Before the committee adjourned yesterday, the debate on the grouping comprising amendments Nos. 46 to 50, inclusive, was coming to a conclusion. Deputy Ó Caoláin was in possession. Has the Deputy concluded his remarks on the group of amendments?
Central Bank and Financial Services Authority of Ireland Bill 2003: Committee Stage (Resumed).
SECTION 10.
Debate resumed on amendment No. 46:
In page 38, lines 28 to 30, to delete paragraph (a).
—(Deputy R. Bruton).
I would like to pick up where we left off yesterday evening. I will not re-hash my case or appeal. Rather, I will ask whether the Minister has moved from his position by recognising the valid concerns Deputy Boyle, I and others reflected here yesterday evening concerning amendment No. 49 and its inadequacies in terms of meeting the concerns addressed by amendments Nos. 47 and 48.
I explained yesterday that our purpose in amendment No. 49 was to accommodate Deputies in the spirit of amendments Nos. 46, 48 and 50. As I also explained yesterday, there are thin legal grounds for amendment No. 49 because of the general principle of law that once legal proceedings have commenced in another forum, they are not interfered with by anyone. Amendment No. 49 is as far as I can go legally.
Is amendment No. 46 being pressed?
Yes.
We are discussing the others and we will come to them separately.
I believe that the combination of amendments Nos. 46 and 50 is the optimal solution. The Minister's is better than nothing, but I would prefer my amendments.
Amendment put and declared lost.
I move amendment No. 47:
In page 38, lines 28 and 29, after "proceedings" to insert "brought by the consumer".
Amendment put and declared lost.
Amendment No. 48 cannot be moved because it is a duplicate of amendment No. 47.
Amendment No. 48 not moved.
I move amendment No. 49:
In page 38, between lines 37 and 38, to insert the following:
"(3A) Despite subsection (3)(a), the Financial Services Ombudsman may accept a complaint against a regulated financial services provider who has begun legal proceedings in relation to a matter to which the complaint relates, but only if that Ombudsman reasonably suspects that the regulated financial services provider has begun those proceedings in order to prevent the making of the complaint, or to frustrate or delay its investigation.”.
I recognise that this is a step in the right direction, but it does not go the whole way in terms of the protections I am seeking. This is something we will revisit on Report Stage.
Amendment put and declared carried.
I move amendment No. 50:
In page 38, between lines 37 and 38, to insert the following subsection:
"(3A) If the conduct complained of is or has been the subject of legal proceedings before a court or tribunal, the Financial Services Ombudsman may decide that it shall not investigate or shall defer its consideration of the matter, if it believes that this would best serve fair procedures.".
Amendment put and declared lost.
I move amendment No. 51:
In page 38, line 40, after "provider" to insert "where the conduct complained of occurs after the commencement of this section".
This relates to whether retrospective action is possible. Some groups felt this should not be possible, but I do not necessarily agree. I would be interested to hear the Minister's view on this issue.
A similar provision is included in the Pensions Acts for the pensions ombudsman. Six years is a reasonable period for retrospection. Therefore, I cannot accept the Deputy's amendment.
Is it the case that there is no legal weakness in a procedure that has retroactive effect?
We do not believe so, although something like this could always be challenged in the courts.
Amendment, by leave, withdrawn.
Amendments Nos. 52 and 118 to 120, inclusive, are related and may be discussed together.
I move amendment No. 52:
In page 39, line 9, after "it" to insert the following:
"and in the case of a Credit Union has made reasonable efforts to use fully the dispute resolution options which are available to the consumer as a member of the Union".
This matter was raised by the credit unions, which have a well established dispute resolution procedure. While the drafting as it stands makes reference to the need for the complainant to have initiated a complaint internally to the bodies concerned, the credit unions felt it should only be in the event of failure to obtain agreement at the end of the dispute resolution process that a further examination by the financial services ombudsman should be undertaken. The formulation offered by the credit union movement was too strong and I have diluted its suggested wording to state that the complainant must have made reasonable efforts to use the dispute resolution process. This means there would need to be a demonstration of reasonable effort by the complainant before it went to the next step.
My amendments are in the context of the special position of the credit unions. I am seeking a further safeguard in recognition of that special position. It reaffirms that the credit unions are voluntary bodies with their own rules and, importantly, their own dispute resolution mechanisms. They are also in line with the recognition of credit unions in the 2003 Act.
