Amendment No. 1 is out of order because it involves a potential charge on the Revenue.
Central Bank and Financial Services Authority of Ireland Bill 2003: Committee Stage.
I challenge that ruling. There is no potential charge on the Revenue. This age old excuse for ruling out sensible amendments tabled by Opposition Deputies is unacceptable. My amendment seeks the addendum of the words "but no later than 12 months after its enactment". If one looks at the historical reality of the Central Bank and Financial Services Authority of Ireland Bill 2003, that is a reasonable proposition and it does not involve a potential charge on the Revenue. I have just now received the Chairman's letter. That, too, is objectionable. I am prepared to attend the committee to discuss all amendments.
The first amendment is in my name and the first notification I receive that it is not admissible is given to me when I am seated here at the committee. That is no way to treat members of the committee. I strongly object to what I regard as very late notification. I have no means of appeal other than being able to object to the decision here. Let us be under no doubt, the proposition in the Bill involves an open timeframe. We must look at that in the context of how far back this was signalled. The measures contained in this Bill were signalled years ago. The report of the implementation advisory group on a single regulatory authority was published in May 1999. It is reasonable to seek to impose a timeframe on the implementation of the measures in the Bill. To include the words, "but no later than 12 months after its enactment", is not unreasonable. I do not accept that that involves a charge on the Revenue. I reject that decision and ask that the committee reconsider my amendment and allow it to stand. It is an amendment meritorious not only of committee support but of the Minister's acceptance.
As Chairman of this committee, I am ruling the amendment out of order. As regards the late receipt of the notification, amendments to the Bill at hand were being submitted by Opposition members up to lunchtime yesterday. The Bill's Office had not completed the assembly of amendments when I left the House at 11 p.m. last night. In that context, it was not possible to fully examine all the amendments until this morning. The effect of this amendment would be to impose a legislative imperative on the commencement of the Act and, as there are incidental expenses and administrative costs associated with some parts of the Bill, it would therefore bring forward the imposition of these costs. The amendment must therefore be judged out of order as it involves a potential charge on the Revenue. That particular wording for ruling an amendment out of order is well established in the House. If the Deputy wishes to address the matter on Report Stage with a different wording, he is free to do so. I have now ruled it out of order.
I support Deputy Ó Caoláin. The background to this Bill is that the Minister chose to introduce part of the financial services regulator legislation separately, in particular those parts that dealt with consumers' interests. It was regarded as unacceptable by many to separate consumers' interests and leave them to division two. The Minister should give an undertaking that there will be no unreasonable delay in implementing this provision. It would not be good practice to see a lengthy delay.
We are not debating the amendment because it has been ruled out of order.
If I may speak on the section, it allows for redress of the Minister's projected time for enactment. Will the Minister assure the committee that it is his intention and that of his Department's to carry out the provisions of the Bill within a limited timeframe following its enactment. This is a reasonable request by members.
I can gladly inform the committee that the provisions of the Bill will be commenced as soon as possible and most likely within the next 12 months. Experience has shown that there can often be good reasons for delaying commencement of a certain provision, reasons which may not be evident today. It is my intention to commence the provisions of the Bill as soon as possible. There will be no undue delay, but it is subject to the normal caveat that I have just entered.
A schedule of amendments to be grouped for the purposes of discussion has been circulated. Is the schedule agreed to? Agreed. Amendments Nos. 2, 29, 30, 66 and 83 are related and amendment No. 67 is an alternative to amendment No. 66. All may be discussed together by agreement.
I move amendment No. 2:
In page 5, before section 2, but in Part 1, to insert the following new section:
"2.—The Board of the Central Bank and Financial Services Authority of Ireland and all subcommittees or panels under its jurisdiction shall be so constituted as to consist of not less than 40 per cent men and 40 per cent women.".
I regard this as a reasonable amendment. It provides for a balance on the various boards of the new body and the various panels of the Irish Financial Services Regulatory Authority that would be at least 40% men and at least 40% women. This would constitute a fair balance between men and women.
This amendment is in the context of the Minister for Finance having at this stage a notorious reputation for refusing——
Yes,toi. He has refused to provide adequate representation by both men and women on different boards. It is not a question of the Minister notionally patting women on the head and saying he appointed a woman to be ombudsman or something else. A photographic exhibition in the hall of Leinster House some time before Christmas showed that some of the Minister’s pet boards, such as the board of the Central Bank, were women-free. The other pet of the Minister’s, the national pensions reserve fund, has one woman commissioner. This element of the Bill concerns the protection of consumers and customers using financial services. Areas such as banking, accountancy, the law and all areas which provide financial services have an abundance of women working at every level from junior up to senior. The customers and consumers who use the services of banks and other financial services comprise equal numbers of women.
The establishment of a number of panels and boards is buried in this Bill. The consumer panel and the industry panel may have between five and 20 members each. The various panels dealing with discipline will have a prescribed number of members. When this Bill is enacted, the Minister will appoint up to 60 people to different panels, boards and review groups. Even for the Minister, it is hardly beyond his wit to acknowledge that for the boards and panels to be composed entirely of women would be inappropriate, but it would be equally inappropriate if they are composed entirely or almost entirely of men.
I hope we live in a more equal society where women as well as men spend money. We live in a society where women as well as men take part in all the activities of that society and where there have been two women Presidents. The Minister should get rid of some of his old-fashioned ideas where, when it comes to the appointment of boards, he manages on almost every occasion to overlook the claims of women to equal rights of representation.
It is unfortunate that we still need to be in the business of counting how many men and women are on a board or a panel. We should have moved beyond that stage a long time ago. The only way to move beyond it and give women and men equality of representation on these boards is to enshrine it in the legislation. This was done when Labour and Fianna Fáil were in Government together by way of a direction from the then Minister, Mr. Mervyn Taylor, and by and large it was obeyed. Since the Fianna Fáil and the Progressive Democrats went into Government together, that objective of having equality of representation has fallen by the wayside. In terms of the functions of this board, having equality of representation by men and women is appropriate. It reflects the experience of society — of men and women — just as we would expect different strands of the financial services industry, people from different parts of the country and those from different interest groups and walks of life to be represented. I demand equal representation of men and women on this board.
I do not know who organised the exhibition which was in place upstairs for approximately six weeks and which displayed the numbers of women on boards. Many Members commented that they had not appreciated how few women the Minister for Finance has appointed on a parity basis to boards. This is a chance to shake off the events of the last century and move forward in the 21st century to give women an equal chance with men.
My amendments Nos. 29 and 66 refer to a similar provision in respect of the council and the consumer panel. The Minister will argue that in an ideal world we should not make legislative provision of this nature and that he would hope to select people of the most appropriate skills and suitability. In reality in many selection procedures, women are not sufficiently represented among the groups likely to make nominations. There has been a pattern of ineffective search mechanisms within the Department of Finance to identify suitable women for such posts. While in ten years we may have reached the stage where we no longer need such provisions, they are sensible and reasonable given our experience. I hope the Minister will support them.
: We are talking about affirmative action towards gender balance. This has been reflected at this committee on numerous occasions in the past. Thus far the Minister has failed to accede to the requests and the sound arguments made. This is not unique to him and the Government. My amendments Nos. 30, 67 and 83 seek to achieve greater participation by women. There may be a differentiation between the amendments regarding the numerical make-up. In my case I am arguing for no less than one third female representation. The detail as to whether it is one third or 40% is not the kernel of the argument. The important argument is that it should be adopted as a matter of course and a point of principle. Only through affirmative action and positive discrimination in favour of women's participation at all levels of public life will we ensure an improved gender balance.
These amendments are sound and sensible, and will appeal not only to the 51% of the population who are female, but also to most sensible men.
As Deputies will be aware, it is Government policy to seek to have a minimum of 40% of the membership of State boards from each gender. Unfortunately it is not always possible to achieve this, given the pool of people available to serve on boards. I will continue to try to ensure adequate representation of both genders on boards for which I am the sponsoring Minister. However, I cannot accept the prescriptive approach suggested by these amendments given the many other factors I must consider when making appointments.
Although I have known Deputy Burton for some time, today she used phrases like "even for someone like yourself" and "even for someone of your old-fashioned ideas". I do not believe I have ever discussed in public matters of gender balance on boards. I have always said the best people should be appointed. What does Deputy Burton know about me that I do not know about myself? When she speaks of my old-fashioned ideas, of what ideas does she speak to which I have given public utterance? We would certainly not agree on economic matters and perhaps not even on some social matters. There may be a wide range of matters on which we do not agree. I have never given vent to ideas in this regard by which the Deputy could be offended.
The Deputy is assuming that I have some old-fashioned ideas in this regard. What does she mean by: "even for someone like yourself"? Although this is known to people who worked with me over many years, long before my advent as Minister for Finance, in my student accountancy days and in my days as a partner in a practice, Deputy Burton and others might be amazed at the attitude I had to the participation of women in the workforce long before it was popular and profitable to so do. Even in my time as Minister for Finance I did not notice any great support from the Labour Party during the period of the last Government when I introduced the principle of widening the standard rate band.
Ms Rosheen Callender of SIPTU would not generally share my economic or other views and we have disagreed on many occasions. However, she is the equality officer of SIPTU and when that barrage came out after the change I made in the budget I have always complimented her on issuing a statement stating it was a socially progressive measure which women had always sought. What was called individualising the tax code was a principle of every socialist I ever knew. Every decent half respectable socialist I ever knew in my career always wanted that. Even though it would have been easier to shut up and say nothing Ms Callender issued a statement as the equality officer of SIPTU complimenting my initiative. That was not supported by the Labour Party. I could understand the opposition of some in the Fine Gael Party, who never took that view. I could understand the opposition of some in my own party, as they are pragmatists who usually respond to the loudest screamers, as do those in Fine Gael. However, I did not understand the attitude of members of the Labour Party at the time, who were nominally of the socialist persuasion.
In my time as Minister of Finance I have taken actions, which I regard as socially progressive to advance the cause of women in society. Deputy Burton has referred to some of the appointments I have made. However, I will not be tied down by a prescriptive approach. I will appoint those I consider to be the best people. There are not many boards under my remit. Under these boards or panels, many more people will be considered for positions, many of whom I hope will be women. Having been a Minister of State in a previous Government, Deputy Burton will understand it is not easy to get suitable women who want to serve on these boards or panels, as we all want.
We have now reached the stage where it is difficult to even get men to serve on these boards for many reasons. Gone are the days when people are knocking on Ministers' doors asking to serve on boards, as was the case in my early days in Government many years ago. Many people, both men and women, see the drawbacks of serving and we have to go to considerable effort to convince people to serve on boards.
Given these considerations, I will do my best to have the best people on the board. I do not subscribe to this prescriptive approach to have particular percentages of men and women. We should pick the best people available.
I dispute the Minister's claim for his non-appointment of significant numbers of women to boards. There are no women on the board of the Central Bank.
The former Minister from the Deputy's party did not appoint women during his three years in office.
When the Minister speaks to us on the budget he is at pains to talk about the historic and great seven-year period he has had as Minister for Finance. In that time we crossed the bar into a new century. Most people accept the notion of the equality of men and women. A board composed entirely——
I accept that as well. Is the Deputy implying that I do not?
——of women is as invidious as a board composed entirely of men. In this case, as the Minister said, and as the Chairman and I know, there is a surfeit of women in the accounting, banking and legal professions. The number of women qualifying in accountancy in recent years is possibly higher than the number of men. The Minister's argument that he cannot find enough qualified women to serve is a load of dissimulation, to be polite about it.
Up to 60 appointments are contingent on this Bill. What is wrong with setting out on a clear basis that we intend having a reasonable level of appointment of men and women? This would give a reflection of business experience, consumer experience and so on. It is Government policy. We nearly fell over an exhibition upstairs from the National Women's Council of Ireland pointing to the lack of women on boards and agencies under the direct control of the Minister. Due to the large number of appointments to be made, a balance should be reflected in the legislation.
Perhaps this will spur on civil servants in the Department to find an appointments mechanism. Does the Minister only look through the ranks of Fianna Fáil for women appointees? Perhaps he should consult with the National Women's Council of Ireland, sports bodies and voluntary organisations as well as business and the professions to discover if they have women appointees who would be willing to serve.
Perhaps the Minister's likely appointees are too narrowly drawn from a party political pot. Fianna Fáil has few women Deputies at the moment so perhaps its pool is limited in this regard. From what I know of Fianna Fáil, I would not have any problem identifying more than a sufficient number of women with party associations who would serve admirably on this board. I am sure the same is true of Senator O'Rourke.
I have great personal regard for the Minister, but in this respect his attitude is old fashioned. In the course of our EU Presidency we should present a modern, forward approach to the rest of Europe. In spite of this, the Minister refuses to acknowledge the principle of equality of representation for men and women on boards of this nature, which are important for regulation.
The Minister referred to socialism and his reaction to the equality officer of SIPTU. He would acknowledge the critical development that has happened in both social market economies, which is what we have, and in capitalist economies. Instead of a debate on the State control of assets such as State control of the banking system what we now have is State regulation. Effectively what we are doing in the Bill is providing a framework of State regulation for the banking and financial services sector, ultimately in the interest of Irish society and consumers.
In that context how can the Minister say he would no more dream of suggesting to me that women be excluded from voting? How can he say that women should be excluded from a right of participating up to a level of 40% in the many appointments which will arise as a result of the legislation? I find the Minister's attitude very last century. I expect more from him.
I am disappointed the Minister is not willing to accept the amendment. The truth of the matter came out when the Minister said how difficult it is to get people to serve on boards. From my experience those who advise and help him to identify and persuade people to serve on boards do not have sufficient knowledge of women of capacity and suitability. It will take a legislative provision like this to force the system to change. The Minister is only one person and he cannot devote his time and energy to appointing all these panels. He must put a system in place and we, as legislators, must try and make sure that the system supports the Minister in making these choices. This is a worthwhile amendment.
I do not agree that the Minister is old fashioned in his thinking, although perhaps having all these stallions roaming the country tax-free gives a wrong impression of his views. The amendment is worth accepting for pragmatic reasons. The system should be forced to find, identify and persuade people to serve. A return will be achieved if the system which the Minister controls is made to make that effort.
The Minister's acceptance of the amendment as presented would still remain aspirational unless it was followed through effectively. I do not believe the current practice of someone who knows someone else in a particular field of knowledge is serving the opportunity of filling board appointments properly.
I raised with the Taoiseach on several occasions the preferable approach of advertising these positions; setting down criteria and qualifications for suitable candidates and allowing accessibility to all citizens. The current practice of limiting it to certain circles of friends or particular interests is not acceptable. We need to open up this system because there are many able people throughout the country who would see it as an honourable position to take up civic service in any of the boards under the remits of various Departments. It will be no different in this case. Such appointments need to be open and transparent. In terms of guaranteeing the level of women's participation that we need to see and encourage, it is beholden on the Minister to accept the spirit of the amendments presented.
I do not approve of the amendment. Equality issues are best pursued through aspiration and the setting of targets which people should try to achieve. I do not believe a mandatory 40% requirement will achieve anything. From my knowledge of the banking industry, as I have a family member working in it, one of the problems is that many companies are reluctant to allow senior executives to serve on State boards. That is the reality of the marketplace. Even if one has a qualified female associate director in a bank, she would be reluctant to serve on a board because of the disclosure requirements involved in working in the State sector generally. This presents a difficulty for managers because they have obligations to the marketplace to make disclosures and can be open to charges of having conflicts of interest because one of their senior executives is serving on a State board. The Minister should perhaps try to build a talent bank of people who have retired from such positions.
