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Select Committee on Enterprise and Economic Strategy debate -
Wednesday, 22 Mar 1995

SECTION 119.

I move amendment No. 293:

In page 62, subsection (3), line 23, after "£10" to insert "or such other amount (if any) as may stand specified in regulations".

The purpose of this amendment is self-explanatory and is similar to a number of amendments we adopted earlier in that it provides that fees may be changed when such a variation in fees is considered desirable or necessary.

We did that earlier.

Amendment agreed to.

I move amendment No. 294:

In page 62, subsection (4), lines 24 and 25, to delete "decides to investigate a request under subsection (3)" and substitute "having considered a request under subsection (3) decides to investigate the matter".

This is purely a textual amendment. It is a better wording than what was there previously.

Amendment agreed to.
Section, as amended, agreed to.
NEW SECTION.

I move amendment No. 295:

In page 62, before section 120, but in Part X, to insert the following new section:

120.—Where a consumer negotiates with a seller in respect of the acquisition of goods and the seller, being a credit intermediary, offers, or is requested by the consumer, to arrange a financial accommodation for the consumer in respect of the acquisition of the goods, the seller shall, before any agreement, in relation to the goods under negotiation resulting from the offer or request, is entered into, disclose in writing to the consumer—

(a) the nature of the financial accommodation,

(b) the amount, number and frequency of payments and the total amount that the consumer would have to pay under an agreement, and, where applicable, the APR,

(c) the name of any undertaking for which the seller acts as a credit intermediary, and

(d) that the seller receives a commission, payment or consideration of any kind from an undertaking for arranging any such financial accommodation between the consumer and the undertaking.".

The aim of this amendment is transparency. It provides that a seller acting as a credit intermediary informs the consumer of the exact nature of the credit on offer, whether it is a cash loan, a hire purchase agreement or a lease. The seller must also, before any agreement is entered into, disclose the repayment details to the consumer. While the Bill already provides that a credit agreement must contain these details, this new section provides that the consumer be made aware of them at a much earlier stage. A seller acting as a credit intermediary must also advise consumers on whose behalf they are offering credit, whether it be a bank, building society, finance house or whatever. The seller must also disclose the fact that he is paid a commission for arranging the credit. This is to ensure that the consumer is aware of any interest the seller may have in organising the credit. To some extent we may have had this debate already.

It is a follow on.

I do not follow the technical nuances between a consumer hire purchase agreement and a credit agreement. I wish to comment on situations where consumers enter hire purchase agreements or borrow through agencies and the specifics of the relationship is very vague or varies in the course of the repayment period. Every politician is familiar with consumers who have borrowed either through hire purchase arrangements or financiers. They have borrowed money, the basis for which seems to be like a foundation of shifting sand. What has been borrowed, the repayment mechanism and the interest repayments seem to be very vague. I hope this element of the Bill will sharpen the protection available to consumers so that if they enter into hire purchase agreements, such agreements will be very specific about how much will be repaid, the basis on which the repayments will be made and their interest element.

This is a particular problem in working class communities, where people have limited incomes and often buy items such as household goods, electrical goods, washing machines and so on through the hire purchase system. Many people in the market are plying this trade of easy access to funding but details of repayments seem to be incredibly vague and loose. This has caused fundamental difficulties for many families, who, after entering into agreements, discover retrospectively that the agreement they entered into is not what they assumed they were entering into in the first instance. This issue is of particular importance for a Bill for consumer protection.

I accept the thrust of the amendment. It is possible for an organisation like the ESB to sell fridges and expensive items without any disclosure of APR, simply because it says this is the cash price and it is paid on an interest free basis in instalments. As a way round the provisions of this Bill shopkeepers will refer people who want credit to a company who will sell them the goods on interest free credit terms. In those circumstances there will be no APR. People will be referred to a separate body who will provide them with, effectively, hire purchase arrangements. Such businesses will be able to avoid APR by being separate entities which sell goods on interest free loans. Such loans are spreading. In English magazines interest free loans for cars are advertised — this is to avoid APR. It is very easy to confuse the consumer and circumvent this legislation by not charging any interest but 25 monthly instalments of a fixed amount and not offering any difference for cash price. This is what the ESB is doing and it will be the coming trend because it is the obvious way round all the regulations this Bill is putting in place.

The thrust of the new section is in line with earlier disclosure and giving information at an early stage. That issue was raised on Second Stage. All these types of advertising seek to cajole and seduce. They are never in the interests of consumers. If they were, they would include plain, straightforward facts in easy to understand language. We are all taken in by seductive advertising and jingles but the bottom line is that the consumer is not getting a better bargain. In many cases he or she is getting a worse financial arrangement. I agree with the thrust of this new section.