Amendment No. 119 states: "provided that the complainant has exhausted all dispute resolution options available to the complainant under a credit union's rules save the referral of the matter to arbitration or to the District Court for resolution." This spirit is also reflected in No. 120, which states: "This is provided that no such dispute shall be dealt with by the Ombudsman unless all dispute resolution options available to the complainant, save referral of the matter to arbitration or to the District Court for resolution, under a credit union's rules have been exhausted." I hope that in recognition of the special circumstances under which credit unions work, the Minister will accede to the requests entailed in these amendments.
Subsection (6) lays down the general principle that before the ombudsman can consider a complaint, the consumer must have given the financial service provider concerned a reasonable opportunity to deal with the problem. This is as it should be. The aim is that the financial service provider should avoid causes for complaint and, when complaints are made, should make a real effort to deal with them in a way that is satisfactory to their customers. What is meant by "reasonable effort" is something I expect the ombudsman's counsel to define further in co-operation with the financial regulator's consumer director. They will both want to ensure that reasonable time limits are set for an institution's internal review of a complaint, so there is no undue delay from the consumer's viewpoint in having a complaint dealt with by the ombudsman.
The same general principles apply to all financial service providers, including credit unions. I hope that complaints against credit unions will be few, given that their customers are also members. I also hope that for the same reason, every effort will be made by credit unions to settle a complaint in preference to allowing it to go to the ombudsman. However, if a consumer is not happy with the way a credit union has dealt with a complaint, that person should have the same rights as the customer of any other financial institution to have a complaint dealt with by the ombudsman within a reasonable period of time. Therefore, I cannot accept the amendments as they would prevent a consumer bringing a complaint to the ombudsman until unspecified dispute resolution procedures had been exhausted.
The Minister is saying that he hopes the financial services ombudsman will develop a code of practice. Our concern is to ensure that the approach taken by the financial services ombudsman in developing such a code of practice regards the existing credit union arrangements as being well developed and that he ensures they are fully utilised before moving on to the next level of complaint. To some extent the Minister is relying on the good judgment of the financial services ombudsman, while the amendments before us seek to copperfasten this point. I would prefer to see some legislative advice being offered to the financial services ombudsman regarding the manner in which he handles complaints about credit unions. Perhaps the Minister will consider introducing an amendment on Report Stage to strengthen these provisions so that there could at least be a presumption that the financial services ombudsman would expect full co-operation with the existing dispute resolution mechanism.
Let us consider the reality of membership of a credit union and what that entails. When a person becomes a member of a credit union, he or she signs up to the rules governing the conduct between the employees and the members as well as dispute resolution and redress. All of that would be superseded by this legislation and people who enter the terms and conditions of membership will be able to ignore the credit union's own arrangements for dispute redress and proceed directly to the ombudsman. That will undermine the workings of credit unions and should be of concern to the Minister.
The proposition in amendments Nos. 119 and 120, however, does not seek to curtail a person's right of address to the ombudsman, but seeks an exhausting of the existing mechanisms that have been in place for many years within the credit union movement in advance of that course of action. We should respect and uphold those mechanisms.
I spoke yesterday about the impact of this legislation on the credit union movement. In my view, there is a desire on the part of certain elements within the banking sector to curtail the activities of the credit union movement. The Minister spoke about the strength of deposits in the credit union movement and that degree of financial strength and power makes a number of the commercial banking institutions jealous.
In this Bill, however, the Minister has caved in completely to the commercial banking sector while paying lip service to the community and non-profit ethos of the credit unions, as he was forced to do in last year's Bill. He agreed that he has taken the existing complaints procedures and ombudsmen of the credit unions, the banks and the insurance companies and merged them within the IFSRA ombudsman structures. Yesterday it was laid down that if someone has a complaint against a commercial bank or broker, he or she first must bring that complaint through the mechanisms of the bank or institution and notify it. Amendment No. 118 seeks that the same right would apply to the credit unions.
The Minister's cleared his extensive amendment No. 117 with some elements of the credit union movement but that amendment specifies that when someone enters into a loan with a credit union, the conditions attaching to the loan, APR, repayment conditions and potential penalties, must be advised to the individual. The same standards should be applied to some of our sharper financial institutions. Under amendment No. 117, however, if the credit union fails to comply with any of these conditions, it is an offence under the Act.