While there are many women serving on very strong boards in corporate life, most of them happen to be people who have reached the pinnacles of their careers. They have left their previous careers in banking and other disciplines and become available to serve as the obvious conflicts of interest are resolved. They are not seen as serving interests other than those of the company. The problem in banking is that there is still a glass ceiling for women. There continues to be a low level of penetration into the industry's higher echelons. One will therefore not achieve anything by insisting on a mandatory 40% requirement. One would be better off encouraging interest and enticing people to commit to involvement.
As I said, I will not accept the amendments. I will endeavour to ensure that there is a cross-section of representation by people of all classes on the panels and boards in question. I would rather not be tied down by the prescription set out in the proposed amendments. There is a woman on the board of the Central Bank and she was appointed by me. Ms Purcell is the first ever female appointee.
- Bruton, Richard.
- Burton, Joan.
- Murphy, Gerard.
- Ó Caoláin, Caoimhghín.
- Fleming, Seán,
- Lenihan, Conor.
- McCreevy, Charlie.
- McGuinness, John.
- Mulcahy, Michael.
- Nolan, M. J.
- O’Keeffe, Ned.
I move amendment No. 3:
In page 5, before section 2, but in Part 1, to insert the following new section:
"2.—The members of the Board of the Central Bank and Financial Services Authority of Ireland and all subcommittees or panels under its jurisdiction shall be required to comply with ethical requirements including requirements as to declaration of interests which shall be prescribed by the Minister for Finance.".
The amendment provides that any person appointed to any of the boards, sub-committees, panels or other committees formed under the legislation will be required to make a declaration of interest which will be laid down by the Minister for Finance. As I stated in the discussion on the previous amendment, I have counted approximately 60 public appointments which have been in the context of this Bill.
The type of economic structure being developed here and in the European Union in general is essentially a free market economy regulated in the interests of business and, importantly, consumers. Regulators should, therefore, be required to make a statement with regard to their interests. As the people in question will not be directors, they will not be required to comply with company law legislation in terms of listing bodies and so forth of which they are directors. However, given that they will be serving in the public interest, it would be appropriate for them to make the kind of declaration made by members of county councils and local authorities with regard to their interests, directorships and so on.
This provision is required to ensure transparency in terms of the appointees' background and the interests they serve. If an apparent conflict of interest were to emerge, at least people would be aware of it. Given that much of the Bill is concerned with regulating the financial services industry in the interests of consumers, it is important that we have some information on the people who are in many ways expected to champion the interests of the ordinary bank customer and the ordinary person dealing with insurance companies and providers.
I support Deputy Burton's amendment. Ethical requirements should apply to members serving on the board, sub-committees and panel and the example of the declaration made by county and local authorities is the basis on which they should operate. It is important that the issue of ethics in public office be reaffirmed time and again. I have noted in my service on this committee and elsewhere that acceptance of the importance of full disclosure tends to be less than serious. This has been particularly true where matters relating to banking and other financial institutions have come before us.
It is vital that people recognise that each of us is subject to an ethical requirement to declare. This is not always accepted by elected or publicly accountable official as an important act. Its absence in the Bill is a deficiency which reflects a less than enthusiastic approach to the area of full disclosure. The only way to address this matter is to ensure that all legislation containing provision for appointments, particularly the Bill, given that it concerns the financial services sector, should require the highest standards. For this reason, the amendment should be enshrined in the legislation.
The amendment has much to commend it, particularly where there is a danger that persons holding a regulatory position may have interests which would affect their decision making. I am aware that the Bill already requires persons who have a specific interest in an issue to signal that fact and withdraw from consideration of the matter under scrutiny. The question which arises is whether it is sufficient to rely on that person to identify that they have an interest, make a voluntary declaration and withdraw, or whether some form of declaration is required on which someone else acts as referee. This could entail the general public, the vigilance of journalists or some other person.
The Minister will have concerns about his capacity to persuade people to join boards if every aspect of their interests will be exposed and, as such, a balance will have to be struck. I do not have a strong view on whether this should require appointees to make a declaration to an honest broker or intermediary who would establish codes of practice, or whether such a declaration should be placed immediately in the public domain. I would be interested to hear the Minister's view on the matter.
As we go down the road of having an increasing number of regulators, the question arises as to who regulates the regulators and in whose interests are they acting. Given that some degree of conflict is inevitable with regard to many of the people who possess the appropriate skills for the position of regulator, we will need to work out sound principles to govern this area. The amendment seeks to allow the Minister to prescribe the method by which a declaration of interests is made, which appears to be the correct approach.
Will the Minister indicate what form of declaration he believes would be appropriate to enable him to protect the right to privacy of the persons in question? Given that these are essentially public service positions, I do not expect appointees to receive substantial reward. If, however, these positions were to give them an inside track on decisions which they should not be able to influence, they could reap substantial rewards. As the question of interests definitely arises, I ask the Minister to comment.
I reiterate the point I made in the discussion on the previous amendment, namely, that the prescriptive approach taken in the amendment creates the danger of discouraging participation by qualified persons, both make and female, from the private sector. This matter should be addressed internally by the bank in question, through the codes and clear ethical principles it applies for staff and board or panel members. One would not be able to get people to serve if a declaration of interests was explicitly required. People in the private sector are not that interested in having their interests declared and paraded across the newspapers and elsewhere.
In principle, I do not have a problem with the Deputy's amendment, but I believe the existing legal provisions are adequate. Schedules 1 and 3 of the Central Bank Act 1942 already require directors of the bank and the regulatory authority to disclose any direct or indirect pecuniary interests they may have in a matter coming before the board of the bank or the authority. In addition, directors within the management of the bank are required to make declarations under the Ethics in Public Office Act. Given the overlap between the membership of the board, the bank and the authority, the fact that two members of the authority are executives means seven of the ten members of the authority are already required to make declarations under the Ethics in Public Office Act, as staff in the regulatory authority are also required to make such declarations.
I am considering designating the regulatory authority separately for the purposes of the Ethics in Public Office Act. This would mean that all senior members of staff, of both the bank and the regulating authorities, would be required to make the declarations prescribed in the Ethics in Public Office Act. I do not see any need, therefore, for the further provisions in this area as suggested in the Deputy's amendment.
The Minister's reply is helpful and clarifies some of my queries. In the amendment we propose that the terms would be prescribed by the Minister for Finance. A large number of people are to be appointed under this legislation and they will not all have the status of board members. For instance, panel members will not be board members. It is my understanding that, at present, they would fall outside any requirement which people such as directors have to make, but not people who are members of the panels or the sub-committees.
The sub-committee's panels are the regulatory mechanism for an important industry. In the public interest, it is important that a declaration is lodged which is akin to either that of a county councillor or a director who has to list in the Company Registration Office their other directorships and memberships. The county council format is the better one because it does not only cover directorships, it covers interests in related areas in the case of the county council in land dealing and so on. There are good reasons why this was introduced.
Will the Minister reconsider this and clarify if he intends applying the ethics legislation to this structure? Will he make a declaration in this regard? Will it be required of all the various appointees in this complicated structure? We should have a Powerpoint projection on the wall to show the boards, panels, sub-committees and advisory groups involved. I am sure the Minister has a clear picture in his head, but the rest of us are catching up in that regard.
Will the Minister undertake to come back to us with further clarification on what he intends doing? This will be helpful to him in the long run in terms of building public confidence in these institutions. It is not enough for people simply to withdraw when there is a contract in which they may have an interest. That is not efficient. This is a regulatory authority for a huge industry in this country and it is a reasonable requirement that members of the various structures make a declaration.
Will the Minister clarify by what authority he can introduce orders to oblige different participants to observe different rules? Does that power give him the capacity to say, perhaps in respect of the consumer panel, he would require a declaration, but it would only be an internal declaration, as Deputy Lenihan said? Perhaps he can provide for grades of declaration that would be increased as one goes up the structure. Is this at the discretion of the Minister? Would it be possible for internal ethics officers within the regulatory authority to receive declarations at a certain level and offer codes of conduct? Can the Minister develop such a system over time?
In this instance the panels are advisory. There is a great difference between an advisory panel and an authority or a board. As I pointed out in my reply, the Central Bank Act 1942 requires these declarations as does the Ethics in Public Office Act. I am reluctant to introduce onerous disclosure requirements for people on these panels.
I understand what Deputies said, but I am not in favour of having an onerous restriction. Earlier in the debate we spoke of how difficult it is to get people to serve on bodies. If we have all these requirements we will not get anybody to serve on them. I am reluctant to proceed down that road.
Under the Ethics in Public Office Act we can prescribe requirements for boards. I am not inclined to implement the provisions of Deputy Burton's amendment about complying with ethical requirements, including requirements as to declarations of interest. I accept that it is intended that the provision be prescribed by the Minister for Finance, but I do not want to take this power to myself and then try to differentiate between what is deemed to be important in that area as opposed to what I did not deem to be of importance in the other area. I would be taking on powers which I would not want to have, even if it were possible to so do. One is usually advised to take the most stringent approach to that matter. I cannot go along with the Deputy's amendment.
I move amendment No. 4:
In page 6, before section 2, but in Part 2, to insert the following new section:
"2.— Section 33E of the Central Bank Act 1942 (as inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003) is amended by the insertion of the following subsection after subsection (1):
‘(1A) At least one non-executive person with experience in consumer protection to be appointed to the Board.'.".
This is a simple amendment, the aim of which is to go back to the original board of the Central Bank and ensure that there is at least one person with experience of consumer protection appointed to that board. The Bill attempts to create a much stronger pro-consumer network in the financial service regulator. The stronger commitment should also be reflected in having a person on the board of the Central Bank and Financial Services Authority who has experience in consumer protection. The Consumers Association of Ireland and others who have been studying the development of this regulatory body are of that view.
The Minister will recall that when the original Bill was debated, one of the issues of considerable concern was whether he was trying to put two horses into harness that were not properly suited, namely the horses of prudential and consumer protection. A professor who is known to the Minister articulated the strong view that this was inappropriate. While we do not seek to unscramble that egg at this stage, with the evolution of the new consumer panels and the financial service ombudsman, we are seeking to have someone on the board with specific experience in consumer protection who is not an employee of the board, as is the consumer director of the authority. This is no reflection on the excellent work she is doing, but one ought to have someone who is not an employee — a non-executive person — with this remit on the board. I commend the amendment to the Minister.
I support Deputy Richard Bruton's amendment. I have tabled an amendment which deals similarly with representatives of consumer-based organisations participating in the various structures in the Bill and being on the various boards. We are seeking to regulate the financial services industry. There is not a person in the country who does not use banking or financial services. We have some consumer organisations that provide an invaluable service to the public and which have acted, for many years and very often in a voluntary capacity, as the chief source of information on banks and financial institutions misbehaving, ripping off consumers or simply offering bad value for money, even where similar services may have been available from other providers at a cheaper cost.
It is important that consumer interests be represented. Organisations which have championed consumer interests at different levels in respect of banks and other financial institutions on many occasions include bodies such as the Consumers Association of Ireland, which has much experience in this area, the Money Advice and Budgeting Service, which helps people in trouble with credit and banks, the Society of St. Vincent de Paul, which does much work in this area, and the free legal advice centres. It is important that a representative of the users or consumers be on the board as of right.
I support the thrust of Deputy Richard Bruton's amendment. If we reflect on various sessions of this committee over the course of last year, particularly when dealing with the building societies and other financial institutions that came before us, we will note that the critical focus of the members has been on the interests of consumers. This is a huge area that is not reflected in the Bill. It is not accommodated or catered for in the proposed makeup of the board and it is very important that those directly involved in the pursuit of consumer protection in society be given a direct input at that critical level. I hope the Minister will accede to the Deputy's proposal.
This amendment relates to an issue that was fully debated last year in the course of the passage of the Central Bank Financial Services Authority of Ireland Bill. At the time, the board on financial regulation was intended to be a public interest board. It has performed well since its appointment, including in its consumer protection role. Therefore, I do not intend to accept the Deputy's amendment.
I am disappointed that the Minister is taking that view. As Deputy Ó Caoláin said, the committee has long felt that this is the one Achilles heel in the structure that the Minister is creating. While this may be reopening a debate we had before, it is also offering an opportunity to the committee to express a view that is generally held in the committee, namely, that in respect of this financial service regulation, we need to make more effort to protect the interests of consumers. I propose to press the amendment.
I have reservations on this, not because of the spirit of what the opposite members are talking about — it is in the right spirit — but because the problem is one of good practice in corporate governance. If one extends a specific representational role to a particular director in an institution or board of this kind, then one is open to the accusation that other interests, for instance, the banking industry or the IBF, are not represented on the board as well. If one opts for that approach one is opening the door to having virtually every interest group or specialised interest group——
It does not specify that the groups would represent the interests of consumers but that they would have experience in an area where the bulk of the board has none.
I move amendment No. 5:
In page 6, paragraph (b), lines 36 and 37, to delete “or acting as Deputy Financial Services Ombudsman”.
This is a technical amendment. There is no provision in the Bill for the appointment of an acting deputy financial services ombudsman, nor is such a provision needed.
I move amendment No 6:
In page 7, paragraph (g), line 28, to delete “instrument;” and substitute the following:
(c) in relation to Part VIIB only, any other financial service provider of a class specified in the regulations for the purposes of this paragraph;”.
This amendment gives me, as Minister for Finance, the power to bring additional financial service providers within the remit of the financial services ombudsman. The means of regulation is laid out in the legislation. The remit of the ombudsman would be confined to financial institutions regulated by the Irish financial regulator or its equivalent in other EU member states. There are financial service providers who are not subject to regulation but whose activities may give rise to complaints. The amendment will provide a mechanism to bring some or all of them within the remit of the financial services ombudsman.
Will the Minister elaborate on the reference to other financial service providers of a class specified in the regulations? Will he provide examples of what he is seeking to address in support of his proposed amendment?
There are those who lend money who do not seem to fall under the control of any particular organisation.
Unregistered moneylenders usually get found out and then they are prosecuted. One is not supposed to be an unregulated moneylender but there are those about whom we have some doubts who would not be caught unless this section was in the legislation.
We have addressed the area of the registered and unregistered moneylenders before. I would have thought it was an obvious area to consider. I was hoping the Minister, by virtue of the construction of the amendment, might also be pointing in some other directions, for instance, towards a matter I raised with him only yesterday. However, I suppose he is not offering any further information.
To what is the Deputy referring?
The Minister recalls our very brief exchange on what one could only describe as illicit banking practices associated with the remit of "other companies". Is this what he is looking at?
That is an example of something that would possibly be covered by this section if it were so deemed that some were carrying on a banking business without being regulated. One could make the case for that. This is mostly a catch-all section to ensure there is no class of people not considered under the legislation and that regulations can be made to catch them.
I asked the Minister yesterday if he had any other indication of such activities taking place. He gave me a very long answer: "No". Therefore, his position is the same today. I was curious to see if I could draw any more information out of him.
I do not know of anyone at the moment.