I assure Deputy Byrne that this will have the effect of sharpening up the protection of the consumer. The phenomenon of shifting sands is known to every Member of the House. It is difficult to see behind some of the products on display and some of the advertisements that the consumer is subjected to, and to understand entirely what is intended.

That is the point.

Over the weekend, a friend of mine made a submission to me on the need to change the definition of APR which is quite a fantastic and complex issue. The Minister at the time, Deputy O'Rourke, confessed frankly in the House that she did not understand it. I do not know if any Member understands the mathematical calculation on page 81 of the Bill.

I refused to even try.

I recommend that Deputy Eric Byrne, who is new to the committee, might apply his mind to it when we are dealing with the other sections.

Do we get calculators with this?

The Deputy can photocopy this for his constituents in Crumlin and pass it around. He should tell them that it is the APR applying to washing machines down the road in Crumlin village, and they will be no wiser at the end of it. I do not know whether it is possible to make it more intelligible and understandable to the consumer but the thrust of this section, which is accepted by everybody, is to try to do that. I do not know whether the phenomenon which Deputy McDowell trails is likely to be the one that will be put in place to circumvent the terms of the Bill. I know that the point raised by Deputy McDowell about the ESB is one that is particularly close to the heart of his party, and old quasi-Statists like yourself, Chairman, and myself tended to take a different view in the past.

But the Minister of State is respectable now.

There may well be a competition element to this and we will see how it works out. I thank the Members of the Committee for their support of this amendment.

Amendment agreed to.

Amendment No. 296 is in the name of Deputy Molloy, who is substituted for by Deputy Michael McDowell. Amendments Nos. 296 and 298 are related and both may be discussed together by agreement.

NEW SECTION.

I move amendment No. 296:

In page 62, before section 120, but in Part X, to insert the following new section:

"120.—Nothing in this Act shall operate:

(a) to impose an obligation on a provider of credit to make a loan or otherwise to advance credit to any person, or

(b) to impose criminal liability on a provider of credit

in either case in circumstances in which the making of such loan or the advancing of such credit or the collecting of repayments in respect of such loan or such credit would be likely to place at physical risk any such provider of credit or the agent or employee of such provider of credit.".

At the Select Committee meeting on 11 May 1994 a new section 3 was agreed which reads as follows:

It shall be an offence to discriminate on grounds of sex, sexual orientation, belief, social status or area of residence in the offering, negotiating or granting of a credit agreement.

Was that Deputy Quill's amendment?

No, I think it was Deputy Bruton's. While I agree that it would be a most obnoxious policy for a city centre store to say, "We don't lend to people from Dublin postal area X or Y", there is a difference and a problem here. This is because in some areas it is impossible for lenders who are engaging in collected credit — this is the important point — to retain collectors who can collect. Some areas are very difficult to collect in and, very reluctantly, collected credit lenders have to say no.

No to what?

Because there is a threat to the collectors and you cannot send them in.

They won't give the money?

No. They will give the money but they may end up being mugged. You cannot send collectors into some areas. The first section is designed to protect a lender who cannot lend by reference to the safety or physical risk to his collector or employee. Such a person can say, "I do not want to prosecute for not giving credit in a particular area because my collectors would be mugged and I cannot get them to go and collect it."

Lest anyone thinks there is some hidden agenda in this, there is not. The reality is that most lenders want to maximise their lending and do not want to declare any area, for any purpose, off limits. There is no commercial reason or other motive why anybody would want to do that but you are confronted with cases where you cannot provide collected credit services. I am talking about situations where you have to send an employee to get the money. If you are put in the position that it is an offence — which Deputy Bruton's amendment makes it — not to give credit in certain areas on geographical criteria, then if you are talking about collected credit you are actually telling a collected credit lender that they must lend in an area where in fact they cannot get collectors to collect.

It would help if we could hear Deputy Bruton — as he was then, but he is now Deputy Rabbitte's boss — on the amendment which he put forward and which I accepted. Would that help the debate?

It says that, "It shall be an offence to discriminate on grounds of sex, sexual orientation [it is a very politically correct amendment], belief, social status or area of residence in the offering, negotiating or granting of a credit agreement." That is fine except when somebody has to pay a person to collect in certain areas and cannot get an employee to do it without risking the collector's physical safety.

I apologise for my lack of continuity but I was not involved when this Bill was debated under the previous Government. I have a problem with Deputy Molloy's amendment because we would be heading down a very dangerous road if, as legislators, we permitted this concept or gave a legislative basis to it by collectively classifying areas of this or other cities as no-go areas.