We spoke yesterday about the swingeing penalties involved for offences under this Bill. The Minister has not set offences for commercial banking at the same level as those for credit unions. It is even more imperative then that if a member of a credit union has a complaint, he or she should utilise the credit union's internal mechanisms as a preliminary. If a credit union did not give out proper information or a person was unwisely brought into a financial obligation he or she could not meet, the Minister has offered two sledgehammers with which to hit the credit union movement.
Unless the movement absolutely adheres to the instructions set out in amendment No. 117, it will be guilty of an offence under the Act and we should bear in mind the voluntary role of the directors involved in a credit union. In the rest of the Bill the Minister is unwilling even to give the credit unions the right to ask the person who is complaining to submit the complaint to the credit union's internal procedures. In the case of the banks, the Minister said he was absorbing the banking ombudsman and the insurance ombudsman into the financial services ombudsman. He is looking after the banks and insurance companies, and both the director of Consumer Affairs and the Minister have spoken about how desirable this is, but he is doing nothing for the credit unions. They are facing intense regulation and being subjected to named offences, but they are not being supported in the complaints mechanism. The full weight of the complaints structure will fall on them immediately.
I ask the Minister to rethink the structure he is putting in place. I have no objection to the contents of amendment No. 117 as a code of practice for the credit union movement but I have grave doubts about them being an offence under the Bill. To fail to ally that with a mechanism for recourse in an internal complaints structure is wrong. There are ways around this if the Minister is willing to address the legitimate fears about the impact the proposal may have.
As I said in my reply, subsection (6) in chapter 5 states that a consumer is not entitled to make a complaint unless the consumer has previously communicated its substance to the regulator of the financial service provider concerned and has given that financial service provider a reasonable opportunity to deal with it.
I referred in my reply earlier to defining "reasonable efforts" to resolve a complaint. The ombudsman will not be out looking for work. He or she would prefer if these problems could be dealt with at the level of the consumer and the financial service provider. It is in the interests of the ombudsman to have disputes resolved where they occurred. The ombudsman's counsel, in co-operation with the financial regulator's consumer director, will develop a definition of "reasonable efforts". Therefore, subsection 6 states that "reasonable efforts" must be made.
Questions have been raised regarding the new set up. The banks and insurance companies have given up their particular voluntary schemes to come under this new structure. Amendment No. 117 has been tailored to suit the credit unions and this has begun with their co-operation. There are many complaints procedures within the credit union movement and mechanisms which are very long drawn out and eventually go to the Irish League of Credit Unions. I cannot put a system into an Act whereby there would be no time limit within which a consumer would go to the ombudsman. That would not be fair to the consumer of a credit union product. Subsection (6) states that reasonable effort must be made by the provider to resolve the dispute. The other procedures then take over. What I have done here is reasonable.
Amendment put and declared lost.
What conceivable objection could the Minister have to the Labour Party's amendment No. 118? If he wishes we could add in a provision to meet his fear that the credit union would drag out the complaint——
On a point of order: I must cut this discussion short because we have dealt with amendment No. 52 and cannot go back to it.
Ms Bruton
I am talking about my amendment No. 118 and replying to the Minister's point. I understood the amendments were being taken together. I beg the Chairman's pardon.
They were grouped for discussion but the Deputy may move her amendment when we come to it.
I move amendment No. 53:
In page 39, line 21, to delete "and the Regulatory Authority".
This arose because someone alerted me to the fact that it is proposed that when someone makes a complaint to the financial services ombudsman, the complaint, as one would expect, will be made available to the financial service provider who must respond. It is somewhat unusual to make a copy of a complaint available to the regulatory authority which would normally be confidential between the complainant, the ombudsman and the financial institution. It appears that the regulatory authority will receive all the reports which the ombudsman feels are appropriate and that the ombudsman has been explicitly charged with the duty of doing that. Why would one give the specifics of the complaint and the details of the complainant to the regulatory authority? It appears to breach confidentiality.
The customer should not have to decide whether a complaint is more appropriate to the ombudsman or the financial regulator. The financial regulator and its consumer director, with her overall responsibility for consumer issues, should be in a position to monitor and act on issues arising from complaints. This is a worthwhile objective.
I accept the Minister's point but is this section not proposing that the regulator may decide to take the case but he or she will not have any of this legislative framework, which has presumably been designed with great care? The section runs to dozens of pages, setting out a procedure with due process, fair treatment to all concerned and rights of confidentiality, etc.