I move amendment No. 7:
In page 11, before section 6, to insert the following new section:
"6.—The Central Bank Act 1942 is amended by inserting the following section after section 33S (as inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003):
33SA.—(1) To enable the Consumer Director to carry out the responsibilities imposed by section 33, that Director may—
(a) undertake studies, analyses and surveys with respect to the provision of relevant financial services to consumers, and
(b) collect and compile information for that purpose, and
(c) publish the results of any such studies, analyses or surveys.
(2) In undertaking such a study, analysis or survey, the Consumer Director—
(a) may, by notice in writing, require any person who, in the opinion of that Director has information, or has control of a record or other thing, that is relevant to the study, analysis or survey to provide the information, record or thing to the Consumer Director, and
(b) may, by the same or another notice in writing, require the person to attend before that Director for that purpose.
(3) A person commits an offence if the person—
(a) intentionally prevents the Consumer Director from exercising a power conferred by subsection (1), or intentionally obstructs or hinders that Director in the exercise of such a power, or
(b) without reasonable excuse, fails to comply with a requirement made to the person in accordance with subsection (2), or (c) in purporting to comply with a requirement made under subsection (2) to provide information, provides the Consumer Director with information that the person knows, or ought reasonably to know, is false or misleading in a material respect.
(4) The Consumer Director may, in writing, authorise an officer or a member of the Bank's staff to investigate the business, or any aspect of the business, of a financial services provider who has been required under this section to provide information, or a record or other thing. Such an officer or member of the Bank's staff may take whatever steps are necessary for or in connection with carrying out such an investigation.
(5) A financial services provider who—
(a) without reasonable excuse, fails to co-operate with an investigation carried out under subsection (4), or
(b) intentionally prevents such an investigation from being carried out, or intentionally obstructs or hinders the investigation, commits an offence.
(6) A person who is convicted of an offence under this section is liable—
(a) on conviction on indictment, to a fine not exceeding €30,000 or to imprisonment for a term not exceeding five years, or to both, or
(b) on summary conviction, to a fine not exceeding €3,000 or to imprisonment for a term not exceeding 12 months, or to both.
(7) Summary proceedings for an offence under this section may be brought and prosecuted by the Chief Executive, but not to the exclusion of any other person who is authorised to bring and prosecute summary offences.
(8) Despite section 10(4) of the Petty Sessions (Ireland) Act 1851, summary proceeding for an offence under this section may be brought within 2 years after the date on which the offence was first discovered.'.".
There is a technical error in this amendment. The reference to section 33 in "To enable the Consumer Director to carry out the responsibilities imposed by section 33" should read "section 33S". I am obliged to mention this.
The purpose of the amendment is to eliminate any doubt that may exist about the power of the consumer director to require financial institutions to provide information and for her to publish it. It is essential that there is no doubt about the consumer director's power in this area, otherwise, the director could be inhibited from publishing survey information relevant to consumers or financial services.
I move amendment No. 8:
In page 11, before section 7, to insert the following new section:
"7.—Section 33C of the Central Bank Act 1942 (as inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003) is amended by substituting the following subsections for subsection (9):
‘(9) If a matter relating to the financial stability of the State's financial system arises in connection with the performance or exercise by the Regulatory Authority of its functions or powers, that Authority shall consult the Governor on the matter.
(9A) The Regulatory Authority may, if it considers it prudent to do so, give a written report to the Minister on any matter of the kind referred to in subsection (9), but may act on such a matter only with the agreement of the Governor.
(9B) For the purposes of subsections (9) and (9A), "matter" includes (but is not limited to) the issue, revocation and suspension of a licence or other authority.'.".
This is the first of three amendments I am proposing in response to the opinion of the European Central Bank, which I have already laid before the House. I will introduce one of these amendments on Report Stage. This technical amendment relates to the role of the appeals tribunal on which I am awaiting the final advice of the Attorney General.
The ECB expressed the view that the inclusion of the word "otherwise" in section 33(c)(9) could give rise to the unintended interpretation that the regulatory authority was only under obligation to obtain the governor’s approval on matters relating to the stability of the financial system in circumstances where it has not reported on such matters to the Minister for Finance. Where issues affecting the stability of the financial system are concerned, it has always been my intention that the regulatory authority could only act with the agreement of the governor. The redrafting of the subsection removes any doubt on this.
I am seeking elaboration on this. The amendment states, "If a matter relating to the financial stability of the State's financial system arises". Will the Minister define "matter" in this context? I do not object in principal to his proposition and he has indicated that it is technical in nature.
This refers to the risk of failure of a bank that might lead to systemic risk. Circumstances could arise where the risk of failure of one bank could lead to all manner of repercussions in the whole financial sector. Hopefully this will never arise. While Ireland has had no experience of this, it has happened in other jurisdictions.
Members will have noted that in the 2003 Act and in this Bill, the European Central Bank is cognisant of the independence of the Governor of the Central Bank and seeks to protect this at all costs. These matters are laid down in the treaty and the ECB has a role in this. We were obliged to send the Bill to the ECB and some of my amendments, including this one, reflect its views. We also had to take on board its views on the 2003 Act.
I said earlier that I thought there should be some kind of presentation or chart——
At some stage, perhaps at the end of our dealings on this Bill and when the two Bills are put together, we will draw up a chart outlining the responsibilities. After getting agreement on this from all parties, including my colleagues in Government, and in light of the McDowell report, we had brilliant charts drawn up and displayed in the Government press centre. Some changes have occurred in the intervening two and a half years. When this is put in place, it would be no harm for everyone, including me, to have such a chart. It becomes a little complicated.
Members may have noticed that when the previous Bill was going through the Houses, I had diagrams before me to remind me on the layout. I do not think they would have been understandable to anyone else. I appreciate that this is somewhat difficult, even for the experts. I have no problem with producing a diagram to show how everything fits together and to outline the responsibilities of the various areas. We will work on this in co-operation with the Central Bank.
While I may be alone in this, I find this to be an exceptionally difficult Bill to comprehend. There are probably more learned Members than me on the committee. There is a need for——
I am sorry to interrupt again. As I said when replying to the Second Stage debate, it is my intention when this Bill is passed to introduce a consolidation Bill on financial services. I hope to introduce it in 2005. Without doubt, of all the Bills that have ever been brought through the Houses, these are the most complex. I can assure Members that not even those well versed in such matters can follow it closely. In producing the previous Bill, we employed outside expertise and the Parliamentary Counsel offered a different approach. It is a difficult area. The Government programme aspires to a consolidated financial services Bill in 2005. In the meantime, we will work to provide diagrams as it will benefit us all, not least the Minister for Finance.
I find this to be an exceptionally difficult Bill. Owing to its many layers, it will probably make a lot of money for many lawyers. If the Department of Enterprise, Trade and Employment made a compromise on the McDowell report, it was a losing compromise in that the Central Bank got control of the regulation. There is a conflict between the prudential side and protecting the interests of the consumer. Deputy Bruton also referred to this. I know the sides will meet in the long run.
A Mr. Westhrup recently made a speech in Dublin, which I have referred to the Chairman. He referred to this committee and its lack of ability to oversee the regulatory function. Unless one had the services of one of the bigger Dublin legal firms, it is difficult to have an overview. Moreover, the explanatory memorandum must rank among the most difficult to understand of any Bill. It is not even cross-referenced in detail to the different sections. I do not wish to complain because I understand how the Minister's Department has had problems with this.
However, Chairman, the committee has the benefit of few services.
We get none.
Other committees have the benefit of receiving clippings and other such services. For example, the Joint Committee on Transport gets clippings of all the comments in regard to transport. I do not know if the Minister is aware that this committee receives no information. If it was available it would save us having to on occasion unnecessarily cross question the Minister, especially where legislation, such as this, is difficult to follow. The Chairman will have to take an initiative to give the committee some resources and support. Members contact the committee to tell it about issues in the newspapers rather thanvice versa.
I accept the Minister's advice on this section. However, there is a fundamental flaw in the structure in that there is an excess of power on the part of the Central Bank in terms of its prudential role. In a certain sense, the protection of the consumer interest in terms of the services supplied to consumers and the cost of those services may well suffer in that balancing act. I await a small, rather than huge, chart on everything.
The Deputy's comments are noted. We will come back to the issue separately. I take her point on consultancy and other budgets available to the committee. Perhaps there is a budget on which we did not draw last year. We will discuss the issue in the joint committee.
Amendments Nos. 13, 15 and 16 are related to amendment No. 9, therefore, amendments Nos. 9, 13, 15 and 16 may be discussed together by agreement.
I wish to advise the committee that I will be introducing significant amendments to section 8 on Report Stage. They arise from advice by the Attorney General that the provisions, as drafted, could be subject to legal challenge. The amendments are likely to provide for an increased level of oversight by the courts of decisions by the financial regulator to impose sanctions. They are also likely to involve some changes to section 9, Schedule 1 and Part 7 of the Central Bank Act 1942 dealing with the Irish financial services appeals tribunal. Deputy Burton raised this matter on Second Stage and it has not been possible as of yet to devise a suitable amendment due to time constraints within the Office of the Chief Parliamentary Counsel. However, the Attorney General is working on it and we will have it for Report Stage.
I move amendment No. 9:
In page 12, lines 15 and 16, after "provider" to insert "other than a Credit Union as defined by the Credit Union Acts".
This arises from the concerns expressed by the credit union movement. The Chairman will recall that when we debated this earlier, there was considerable concern that the financial services regulator would not take on board the ethos of credit unions, the staff of which are essentially volunteers. This provision proposes a heavy-handed approach to taking speedy enforcement actions against those who do wrong within the financial institutions. While it is wholly appropriate, subject to the discussion which the Minister initiated a moment ago, that major financial institutions would face fines of up to €5 million and investigation by such a panel, the credit union movement believes that the Minister's proposed amendment, which will apply to credit unions, is out of kilter with the strategic plan of the IFSRA, which refers to developing the appropriate regulatory system for the credit unions, having properly differentiated the supervisory approach and taking account of their ethos.
It has been suggested that the enforcement against credit unions should come within their own system, the register of credit unions, which has been appointed within the IFSRA framework. Bringing to bear this sledgehammer approach in respect of credit unions is not appropriate to the systems in place. The people with whom I have discussed the issue have made a number of proposals. One is to remove the provision so that credit unions would not be investigated by this panel and an alternative approach would be used for their supervision. If the Minister is not well disposed to that, the other amendments come into play, namely, that there would be a special panel for enforcement actions against credit unions so there are not the same types of person investigating credit union misdemeanours as would be investigating the misdemeanours of a major financial institution, with armies of accountants and lawyers and so on to protect it. The concern here is that the system is slipping back into its old attitude to credit unions in that they are the same as any other financial institution and should be approached in the same way. Most committee members have been persuaded by presentations we have received that this is not appropriate and that we ought to take a different approach.
In regard to the Minister's brief intervention, I welcome his indication that there will be Report Stage amendments. However, Report Stage often produces a truncated debate. We must be mindful that the High Court recently found our dealing with certain legislation wanting in our failure to adequately investigate and tease through proposals. In this instance, Report Stage amendments are necessary because we are concerned with administrative sanctions which, in my understanding, cannot exist without appeals to the courts. The appeals mechanism here appears shaky and uncertain and I wonder if it will stand up to scrutiny. If the Minister proposes such amendments, there will have to be provision for advance publication and an opportunity for outsiders who might be affected to make an input to committee members and a chance for us to prudently consider those reactions to the Minister's proposals. The debate should not have guillotines, time limits or some of the other features which have characterised recent Bills.
When the Bill was introduced, I spoke at length on the question of the constitutionality of the provisions for sanctions in section 8. The sanctions provided for are potentially very onerous and significant, including fines of up to €5 million with provisions for reprimanding individuals and institutions, up to barring individuals from working in any aspect of financial services.
Article 34 of the Constitution states: "Justice shall be administered in courts established by law...". The sanctions proposed in the Bill's structure are at the upper end of the sanctions scale and would give rise to High Court or criminal court proceedings, depending on what was appropriate. On the question of this regulatory system working, I have spoken to a number of people in financial institutions and I have no doubt that the first time a significant sanction is imposed there will be a rush by the financial institution, service provider or individual directors to the High Court to challenge the constitutionality of the proceedings.
The Minister and the Attorney General — probably the latter to a greater extent — must convince the committee that the structure is constitutional and workable. It will do terrible damage to confidence in the structures which IFSRA is setting up if there is a fundamental doubt about the constitutionality of the sanction powers. The boards and panels and the regulatory mechanisms involved will end up being extremely inhibited in taking any of the sanctions because of the justifiable case put forward by the Labour Party that they are very likely unconstitutional in their present format.
How is the Minister likely to try to improve matters? The author of the current structure was that great lawyer before whom all of us bow, the Minister for Justice, Equality and Law Reform, Deputy McDowell. As someone pointed out this morning, students in UCD tried to touch the hem of his coat.
The structures of the Central Bank and Financial Services Authority of Ireland Bills are not what Deputy McDowell's majority report recommended. What the Government finally agreed to was a combination of recommendations. It was not the case that the majority report went one way while the minority report went another way, with one person preferring another structure. It is the latter to which the Government agreed. To blame the former Attorney General——
I am not blaming anyone. This is a difficult problem. The committee is entitled to obtain a detailed briefing on the shape of what the Minister is proposing to respond to the Labour Party's criticisms, which he now accepts. Will he choose a High Court judge or a retired High Court judge or somebody with significant legal and judicial experience as the chair of the sanctions panel or of that part of the regulatory authority which has the power to impose sanctions? At a minimum, something like that will be necessary in order not to annoy those who currently sit on the High Court and Supreme Court benches, because this is straying into their area. The Minister may say this is because of the Constitution, but the Constitution is what we must deal with. We are entitled to obtain the benefit of the Attorney General's advice to the Minister or a summary paper which details, first, the flaws in the current proposals and second, how, on Report Stage, the Minister intends to deal with them.
We are not constitutional lawyers. If the Minister makes proposals the day before we are to deal with them I cannot say our commentary will be ideal. This goes back to the issue of the resourcing of this committee. The committee has no resources. The House employs a senior counsel or a junior counsel——
A legal adviser.
A legal adviser costs the Dáil much money.
It is a junior counsel.
However, this person is not available to the committee. We are individual Members as we sit before this committee. Therefore, we have no assistance. There is no point in people saying things will happen in a few years or writing pieces for Trinity College which say that this committee is not doing its job. It is not resourced to do its job. However, I have pointed out these problems to the Minister.
My amendment deals with the credit unions and how they are dealt with by the sanctions panel. I reiterate that the credit union movement has done a great deal for many people. Effectively, it is a form of people's banking. The big banks and financial institutions do not like this and if they can, they will make IFSRA a Trojan horse to choke off the work of the credit unions. In the context of the Minister's own SSIA schemes, a number of credit unions — particularly, I might add, those associated with the Civil Service and the Revenue Commissioners — are awash with money and the banks have their eye on that money. There is no point in saying otherwise.
We all want to see the credit unions properly regulated. I deplore the divisions that have arisen in the movement in recent times. There are management issues to be addressed by the credit union movement which are important in terms of protecting their members. Fundamentally, however, the credit union movement is a not-for-profit movement, unlike the rest of the financial services industry, which is very much for profit. Using the same sanctions procedure to deal with the credit unions, as the Minister is doing in this Bill, is unsatisfactory. We are presented with the Bill as we find it, so the purpose of the Labour Party amendment is to ensure that the panels which may investigate wrongdoing by credit unions include members who have experience of the credit union movement. That is a minimum requirement.