There are areas where crime is more prevalent and muggers exist in a higher preponderance than others but they are a tiny minority of a community. By accepting the concept of a physical risk to collectors we would effectively be blacklisting a whole community. That would be bad politics and bad legislation which would be open to challenge at other levels. I have strong reservations about anybody accepting the concept of a place where collectors are at physical risk because of the danger of classifying the whole community as muggers when they are basically law abiding people amongst whom a tiny percentage is engaging in illegal activities.

I am not in agreement with this amendment. I have vivid memories of accepting Deputy Bruton's amendment and being clear on what I was accepting. If this amendment is accepted it is, in a way, a direct contrast to an earlier amendment in which we sought to make it clear to a person who was being refused a loan why he or she was being refused and for what reason. We sought to make the granting of loans open and transparent so that nothing would stand in the way of a person being eligible to be considered for a loan. Although it sounds odd, if we include this we are actually creating an elitism in the collected credit area. We are saying, do not go into X terrace, and people would say even the money-lenders do not go into that terrace, they are not allowed in there and the law says they do not have to go in. It is anathema to what we set out to do and I certainly will not be agreeing to it.

Perhaps I could read my note which refers to Deputy Molloy's amendments. It is brief. The amendments were grouped together although Deputy McDowell only argued the first one.

There is nothing in this legislation which imposes any obligation on a provider of credit to make a loan or to advance credit. These are commercial decisions, responsibility for which resides with the provider of the credit. Providers of consumer credit are the best arbiters of the credit worthiness of their clients. The Bill does not attempt to interfere with the decisions to be made by providers of credit as to whether they should advance a loan or otherwise. Thus, I cannot accept the Deputy's amendments.

That, I admit, is a brief dismissal of an attempt by Deputy McDowell to address a phenomenon which, indisputably and regrettably, exists. I agree with Deputy O'Rourke. Deputy Byrne might not be familiar with the Bill but his remarks in this regard are thought provoking. There would be serious implications if we were to acknowledge in legislation the existence of "no-go" areas in this or any other city. There are areas of this and other cities where the incidence of criminal behaviour is totally disproportionate to that which afflicts other communities and people are striving to live and rear their families there.

However, as Deputy Byrne said, the offenders are a tiny proportion of that community and we would effectively blacklist the entire community if we gave expression to it in legislation. A small number of thugs certainly can make life hell — and are making life hell — for a large number of law abiding residents in some areas of Dublin, the city I know best. However, to acknowledge that they can set up their own policing in those areas or determine who — moneylenders or anybody else — may come in to canvass from door to door for any organisation or cause would be regrettable.

The fears behind Deputy McDowell's amendment are, I hope, unnecessary. I cannot see the legal consequences deriving from this Bill which would pose difficulties for moneylenders or others in terms of imposing a new duty on them to do things against their better commercial judgment. No such new duty is imposed by this legislation. This, as much of the moneylending section of the Bill inevitably does, makes an incursion into the area of criminal law and crime in society. I do not wish to reopen that argument. We cannot legislate for "no-go" areas in parts of this jurisdiction purely because of the extent of petty crime or thuggery.

I am happy to withdraw the amendment on the express understanding that this Bill imposes no obligation on lenders to lend in contravention of their better commercial judgment. If that is everybody's understanding of what the Bill means, so be it. However, the amendment was not put down in the interests of the "fat cat" lenders — the reverse is true.

The people who act as collectors are generally unionised. They are put at some degree of risk because of the nature of their work. Just as bus conductors and bus drivers must be protected sometimes by CIE discontinuing services to certain areas in some circumstances — a general obligation on bus transport companies to provide services would have to be subject to the general stricture that they cannot be forced to provide a service in circumstances where there is a risk of violence to union members who drive their buses — the same applies to collected credit. If it is generally understood that there is no obligation to lend in a manner that contravenes better commercial judgment, I am content to leave it at that. The collected credit industry was worried that a legal duty to lend was being imposed on it by the non-discrimination clauses in the Bill which would have the effect of forcing it, despite reservations as to whether a collection service could reasonably be provided, to make loans. If it is understood that is not the case, I accept it is not necessary to change the Bill to specifically state as much.

Deputy Richard Bruton's amendment last May specified status, sex, creed and address or location. Will the Minister clarify if that remains in the Bill?

Absolutely.

Deputy McDowell has withdrawn the amendment on the grounds that the Minister said there is no obligation and that it will be left to the better commercial judgment of the lenders. Is Deputy McDowell suggesting that the Bill allows the lender to build in to the lending process punitive commercial criteria for areas where he does not want the collectors to go?