The regulator in the other Act is responsible for dealing with the financial institutions and the consumer director has a specific role there.
Those rules would not include the way in which either would handle an individual consumer's complaint.
No, but the regulator, having seen several of these complaints, might decide to take an interest in these actions as well. The individual consumer could be dealt with under——
In that case surely the financial services ombudsman should alert the regulator when he or she feels there are issues of a broader regulatory importance. Perhaps we should leave this until we are on Report Stage.
Yes. I can look at that again.
Which does the Minister regard as the superior authority? Is it the director, the financial regulator or the financial services ombudsman? There is a great deal of confusion at the heart of this and it will be an excuse to pass some poor bewildered customers from Billy to Jack and back again. The financial services ombudsman is an officer of something but of what I am not quite sure. There is also an independent officer who is at the same time passing material to and fro and back again. Yesterday I asked for a chart. Which of these is superior in the hierarchy?
Each is independent.
No, they are not. They go back and forth to one another in different parts of the Bill.
They do not.
They do.
They can certainly talk to one another because the regulatory authority set up under the previous Bill includes the consumer director, which we added. This Bill is about the activity of the financial ombudsman. That is the difference.
The financial ombudsman is effectively subject to the consumer director.
That is not the case. The financial ombudsman is independent.
How does a customer decide to whom to address a serious matter?
That is what I said in my reply. It is not for the complainant to decide where to go. The particular body concerned will decide whether a complaint is more appropriate to the ombudsman or the regulator. As far as the complainant is concerned, he or she should not have to decide whom to address. That is the objective behind this section.
I accept the Minister's point but I would like him to look at this because it appears that if it is passed onto another authority, that authority should be at least charged with the same protection of the confidentiality and so on of the complainant.
I am assured that they are.
Amendment, by leave, withdrawn.
Amendment No. 54 not moved.
I move amendment No. 55:
In page 46, lines 30 and 31, to delete ", expense or inconvenience" and substitute "or expense".
The phrasing of the Deputy's amendment appears to express the converse of what he intended to put down. My note says that it is not unreasonable for the ombudsman to have the option to award compensation for inconvenience caused to a customer by the unjustified actions of the financial services provider. Therefore, I am not prepared to accept the amendment, which might have been attempting to do something else but the effect of which would be that the ombudsman would not be in a position to award compensation for inconvenience to a customer. I am sure the Deputy did not intend that position.
Amendment, by leave, withdrawn.
Amendment No. 56 not moved.
Amendments Nos. 58 to 62, inclusive, are a related cognate group to amendment No. 57 while amendment No. 63 is also related. Amendments Nos. 57 to 63, inclusive, may be discussed together by agreement.
I move amendment No. 57:
In page 49, line 27, to delete "High" and substitute "District".
These amendments seek to make the legal process accessible to all consumers in terms of the last court of address. The legislation proposes that matters arising from a decision by the financial services ombudsperson can be appealed to the High Court. Due to the prohibitive nature of High Court costs, this will severely restrict the opportunity for many citizens to seek redress. The Credit Union Act allows disputed decisions to be appealed to the District Court. This should apply across the board in all business of the financial providers that will be affected by the Bill.
What is the rationale behind choosing the High Court as the forum for appeal? An appeal can proceed to the Supreme Court, which I believe should be substituted by the High Court. It must be recognised that many people with a judgment in their favour made by the ombudsperson could find themselves facing an appeal lodged by the service provider to the High Court. This is beyond the affordable risk they could take on at that point. Despite the financial services ombudsperson's decision being in favour of the consumer, the financial provider with more resources at its disposal could win by default, as the complainant would not be in a position to afford such a contest. The District Court is the appropriate level of the judicial process to which all appeals should be first referred. I hope the Minister for Finance will see the sense of that and incorporate these amendments in the Bill.
These amendments seek to substitute the District Court for the High Court for appeals of the ombudsman's decisions. I sympathise with the amendments' intent to ensure that the costs of court proceedings do not disadvantage the consumer where financial institutions appeal against the ombudsman's final determination, or where the consumer wishes to exercise the right to appeal to the courts. I accept that the costs factor could be seen as a deterrent for the consumer in a way they would not be for a financial institution. However, it would be highly exceptional that either a financial institution or a consumer would find it necessary to appeal against a determination of the ombudsman.