Last year the Minister, following his own consultations with the credit union movement, included, as an amendment, a section in the Bill which recognised the uniqueness of the ethos of the credit union movement. This is an argument between large-scale, for-profit, capitalist institutions — good luck to them — and the credit union movement which, whatever its faults and weaknesses, is designed to offer a not-for-profit service. In the long run, if the Minister proceeds in this way without specifically acknowledging the ethos of the credit union movement, as he undertook to do last year, he will destroy the credit unions. The big banks will be waiting in the wings to make them an offer they cannot refuse. There is no doubt that many of the financial institutions are simply jealous of how much credit unions have managed to achieve and how they have provided services — putting roofs over people's heads and offering people access to banking and credit — that the banks and other financial service providers were not prepared to provide.
The Labour Party's amendment is designed to accommodate these concerns. When he is considering his amendments on Report Stage, I hope the Minister will also consider amendments which will significantly strengthen the power of the recognition afforded to the credit union movement within the IFSRA structure.
I support the amendments. Amendment No. 16 is in my name. The establishment of the regulatory authority sanctions panel constitutes a row-back on the already recognised special position of the credit union movement as it appears in the 2003 Act. We should not allow the unique nature and ethos of the credit union movement to be undermined or challenged and we have a responsibility to uphold and safeguard it at all times.
Deputy Burton spoke about the success of the credit union movement and in our experiences as elected representatives, we know the key role it plays in the lives of those who have not been traditionally served by the banking sector. It has provided young people with a way to escape poverty and marginalisation through education into a new and fulfilling life. For many poorer families in our society that has meant so much, where impoverishment and denial of access to third level education have been arresting and restricting facts of life. The credit union movement has given so many families that critical leg up in breaking that cycle of poverty and I applaud its contribution.
In its submissions to each of us as Deputies, the credit union movement has expressed concerns that the sanctions panel will row back on the unique position of the credit unions. It has offered a proposition that there should be a dedicated credit union sanctions panel or that members of the panel with credit union expertise should be appointed, as I propose in amendment No. 16.
Amendment No. 16 works in line with amendments Nos. 11 and 12, which, along with amendment No. 1, the Chairman has ruled out of order on the basis that they would involve a potential charge on the Revenue. I sought to extend the numbers on the panel from a low point of six to nine members to a low point of nine to 12 members to accommodate participation by those with credit union expertise. Amendment No. 16 would ensure that three members of the panel limited to six people would have a credit union expertise. I would hope that they would all have credit union expertise but that was on the basis of the Minister accepting an additional three members at least and a number no less than nine and no greater than 12. I am denied the opportunity to pursue those amendments by the Chairman's ruling and I want him to feel as bad about that as I can make him.
The kernel of amendment No. 2 is not the specific number but the principle. I would like the Minister to acknowledge that the credit union movement has a special place. It is an all-Ireland movement that has transformed the financial reality of life for many ordinary people and has denied those registered and unregistered money lenders much of the oxygen that might have made their activities more profitable and attractive. I hope the credit union movement will be acknowledged for having played a significant role in curtailing that disease in our society.
It is important that we acknowledge the success of the credit union movement not with the threat of subsuming it within the banking and wider financial sector, but by recognising the special role it plays within the configuration of financial services. There is no doubt that its success is underpinned by the level of support it enjoys from Irish citizens across the island. The fact it has €8.5 billion in savings reflects that success and that citizens have been encouraged to save, particularly the sector that would not traditionally have been able to do so. Its lending book, at €5.5 billion, shows that it is a solvent organisation that deserves the special support and acknowledgement of the Government. The Minister has an opportunity to ensure that the special recognition in the 2003 Act is sustained, maintained and continued in the Bill.
There was considerable debate on this in the first Bill. The intention then of placing credit unions under the remit of IFSRA was inspired by the agenda of the larger financial institutions to suffocate the credit union movement. There is also the opinion of the European Central Bank about how credit unions should be treated. I argued then that it was made under a false assumption of how it identified credit unions and how they exist here. It compared Irish credit unions to the German model when they are more akin to the American model, where there is a separate federal regulatory agency for credit unions. I am not convinced the provisions in this second Bill constitute a better model.
The experience of the relationship between Dr. O'Reilly and the register of credit unions is that it works well and there is a degree of autonomy and independent action but it is dependent on the personal relationship that exists.
I had largely said what I wanted to say on the section dealing with credit unions. I support Deputy Bruton's amendment because while the existing provision is working quite well, to introduce this new one would put in place a legislative framework and requirement that could be interpreted and used differently by different people. That would be unhelpful to the nature of the fluid relationship and degree of autonomy there should be for the registrar of credit unions and the credit unions within the IFSRA set-up. I hope the Minister will take these arguments on board and accept Deputy Bruton's proposal.
I am surprised that the amendments regarding the wider argument about sanctions will be coming before us on Report Stage.
There is another vote in the Dáil. We will suspend the sitting again until after the vote.
I must attend a party Whips' meeting at 5 p.m. My contribution on amendment No. 9 is complete. However, amendment No. 10 in my name is next and if the vote takes ten or 15 minutes, I will not be able to return.
The amendments must be taken in sequence. We cannot proceed to amendment No. 10 until we have decided on amendment No. 9.
We were dealing with amendment No. 9 which we were discussing with amendments Nos. 13, 15 and 16. Deputy Boyle had concluded his contribution.
As I have indicated, I intend to table extensive amendments to section 9 and related provisions to deal with sanctions and the appeals tribunal. This is to ensure the system for imposing sanctions is not vulnerable to challenge on constitutional grounds. I have listened to what Deputy Burton has said on this matter and perhaps before Report Stage will arrange for an extensive briefing regarding Report Stage amendments and the advice available. I do not think it is in line to hand out the advice of the Attorney General but members can be briefed generally on the matter at the meeting.
On amendment No. 9 and associated amendments, I am not sympathetic to amendments that seek to make special provision for credit unions regarding breaches of the law. We have already made special provision in law for them. The rules governing their operations were laid down in the Credit Union Act which reflects their not-for-profit ethos and the fact that they are staffed largely by part-time volunteers. It is, therefore, less demanding in regulatory terms than in the case of other providers of financial services.
We have provided for a separate registrar of credit unions within the financial regulator to oversee regulation of the sector. In the case of a credit union, this section will apply mainly to breaches of provisions of the Credit Union Act or codes or regulations issued under its terms. The allegation that such a breach had occurred would most likely come from the registrar of credit unions or his staff. The registrar will be fully conscious of the nature of credit unions and would be unlikely to find formally against a credit union or a member of its management unless satisfied that there was evidence of a serious breach.
The task of a sanctions panel is to judge whether an allegation is well founded. The key qualification for members of a panel in dealing with an allegation against any financial services provider is that they be knowledgeable and act fairly and impartially. I see no reason for them to be expert in any specific financial sector, though, since they will probably mainly be drawn from the staff of the financial regulator, they are likely to have a good knowledge of the financial sector as a whole, including credit unions. Therefore, I do not accept the case for special treatment for credit unions regarding breaches of the law.
I need not remind Deputies that there is wide-ranging consent regarding the proposition that compliance with the law should be a key public policy objective. I am not prepared to accept otherwise regarding any sector, however worthy its ethos and objectives. Therefore, I must reject the amendment. We have had this debate about credit unions a good deal in recent years and on several occasions during my time as Minister for Finance. However, there are differences between credit unions. There are very large credit unions, medium-sized ones and a good many smaller ones. Deputies will probably have seen evidence of this in certain divisions within the credit union sector.
I certainly accept that there is a fair degree of competition for deposit moneys and business, which is good. The retail banks are in competition with each other and the credit unions. The latter are very good players in one segment of the market, and I would expect that, if the banks were doing their job, they would be eyeing business that they should get. That competition has been good for everyone, and credit unions have played a vital part. However, there are very large credit unions. I believe I read last year that there was approximately €8 billion in credit union deposits in Ireland. That is not a small sum. Some of the credit unions are quite large players.
I believe in good but not oppressive regulation in the sector, though one should not be bureaucratic in any area, something the European Union is learning. The Irish, the Luxembourgeois, the Dutch and the British are jointly sponsoring an initiative for the next Presidency for less regulation in the European Union. I do not believe in excessive regulation or red tape but there should be good and proper regulation. I, therefore, deemed it appropriate, in setting up this structure, that the credit unions should come under it. In the previous Act we recognised their ethos.
There was a separate registrar of credit unions but one must at all times be very conscious of the obligation to have good practice and proper regulation. Credit unions have nothing to fear but the authorities and I would be failing in our duty if we did not have proper procedures. Their special role is recognised, and it is appreciated that they do enormous good in Irish life. They are a diverse body of people; the credit union movement is sometimes fractious because of different sizes, responsibilities and so on. That is the reason we are trying to have an umbrella organisation to deal with matters properly. I must reject the amendment.
What is being sought is in no way special treatment. The Minister's suggestion that we somehow regard credit unions as above the law or believe the law should not apply to them is both contentious and misleading. It is not an attempt to create a situation where credit unions would not be obliged to exhibit probity or observe all the other requirements. We are trying to ensure the approach taken to them in enforcement bears in mind the nature of the resources available to them in order that one does not expect the same of, or come down in the same way on, a volunteer as one would on a financial institution with enormous resources, financial backup and accountants.
In the Bill I see no effort by the Minister to recognise proportionality in the approach to prosecuting failings in financial institutions. Clearly, if one is running a credit union with volunteers, failings of one sort or another are more likely. We want to see a proportionate enforcement approach and that the proceedings that would be used to hear a case of misdemeanour regarding credit unions would also take account of the lesser resources. I know that the Minister is hoping the board will conduct its proceedings, as he says himself, with as much expedition and little formality as possible. However, those before it are entitled to be assisted and represented by legal practitioners and others. Some will go before it with an army of accountants, auditors and advisers to defend themselves, while others will not. That is the reason there is a desire on the part of the sponsors of the amendments to see that the body hearing cases is familiar with the procedures of credit unions and the ethos of the movement and that it takes a proper, proportionate approach to enforcement. We are not trying to avoid enforcement for credit unions but get a reasonable regime that is sensitive to their needs.
If the Minister can convince me that he will make other amendments later in the Bill to show that the procedures and penalties will take account of the nature of credit unions and the sorts of people who might come before the panel on enforcement proceedings, we may be able to agree. However, I have not heard him flag any amendment that he hopes will ensure the system is fair to such bodies.
I am very disappointed that the Minister is taking what is effectively a punitive attitude towards credit unions. As I said, the sanctions provided for are very onerous. In the context of the credit unions being mutual, not-for-profit organisations, the regulatory regime will constitute a significant threat to them. Taking community based credit unions into account, particularly those in small or poor and disadvantaged communities, the Minister is proposing a very onerous regime for their directors — the kinds of people Fianna Fáil once aimed to represent. It is very bad of the Minister to introduce such a punitive regime, particularly in the context of his long amendment later in the Bill regarding the conditions that will be imposed on credit unions for loans and notice to members. He is not imposing such a regime on the banks.
I have no problem in principle with imposing strict conditions on credit unions in advising their members of terms and so on. However, under the terms of amendment No. 117 in the name of the Minister, if they fail to meet very detailed and onerous requirements, they will be guilty of an offence. That offence could relate to a failure to detail everything regarding the APR, interest penalties and so on in writing or any charges that, although not included in the calculation of the APR, must be paid by the member in specified circumstances. The banks' big moan is that the credit unions argue that they provide cheaper financial services but that, if calculated in a particular way, those services might not appear as cheap.
Amendment No. 117 is another rod with which to beat the credit union movement. If credit unions do not meet the new regime in every respect, they will be guilty of an offence which will draw down on them the full sanctions framework envisaged in section 8. Whoever composed it did a neat bit of footwork to place another burden on the credit unions. The Minister's attitude is penal. I am all in favour of the credit unions being properly regulated but they are not the same as profit-making banking institutions. In amendment No. 117 the Minister is imposing on them requirements not imposed on the banks, insurance brokers and others who have a much stronger reputation over a long period for dealing harshly with customers, giving them a bad deal and in many cases ripping them off, yet he reserves all of his detailed regulations and penalties for the credit union movement. If he has his way it will be a disappearing one.
What needs to be focused on is the fact that one cannot say a voluntary director of a local credit union who could be held accountable for breaches of regulations and face penalties accordingly will be treated on a par with his counterpart in a bank or other financial institution which operates for profit. The people concerned are in full-time permanent and pensionable employment and receive a high level of remuneration. The penalties apply to the individual as well as the institution. We talked about the difficulty the Government had in attracting people to serve on State boards etc.
The Minister could create a scare in terms of the role of the voluntary director within a credit union, a not-for-profit organisation which has built its success on service, not return. There is an enormous difference and nobody is arguing that regulations should not apply. Nobody would argue that a breach was more acceptable in one institution rather than another. It is a question of how one addresses the unique and special character of the trade union movement and how one deals with breaches. To lump the two together is a mistake.
The Minister did not refer to the credit unions' first choice — a dedicated sanctions panel. While there is not a specific amendment to this effect, will he agree the case being presented by members of the committee is valid and concede that there must be a special provision to address breaches of regulations in the credit union movement? Will he indicate his view on the proposition of a dedicated credit union sanctions panel as against the regulatory authority sanctions panel being provided for in the legislation? Without repeating the reasons articulated by my colleagues, this is something that stands on its merits and, therefore, merits his acceptance. I appeal to him to so respond.
I regret the impression is being given that the Bill penalises the volunteer. I stress to members of the committee that what it is trying to do is to put a proper regime in place for organisations which handle people's money. There is a responsibility on those in charge of other people's money to act in a particular manner. Even if one is the honorary treasurer of the local tennis or football club, there are certain responsibilities one must automatically take on board. When one is dealing with a credit union, regardless of whether it is large or small, one is dealing with a great deal of money, in some instances, the only savings of an individual for whom loans may be involved. Certain standards, therefore, must be applied. There has to be regulation.
I am afraid I cannot go along with the argument that all types of special deals must be put in place as regards the credit union movement. We recognise their special place in the Bill. I cannot accept, however, that there should be special panels just to deal with them, as if nobody else understands the issue. It is understood when one is dealing with other people's money that one must act responsibly. That is all we are asking them to do. There must be transparency.
The amendment was described as a rod with which to beat the credit unions. It is not. The credit unions have grown and will continue to grow in competition with all of the other entities. The bigger they become and the greater the resources under their control the more responsible those charged by the movement to look after their affairs will have to be. The regulatory authority must act in this fashion. Some of those involved in the credit union movement appear to suffer from a persecution complex as if everyone was out to get them but that is not the case.
No one is arguing that a case can made to dismiss or excuse breaches of regulations as regards best practice and conduct in caring for other people's money. Unquestionably, the issue relates to the special position of individual directors of credit unions who act in a voluntary capacity, some of whom put in up to 20 hours a week. Many are older retired people who built expertise during their own careers, yet they are being required to face potential penalties that may apply should there be inadvertent breaches of the regulations. I have a difficulty in understanding how they can be painted in the same picture as those working for significant returns and with full awareness. A special case can be made.
A vote has been called in the Dáil.
