Select Committee on Enterprise and Economic Strategy debate -
Thursday, 28 Jul 1994

SECTION 54 (Resumed).

Mr. R. Bruton

I move amendment No. 170:

In page 35, between lines 37 and 38, to insert the following subsection:

"(4) In the case of a housing loan, separate notification shall be served on the spouse of the consumer.".

This amendment suggests that there should be a formal early warning system in consumer credit agreements. I am not totally hung up on the format set out in the amendment. After two payments have been defaulted on, a default notice should be issued informing the consumer of the position and where advice or assistance can be obtained. In discussion on an earlier amendment in the name of Deputy Rabbitte, we dealt with a code of conduct. The suggestion in this amendment is more specific. It is designed to prevent credit agreements getting out of hand without consumers becoming aware that there is cause for concern and that there are options open to them as to how they might overcome the difficulties which appear to be emerging. It may be argued that it would be too inflexible to apply this provision to every consumer credit agreement but there may be an alternative to the one I proposed which may be invoked. I have not considered what reduced form we could invoke. Where there are substantial credit arrangements which involve large sums of money and substantial risks to consumers, there should be early warning systems to point consumers in the direction of the assistance and advice which they can obtain. I would like to know whether the Minister thinks an amendment like this, or a variant of it, would be appropriate.

Mr. Rabbitte

I support the spirit of this amendment. As Deputy Bruton said, I adverted to it earlier in a different context. The Minister is aware that many of the submissions we received from organisations working at the lower end of the consumer market have raised the point of an early warning system or code of practice which would not only warn consumers of the implications but also give them access to remedies, guidance or advice on how to deal with indebtedness they are accumulating and the consequences. We all have experience of people getting deeper and deeper into debt and involving themselves in the ostrich syndrome of trying to ignore this until it becomes so serious that they are threatened with eviction, arraigned before the courts, heavily fined, imprisoned or whatever. In many cases such remedies are ineffectual. There is very little point in some cases in arraigning certain consumers before the courts and fining them heavily because they are unable to pay it and it only makes the original situation worse. The organisations concerned about this seem to agree that there ought to be a code of practice which would require the creditor to warn consumers of the accumulating problems and to, perhaps, refer them to the scheme being piloted by the Department of Social Welfare of money advice agencies where expertise is available on money management and how they might get out of the hole they are in.

I support the thrust of the amendment and I would like to hear the Minister's views on it. I do not know the best way to frame it in the legislation. It is an important area because the traditional resort to the legal process is meaningless in a great many of these cases. Simply imposing heavy fines or threatening imprisonment does not help.

Mrs. O'Rourke

As other speakers have said, the thrust of the amendment is on the right lines. The difficulty is finding a way to put it into legislation without the necessity of providing precise details on every credit arrangement. Deputy Bruton's amendment No. 43, which we accepted earlier, states:

In page 14, subsection (1), between lines 4 and 5, to insert the following:

"(f) to publish Codes of Practice setting out conduct regarding credit agreements, in order to secure transparency and fairness in relation to the terms of credit agreements and the conduct of agents dealing with the consumer.".

The committee will remember that at that time we spoke, more or less, about what we are debating now. I wonder if we could incorporate the thrust of this amendment within the codes of practice as adopted under amendment No. 43. It would be difficult to put it into legislation precisely as it is.

Mr. R. Bruton

I have no objection to that approach. Perhaps we could modify the amendment dealing with the codes of practice to make it clear that one of the codes which we would like to see would be in the area of early warning in the event of defaults occuring and access to advice and assistance. In principle, that would be acceptable. It would allow the Director of Consumer Affairs to mix and match——

Mrs. O'Rourke

As he saw fit according to different types of credit agreement?

Mr. R. Bruton

That is right. It would be instead of imposing something which might prove to be inflexible in certain circumstances and which we do not foresee at present. The only issue is that, at the end of the day, these codes of practice will not have any binding effect. We will be depending on the Director's advice becoming accepted by credit institutions over time. However, he does at least have the ability to challenge the terms of all lending institutions in the courts so we may be getting there by degrees. Subject to considering the wording of amendment No. 43 which dealt with the codes of practice, I will accept the Minister's view.

