I move amendment No. 259a:
In page 54, subsection (1), line 26, to delete "consumer" and substitute "borrower".
This is simply a textual amendment in keeping with the usage of the word "borrower" throughout Part IX.
SECTION 99.
Amendment agreed to.
I move amendment No. 260:
In page 54, subsection (2), line 43, to delete "to which this subsection applies" and substitute "in relation to a housing loan".
This section relates to APR and the amendment is both correctional and for clarification purposes. The word "subsection" as used is incorrect as the whole section applies to the calculation of APR. In order to rectify this and in the interest of simplicity, I propose to delete the words "to which this subsection applies" and substitute "in relation to a housing loan".
Amendment agreed to.
I move amendment No. 261:
In page 55, subsection (2) (b), lines 3 and 4, to delete "annual percentage rate" and substitute "APR".
The purpose of this amendment is similar to a number of other amendments taken earlier. It is to highlight the word "APR" rather than the use of the words "annual percentage rate". We had a conversation about that point and we are all none the wiser. Can anybody explain annual percentage rate?
I can.
Give it a shot. Is it precise?
We should stick to the amendments. The Minister should not provoke the Deputy.
We used to call it the internal rate of return.
Amendment agreed to.
Amendments Nos. 262 and 263 form a composite proposal. With the agreement of the committee we will take the amendments together. Is that agreed? Agreed.
I move amendment No. 262:
In page 55, subsection (2) (b), line 8, to delete "amount" and substitute "interest rate is fixed".
The purpose of these amendments is to ensure clarity of the method in which the calculation of the APR should be made in circumstances in which there is a period of interest during which the interest rate is fixed to ensure that the calculation shall only assume that the fixed rate will apply for the period or periods specified and, for the purposes of the calculation, that the rates, which will be applicable to the other periods in which the interest rate is not fixed, will be those which apply at the time of calculation to curbed variable rate lendings.
The current variable rates will be calculated as being fixed for the specified period to which the fixed rate does not apply. The purpose is transparency and to prevent the usage of the lower rate in advertisements. There was a great ruaille buaille a couple of years ago when a certain group advertised a lower rate and gullible people fell for it. The purpose of the amendments is to prevent a recurrence.
The amendments are eminently reasonable. If this was not in place, a person could advertise a 2 per cent interest for the first day and a 12 per cent rate thereafter.
However, a person could fall for the first day's rate.
That is correct. Clearly, the APR should use the current 12 per cent rate as the one for calculating the rest of the period after the first two days.
It is appropriate that the Minister should include this in the legislation as she drew attention to a case some years ago where people were grossly misled. A person is vulnerable in such a situation, I am glad this is included in the legislation and I applaud the Minister for doing so.
One can get paranoid when constantly dealing with a Bill. Jingles are played on radio which feature people with particular accents. Sometimes a very amusing jingle is broadcast but one wonders when advertising strays into an arena of taking advantage of gullible people, for example, in aspects of advertising financial products.
Amendment agreed to.
I move amendment No. 263:
In page 55, subsection (2) (b), lines 8 and 9, to delete "is variable".
Amendment agreed to.
I move amendment No. 264:
In page 55, between the lines 21 and 22, to insert the following subsection:
"(3) A mortgage lender shall comply with the requirements of this section in relation to the calculation of the APR in respect of a housing loan.".
This amendment raises the offence referred to in amendment No. 78 to section 12. Its effect is that a mortgage lender who does not comply with the requirements of this section in relation to the calculation of APR and how it is shown in respect of a housing loan may be charged with a summary offence. It will now be regarded as a serious breach of the law to disregard these provisions by misleading or misinforming the consumer of credit in relation to the APR of a credit agreement. This legislation requires the APR to be displayed more prominently than any other information. It will be regarded as a serious matter to disregard this.
It goes without saying that the APR should be calculated correctly.
Lenders have a specific responsibility in this area. I am glad we are making it clear, through the legislation, that heavy penalties will accrue if, through error or shoddy practice, they do not comply with the requirements of this section. I am delighted it is included because it sends a proper message. Lenders must look after their business affairs properly and professionally. Most of them do but it sends a signal to those who might have a mind to act otherwise that this legislation will not tolerate it.
Amendment agreed to.
Question proposed: "That section 99, as amended, stand part of the Bill."
I wish to refer to an issue I raised earlier regarding section 99 (1) (b). We are providing in this that charges payable by the borrower for non compliance with any of his commitments laid down in the credit agreement will not be included in the APR. I draw the Minister's attention to section 93, dealing with moneylenders, in which it was stated that a moneylending agreement shall be unenforceable against the consumer if it provides for any additional charge which may apply in the event of default. What is sauce for the goose is sauce for the gander. We are saying to mortgage lenders that they can have non compliance penalty clauses but we are saying to moneylenders that not only can they not have them but that the whole credit agreement would be unenforceable. I do not understand why we are applying different principles to different types of lenders. If the Government considers it correct that there should be no penalty clauses for default, apart from legal costs, why does it permit them to mortgage lenders?
The Deputy's point is that we are not saying it is unenforceable here and we are in the other case.
Indeed, the Minister is going further in expecting that they might occur here and saying in the other case that they are unenforceable if they do.
Part of that dichotomy which appears in the Bill from time to time and to which the Deputy referred, arises from the point that the directive as it originally appeared dealt with moneylending. We expanded the directive because consumer credit was involved, although for a small amount, but I could not see why the biggest consumer transaction in one's life — the purchase of a house — should not be included.
We are dealing with housing and mortgages etc., which are subject to extensive legislation and regulation from another Department. We conform with that as that Department is the prime purveyor of that legislation. That is my explanation in reply to the Deputy's remark about sauce for the goose being sauce for the gander.
It is not clear. Do mortgage lenders generally apply penalty clauses where a borrower defaults on their commitments? Is that a general practice? We are saying here that in calculating the APR they need not include these charges. Are they a common feature of housing loans and, if so, are they desirable?
I will have to come back to the Deputy on that.
We can come back to it on Report Stage, but it seems inconsistent. We are confirming the impression that moneylenders — even licensed ones — are big bad wolves who cannot be allowed to do anything——
Let us remember that the amount of money one might borrow from a moneylender is usually not enormous — it is normally for domestic use — whereas the amount of money borrowed for a mortgage through a building society would be much greater.
The principle at issue is whether they should have a right to set penalty charges but I have never seen a good argument for allowing it.
Never?
If we say that they should not be in moneylenders' contracts why should they be in building society contracts? Perhaps the Minister would look at it for Report Stage.
Subsection (1) (c) relates to charges for insurance on the life of the borrower. Some of these loans would only be issued contingent on these insurances — they are linked in some way. Why do we not include them as part of the cost of credit? Is it because they are a separate contract?
I suppose they are separate.
Question put and agreed to.