Rather than concentrating on the issue of non-compliance with regulations the Minister should look at the reality of the voluntary director's role. That is the case members are making. I ask the Minister to reconsider.
The sitting is now suspended. We had agreed to suspend at 5.15 p.m. and return at 6 p.m. until 8.30 p.m. I advise members I will be unable to attend after 6 p.m. As the vice-chairman is unavoidably absent, I propose that Deputy Nolan chair the meeting from 6 p.m. onwards. Is that agreed? Agreed.
We are resuming on amendment No. 10.
I move amendment No. 10:
In page 13, between lines 32 and 33, to insert the following:
"33AO.—(a) The Regulatory Authority shall be responsible for the regulation of non-deposit taking financial institutions. The Minister will draw up a licensing scheme for non-deposit financial institutions and lenders.
(b) The Regulatory Authority shall be responsible for monitoring surcharges levied by credit institutions for the provision of services to customers.”.
One of the recommendations made by Free Legal Advice Centres when the heads of the (No. 2) Bill were circulated for consultation related to non-deposit taking financial institutions to the effect that they should require a licence for loans secured on the principal private residence. That is a recommendation of the McDowell report. This has been called for consistently by the Director of Consumer Affairs and organisations working with people in debt. As it is surprising that this provision has not been included in the Bill, I have sought to include it in the section that establishes the sanctions committee.
The second element of the amendment relates to monitoring surcharges levied by credit institutions for the provision of services for customers. The first Bill transferred from the Consumer Credit Act the ability of the IFSRA to monitor charges for services but appears to be uncertain with regard to penalty clauses in that financial institutions seem to be able to levy with impunity in the repayment of loans. Several bodies have called for this uncertainty to be cleared up by definitely providing in the Bill that a responsibility of the regulatory authority and, subsequently, the sanctions committee should be to recognise that charges, other than charges for services, are levied by financial institutions and that these penal charges should be monitored. There is a need for clarity in the Bill to cover such charges.
I support the amendment. These operators are non-status lenders. They offer consolidated loans with severe high rates and surcharges. There is no monitoring or licensing of their operations and they can effectively charge usurious rates. There is no power to monitor their surcharges, approve them or even challenge whether they should be allowed to continue. What is being sought is that the Minister would at least give a commitment that this is a sector which he believes ought to be regulated in some fashion.
I support the amendment and presume it relates to the moneylending sector, be it registered or non-registered. I note the use of the word "institutions". This could be interpreted in its broadest sense because it could be institutions of individuals, which is what applies in some of the cases that are current. The Minister referred to this sector on a previous amendment. I will defer further comment until I hear his response.
The amendment is reasonable. It would give protection to poor and sometimes vulnerable people. If the Minister cannot accept it now, I hope he will agree to come back on Report Stage with an equivalent wording that respects the spirit of the amendment.
The amendment addresses two broad issues — the regulation of non-deposit taking financial institutions and the monitoring of surcharges levied by credit institutions. I assume the Deputy's intention was to stimulate debate because his proposed amendment would not suffice to introduce such major policy changes.
On the first issue, I refer the Deputy to the Government's recently launched regulatory reform programme which sets out the general principle that regulation should have proper justification and be proportionate to the objective sought. The amendment fails to address the question of the reason there should be regulation of non-deposit taking financial institutions and lenders. Unlike deposit taking institutions, customer funds are not at risk. In their lending activity, financial institutions are subject to the terms of the Consumer Credit Act. I have provided separately in the Bill for an extension of the application of that Act to all lenders who provide funds on the security of a family home. The objective is clear, to provide a degree of protection for the borrower in respect of a core family asset, the family home. I have also inserted a provision in the Act to allow for an extension of its provisions to non-personal consumers.
With regard to lending in general, our laws do not interfere with the freedom of the lender and borrower to agree an appropriate rate of interest. The Consumer Credit Act provides for a limited degree of oversight of bank charges other than interest rates but it is only in the extreme case of moneylenders who charge in excess of a specified rate of interest that a limited regulatory regime for interest rates is provided for in the Act which otherwise focuses on the framework within which lending takes place, providing for protection of the consumer in matters such as advertising and the content of credit agreements.
I readily accept that we need to keep under review the appropriate balance between commercial freedom and protection of consumers. The Consumer Director, for example, is examining the case for making it easier for a consumer to use section 47 of the Act which provides for a right of appeal to the Circuit Court with regard to excessive cost of credit. The new consumer credit directive, if approved by the Council and Parliament, will impose an obligation on lenders to lend responsibly. Separately, the Competition Authority is examining the degree to which consumers are benefiting from real competition in the banking sector.
While I cannot accept the amendment for the reasons stated, I will continue to keep this area under review, taking account of advice from the Consumer Director, consumers and developments at EU level.
I accept the Minister's comments about the broadness of what is being suggested in both areas. I had hoped, however, that he might take into account in this Bill the problems that arise in both instances. It is not just about individual moneylenders, even though they would be covered by the amendment. I cited the example on Second Stage of a woman who had received a business loan through a merchant bank. She paid a large proportion of the loan off but it went into arrears which deepened because of severe default charges. The security on the loan, a family property, was sold. It was greater than the amount still owing and the bank foreclosed on the business. It took the family security, even though it had already received a large amount in payment from the individual. There is a need for regulation in this area. We are not talking about Shylocks but about respected credit institutions. In that context, I was hopeful the Minister would recognise that the problem is evident to an unacceptable level and that there is a need, through legislation such as this, to monitor it properly.
Will the Minister clarify his response? As I understood it, these were groups which were effectively charging moneylender type charges on the security of the property. My recollection of the Consumer Credit Act is that it only provides for a cooling off period and a clear statement of the terms of the agreement. Perhaps I do not know enough about these financial instruments but if the argument is that some of the rates are moneylender type rates, will the Minister consider that the moneylender exception of control, where there is a cap, ought to apply or is he saying these are within the general margins of other financial institutions and there is nothing exceptional about the surcharges or the default agreements? There ought to be some protection against extremely unreasonable default arrangements or surcharges rather than have them simply stated in a contract that somebody signs.
If it is lending to personal consumers at a rate in excess of 23%, it falls within the moneylending regulations. If it is other lending of a commercial nature, it is strictly a matter between the lender and the borrower. The antidote to most of the things that Deputy Bruton has mentioned is competition, so that a consumer can go from one company to another. The market has changed dramatically during our time in Leinster House. I never thought I would see the day where lending institutions would be sending notes in the post every week or two offering loans. At this stage, they are nearly climbing over the counter to meet people in the street to give them money and if they do not do it, there are people down the street who will. People behind the counter ask me if I am satisfied with all the services they are offering, but there was a time when one would be afraid to turn up at a bank. That has been brought about by competition.
Why is the Minister taking this negative attitude to Deputy Boyle's amendment, given his own amendment No. 117 concerning credit unions? This amendment seeks to correctly impose conditions on information that the credit unions ought to give their members. It requires them to provide the clearest information. These are set out in the amendment and include:
(i) any charges that, although not included in the calculation of the APR, must be paid by the member in specified circumstances; (j) the date on which the loan expires; (k) the manner in which the member can terminate the agreement before the final repayment instalment is payable and the cost to the member of terminating the agreement; (l) any cost or penalty that the member may incur for failing to comply with the agreement.
Is this appropriate for credit unions, which certainly do not set out to exploit people? They may suffer from inefficiency and may occasionally suffer from a rogue member or officer but, by and large, credit unions set out to give a mutual-based service.
The Minister has set out detailed obligations with which they must comply in order to provide any loan to any member. It must be remembered that many credit union loans are for less than €500, yet the Minister has set out seven pages of detailed regulations governing every loan to any member of a credit union. Why does he take that attitude to credit unions — whose social, not-for-profit ethos he acknowledged earlier — while not accepting a point that is made about for-profit institutions, such as illegal money lenders and certain types of loan agency? If one defaults in paying such people, one may not suffer the traditional threat of having one's legs broken, but one will certainly risk going into hock way over one's head. The Minister will be aware of such cases. I have dealt with many of them and perhaps he has also. If a debt is not paid to a financial institution in time, the responsibility for collecting it may be passed on to an agency. Then the penalties and charges start to mount incredibly rapidly to the point where people find they are in debt way over their heads.
Deputy Boyle's amendment is reasonable. If the Minister examined his own amendment No. 117 and, in that context, applied some of those rules to the for-profit financial services sector, we might get some equity. The Minister has outlined the points he feels are appropriate to credit unions, but how much more appropriate would they be to the kind of institutions to which Deputy Boyle has referred? I would like an answer from the Minister as to why the regime that is appropriate for credit unions, with their social ethos, cannot be applied to the institutions that Deputy Boyle is talking about.
Deputy Boyle's amendment aims to make the regulatory authority responsible for the regulation of these non-deposit-taking financial institutions. As I pointed out in my reply, these institutions do not take any deposits so why should they be under the control of the regulatory authority? Regarding their lending activities, these financial institutions are subject to the terms of the Consumer Credit Act. I have made a significant change here. Separately in the Bill, there is an extension of the application of the Consumer Credit Act to all lenders who provide funds on the security of a family home. I considered it necessary to do that because the family home is the biggest asset that most people have. I have also inserted a provision in that Act to allow for the extension of its provisions to non-personal customers.
An amendment to the Credit Union Act is the preferred solution because this was also the preferred solution of credit unions and it was done in full consultation with them. The other, easier alternative would have been to remove the exemption of credit unions from the consumer credit directive, but the credit unions did not want that. This particular change was made after consultation with the credit unions. Their position was that in light of the extension of the consumer credit directive——
To save time, I am not objecting to this being applied to credit unions. I am asking whether the Minister can apply the same approach he has adopted to the not-for-profit sector to the type of institutions to which Deputy is referring. It would be perfectly acceptable for the Minister to come back to us on Report Stage. We do not expect him to propose an amendment straight away.
No, I will not do that in any event. I do not see why I am being asked to regulate these non-deposit-taking financial institutions, although their lending activity comes within the terms of the Consumer Credit Act.
The McDowell report recommended this and it was included in the heads of the Bill that were circulated for consultation. Something has happened between the McDowell report, the circulation of the heads of the Bill and the publication of the Bill that has made this decision effective. Why is it not in the Bill now when it was thought necessary by the McDowell report and was included as part of the consultation process in the heads of the Bill?
It was because we concluded that the McDowell report was about the security of the family home, and I am providing for that.
Is the Deputy pressing the amendment?
Amendments Nos. 11 and 12 have been deemed to be out of order.
I wish to record my objection to the refusal to accept both these amendments. The Standing Sub-committee on Dáil Reform should consider the fact that Opposition Deputies are precluded from offering substantive amendments on the spurious argument of an additional charge on the Revenue. That is something that needs to be visited. It was exercised today concerning the Aer Lingus Bill against a Labour Party amendment and here it is being exercised against my reasonable proposition that should have been taken and discussed in its own right. I strongly object to both amendments being deemed to be out of order.
That would require a change to the Constitution. As I recall, only the Government can levy a charge on the people.
I do not believe that is the reality. There should be no mistake, in terms of the make-up of the committee or the House, that the Opposition would not have the wherewithal to impose its will on such matters. It would first have to be accepted and embraced by the Government; that is the only way it could proceed. The Minister's point does not hold water. The validity of the argument or proposition made by the Opposition Member is what matter. If it is accepted on its merit, that is, if it has sustained itself in debate, it should be adopted. I am prevented from even making the argument by virtue of this ruling. I would have hoped that the Minister would have accepted and understood that. This is a deficiency in the code of practice in the Houses.
I move amendment No. 13:
In page 13, line 40, after "Panel" to insert the following:
"who shall in the case of an allegation against a Credit Union be persons who are knowledgeable of the operations and ethos of Credit Unions".
Amendments Nos. 14, 17 and 18 are related and may be discussed together by agreement.
I move amendment No. 14:
In page 13, line 40, after "Panel" to insert the following:
", at least one of whom is a person other than an eligible person under subsection (3)(a) and (3)(b) below”.
This amendment again involves the panel that will investigate these misdemeanours. It suggests that at least one member of the panel investigating any particular case should not be a member of the IFSRA and should be independent. Perhaps this is already implicit, but the amendment would make it explicit.
I want the Minister to acknowledge consumer organisations. Amendment No. 17 seeks to ensure that they will be represented, as of right. I spoke about this matter earlier. The Bill is largely to be welcomed because it affords additional safeguards to consumers. However, it comes wrapped in the mantle of the Central Bank which is dominated by an approach which essentially looks to the prudential side of banking rather than to the consumer service side. Consumer organisations such as the Consumers Association of Ireland, the Society of St. Vincent de Paul, particularly those members of it, Professor John Monaghan and others, who have made a number of statements in respect of people falling into debt, MABS and the credit union movement, especially in respect of its work with MABS, have given valuable service to consumers. It is a grave mistake on the part of the Minister not to include, as of necessity, representatives of consumers.
The Minister stated earlier that he cannot find suitable women to serve on boards. Unless some direction is given, it may be extremely difficult for the Department of Finance, the Central Bank and the IFSRA to find consumers who will serve on the panel. Numbers of such people would knock one down in the street outside the Central Bank, but there will probably be grave difficulty in finding appropriate representatives of consumer organisations.
The Government, the Minister's party and my party have long championed the notion of social partnership. While the latter has downsides, it has, on the whole, been beneficial for society. The Minister should acknowledge that consumer organisations have an important social partnership role to play in respect of particular features of our society. They ought to be represented on the panel and that is the purpose of the Labour Party amendment.
The principle is established through each of these amendments and it is merely a question accepting one or more of them. Amendment No. 18 in my name is probably the weakest of the three in that it refers to a person who has "expertise in consumer protection advocacy". The other amendments refer to such expertise and to experience in the field of financial services. Persons with both might be difficult to find because it is rare that the twain meet. The Minister should give consideration to including on the panel people with backgrounds in consumer advocacy and consumer protection. This matter was at the heart of the debate on the original legislation and is what the Bill is meant to address. To not include such a designation would be to undermine the hope of consumer organisations that the Bill can meet their concerns.
I support the thrust of the three amendments. We addressed earlier the issues of consumer awareness and consumer representation in terms of this legislation. The need to ensure advocacy within the panel is very important and I await the Minister's reply.
As already indicated, I am bringing forward major amendments to this section in order to address concerns about the constitutionality of its provisions. I cannot say at present if a sanctions panel will be part of the sanctioning procedure. The McDowell report recommendation in this area did not envisage such a panel but rather the direct imposition of sanctions by the regulatory authority. Against this background, I am not willing to accept an amendment that would oblige the regulatory authority in every case to include an outside expert in a board adjudicating on a particular complaint.
I am, however, sympathetic to the objective of amendments Nos. 17 and 18 from Deputies Burton and Boyle, which seek to widen the pool of potential outside experts to people with consumer backgrounds. I am willing to consider bringing forward an appropriate amendment in this area on Report Stage.
The Minister is not accepting amendment No. 14. Will he explain the position more clearly? An outside expert could, for example, be a judge.
I am not accepting the Deputy's amendment because, at this stage, I am not sure whether there will be a sanctions panel. I am taking legal advice in respect of the matter. There is no point accepting an amendment if we do not proceed with our intentions in this area. That is the main reason for not accepting this amendment. If amendments Nos. 17 and 18 are withdrawn, I will consider bringing forward an appropriate amendment on Report Stage to address the points made by Deputies Burton and Boyle.