I am not saying that. The Minister is saying that nothing in this Bill forces anybody to lend where it would be commercially nonsensical to do so. There is no possible motivation for collected credit lenders to declare anywhere off limits because it is exactly against their interests to do so. However, they want to be assured that if in particular circumstances they have a bona fide reason based on commercial judgment, for example, that they cannot get somebody to collect the money, that they will not be prosecuted. I accept the Minister's assurance that the intention of the Bill is not to impose an obligation on them to provide a service which they cannot commercially provide. There is a legal obligation on employers not to expose their employees to unnecessary risks.

The phrase "that they cannot commercially provide" could apply in a posh area.

I accept that. It could apply anywhere. A gang might be operating in deepest Foxrock hitting collected credit if it was being supplied there. It is no reflection on the area or the people who live in the area. It relates to the risk to the credit collector. It might well be that collected credit people were being set upon nowhere near the locations from which they were collecting.

Does the Minister wish to add anything to that?

I do not think so. We have conjured up many images during the course of this debate but the one of moneylenders walking down the leafy streets of Foxrock threatens civilisation as we know it, and I hope that it will not happen.

There is poverty in many areas.

Amendment No. 296, by leave, withdrawn.
NEW SECTION.

I move amendment No. 297:

In page 62, before section 120, but in Part X, to insert the following new section:

"120.—A breach of any requirement made (otherwise than by any court) by or under this Act shall incur no civil or criminal sanction as being such a breach, except to the extent (if any) expressly provided by or under this Act.".

This section reflects a section which exists in the corresponding English statute, in section 170 of the UK Consumer Credit Act. It merely states that unless the Act specifically states that something gives rise to a civil or criminal sanction, it does not do so. In other words, there are no implied criminal offences in the Act, there has to be express provision for them.

In the case of the UK Act, which is a similarly lengthy Act, parts of which are mirrored in this Bill and parts of which are not, it was thought by its draftsman that there was considerable merit in providing that, "a breach of any requirement made (otherwise than by a court) [that is to protect the rights of the courts to direct people to do things] by or under this Act shall incur no civil or criminal sanction as being such a breach, except to the extent (if any) expressly provided by or under this Act". In other words, one does not commit an offence unless the Act says that it is an offence, and one does not become civilly liable to a borrower unless, for example, the Act says that one will be civilly liable to have the loan forfeited or declared uncollectible.

This provision was put in the corresponding UK legislation to make it clear that people providing credit know, by reading the Act, whether this is a criminal offence and that they are not going to be sued for breach of statutory duty by borrowers. Under the Act, the Director of Consumer Affairs and the courts have powers to declare loans unlawful or whatever, but that is it. We are not trying to bring in a pack of rights which are not expressly provided for in the Act, not so much a pack of rights but a series of potential court cases in which lenders are sued for civil wrongs for breaches of this or that by borrowers or consumers.

But, it creates new torts.

Yes. It is present in the UK Act and is not some invention of mine.

I have difficulty in understanding the need for and purpose of this amendment. This is also the view of the Attorney General's office. In the circumstances, I am not in a position to accept it.

Will the Minister arrange for his office — if necessary, to get advice from the Attorney General — to investigate the function of the equivalent section in the UK Act? If its merit is seen to exist in the light of such an investigation, perhaps we could revisit the matter on Report Stage.

I am very happy to do that. We only received the amendment last night and, in fairness to everybody concerned, it seemed somewhat difficult to envisage the circumstances which would require us to make express provision to ensure that lenders could not be sued by borrowers, unless expressly stated in the Act. I find it somewhat difficult to see in the Bill where there is exposure to new civil wrongs.

That is the basic problem.

I will consider the matter.

This amendment encompasses parts of amendments Nos. 296 and 298. I accept that the collected credit representatives, whom I met on many occasions during the course of the debate on this Bill, would seek to protect their rights in any legislation such as this. However, it was always meant as a consumer credit Bill. I do not know why that provision is in the UK Act but what is being put forward in amendment No. 297 is a convoluted way of getting around the discussion which we had on amendments Nos. 296 and 298. For that reason, I would welcome an elucidation of it from the Minister. However, my instincts tell me that I should not agree to it.

Amendment No. 297, by leave, withdrawn.
Amendment No. 298 not moved.
NEW SECTION.

I move amendment No. 299:

In page 62, before section 120, but in Part X, to insert the following new section:

"PART XI

OBLIGATION ON CREDIT INSTITUTIONS TO NOTIFY DIRECTOR OF ALL CUSTOMER CHARGES

120.—(1) Each credit institution shall, within three months, notify the Director of—

(a) all charges imposed by it in relation to the provision of any service to a customer or to a group of customers, and

(b) any term or condition upon or subject to which such service is provided.

(2) A credit institution shall notify the Director of every proposal—

(a) to change any charge, term or condition which has been previously notified to the Director under subsection (1), or

(b) to impose any charge, term or condition, applying to the provision of a service to a customer or to a group of customers, which has not been previously notified to the Director under subsection (1).