Such a determination would go through three stages. Complaints would be examined by an institution's internal dispute settlement procedure. This would be followed by an attempt by the ombudsman to mediate and finally by the formal determination of the ombudsman. It is right, in accordance with the precedent set by the pension's ombudsman, that the High Court would review the ombudsman's final determination in the highly exceptional case that there was an appeal against such a determination. Section 57CL(2) allows the financial services ombudsman to be made a party to an appeal to the court. This provision would help level the playing field, as it were, as the ombudsman would be expected to vigorously defend his or her decision in such proceedings. I am not in a position to accept these amendments.
The Minister acknowledged the rationale behind the set of amendments and expressed some sympathy for them.
I did not.
He expressed sympathy for a scenario that could arise where a consumer might not be able to defend a favourable case arising from the ombudsperson's ruling if the financial institution initiated an appeal. The Minister gave some of his thoughts on what is appropriate in terms of a follow-on to the ombudsperson. He cited one particular instance but did not refer to the case I put concerning the Credit Union Act, which refers matters in the first course to the District Court. Given that he has expressed sympathy and an understanding for the rationale behind the amendments, I do not believe him when he says that it would be rare that a situation may arise following the exhaustive procedures of examination.
That is not good enough because one single case might arise. The primary focus of this legislation is to protect the rights and interests of the consumer. The Minister is acknowledging that he is not doing that in the particular instances I proffered. It is not beyond the bounds of possibility that such a case may arise. As the Bill is drafted, the Minister for Finance is providing the financial institutions with a means of overriding the ombudsperson's decision. In the other scenario, where a consumer wishes to appeal the ombudsperson's decision, recourse to the High Court is prohibitive. The text of this legislation is not consumer-friendly and does not take into account those citizens for whom High Court proceedings are a prohibitive and costly course. The arguments I have made are valid. I appeal again to the Minister to acknowledge that this is a fundamental deficiency in the legislation as drafted.
I see the point of Deputy Ó Caoláin's amendments. Is there any scope for the Minister to grade the court in accordance with the scale of the issue involved? District Courts hear cases up to certain amounts in damages while other courts hear those with higher figures. Can the consumer be given the option to go to a District Court if the appeal was up to a certain figure? Would that be a way to resolve this, instead of forcing everyone to the High Court, even if it is not on that scale?
I do not believe we will see many applications to the courts. One must remember what we are trying to deal with here. The purpose of setting up the ombudsman scheme is to move away from the courts and to engage some third party who will be accepted by all as giving a fair hearing and making a final and just decision. Under the existing insurance ombudsman scheme and the banks scheme, part of the conditions to which the banks and insurance companies have agreed is that they will not appeal to the courts when decisions go against them. Decisions to make them want to do so would be very rare. With the pensions ombudsman scheme, the final determination is by the High Court. I do not know if any item under that scheme has ever been brought to the High Court, but I do not anticipate a raft of ombudsman decisions being appealed to the High Court.
If one lowers the threshold and tries to grade matters, one gets into a legalistic framework. We are seeking a determination which everyone will accept. That is what the ombudsman will try to do. If no agreement is found after a matter goes through the process with a financial proprietor, the ombudsman then becomes involved, mediates and seeks agreement, perhaps over a long period. If in the end no agreement is reached, the ombudsman will make a determination. That comes at the end of the process, when all other avenues have been explored. There may be occasions when people then want to appeal a decision to a higher court. The legislation we have before us is reasonable.
During my short experience as a member of this committee, we saw a determination by an ombudsman refused by the Revenue Commissioners over a question as to whom it was to apply. It is not beyond the bounds of possibility that a party to a particular case brought to this or any ombudsperson may be disputed subsequently. In the very recent past, this committee has seen such a case.
The Minister said he did not anticipate that many such cases would arise. He did not say "any". The fact that any case at all might arise is a good reason for opting for the District Court in the first instance. The Minister cites banks and other financial institutions being party to an assurance that they will not then seek recourse——
That is the case under the scheme which currently operates.
This Bill seeks to apply itself to a much wider body of financial services providers than those who are party to that existing arrangement. The Minister has addressed some of those as did his colleagues yesterday when discussing the activities of some merchant bankers and others involved in so-called registered moneylending activities, and a whole raft of others who hopefully will come under the restrictions that this Bill seeks to impose and the discipline it seeks to introduce into this industry. Nothing in the replies given by the Minister negates my arguments. We are bound by our responsibility to protect consumers in any eventuality and to see that their rights are not diluted or erased.