I move amendment No. 15:
In page 13, line 40, after "Panel" to insert the following:
", and in any matter concerning a credit union, at least one of these members shall be a person with knowledge and practical experience of credit unions".
I move amendment No. 16:
In page 13, line 40, after "Panel." to insert the following:
"Three members of the Panel shall be appointed on the basis of their knowledge of and expertise in Credit Union matters.".
It is not acceptable that we would allow for the make up of a panel that would not have an awareness of and appreciation of the ethos of the credit unions. I intend to press the amendment.
- Boyle, Dan.
- Bruton, Richard.
- Burton, Joan.
- O Caoláin, Caoimhghín.
- Cregan, John.
- Curran, John.
- Kelleher, Billy.
- McCreevy, Charlie.
- Moynihan, Donal.
- Nolan, M. J.
- O’Connor, Charlie.
I move amendment No. 17:
In page 14, line 2, after "in" to insert "consumer protection (including by virtue of participation in consumer organisations),".
I move amendment No. 18:
In page 14, line 6, after "providers" to insert ", or have expertise in consumer protection advocacy".
In view of what the Minister has said, I will withdraw the amendment, but I will resubmit it on Report Stage as a fail-safe mechanism.
I move amendment No. 19:
In page 14, line 24, after "allegation." to insert the following:
"The Regulatory Authority shall have due regard for upholding the public interest in the expeditious execution of proceedings.".
The amendment is self-explanatory. It is a statement of intent on how the authorities should proceed having due cognisance to the public interest.
While I share the intention behind the Deputy's amendment, I am not sure that, as drafted, it is of practical value. One must also bear in mind the duty of the authority who act fairly in considering the imposition of a sanction. I do not propose to accept the amendment at this stage. The avoidance of a due delay can be accommodated through the amendments already announced for Report Stage.
I am trying to work out the distinction between acting fairly and not acting in the public interest, but I am sure it exists. While I accept what the Minister has said, I will resubmit an amendment on Report Stage.
Amendments Nos. 20 to 23, inclusive, are cognate and will be discussed together.
I move amendment No. 20:
In page 18, line 20, after "oath" to insert "or affirmation".
The purpose of the amendment is to provide for affirmation as well as for oath. The Oaths Act allows an affirmation applying to administrative matters. It states that it only applies to a proceedings. The Interpretation Act 1937 does not apply. It only applies to a person entitled to affirm. My amendment seeks to provide for an oath or affirmation to ensure that the legislation addresses this requirement.
I am positively disposed towards the amendments and willing to bring forward a suitably worded text on Report Stage.
I reserve the right to reintroduce the amendment if the Minister does not bring forward the wording.
Amendment No. 25 is an alternate to amendment No. 24, therefore, amendments 24 and 25 will be discussed together.
I move amendment No. 24:
In page 19, to delete lines 34 to 41 and substitute the following:
"(i) if the financial service provider is a body corporate or an unincorporated body, an amount not exceeding whichever of the following amounts is the greater, namely €5,000,000 or 10 per cent of the turnover (or profits) of the undertaking in the financial year ending in the 12 months prior to the decision of the board, or
(ii) if the financial service provider is a natural person, an amount not exceeding whichever of the following amounts is the greater, namely €5,000,000 or 10 per cent of the turnover (or profits) of the individual in the financial year ending in the 12 months prior to the decision of the Board, or
(iii) if the regulations prescribe some other amount for paragraph (a) or (b), that other amount.”.
The amendment attempts to strengthen the provisions in the Bill. It was recommended that this change be made on the issue of sanctions against financial services providers in regard to the scale and proportionality of the sanctions. I note that Deputy Burton has an alternative wording. It takes due cognisance of the size of the sanction in regard to turnover and the period to which such sanctions might apply.
The amendment seeks to ensure that the sanctions proposal is constitutional. The Minister said he is already getting advice from the Attorney General in regard to the constitutionality of the sanctions proposals and is bringing forward alternatives on Report Stage. The legal advice available to me indicated that the Minister would be on much safer ground if he were to have the €5 million or 10% format because, as he said, the sanctions panel must act with a degree of justice and fairness. The legal advice appears to indicate that for some organisations the level of the €5 million fine would be completely destructive, whereas the 10% formula would allow it to be applied to organisations, no matter how small. It is also appropriate in the context of the earlier debate on credit unions.
The purpose of the subsection the Deputy seeks to amend is to put an absolute upper limit on the financial penalties that can be imposed on financial services providers. Within that limit, the sanctions panel can impose whatever penalty it judges appropriate. It would be reasonable for the panel to have regard to the capacity of the financial institutions to pay the penalty. Furthermore, subsection (6) provides that the penalty may not be such as would be likely to cause financial services providers to cease business.
I see no particular merit in laying down an alternative maximum based on turnover since this could easily be a matter of dispute. I do not, therefore, propose to accept the amendments.
I move amendment No. 25:
In page 19, line 36, after "€500,000" to insert "or 10 per cent of the person's actual or estimated turnover in the immediately preceding year, whichever is less".
I expect to introduce amendments to section 10 on Report Stage. These amendments arise from advice from the Attorney General that the provisions as drafted could be subject to legal challenge. The amendments are likely to focus on the extent of the ombudsman's power to award compensation and the possible involvement of the courts in certain circumstances.
I move amendment No. 26:
In page 26, between lines 31 and 32, to insert the following:
"(iii) to provide reports on the experience of his/her office and the climate for consumers in the Financial Services Sector which would better inform policy makers within and outside the Authority of the position of consumers;".
The amendment proposes that the financial services ombudsman would to some degree have powers like the general ombudsman, namely, to advise the Dáil of cases that come to his or her notice, specifically where there has not been compliance from the authorities concerned, so that it is alerted to policy makers that this is a problem. We ought to give the financial services ombudsman a similar general capacity to comment on what is happening in the sector and to advise policy makers, some of whom would be within the authority, or the Minister or whoever.
I welcome the Minister's plans for Report Stage. Perhaps we could get advance notice of the changes he will make. I understand that one of the innovations of this is that the financial services ombudsman would have powers to compel people to abide by his rulings. The Minister appears to suggest this is open to challenge and recourse to the courts. It is important that binding decisions emerge. Subject to the legal protections, we should continue to give the financial services ombudsman the capacity to make binding decisions.
I support the thrust of the Deputy's amendment and I intend to introduce an appropriately drafted amendment on Report Stage.
Amendments Nos. 27, 28, 31, 33 and 35 to 40, inclusive, are related. Amendments Nos. 36 and 37 are alternates to amendment No. 35. All these amendments may be discussed together, by agreement.
I move amendment No. 27:
In page 27, line 2, after "persons" to insert "(a majority of whom shall be consumer representatives)".
The purpose of this amendment is to ensure that the legislation serves the interests of consumers and is not turned into something which is under the control of the industry itself. We have already had discussions about consumer representation. The equivalent legislation in the UK ensures that consumers and consumer interests, and not the banks and financial services industry interest, predominate in the make-up of the board there.
When IFSRA was established and the board of the Central Bank was reformed the Minister stuffed the boards of the Central Bank and IFSRA with representatives of the banking and financial services industry. This was with the sole exception of the woman appointee to whom the Minister referred and who, I am told, also wears a consumer hat, in the sense that, like the rest of us, she buys her messages, uses the supermarket and so on. That should not have happened. The Minister now has an opportunity to redeem the situation somewhat and to show that the purpose of this Bill is to protect consumers' interests.
The IAASA legislation, regulating accountants and auditors went through the Dáil recently and I am sure the Minister will recall the high dudgeon exercised by accountants at the insufficient representation of the accountancy profession on that board. Accountants were granted some representation but nothing like what they sought, nor should they have been. These amendments will strengthen the Minister's hand. If the industry demands that it control the board the Minister will be in a position to refuse that demand and to argue that because the purpose of the legislation is consumer protection the majority of board members will represent consumer interests. I have already given the Minister certain categories which would act well in this regard.
Is action to be taken against certain anti-consumer practices? In most cases, if, for example, a mortgage holder becomes unemployed or there is an illness in his family, the mortgage holder, his financial adviser or public representative can make a case to the mortgage provider, have the loan rescheduled and the matter dealt with in a reasonable way. However, one building society has become fat and rich from fleecing people with hidden charges and costs once they fail to meet all the terms and conditions of their mortgage. Are these the kind of people who will dominate this structure or will it consist of representatives of consumers?
If the financial services ombudsperson is to do his or her job he or she must have a pro-consumer orientation. That includes the board and the panels. If the Minister agrees to this he will strengthen his own hand by telling the financial services industry and the banks to keep at a distance. The purpose of this Bill is not self-regulation but regulation in the interests of consumers. I strongly urge the Minister to accept this amendment. I hope he will accept it.
In this grouping, amendment No. 36 appears in my name. I note that the Minister and Deputy Boyle have adopted the same wording. The amendments propose that the words "other than the Chairperson" be inserted after "members". The Minister is acknowledging the importance of members other than the chairperson having knowledge or experience of consumer issues.
The other amendments seek to ensure a greater level of that knowledge and experience. I support the amendments presented by the other Deputies, while acknowledging that the Minister has mirrored my amendment.
We must remind ourselves that the critical focus of this Bill is consumer protection. The Bill must be in the consumer protection field. It is in the interest of the individual service user that all of this takes place. Therefore it is critically important that a balance is forged from the beginning. That can be done only in the context of weighting the make-up in favour of that awareness and knowledge.
I support the amendments of my colleagues while acknowledging, however, that the Minister has gone part of the way. I encourage him to emulate the other recommended formulae before him.
Amendment No. 31, which I propose, suggests a mechanism for not having the council membership dominated by representatives of the financial services industry. My amendment generously suggests a financial services representation of 50%. The Bill suggests a council membership of between five and ten, one of whom must represent consumer interests and one of whom must represent the interests of the financial services. This gives the Minister scope to appoint nine people from the financial services sector. There is a need for the provision suggested in amendment No. 31. A council of ten should have no more than five representatives of the financial services industry and a council of five should have no more than two. As Deputy Burton has cited, the UK body is weighted in favour of consumer interests. This legislation should encourage that.
Like Deputy Ó Caoláin and the Minister, I suggest, in amendment No. 37, that the words "other than the Chairperson" be inserted in line 7. I expect that will be accepted and I am pleased that is the case.
In amendment No. 39, I ask that the word, "protection" be included after "consumer" in line 9. This is an important qualifier. The Bill talks about consumer protection and we should use every opportunity to stress that within the text of the Bill.
My amendment is No. 28. It is self evident that the council should contain a majority of members who do not represent the industry in respect of which the ombudsman will make findings. The council should not be seen as the majority being dominated by the provider sector. Any majority should be in favour of the consumer.
I must confess that I do not recall the reason for tabling amendment No. 33 which raises questions regarding mortgage or insurance intermediaries. Perhaps the Minister will comment on whether the mortgage or insurance sector, which may be equally affected, should be separately represented on the council although not necessarily by a person from a representative body.
Some of the amendments are based on the misunderstanding of my intentions in terms of the ombudsman council. The idea of a council arose from the public consultation process on the Bill. Existing voluntary ombudsman schemes have such councils. There has been no objection to the principle of such a council.
The council will play an important role in setting out the detailed regulations governing the ombudsman scheme as well as appointing the ombudsman and deputy ombudsmen. My intention is to provide a broad balance between representatives of the financial services industry and consumer representatives and that the chairperson should have knowledge or experience of consumer issues. Given its central role, it is important that the council should have the confidence of consumers and of the financial services industry. The provisions for appointment of its members are drafted accordingly.
The Bill provides that the Minister must consult with the Minister for Enterprise, Trade and Employment and consumer and industry bodies before making appointments to the council. Amendment No. 35 is a redrafting of amendment No. 36 submitted by Deputy Ó Caoláin. It makes clear that at least one other member of the council apart from the chairperson must be from a consumer background. Amendment No. 38 specifies that at least one of the consumer members of the council must have knowledge or experience of consumer protection issues. This is important in view of the task facing the council and it addresses the points raised by Deputy Burton's amendment No. 40. I hope that, with this clarification, Deputies will agree to withdraw their amendments.
What is the Minister accepting?
I will not be writing into the Bill the status of people to be appointed but I would expect to include people from the particular organisations mentioned. It would be necessary to do so but I do not wish to include that in the Bill. I intend to consult widely with industry and consumer bodies. If Deputies wish to provide me with advice in that regard, I will gladly take it on board.
The Minister is, in amendment No. 38, accepting my amendment No. 40 and Deputy Boyle's amendment No. 39. He is changing it to state "consumer protection and other issues".
Yes. My amendment covers the point raised in the amendments tabled by Deputy Burton and Deputy Boyle. Amendment No. 35 is a redrafting of Deputy Ó Caoláin's amendment No. 36.
Will the Minister clarify why he says it does not matter who is in majority on the council?
The council idea grew from the consultation process. It is intended that the council will have a role in setting out the detailed regulations governing the ombudsman scheme and it will also be involved in appointing the ombudsman and deputy ombudsmen. I intend having a broad balance between representatives of the financial services industry and consumer representatives and providing that the chairperson should have knowledge or experience of consumer issues.
Is that consumer issues or consumer protection issues? We all have experience of consumer issues. It is consumer protection issues that are important.
I will take that point on board. Amendment No. 38 provides that at least one of the consumer members of the council must have experience of consumer protection issues. I would not like to be too prescriptive in relation to the chairman of the council.
The Minister has not answered my question on the balance of membership issue. If they are not proceeding by way of consensus, they are proceeding by way of vote and therefore the balance——
That is not the intention.
They will make appointments and will have to make definitive choices.
It will be broadly representative of the financial services industry and consumers. It is the best I can do.
I move amendment No. 30:
In page 27, line 3, after "decides" to insert ", and at least 2 of whom shall be women".
I move amendment No. 31:
In page 27, line 3, after "decides." to insert the following:
"The number of persons representing the financial services industry shall not be allowed to exceed 50 per cent of the Council membership.".
- Boyle, Dan.
- Bruton, Richard.
- Burton, Joan.
- Ó Caoláin, Caoimhghín
- Cregan, John.
- Fitzpatrick, Dermot.
- Kelleher, Billy.
- McCreevy, Charlie.
- McGuinness, John.
- Nolan, M. J.
- O’Flynn, Noel.
Amendments Nos. 34, 68, 69 and 84 and related to amendment No. 32 while amendment No. 69 is an alternative to amendment No. 68. Amendments Nos. 32, 34, 68, 69 and 84 may be discussed together by agreement.
I move amendment No. 32:
In page 27, lines 6 and 7, after "Employment" to insert the following:
"and after the advertising of the positions for application by individuals and after a process of independent short listing of applicants with suitable experience".
The purpose of this amendment and the related amendments is to provide that the members of the council and the panels would be selected by way of public advertising of the positions, allowing candidates to apply for the posts and for an independent short listing of the applicants. The Minister would then have a selection of candidates from the best available applicants. There is much to be recommended in this approach to the selection of members of State bodies generally and particularly for State bodies of this nature where we are seeking to represent the general consumer population and the financial services sector.