(3) Every notification under subsection (2) shall be accompanied by—

(a) a fee of £25,000, or such other amount as may stand specified for the time being in regulations, in respect of any proposal to

(i) impose or increase any charge, or

(ii) change any term or condition which in the opinion of the Director is detrimental to a customer or a group of customers,

(b) a statement of the commercial justification for the proposal including a detailed statement of costs, and

(c) details of the estimated amount of additional revenue accruing from the proposed charges.

(4) The Director may direct a credit institution—

(a) to refrain from imposing or changing a charge, term or condition, applying to the provision of a service to a customer or to a group of customers, without the prior approval of the Director, and

(b) to publish, in such manner as may be specified by the Director from time to time, information on any charge, term or condition applying to the provision of a service to a customer or to a group of customers.

(5) A direction under this section may be expressed to apply—

(a) to every credit institution or to credit institutions carrying on a specified type of banking or financial business,

(b) to all services provided to a customer or to a group of customers by Xedit institutions or to specified services or to services of a specified kind, or

(c) to a specified time or times or during a specified period or periods,

and the direction shall—

(i) (I) be communicated to every credit institution concerned, and

(II) where not communicated in writing, be confirmed in writing to every such credit institution concerned as soon as possible thereafter, and

(ii) have effect in accordance with its terms.

(6) The Director shall, in exercising his powers under this section, have regard to—

(a) the promotion of fair competition between

(i) credit institutions, and

(ii) credit institutions carrying on a particular type of banking or financial business,

(b) a credit institution passing any costs on to its customers or a group of its customers in proposing to impose or change any charge, term or condition applying to the provision of a service to a customer or a group of customers, and

(c) the effect on customers or a group of customers of any proposal to impose or change any charge, term or condition applying to the provision of such service.

(7) The Director may amend or revoke a subsisting direction under this section and may amend or revoke a subsisting direction which has been amended.

(8) The Director may exempt a credit institution from the obligation to notify the Director under this section in respect of—

(a) any charge which has been individually negotiated bona fidewith the credit institution by a customer, or by or on behalf of a group of customers, of the credit institution, or

(b) a class of term or condition applying to a service provided by the credit institution, if the Director is of the opinion that it is not necessary for it to be so notified in order to decide whether or not to issue a direction under subsection (3) in respect of the service.

(9) In this section, ‘charge' and ‘term or condition' do not include any rate of interest.".

The amendment is based, to a large extent, on the old section 28 of the Central Bank Act, 1989. Amendment No. 299 transfers responsibility for all transaction charges by credit institutions from the Central Bank to the Director of Consumer Affairs. In addition to charges by banks, the Director's remit will also extend to charges levied by building societies and other credit institutions. The Central Bank Act, 1989, applies to transaction charges levied by banks only.

The issue of transaction charges has been a contentious one for a considerable time. Increases in transaction charges or the introduction of new ones tend to give rise to a surge of both consumer and business anger at the uncontrolled proliferation of such charges and their apparent lack of transparency. There is also a perception that the examination by the Central Bank of proposals to increase charges is not overly rigorous.

In addition to the repeal of section 28 of the Central Bank Act, 1989, as proposed in amendment No. 303, our further addition to the proposed text provides for the levying of a fee of £25,000 for each application to increase or introduce a new charge. Such a fee will cover the additional associated costs to the Director of Consumer Affairs of investigating all future proposed increases in charges, as well as discouraging too frequent or frivolous applications.

The amendment tabled by Deputy O'Rourke seems to prohibit certain credit institutions from passing the cost of this fee on to their customers. Subsection 6 (b) of my amendment provides that the Director when exercising his powers should have regard to credit institutions passing any costs on to customers. Thus the Deputy's concern is already taken into account.

It is not.

The application and adjudication procedures proposed in relation to transaction charges shall be more rigorous and far reaching than those pursued until now. For example, the Director will have to take account of the justification advanced and weigh it against the impact new or increased charges will have on various categories of customer.

I intend to table an amendment on Report Stage extending restrictions on the disclosure of information provisions of section 8 of the Bill as proposed by amendment No. 55 to cover the sensitive banking information which will become available to the Director. Thus the Director will have the same duty of confidentiality as does the Central Bank at present under section 16 of the Central Bank Act, 1989. This duty of confidentiality will not however prevent the Director from disclosing the justification and reasons for any increases in transactions that he may allow.