Amendment, by leave, withdrawn.

Mr. R. Bruton

I move amendment No. 170a:

In page 35, between lines 37 and 38, to insert the following subsection:

"(4) In the case of a housing loan, separate notification shall be served on the spouse of the consumer.".

This amendment is simply to provide that in respect of a housing loan both spouses would be informed of the impending action planned by the creditor. Mortgages are now predominantly in joint names so that automatically both spouses would be informed. However, there are still mortgages which are not in joint names and it is important that both spouses would be informed of any problems arising in relation to a mortgage.

It is important to bear in mind that the Family Home Protection Act does not protect a spouse from losing their home in the event of loans going astray, whatever the form of loan secured on a house. For example, if a spouse took out a business loan which was secured on their house it could jeopardise both spouses' interest.

Most lending institutions look for the spouse's permission, under the Family Home Protection Act, when a loan is issued. Therefore, we should correspondingly expect the lending institutions to inform the spouse of adverse developments in the loan and to allow both partners to have a role in deciding what should be done within the 21 days to try to remedy the situation.

Mr. Rabbitte

I support this amendment. We have all had occasion during the course of this Bill to draw heavily on our constituency experience. I had a case very recently where the husband having secured a loan against the house and the business going badly, went into very serious depression and, ultimately, illness. The wife genuinely had no knowledge that that was the final act in a number of perhaps reckless acts which he made in good faith to protect the business. She only became aware of it when he was beyond caring or able to take any action.

There are circumstances where if the creditor was required to notify the spouse of the situation, the spouse could intervene to take some action which would at least protect the home. I do not think it is a very onerous imposition on building societies or banks to require them to so advise the consumer in those circumstances,

Mr. Crawford

I also support this amendment. It is very important that the spouse would get the information in time. I was involved through farm organisations in dealing with many financial problems in the early 1980s and from that experience I know this provision could be of major benefit, not only to the family concerned but also to the lending institution, if both partners were informed. As Deputy Bruton said, in most recent mortgages both partners would be involved. However, that was not always the case. It would be useful if this amendment was accepted.

Mrs. O'Rourke

I also think this is a very reasonable and worthy amendment. However, I want to remind Members that section 51 provides that Part V does not apply to housing loans. I ask Deputy Bruton to resubmit the amendment when we come to Part IX which is, in effect, the housing loans section of the Bill. The amendment would be appropriate to that Part but I am precluded from including it here because this section does not deal with housing loans.

Mr. R. Bruton

Which section deals with default?

Mrs. O'Rourke

Section 51 provides that Part V does not apply to housing loans.

Mr. R. Bruton

Are similar provisions of ten and 21 days allowed for notification in Part IX?

Mrs. O'Rourke

There are several sections in which that could be resubmitted for insertion by the Deputy.

Mr. R. Bruton

Section 51 is described as dealing with limitation on creditors' right of enforcement. Is a similar description applied to housing loans?

Mrs. O'Rourke

No.

Mr. R. Bruton

Even though we are making provision for similar 21 day notices?

Mrs. O'Rourke

The Deputy seems to want the spouse to have any information which might jeopardise the ownership of the home.

Mr. R. Bruton

I am also raising the wider issue of why we have excluded housing loans from this type of provision. No loan is as important as a housing loan when considering matters such as early warnings, default notices, and periods to take action.

Mrs. O'Rourke

I suggest we reconsider this matter on Part IX of the Bill.

Mr. R. Bruton

I suggest we may have been remiss in deciding to exclude housing loans from this and similar provisions.

Mrs. O'Rourke

That is what has been done up to now.

Mr. R. Bruton

Perhaps we can look at this again on Report Stage.

Mr. M. McDowell

The definition of "housing loan" does not apply to every mortgage. It is remarkable that a person can lose a second home or a business premises without his spouse being notified.

Mr. R. Bruton

Rather than delay the meeting now I will withdraw the amendment at this point, pending the possibility of amending either section 51 or Part IX at a later stage.

Amendment, by leave, withdrawn.

Section 54, as amended, agreed to.