It has become part of an established pattern that an inside list exists and the Minister makes selections from that list. In my view that system is not producing the best people available. It is a system of selection that is past its sell-by date. The Minister should consider the public advertisement of these positions. It would result in a broadening of the talent base for selection and create public confidence in the selection process. The selection would then be from people who truly have the public interest at heart. That is not to suggest that the Minister would not select people who are eminently suitably qualified. Part of the merit of this selection process is that it be transparent, above board and designed to make the best possible selection.
I wish to emphasise the critical component parts of my amendment No. 34. The selection should be by open competition, which is publicly advertised. The interviews of short listed candidates should be based on published criteria of qualification. We have discussed this matter here frequently. It has also been raised with the Taoiseach on the floor of the House a number of times. As Deputy Bruton said, the Minister is not reaching out to the widest possible pool of people. We need to move to a point where we are open, transparent and free of any accusation or sense of cronyism. This can only be done by widening the circle from the very limited pool, which seems to be becoming more limited judging by the responses we are achieving particularly in attracting women to take such positions.
There will be at least 50 positions in the financial services ombudsman council, the consumer panel and the industry panel. The Minister has an opportunity, afforded by these amendments, to open the appointments in a fair transparent way. I am sure the Minister knows that consumer trust will be critically important in the establishment of the bodies arising from this legislation. Consumers' trust can only be secured if there is no sense of favouritism or party political patronage in such appointments, which should take place by public competitions that are publicly advertised. The criteria for qualification should also be advertised and the appointments made from a short list of the applicants who will unquestionably come forward. I commend amendment No. 34 and the thrust of the other amendments in this grouping.
I would support the thrust of these amendments. The responsibility of making up to 60 appointments, as provided for in the Bill, creates a challenge for the Minister. Earlier he said his Department finds it difficult to find suitable appointees. Much of this Bill is inspired by the financial regulatory framework in the United Kingdom where many appointments are now publicly advertised, whether they relate to the UK honours list or the appointment of a chair or director general of the BBC, both of which are extremely important jobs.
We live in the real world and we recognise that parties in Government may seek to appoint those with a sympathetic understanding of from where that party is coming. If appointments were made on this basis, equilibrium would be reached and people of all parties and none would be appointed to different boards and organisations from time to time. During the Minister's seven years, which has been one of the longest periods of any Minister for Finance, he has broken new ground in many areas. Given the number of appointments arising from this Bill, they should not be filled by ward heelers, who would damage both the status of politics and the credibility of the authority.
On Report Stage the Minister should introduce an amendment indicating he has decided on a process for appointment. The Department of Justice, Equality and Law Reform initiated a process whereby those wishing to be considered for judicial appointment can apply. While, unfortunately, the selections are still political, the sky has not fallen in. There is a process for those applying to TLAC. The Minister has nothing to lose and would add lustre to his reputation by introducing a more open process, especially given the problem he outlined earlier.
About six or seven weeks ago, Michael Buckley of AIB launched a major study by the organisation representing the interests of businesswomen. The study showed that women only comprised 5% of appointments to boards in the banking sector. In launching the report, Mr. Buckley had the grace to say that since his bank, along with a number of other financial institutions with which he was associated, had attempted to get more women, they had found it hugely useful and developmental from a business point of view. The Minister would not regret taking such a step and would find a good selection of people available for appointment. This would help to ensure he had quality representative women, which he indicated is a problem for his Department.
I do not accept an open competition method of recruitment would be suitable for the ombudsman council or the consumer or industry panels. In the case of the ombudsman council, it is necessary to ensure an appropriate balance between industry and consumer representatives. As required by this Bill, I will consult the Minister for Enterprise, Trade and Employment when making the appointments. I also intend consulting industry and consumer representative groups. In the case of the panels, the Bill obliges me to consult the Minister for Enterprise, Trade and Employment and in the case of the industry panel the Taoiseach because of the close involvement of his Department with the international financial services sector. The Bill also obliges me to consult industry and consumer representative groups. These methods of selection are the most appropriate in the circumstances and I cannot accept the amendments.
As I must appoint a large number of people to these panels, I might consider placing advertisements seeking expressions of interest to serve on these boards. However, I will not have open public recruitment competitions, as would be the case for a Civil Service or local authority posting. Some people might be less willing to apply if they thought their names would get into the public domain in the event of them not being selected. I will have to consider this in the context of the Freedom of Information Act. While I might seek expressions of interest, appointments will occur on the basis outlined in the Bill.
I have taken a fairly liberal approach to appointments under my direct remit and have appointed people of all political parties and none. Having been criticised by some of my party colleagues for taking that approach, I do not have a problem with it. Having said that, membership of a political party should not debar anybody from being appointed to a board or authority. I do not accept the notion, which seems to have developed, that if one is associated with or supports a political party, one should be automatically debarred from appointment to any position. The criticism in this regard appears to apply only to people associated with my political party and does not appear to apply when other parties are in power given that they appear to be able to appoint anybody they wish and nobody seems to comment. I place that on the record as I have done in the past.
My amendment does not envisage that the appointments be made from the short list. It would, as the Minister stated, entail the submission of expressions of interest, from which a short list would be drawn up. The Minister would then have some discretion in terms of selecting from it.
No, the Minister would have total discretion as set out in the Bill. I might decide to seek expressions of interest from interested parties just to see them without compiling a short list from it. I could then make my decisions in line with the consultation process, as outlined in the Bill, which advises that I consult the Minister for Enterprise, Trade and Employment in some instances and the Taoiseach in others.
The Minister appears to be indicating that he will take a progressive view on this issue and will attempt to broaden the pool by having expressions of interest. He appears to be worried, however, that a successor Government will want to appoint party hacks and so forth. Will he protect against that possibility by including in the legislation a provision to obtain expressions of interest from which, following examination, a short list of people with suitable experience would be drawn up and the appointees selected? In doing so, he would not only take a virtuous approach, but also ensure that his successor would take an equally virtuous line.
I am not changing the powers available to the Minister in this regard, either for me or future Ministers for Finance. As I stated, I may consider advertising in suitable newspapers and journals for people who might be interested in this particular type of activity and see what emerges, but the people who will be appointed will not be confined to the people who apply.
I have listened with interest to the Minister's reply. Some progress could be made if he is suggesting, as he appears to be, that he would give public notice of his interest in possible appointees' names for consideration.
I would not, however, exclusively confine myself to the people who would respond to such an advertisement.
That is fair enough. Nevertheless, the Minister would be giving public notice, which is important.
I will consider it.
That is an important development because the position heretofore has been that this process largely has not taken place in the public domain. This is the main contributory factor to the ever depreciating pool of people from which these and other appointments are and will be drawn.
I will also have to consider the possibility that some people may not apply if, following the appointment, the names of unsuccessful applicants will be released into the public domain. I have not considered the ramifications of the Freedom of Information Act in that regard, but it will bear on my thinking given that many matters are discoverable under the Act.
Again, in terms of public notice, a third party may suggest consideration of an individual.
Exactly, and I expect that in such circumstances some of the bodies cited in the area in question may indicate that some of their staff or members may be suitable candidates. I also intend to have that process.
To short circuit this discussion a little, I encourage the Minister to act as he has suggested in terms of giving public notice. It would be a significant improvement on the practice heretofore and I will await with interest to see how it works out in practice. That said, three of the amendments in this group of five are in my name. They are replications as they apply in three appropriate points in the Bill. The formula I have presented constitutes best practice in terms of open competition, public advertisements and interviews of short listed candidates based on the published criteria of qualification. Ultimately, this is the best approach and I strongly advocate it. That said, I recognise the Minister has indicated a willingness to take a significant step towards a greater level of public awareness, albeit one which is not yet fully transparent. I hope in time he will make the full journey.
The Minister's comments in this regard are helpful. Perhaps he will have a clearer idea by Report Stage. For example, it may be appropriate to contact organisations which could supply qualified people. Those active in management levels of the GAA who give considerable voluntary time come to mind as potentially appropriate persons to serve in some part of the structure. Such individuals may, for example, have a business background and have experience in a major organisation with many members, such as the GAA. Similarly, the National Women's Council of Ireland, which has been campaigning on issues connected with the participation of women on panels for a long time, would probably be able to supply a list of likely names without being partisan.
I share the Minister's view that membership of a political party should not in any way be a barrier to becoming a member of any board. The vast majority of members of all political parties became involved in them out of a sense of public interest and service. A small number have brought the notion of public service, allied to political party membership, into disrepute which is regrettable. Essentially, we should ensure that membership of one of the Government parties is not regarded, as is often the case, as asine qua non of serving on a board for those who are not civil servants in Ministers’ Departments.
We want suitable people with appropriate qualifications to do a public service job for a certain period, regardless of whether they are members of a political party. If such a rule came into force, members of all political parties would share positions over a ten year period. The notion that in the event of a Government changing hands, a certain set of people would leave boards to be replaced by a new set of people with particular allegiances would not serve anybody's interest in the long run. As I stated, important jobs which were formerly regarded as an exclusively political preserve are now advertised publicly in the United Kingdom. It is also open to the Minister to consider establishing a level of non-political, non-partisan balance to obtain the best Irish society has to offer. That would include the important consideration of the representation of women.
I welcome the Minister's positive statement. I am certainly anxious to co-operate in progressing a matter of this nature. It will be good for all of us.
As the Minister is willing to consider this matter, I will not press my amendment. I will raise it again on Report Stage. The Minister will be surprised by the quality of the people who come forward from the public advertisement. Excellent people will apply.
I move amendment No. 34:
In page 27, lines 6 and 7, after "Employment." to insert the following:
"Appointments shall be made from a short-list of candidates drawn up following an open competition, publicly advertised, and interviews of short-listed candidates based on published criteria of qualification.".
On the basis of the Minister's earlier comments, I will withdraw this amendment while reserving the option to reintroduce it on Report Stage.
I move amendment No. 35:
In page 27, line 7, after "members" to insert "(other than the Chairperson)".
I move amendment No. 38:
In page 27, line 8, after "of" to insert "consumer protection and other".
I move amendment No. 41:
In page 27, between lines 49 and 50, to insert the following:
"(f) to report to the Oireachtas any matter in relation to public policy or to legislation which it views as important to ensure an efficient, competitive and consumer oriented Financial Services Sector, and”.
This amendment deals with the functions of the council which the Minister has set out. I propose that we add an additional role whereby one of the council's functions will be to report to the Oireachtas on any matter of public policy or legislation which it considers important to ensuring an efficient, competitive and consumer-oriented financial services sector. The provision seeks to provide the council with the capacity not only to oversee the work of the financial services ombudsman, but also to present to the Oireachtas the knowledge it gains and suggest legislative amendments and initiatives.
The amendment does not take account of the existing provisions of the Bill which provide for extensive accountability to the Oireachtas for the ombudsman scheme. Section 57BH provides that the chairman of the council must appear on request before an Oireachtas committee and provide such information, including documents, as the committee specifies. Section 57BW imposes a similar obligation on the financial services ombudsman. There is also provision for publication of various reports by the ombudsman and for the laying of his or her strategic plan before the Houses of the Oireachtas.
Amendment No. 43 provides that I must lay the detailed regulations governing the ombudsman's scheme before the Houses and that either House can annul these regulations. The existing provisions of the Bill provide ample accountability to the Oireachtas, including, crucially, my accountability as Minister for the policy and legislation governing the ombudsman and, more generally, the financial services sector. I do not propose to accept Deputy Bruton's amendment.
This amendment was not tabled solely to address accountability. It seeks to ensure that the financial services council will be able to add value to the work of the Oireachtas. It would not simply be a matter of calling the chairman in for purposes of scrutiny. It would also allow the council to take initiatives where the development of financial services regulatory legislation has overlooked certain matters. The council would be able to give the benefit of its experience to us.
I was surprised at the absence from the list dealt with in Section 57BD of a provision whereby the council would create policy in the same way as a normal board. While it may create guidelines under which the ombudsman will operate, the council does not appear to have powers of direction or to create policy. It does not appear to have the general corporate powers a board usually has in other corporate organisations. Is that a specific and conscious restriction on the role of the council or does the Minister envisage it adopting policy positions?
The Bill is only setting out the framework for what the council should be able to do. The council itself will set the general guidelines and the manner in which it will operate.
Is it taking a power to direct the financial services ombudsman to pursue certain methods of operation?
In practice, yes.
I am not proposing a measure which solely addresses accountability. My proposal seeks to ensure that the council will inform our work.
The council will do that through its operations and by coming before the Oireachtas committee. There is no need to include a specific provision in the Bill.
It would be worth making this amendment.
I move amendment No. 42:
In page 28, line 15, after "providers" to insert the following:
", but the Council shall not impose any levies or fees until such time as the Consultative Industry Panel has been established pursuant to section 57DA of this Act".
We are establishing panels to examine policies, guidelines and regulatory rules and to advise on fees and levies. However, it does not seem to have been envisaged that there will be a need to ensure the fees are not imposed before the panel is established. Is that the result of an oversight in the legislation or must we impose this restriction to ensure it is not proceeded to set levies and charges until there has been an opportunity to consult?
This amendment appears to be based on a misunderstanding. The industry consultative panel has a consultative role on the levies imposed by the regulatory authority to fund its activities. It has no such role in respect of the levies to be imposed to fund the ombudsman. Since I envisage that approximately half the members of the ombudsman council will be from the financial services industry, there is sufficient industry input on levies and fees.
I move amendment No. 43:
In page 29, between lines 28 and 29, to insert the following:
"(4) As soon as practicable after the Minister has consented to regulations in accordance with subsection (3), the Council shall arrange to lay them before each House of the Oireachtas.
(5) A House of the Oireachtas may pass a resolution annulling regulations laid before the House in accordance with subsection (4), but only within 21 sitting days after they are laid.".
This amendment is designed to further strengthen the accountability of the ombudsman scheme to the Houses of the Oireachtas. It provides that the detailed regulations governing the scheme must be laid before the Houses and that each House has the right to annul them. The laying of the regulations before the Houses will take place after I have given my consent to them. Before giving such consent, I will consider carefully the impact of draft regulations on the treatment of customers of financial institutions in general. I consult with the financial regulators to this end.
I move amendment No. 44:
In page 30, line 48, after "adjudication." to insert the following:
"The Financial Services Ombudsman shall uphold the public interest by upholding the autonomy and independence of the Bureau from the financial services industry.".
As with another amendment I tabled, amendment No. 44 is proposed because it is important to strengthen the section and the Bill itself. There should be added emphasis on the references to public interest and the need to uphold the principle of the autonomy and independence of the bureau from the financial industry. It is self-explanatory.
While I have no objections to the sentiment behind this amendment, the provisions of this part of the Bill already ensure that the bureau will be clearly independent of the financial services industry. As the amendment will not add anything of substance to the Bill's existing provisions, I cannot accept it.
I have a question for the Minister which arises partly from this amendment as well as from a general point of principle. The Minister has created a structure in which everything is under the control of the Central Bank. That involved a political battle which was lost by the Minister's colleague, the Tánaiste, and the Department of Enterprise, Trade and Employment.
Under the structure envisaged in the Bill, the financial services ombudsman will come under the authority of the Central Bank. Unfortunately, the Minister has chosen structures which reflect a traditional, Central Bank and prudential point of view. We have grown weary of, and accustomed to, scandals such as Ansbacher, the non-resident deposit accounts, NIB and many others. Yesterday, the Minister indicated that on 28 March the Revenue Commissioners will launch a recovery programme targeting people with non-resident accounts in the North and elsewhere.