Amendment No. 310 to the Long Title of the Bill is to reflect the monitoring role being given to the Director in relation to charges by credit institutions and the repeal of section 28 of the Central Bank Act, 1989, as provided for in amendment No. 303. The purpose of the latter amendment is to repeal two sections of that Act which have now been superseded in new sections of this Bill. Section 28 of the Central Bank Act, 1989 gave the Governor responsibility for bank transaction charges. Section 136 of that Act was an amendment to the Moneylenders Acts, which are being repealed in this Act as indicated in the Second Schedule.

I move the following amendment to amendment No. 299:

In subsection (3) (a), after "customers," to insert the following:

"Provided that such fee is to be borne by the credit institution and not transferred in any fashion to the customer,".

The fee mentioned is the fee of £25,000. When we started this Bill this issue almost led to the end of discussion on it. I was preparing this section and four months were spent speaking to the Minister of Finance and the Taoiseach of the day, before I was given permission for it. I cannot disclose the Government decision for reasons of Cabinet confidentiality, but the then Minister for Enterprise and Employment received the permission of the Cabinet to transfer the charges from the Central Bank — which received them under the Central Bank Act, 1989 — to the Director of Consumer Affairs. It was my ambition for months to achieve that, which I did through constant harrying. I am glad I did and that the Minister, Deputy Rabbitte, has taken up the cause I espoused with such vigour.

I did not accept the fee of £25,000 because I knew what would happen. The Minister's amendment is not explicit enough. Banks, credit institutions and insurance companies will in their usual fashion incorporate that fee in another way and consumers will pay for it. When the officials mentioned the fee of £25,000 I rejected it. This was while I was still strongly pursuing the transfer of all bank and insurance charges to the Director of Consumer Affairs; we were all agreed on that.

It may sound fine for the Minister to pin his colours to the mast and say he will massively penalise the banks and charge them this fee, although in the recent budget he was their dear friend. Undoubtedly the Minister and I and every other consumer in this country will pay this £25,000 by some circuitous route. The Minister has made a grievous mistake.

I was given permission to transfer this to the Director of Consumer Affairs. There should be a fee but if it is that size banks and insurance companies will charge extra money per cheque or to see the bank manager. They will have to ask the Director for permission to increase their charges but that £25,000 will be borne in hidden ways by every consumer of credit products.

The Minister has made the wrong decision. On the surface it may be a populist move to get the banks to pay £25,000 and he may think he is a good Minister in so doing, but meanwhile the banks got away with murder in the recent budget. I ask him to consider my amendment, which is much more explicit than his. My reading of his amendment inspired me to table mine. It provides that "such fee is to be borne by the credit institution and not transferred in any fashion". The Director, Mr. Willie Fagan, will be able to use that.

How does the Deputy propose we do that?

I am putting down the amendment but the Minister is in charge. I ask him to see that does not happen. He was wrong to accept the daft amendment put to him.

The last time I had the opportunity to speak on bank charges was during a debate handled by the current Leader of Fianna Fáil, Deputy Ahern, in his role as Minister for Labour. The debate dealt with legislation to oblige employees to accept payment by cheque. The terms of the Truck Acts were being abolished. I argued strongly on behalf of workers that the banks were so notorious in applying charges — as those of us who have bank accounts know — that the real take home pay of workers would be adversely affected.

Matters have become progressively worse. I wanted to show one of my more recent bank statements to indicate the additional charges that have come in since that issue was debated. There seems to be no power over the methods banks use in imposing charges. They behave in an outrageous and apparently unregulated way. It is interesting the Minister said the Central Bank, which is supposed to control their behaviour, seems to have acted in such a neutered way as to be useless in protecting consumers.

This is an attempt to discipline the banks by making them more thoughtful in applying additional charges or increases on consumers. I hope the charge does not remain £25,000 and will rise with inflation. It is a step in the right direction. There is an obligation on us as legislators to take on the might of the banks in the interest of consumers, who are being trodden upon by banking institutions. I compliment the Minister for suggesting that provision. I agree Deputy O'Rourke wants to make it foolproof in the interest of the consumer but I do not know whether her argument holds water. The logical extension of her argument is that it is wrong to tax employers because——

No, I am saying charge for it but make sure we do not pay for it.

There is an argument that we should not levy any more charges or taxes against employers because they will automatically be transferred to the consumer. If that argument was carried to its logical conclusion, one would not take money from anybody who had to give it back to the State. The Minister should hold firm on this as £25,000 is a pittance to the major banks.

The Deputy and everybody else will be paying it.

A banking institution paying £25,000 is a pittance in the context of its overall administration costs as against its profits. It is a very small penalty, so small in fact that it is difficult to deem it a penalty. It will mean much work for Mr. Fagan as he will be asked to intercede on many occasions. I presume he has many overheads when investigating requests for increases and I would like to see the money going direct to his coffers. He could use it more productively through monitoring and acting as a consumer watchdog against the financial institutions, particularly the big banks.

