quickly. For example, a cooker may break down. If the cooling off period was compulsory they might be stuck for three, five, ten days or whatever and it may not be possible always for them to wait that cooling off period which could cause them great inconvenience and hardship. I support the Minister in inserting the cooling off period but at the same time telling the consumer they have a right. With Deputy Richard Bruton's amendment we will endeavour to impress upon the consumer the seriousness of his or her personal decision to sign away his or her right to the cooling off period.

Mrs. O'Rourke

It is a knotty problem.

Ms Keogh

I agree with Deputy Flood and the Minister here. It is a question of striking a balance. It is important that people be aware of the cooling off period. I accept what the Minister said about that but we do come across people at our clinics who virtually have an instant need of white goods, cookers or whatever else——

Mr. McCormack

——to cook before they pay.

Ms Keogh

Exactly. In such instances I would be very concerned to protect consumers from illegal moneylenders. We are all aware of the difficulties into which people get with them. Deputy McCormack suggested a graduated cooling off period but that would not be feasible in every circumstance. We have probably adopted the right approach to this. I cannot foresee people who have no money availing of public transport to reach a premises. I do not consider that realistic. We are talking about protecting people on one level while simultaneously talking about people being able to cope with their domestic problems.

Mr. McCormack

Is there any provision on the limit of money for the cooling off period? When talking about the cooling off period. I had not in mind the repair of a cooker or something minor. I was thinking of major commitments people would be undertaking. Is there any provision in the Bill, or in this section, limiting the amount of money being loaned relevant to the cooling off period?

Mrs. O'Rourke

No.

Mr. McCormack

Then, I will have to go along with the amendment. In circumstances in which a person sought a loan of £50 for the repair of a cooker they would have to have a right to forego the cooling off period, but if a person tried to borrow £20,000 or £200,000 to buy a public house that would be a different matter altogether.

Mrs. O'Rourke

Buying a public house would not arise because that would be the purchase of a business. This is a Consumer Credit Bill.

Mr. McCormack

Yes, but if we are dealing with minor versus major commitments——

Mrs. O'Rourke

The Bill embraces minor and major commitments/credit agreements.

Mr. McCormack

If it deals with minimal loans a system would have to be devised to allow a borrower to sign off their right to a ten-day cooling off period. For example, a cooker would be well cooled off if one had to wait a ten day cooling off period before having it repaired——

Mr. R. Bruton

I am not wedded to the idea that we should have to have the statement signed separately at the lender's business premises. On the other hand, in some instances of hire purchase there is a lot of impulse buying, when I predict circumstances will arise in which people will be offered, as an attractive option, foregoing their ten days' cooling off period which would subject them to a certain amount of pressurised purchasing. An opportunity to reconsider the agreement overnight and decide the following day would be preferable. I suppose, at the end of the day, we cannot hold everyone's hand; people have to take responsibility themselves.

Therefore, I am happy to withdraw subparagraph 3 (b). Perhaps we should consider whether consumers might be alerted to the fact that, as Deputy McCormack suggested, they could withdraw, consider the matter overnight or whenever and return, that that be an option open to them. That might be the best of all worlds in that people would be told they have a perfect right to withdraw from the credit agreement rather than be bamboozled into signing it. The Minister has accepted our warning.

Mrs. O'Rourke

The point raised by Deputy Keogh was relevant. Suppose one had to go to a business premises to sign this separate form. That might be the delay that would put a person into an illegal moneylender's hands, who would arrive on the doorstep and say he will give the money of course, the ten day period is not mandatory.

Mr. McCormack

I know that.

Mrs. O'Rourke

One is allowed ten days but one does not have to wait ten days. If one has cooled off sufficiently in one, two or three days he may say he is happy with what he is getting. There is no obligation on the ten days period. Deputy McCormack wanted me to insert variations of the cooling off period.

Mr. McCormack

I would be happy with the separate signing of the form if that were done in the absence of the person lending the money.

Mrs. O'Rourke

We are accepting Deputy Bruton's amendment.

Chairman

To assist our consideration, may I say that in my capacity as a peace commissioner I am often asked to witness a signature. On that form I have to state where I actually made the signature, and the location in the county in which I witnessed it. For that reason, would it be possible to stipulate the location where the agreement was signed? There is precedent for that which happens regularly. As a peace commissioner, for example, I have to say I witnessed this signature at my home address in Cork on such and such a date. I do not know whether such legal requirement obtains. It might be possible to check this out. I do not want to influence the debate in any way.

Mrs. O'Rourke

The Chairman's interjection is valid. In the case cited the Chairman is witnessing a document in his capacity as a peace commissioner which requires his signature. In this instance the consumer is forgoing his or her cooling off period and we want to alert them to that fact.

Chairman

It refers to subparagraph 3 (b) of Deputy Bruton's amendment.

Mrs. O'Rourke

I am glad to accept Deputy Bruton's amendment on which there has been a good discussion here. As Deputy Keogh said, balance is what we need. In the light of how the Bill operates in its first year and the report of the Director of Consumer Affairs we might make a change or a regulation on it at that stage.

Mr. McCormack

We will probably have a different Minister then.

Mrs. O'Rourke

Deputy McCormack is full of foreboding and talk today about changes, moves and so on. Deputy Deasy also had a great time on it.

Mr. McCormack

It is the silly season.

Chairman

Deputy Bruton has indicated that he will delete (b) which, in effect, is an amendment to his amendment.

Amendment to amendment No. 50 agreed to.

Sitting suspended at 12.43 p.m. and resumed at 2 p.m.

Mrs. O'Rourke

I move amendment No. 159:

In page 34, subsection (3), line 4, after "loan" to insert "or credit availed of by means of a credit card".

The purpose of exempting purchases made by means of a credit card from the provisions of section 50 is in recognition of the different types of regime which apply to credit supply by way of credit card. It is understood that the normal practice in relation to consumers who are dissatisfied with credit card purchases is to provide a credit note cancelling the original transaction. The EU Commission spoke to us about this matter and pointed out the error of our ways. If one buys an item with a credit card, say, an item of clothing, it could be well worn in the ten days cooling off period, so this amendment is to exempt a purchase on credit card from being subject to the cooling off period requirements.

Mr. R. Bruton

On practical grounds it seems it is a reasonable amendment.

Mrs. O'Rourke

I envisage someone buying a lovely suit and wearing it for ten days, returning it and saying he or she did not like it, thus making use of the cooling off period.

Mr. Noonan (Limerick East)

We can do that already.

Mrs. O'Rourke

Bring it back?

Mr. Noonan (Limerick East)

One can cancel the transaction and get a credit.

Mrs. O'Rourke

The Deputy is our expert on the banks. I should ask the member of the committee how he got on. Did he get a further decrease in the bill since last week?

Chairman

It would be a positive result from our deliberations.

Amendment agreed to.

Section 50, as amended, agreed to.