Amendments Nos. 41 and 42 are related to amendment No. 40 and all may be discussed together by agreement.
SECTION 32.
I move amendment No. 40:
In page 30, subsection (3)(a), lines 11 and 12, to delete "the relevant percentage of his outstanding liability; and" and substitute "the amount of his outstanding liability; or".
I welcome the Minister's decision.
Amendment agreed to.
I move amendment No. 41:
In page 30, subsection (3)(b), line 13, after "approved" to insert ", in accordance with the registered rules,".
Amendment agreed to.
I move amendment No. 42:
In page 30, subsection (3)(b), line 14, to delete "board" and substitute the following:
"board;
but no approval may be given under paragraph (b) if, were the withdrawal to be approved, the value of the member's savings immediately after the withdrawal would be less than 25 per cent of his outstanding liability".
If one has a loan and a deposit and does not want to increase the loan but during the year added £1,000 to the deposit, could one withdraw the deposit because one has a good record of repayment? Would it be at the discretion of the board of the local credit union?
It can be withdrawn provided it does not drop below the 25 per cent threshold.
That takes from the autonomy of the board which knows its client best.
It is merely a prudential provision. A threshold is provided below which one cannot go. For example, if one had £10,000 in the credit union and a loan of £6,000 and wanted to borrow the remainder against the deposit. Ultimately, it is a decision of the credit union board. It is proposed that the deposit amount does not go below £1,000 or 25 per cent of the loan.
If one has a loan for £10,000 and a deposit of £2,000, repays the loan on a regular basis, but also increases the deposit, could the money saved be withdrawn?
Yes.
Why set down a percentage? Why not leave it at the discretion of the board which knows its client best and is in the best position to assess the position? It will get rid of the incentive to save and will take away from the borrowing element. Credit union affairs are well managed. Having a percentage there is not helpful.
I do not agree with Deputy O'Keeffe that it could be a disincentive to saving, but rather would argue the opposite. The credit union would also want the individual member to exercise some responsibility.
There is a standard loan for house repairs or whatever, which may be £10,000. In the meantime, the credit union member may have an approaching event such as a wedding or holiday for which he saves. Is he restricted in saving that money and then taking it out on the date he needs it because he has a loan in excess of 25 per cent of his savings? If that is the case, the temptation is to move to a bank or post office to save for a different purpose. We want to encourage people to remain with the credit union. There should not be any restriction on normal, everyday activities.
I do not agree we are doing anything which is not entirely in line with the spirit of what Deputy O'Keeffe and Deputy Boylan said. The purpose of section 32(3) is to define the circumstances in which withdrawals by members of their shares and deposits in the credit union can be made when they have an outstanding liability, for example a loan. The subsection attempts to deal with the following three sets of potential circumstances.
First, if there is a withdrawal of savings and the amount of the remaining savings of the credit union member is greater than or equal to his outstanding liability to the credit union he should be allowed make the withdrawal without restriction as the credit union is at little risk because the member continues to hold an amount of savings sufficient to cover the outstanding liability. This deals with Deputy O'Keeffe's position.
It does not.
In the second set of circumstances, if the amount of the member's savings after his planned withdrawal would be less than the amount of his outstanding liability to the credit union there is some element of risk involved for the credit union in making the withdrawal and the subsection proposes that the assessment of risk be made by the board of directors. Again, autonomy lies with the credit union.
If someone adds to his deposit during the loan and is paying the loan as laid out in the schedule of agreement, can he withdraw that deposit after the loan is granted?
Yes. The Credit Union may wish to exercise some discretion in the matter.
This is a fundamental section. Both of us agreeing something which is not written in the Bill is a different story.
It is written in the amendment. Provided someone does not go below 25 per cent of the loan, there is no difficulty. This is a prudent measure. We would not have the dynamic that drives credit unions if we did not have such prudence. That is one of the proud boasts of the credit union movement.
I might have £2,000 on deposit and £10,000 as a loan. If I add another £2,000 to that for a special event, can I withdraw that?
No. One quarter of £10,000 is £2,500. One cannot go below that without seeking the permission of the Registrar.
The board can best assess the position.
It has the freedom to apply to the Registrar if it thinks there are circumstances where this condition should be waived.
This occurs in the daily operation of a credit union. If it has to have to apply to the Registrar——
It is tricky to give an answer to that. If, in the type of case Deputy O'Keeffe proposes, the credit union member is discharging his liability to repay his loan, obviously the total amount of the loan is reduced. Therefore, the 25 per cent threshold comes down as the same time as the member puts in additional money through either shares or deposits. It is a changing target. It is prudent that there should be a threshold. Otherwise, the credit union could be ripped off.
Can a member withdraw savings after a loan is granted, providing the repayments are in order?
That question has already been answered twice.
He or she can. It depends on the 25 per cent threshold.
Will the Minister take on board the every day activities of householders who plans for an event? They should still be encouraged to deposit money and should not be restricted, provided they are making their repayments. They should be encouraged to stay with the credit union and should be given flexibility.
Amendment agreed to.
I will have to look at that. It may look simple but it is fundamental.
I do not think it is simple. It is a question of where one is coming from. If over the past 40 years the credit unions had been run in as lax a fashion as I have heard some colleagues argue for in recent months, the credit union movement would not be the success it is today.
Amendment No. 44 is an alternative to amendment no. 43 and both may be discussed together.
I move amendment No. 43:
In page 30, lines 15 to 17, to delete subsection (4) and substitute the following:
"(4) If the Registrar sees fit to do so in the circumstances of a credit union, he may, on such terms as he thinks proper, by notice in writing addressed to the credit union provide that subsection (3) shall apply in relation to the credit union with the substitution of a higher or lower percentage than that for the time being applicable to the credit union under that subsection.".
This amendment arises from the discussion we have just had. In my discussions with the Irish League of Credit Unions, the point was made that some flexibility should be allowed on the 25 per cent provision in the case of an individual credit union. I have accordingly proposed that the Registrar shall be allowed to change that figure to a higher or lower percentage by way of notice in writing addressed to the credit union concerned. This is adequate flexibility for credit unions and I commend the amendment for approval.
As this amendment is related to the previous ones, I will probably deal with the matter on Report Stage. Do I have to notify the committee about this?
It will be a matter for the Ceann Comhairle to accept amendments on Report Stage.
Amendment agreed to.
Amendment No. 44 not moved.
Section 32, as amended, agreed to.