I am strongly opposed to this amendment, it is badly drafted and badly thought out. It is showmanship of the worst kind and, in the last analysis, does not stand up to scrutiny. If Deputy O'Rourke's amendment was accepted I would be sympathetic but, unfortunately, she has challenged the Minister to contradict her underlying assumption that the cost of this procedure will be paid for by banks' customers. Nobody else can pay it. No group of people, apart from bank customers, gives money to banks and, therefore, bank customers will be required to pay £25,000 to the Director of Consumer Affairs every time there is a change in banking charges. That is the reality.

The sum of £25,000 is being sought from the banks because the Government is not willing to fund its own watchdog. That is the most important thing. The Government is not willing to give resources to the Director of Consumer Affairs to investigate the banks and to decide whether something is right or wrong. It is requiring the banks to pay for investigations into their own proposals to change charges. That is the second matter which is wrong in principle, especially considering the ideological origins of the Minister of State's. The idea that people should pay for an investigation into their own affairs is obnoxious. It is demeaning that the State is not willing to fund an officer of the State and provide him with sufficient resources to carry out his duties without carrying the begging bowl to the institutions he is supposed to police.

It is clearly stupid — I use that phrase advisedly — to provide that £25,000 should be given to the Director of Consumer Affairs to investigate any change in a bank's terms and conditions even if it is justifiable. Believe it or not, there are times when a change in a bank's charges is justifiable. If 12 people looking at all facts would, within ten minutes, come to the conclusion that the request to change was reasonable it is absurd that a bank must, nonetheless, pay £25,000 to the Director of Consumer Affairs. The Bill makes no provision for distinguishing between justifiable and unjustifiable investigations. Obviously it could not do this because it is almost a judicial function.

The Bill states that this will apply to all charges imposed by a bank in relation to any service to a customer or a group of customers. I am open to correction by the Minister. An institution could decide to provide section 84 lending to Mr. Goodman at a different rate. This Bill requires the bank to pay £25,000 to the Director of Consumer Affairs to investigate any proposal to impose or increase a charge which is detrimental to a customer or a group of customers.

Any charge is detrimental to a customer.

I cannot understand why, in those circumstances, there is not a de minimis rule. Under subsection (8) the Director is entitled to exempt a credit institution from the obligation to notify him where a charge is individually negotiated bona fide by a customer. There might not be such an individual negotiation. If a bank unilaterally decides to double the charge for collecting cash from supermarkets because it is costing more than ever, that is not negotiated bona fide. The bank is saying it will increase the charge. A customer knows that if he does not agree the terms with the bank, he can force the bank to pay £25,000 because there is not a bona fide negotiation to get permission to increase the charge.

I am deeply sceptical of the thinking, in so far as there has been thinking, in this section. We need competition and flexibility in banking and it cannot always be flexibility downwards. Sometimes charges have to be imposed on a customer or group of customers which they may not like. Providing that the Director of Consumer Affairs must receive £25,000 — effectively a fine — on the making of any adverse change in charges to a customer or group of customers is wholly misconceived.

I listened to the Minister on the radio today. There is no doubt that it made great box office but that is all. In fairness to Deputy O'Rourke, who had a great appetite for good publicity, she would never have had the neck to attempt it. If the Minister is serious about having a Director of Consumer Affairs, there should be provision for funding him. If he seriously wants to discourage banks from increasing their charges, he should have a Director who is vigilant against such things. We cannot say to a bank that it will have to pay £25,000 every time it wants to impose charges on a customer or a group of customers unless the charge has been individually negotiated with the credit institution by a customer who will not negotiate charges not in his interests.

If I was part of the Goodman group of companies and it was proposed by a bank to increase the charges for a section 84 loan to me by 10 or 15 per cent, I would not negotiate with them. I would tell them, go and give £25,000 to Deputy Rabbitte and the Director of Consumer Affairs and justify it to them; go through that procedure because I will not pay it. There will be no negotiations where somebody realises that the alternative to saying "No" is that the bank must pay £25,000 to the Director of Consumer Affairs.

I strongly object to the principle of the State saying to anybody that no matter how justifiable the increase one is seeking, one must pay the Director of Consumer Affairs a very significant sum in order for him to decide whether what is obviously justifiable is justifiable. This flies in the face of reason and it is pure, unadulterated showmanship.

I appeal to Members to refrain from making personal remarks——

The Minister is quite used to it.

——particularly when the same remark is repeated.