While people must be responsible for their financial decisions, nonetheless little old ladies and gentlemen did not go into banks in Carlow, Newbridge or elsewhere and set up non-resident or overseas deposits purely of their own volition. If another scam evolves or if people are charged — correctly — significant penalties by the Revenue Commissioners for not declaring tax, will the financial services ombudsman be able to take action against the banks and financial institutions which facilitated such practices? They did so in the past by supplying application forms and so forth? Even one of the Minister's former colleagues engaged in this practice because somebody in a bank provided him with an application form. This is a valid question in that, regardless of the personal responsibility of those involved, the banks share a large measure of responsibility, from which they have walked away scot free thus far. If, after 29 March, people find themselves facing substantial charges and penalties, will the financial services ombudsman seek redress from the financial institutions which placed such people in such a position?
The Central Bank saw none of these practices in the financial system and ran away in cases where it suspected them, fearing their exposure would undermine the stability of the system. What does the Minister expect from the financial services ombudsman? How will the person appointed be genuinely independent and on the side of ordinary people with a bank account?
I will quote a paragraph from the Consumers' Association of Ireland's letter to the Department of Finance following Second Stage. It states:
Moving forward, it will be important that the council of the Financial Services Ombudsman and the Ombudsman, its management and staff, remain entirely [at]arm’s length of industry. This is more a matter of ethics, but some consideration could be given to it in the formation of the Bill. It will be essential for the office to avoid becoming captive to industry from overfamiliarity with senior management and corporate hospitality.
This statement was issued after Second Stage, yet the section has not been amended by the Minister. I fail to see how the Bill provides the safeguards indicated by the Minister when those who are organised to represent consumer protection interests believe this section includes a flaw which needs to be remedied.
An ombudsman, by definition, must be a person of standing who is recognised by everybody in the area over which he or she adjudicates as a person of balance and fair judgment who is not captive of any particular sector. The person who will be appointed to this position must be regarded by everybody, consumers and financial services' interests, as a person encapsulating those qualities. It would be wrong if the person appointed to the job was seen to be a captive of either side. He or she must be recognised as representing balance, which is what an ombudsman generally is or should be.
When we appoint an ombudsman — this was the case with the procedure used to appoint the current Ombudsman, for example — I consult members of the Opposition to ensure that the person appointed is acceptable to all the parties in Leinster House. In appointing someone to this particular sphere, it is not necessary to include the amendment tabled by Deputy Boyle because it would imply that the person appointed would possess the qualities described in the amendment unless it was inserted in the legislation. The whole purpose of the ombudsman would be negatived if that were the case because the person who held the position would be regarded as a captive of one side or the other after a while and would be of no benefit to anybody as an ombudsman.
The ombudsman will not be under the control of the Central Bank. The office will have its own counsel, will levy fees and so on. Deputy Burton is getting mixed up with the regulatory structure we established under the Central Bank Act as well as the way in which the Central Bank is regulated, the people appointed to its board, including the concept of consumer directorships, and so on. This Bill addresses the other part of the McDowell report related to the financial services industry and its recommendations on an ombudsman, consultative panels, consumers interests, etc. The question regarding taxation can be pursued in other fora. It was adequately addressed at Question Time yesterday so there is no point debating it at length now.
I move amendment No. 45:
In page 35, line 30, after "concerned." to insert the following:
"The annual report shall also include sections on—
(a) a review of trends and patterns in complaints coming forward and which may be of interest to the Director of Consumer Affairs,
(b) an authoritative commentary by the Ombudsman on the state of financial consumer protection in the State, with observations and recommendations.".
I agree with the Consumers' Association of Ireland that the ombudsman should produce an annual report to highlight certain areas, particularly those which may of interest to the Director of Consumer Affairs. The first part of the amendment attempts to make this direct link, particularly given that consumer protection is intended to be the central focus of the Bill. A commentary by the ombudsman on the general state of financial consumer protection in the State would be another valuable aspect of an annual report.
In addition to the annual report provided for in section 57BR, section 57BS requires the ombudsman to publish a summary of complaints at least once a year and, with the approval of the council, other reports. I have no doubt that the ombudsman will comment on trends and patterns in complaints. I am not sure that it is the ombudsman's role to provide an overall commentary on the state of financial consumer protection, as this is more a function of the regulatory authority, specifically its consumer director. I am willing, however, to consider tabling an amendment on Report Stage, perhaps to section 57BS rather than section 57BR, to require the ombudsman to publish a review of trends and patterns in complaints.
That may be in order. The Minister should note the valuable role played by the previous Information Commissioner and his commentary on the operation of the Freedom of Information Act. The ombudsman could play a similar role as regards this legislation if he were given similar powers.
Amendments Nos. 47 and 48 are alternates to amendment No. 46, while amendments Nos. 49 and 50 are related, the latter being an alternate to the former. The amendments may be discussed together by agreement.
I move amendment No. 46:
In page 38, lines 28 to 30, to delete paragraph (a).
I have not had an opportunity to read the Minister's amendment. My amendment proposes to delete the paragraph which would remove the entitlement of a consumer to make a complaint if it is or has been the subject of legal proceedings. Any financial institution not willing to be investigated could simply initiate proceedings that would obstruct the financial ombudsman. I propose that we delete that paragraph and substitute a provision for a system whereby the financial services ombudsman would have the power to make a decision as to whether he would proceed to investigate or defer consideration even if a case were before a court or tribunal. That was my version. I am sorry I did not get a chance to read the Minister's version.
This arises from an ambiguity that was first highlighted to me in submissions by free legal aid centres. Accordingly, I proposed the insertion of the words "brought by the consumer" after the word "proceedings". The concern is that a consumer cannot make a complaint to the ombudsman if the conduct complained of is or has been the subject of legal proceedings. Does this relate to a legal course taken by the complainant or by the party complained against in an effort to frustrate the opportunity of the ombudsman taking the complaint subsequently?
The Minister's amendment No. 49 gives me further concern that it was accepted that legal action could be taken by either the complainant or the party complained against. This only copperfastens the importance of closing off this area. What is the onus on the ombudsman, in the Minister's suggested formula, to establish whether there was reasonable suspicion that the regulated financial services provider had begun the legal proceedings to prevent the making of the complaint or to frustrate or delay its investigation? That adds some weight to the concerns expressed by FLAC.
Is it appropriate to leave the responsibility on the ombudsman to make the determination as to the real intent of the financial services provider? Would it not be better to do as suggested in amendments Nos. 47 and 48 in my name and that of Deputy Boyle, to specify that this is only in the event of a legal case being brought by the consumer, which would close off the avenue in regard to a case being brought by a services provider? This would eliminate the responsibility of the ombudsman having to make that judgment call. FLAC has made a valid case. I commend amendments Nos. 47 and 48 as the appropriate way to amend this issue.
Only time will tell how effective the role of the financial services ombudsman will be. Reference is made to a bureau and to the ombudsman being an officer. Is the ombudsman an officer of the bureau?
The legislation also refers to the ombudsman being required to co-operate with the Director of Consumer Affairs and, effectively, also with the financial services regulatory authority and the pensions ombudsman. This gives rise to a problem. Basically, the Minister is taking the framework of the industry's voluntary complaints structure which has existed for a period of time in regard to areas such as insurance and he is tagging on the ombudsman structure to that. However, the ombudsman structure in the legislation does not have the powers that let us say Emily O'Reilly, the Ombudsman has. It is a hybrid. As the Bill is the creature of the Central Bank, it lacks the strength of an independent office. The Director of Consumer Affairs has done well so far in setting up her job and I compliment her on this. She has been very much to the fore in making the public aware of the services being offered.
I generally support what both Deputy Bruton and Deputy Ó Caoláin said, but the position of the ombudsman is relatively weak. The teeth have been pulled in order to placate the Central Bank and the financial services industry. I wish the Minister would come back with a far stronger concept that would be genuinely independent, because this is not.
My amendment has the same wording as Deputy Ó Caoláin's and is an alternative to Deputy Bruton's amendment. The Minister either needs to remove the existing reference in the Bill or to address the inconsistency of a consumer being subject to legal proceedings but not being in the position of having initiated proceedings. These are the choices available to the Minister, otherwise the Bill will contain a serious inconsistency.
My amendment, No. 49, seeks to prevent the financial service provider from using court proceedings to frustrate an ombudsman's investigations. I believe that captures the intent of the other amendments submitted and I hope the Deputies will therefore agree to withdraw their amendments.
In regard to what Deputy Burton said about the powers of the ombudsman. The Bill does give power to the ombudsman. After wide consultation we amalgamated the schemes already in existence. Most people agreed this was a good idea. Far from the powers being insufficient, we recently received strenuous representations from the Irish Bankers' Federation protesting in the strongest possible way that the powers of the financial services ombudsman are too great and too draconian.
I suspect they will also lobby Members on the other side of the House in this regard. The basis of their lobbying is that they are concerned.
I had lunch in the financial service industry, not with the people directly involved, where this subject was mentioned by a number of people who are concerned at the powers given to the financial services ombudsman. Far from being light powers, some people in that sector think they are far too onerous.
With respect to the Minister, his reply that amendment No. 49 caters for the objectives of amendments Nos. 47 and 48 is not satisfactory. Amendment No. 49 allows for a situation where legal proceedings taken by the party complained of will be allowed to prevent a complainant bringing his or her concern to the ombudsman. All that amendment No. 49 achieves is that the ombudsman has satisfied himself or herself that the action taken by the financial services provider was not purposely intended to be in any way obstructive. What if it is not possible to determine intent? That it is there at all will debar and preclude the complainant from bringing a case to the ombudsman. The Minister's amendment remains deficient and does not address the core point, which is that the consumer should not be prevented from bringing his case to the ombudsman by virtue of legal proceedings already in train or which have already been addressed. The very important point is that the Minister is leaving a whole range of possibilities for financial services providers to take legal action that will automatically debar the consumer from having recourse to the ombudsman. We should not be signing up to this.
It is very important that we protect the consumer at all times and that the consumer is afforded access to the ombudsman in all reasonable circumstances. In this circumstance, it is unreasonable of the Minister, in his amendment, to close off this avenue as he prescribes. The only way the consumer can be protected is by making provision in the manner amendments Nos. 47 and 48 suggest, namely, that the court proceedings only debar the consumer taking the case to the ombudsman if the consumer initiates the judicial action in the first place. I appeal to the Minister to reconsider the point on that basis.
My amendment is an attempt to establish a half-way house between the two positions being outlined. There is probably a subset of cases where the ombudsman would legitimately decide, because an action had been initiated against a complainant, not to investigate a case. However, the Minister's formulation is far too prescriptive in that he is trying to restrict the provision only to cases where the ombudsman forms an opinion. It obviously creates the opportunity for a financial institution wishing to block the process to challenge whether the ombudsman had grounds for forming that opinion. The ombudsman is trying to prove something about the financial institution which could be quite tricky to establish. My amendment would ensure that the financial services ombudsman would have pretty much total discretion in deciding, in the interest of fairness, whether to hear the case or not to do so because of a court case. It would be best if the financial services ombudsman made the call, in which case it would not be so easy for the financial institution to go behind that by exploiting the opportunities to challenge left open by the Minister.
Like Deputy Ó Caoláin, I do not believe what is being suggested in the Minister's amendment No. 49 is sufficient. If anything, it opens the door for a financial institution to delay and frustrate by taking a possible complainant through the legal process. Having such a loophole in the legislation certainly does not represent the consumer's interest. This could only be changed by adopting either amendment No. 47 or amendment No. 48 and by stating specifically that debarment would only be an option if the consumer himself initiated the action. The consumer should not be placed in a position where he becomes the victim of a large, well resourced financial institution that seeks to use a legal process in this way against him or her.
I could approach this in a totally different way by withdrawing amendment No. 49 and rejecting the other amendments put forward by the Deputies. It is a general principle of law that when legal proceedings are conducted in other fora, nobody else gets involved. When my amendment was drafted, we were somewhat surprised that it was accepted by the Office of the Attorney General because it could be deemed to breach that particular principle.
It is a matter of its being tested.
Exactly. My amendment tries to get over the fact that if the ombudsman suspects that the financial services provider has taken action against a customer only to frustrate the possibility of the case being heard by the ombudsman, the ombudsman can go ahead with that particular complaint. That is going a long way down the road towards accommodating what the Deputies want in their amendments. The alternative is to reject the amendments tabled by the Deputies because of the possibility of proceedings. However, my amendment, No. 49, is a pretty reasonable compromise in the circumstances given the way these issues have been dealt with in the past.
I was sorry that the Minister opened his remarks by offering us what I would regard as a Hobson's choice. He suggested that we either accept his amendment, No. 49, or reject it and our amendments along with it. This is not the proper approach. The deficiencies in amendment No. 49 have been spelled out as clearly as I can manage given the complexities of all that is involved. I am surprised the Minister has not taken on board the very reasonable concerns other Deputies and I have articulated.
Amendment No. 49 almost gives direction in the event of a financial services provider wishing to subvert the possibility of a case being heard before the ombudsman. Such providers are very powerful, solid organisations which could, for a variety of reasons, devise a mechanism that could thwart a consumer's right.
There are consumers who would thwart the genuine legal considerations of a financial provider. Not all consumers do everything correctly. One cannot look at the matter and say there is only one big baddy in this whole area.
I accept that is the case.
The Deputy would know that from his experience in his previous employment.
I accept the truth of what the Minister is saying. There are lots of examples one can cite. However, our critical focus in this legislation — I have emphasised it earlier — is on the area of consumer protection. This Bill is not devised to protect the financial services sector but to protect the interests of consumers who avail of the services being offered by that sector.
There is a deficiency in amendment No. 49 in that it does not substantively address the concerns the free legal aid centres have highlighted and that Deputies Boyle and I have articulated in the course of this evening's discussion. Rather, as I have suggested, it identifies a course whereby a financial services provider could well thwart the right of a consumer to bring a case to the ombudsman by virtue of the fact that he or she had initiated related court action, but which the ombudsman could not judge to be intended as either obstructionist or delaying. This is all very reasonable and I fail to understand why the Minister cannot take those concerns on board and accept the very sensible course offered by the free legal aid centres, as reflected in amendments Nos. 47 and 48 in my name and that of Deputy Boyle. Accordingly, I appeal again to the Minister, in the closing seconds of this hearing, to take a long breath, come back having reconsidered the appeal and, I hope, give us a more positive reply.
The most likely circumstance I envisage would be where a financial institution seeks to recover money in dispute. Under the provision, the ombudsman will not be able to say that actions were taken to prevent his investigation of the matter. That would fall if Deputy Ó Caoláin's amendment were accepted. However, it would stand under my amendment and the ombudsman could investigate this, even if the financial institutions were pursuing money. My amendment gives a little bit of discretion and also recognises that consumers can abuse systems. I feel my amendment is a better formulation.
Does Deputy Bruton not realise that the ombudsman is the appropriate person to determine whether the consumer is adopting a less than appropriate course? If a consumer were being vexatious, the ombudsman could rule accordingly. The critical issue is to protect the access.
My amendment gives the ombudsman the discretion to make the call on whether he will investigate this.
I cannot agree with the Deputies.
Perhaps the Minister will re-tune his reply.