I am glad to note that a Government is at last introducing legislation to take on the banks. When I hear Deputy McDowell, I am sure the Minister has got it right. For far too long banks have existed to serve the big fellows. Over the years, big businesses, such as Goodman's, which negotiated with the banks never had to pay charges because they were doing deals all the time. This is still happening and the working class pay the penalties. I am glad the Minister is including £25,000, but I wish it was £100,000. He is letting them off too lightly.

The Minister and the Director of Consumer Affairs, Mr. Fagan, will monitor the situation to ensure that the banks do not pass the charges onto the consumer. They will observe the position on a regular basis and if they feel this is happening, I am sure they will not be slow to further increase the charge. It will come to a stage where the banks will not be able to continue to do that because they will not be able to compete.

For far too long the big fellows have been getting away with murder in this country. It is the small man who has maintained the banks and made big profits for them because he has been tied in with loans. He could not walk away and go to another institution. He did not have the finances to do so, but the big fellows could deal with other banks. This is what was happening. I welcome this because it is the first attempt by any Government to take on the banks.

The Deputy is wrong. I took them on quite well.

The Deputy did not do too well with them.

Indeed I did because my amendments were accepted. The Deputy is well aware of it.

Not at all.

The Deputy is very quick to jump the fence.

This is the first time any Government has taken them on and I welcome it.

The budget was very good to the banks..

It was powerful to them. They have their very best friend in the Minister for Finance, Deputy Ruairí Quinn.

The Deputy was not bad to them herself when she was in Government. She was very good to them.

I support Deputy O'Rourke's amendment. She is absolutely correct in transferring the watchdog onus from the Central Bank to the Director of Consumer Affairs. However, the Minister is sadly mistaken if he seriously believes that the banks will absorb the £25,000. They will not absorb it and it will be transferred to the customer, which includes us all. Even at this late stage, the Minister should reconsider this proposal. The public know perfectly well that the banks, either individually or collectively, will not absorb this charge. They will add it to their fees and interest.

Their margins.

It will be put forward in such a way that the Minister and his officials will be unable to detect it among all the proposals they will put to the Director of Consumer Affairs. I agree that the director is perfectly positioned to examine any proposals by the banks to increase their fees, but the Minister is sadly mistaken. I ask him, even at this late stage, not to impose this charge on bank customers.

It is most impressive to see Deputy O'Rourke wearing two hats in this debate. The Deputy earlier claimed that the banks got away with murder in the last budget. Now she is afraid to apply a charge to the banks.

No. I said provided——

(Interruptions.)

Deputy O'Rourke, I will give you an opportunity to make any correction you wish.

I am asking that the fee should not be borne by the customer. My request is in writing so there is no point in the Deputy seeking to put forward a point of view, attributed to me, which is incorrect. My amendment includes the proviso that such fee be borne by the credit institution, that is, bank or insurance agency, and not transferred in any fashion to the customer.

In fairness to my colleague, I was replying to Deputy Ring, who said the Government was taking on the banks and I said it was very good to them in the budget. The Deputy is reversing our statements to suit himself.

The Deputy cannot deny what is written in front of him.

Deputy O'Rourke, you are entitled to call a point of order and I will allow it. However, we do not want arguments across the floor.

The Deputy has not seen my amendment.

I have seen it. If the Deputy would give me an opportunity——

Do you wish to continue?

I will adjourn the meeting if there are any more interruptions.

When a tax was imposed on the banking system by the Deputy's party in Government——

And by the Deputy's party in Government also.

By all the Governments concerned; they were part and parcel of it at that time. The Deputy's party continued it until it was removed this year.

The levy on the banks was removed.

No clause was inserted on that occasion to provide that it should not be transferred in any fashion to the customer. As regards the banking system, I remind Deputy O'Rourke that this happened when she was the Minister.

I was never Minister for Finance.

They introduced hidden charges. My friend, Deputy Eric Byrne, has outlined the position. There is no fear of the banks applying this £25,000 fine to the consumer. They cannot do it without first receiving the permission of the Director of Consumer Affairs. Surely it is clear to Deputy O'Rourke that the banks cannot pass on this charge to the consumer without consulting the Director of Consumer Affairs. Under the Bill, they must consult him if they are to pass on any levies or fines imposed on them. The Minister is copperfastening the position. They must comply with the regulations and they must seek the permission of the director before passing on——

They will pass it on to the consumer. That is a new twist to the Bill, which I never heard before.

It is now 5.30 p.m. It is obvious that we will not reach the end of the agenda. I propose the meeting adjourn, with the Minister in possession to reply at 3 p.m. on Wednesday.

Could we take the vote on the amendment? We must take it anyway.

We do not have to do anything if I adjourn the meeting.

The numbers do not add up for the Chairman.

The Select Committee adjourned at 5.30 p.m. until 3 p.m. on Wednesday, 29 March 1995.

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