In this instance, the insistence of the High Court as the first court of referral arising out of any continuing disagreement over an ombudsperson's ruling is unquestionably in favour of the financial services providers and against the interests of most ordinary consumers of these services. We are building a prohibition into the legislation and providing a balance in favour, in the worst case scenario, of the service provider. That is fundamentally wrong. What I seek to do does not prejudge who is right or wrong, but allows each party access to an affordable court which is not prohibitive to so many in Irish society today. The District Court is an appropriate vehicle to be used. As I have said repeatedly, it is the one already applying in terms of the Credit Union Act. To change that — I am presuming the proposed legislation applies to the credit unions and supersedes earlier provisions regarding them or any other financial institution — is a backward and unacceptable step. I ask the Minister again to reconsider. If at any time in the future the legislation ill-serves the interests of any citizen, it is not acceptable. That is the criterion we must use, not the prospect of there being very few such cases arising. A few is a few too many.
I have made my case.
Amendment put.
The Committee divided: Tá, 3; Níl, 7.
Tá
- Bruton, Richard.
- Burton, Joan.
- Ó Caoláin, Caoimhghín.
Níl
- Andrews, Barry.
- Fleming, Seán.
- Lenihan, Conor.
- McCreevy, Charlie.
- McGuinness, John.
- Nolan, M. J.
- Ryan, Eoin.
Amendment declared lost.
I move amendment No. 58:
In page 49, line 36, to delete "High" and substitute "District".
Amendment put and declared lost.
I move amendment No. 59:
In page 49, line 39, to delete "High" and substitute "District".
Amendment put and declared lost.
I move amendment No. 60:
In page 49, line 44, to delete "High" and substitute "District".
Amendment put and declared lost.
I move amendment No. 61:
In page 50, line 6, to delete "High" and substitute "District".
Amendment put and declared lost.
I move amendment No. 62:
In page 50, line 12, to delete "High" and substitute "District".
Amendment put and declared lost.
I move amendment No. 63:
In page 50, line 15, to delete "Supreme" and substitute "High".
Amendment put and declared lost.
I move amendment No. 64:
In page 50, line 34, to delete "civil".
The purpose of this amendment is to request the Minister to remove the word "civil" where it states "or other civil liability". The advice I have received is that, following the NIB case and the case in Europe involving Ernest Saunders, which I am sure the Minister will recall, compelled evidence cannot be disclosed in criminal proceedings here. Therefore, I am told that to use the word "civil" to qualify "liability" is legally inappropriate. Compelled evidence should be inadmissible in all proceedings and not simply civil proceedings. It is, therefore, a technical amendment.
I need to consult the Attorney General regarding the amendment. Subject to his advice, I may be able to table an appropriate amendment on Report Stage.
Amendment put and declared lost.
I move amendment No. 65:
In page 52, line 3, to delete "EAA” and substitute “EEA”.
This is purely to correct a typographical error.
I thank the Deputy for pointing out the error, which should, of course, be corrected. I therefore accept the amendment.
Amendment agreed to.
Question proposed: "That section 10, as amended, stand part of the Bill."
I noticed in the explanatory memorandum that the Minister is making provision for the existing non-statutory insurance of credit institutions to be absorbed into the statutory scheme. That is obviously the practical and correct way to proceed. However, will there be any re-examination of practices or best practice scrutiny conducted as part of the hand-over?
There will be an ombudsman council. I am sure the review of best practice, etc, will be examined by it and matters will evolve in time.
Question put and agreed to.
SECTION 11.
I move amendment No. 66:
In page 53, line 47, after "members" to insert ", at least 40 per cent of whom shall be male and at least 40 per cent female".
Amendment put and declared lost.
I move amendment No. 67:
In page 53, line 47, after "members." to insert "At least one third of the members must be women.".
Amendment put and declared lost.
I move amendment No. 68:
In page 53, line 54, after "consumers" 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".
Amendment put and declared lost.
I move amendment No. 69:
In page 53, line 54, after "consumers." 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.".
Amendment put and declared lost.
Amendments Nos. 71 to 75, inclusive, are alternatives to amendment No. 70 and all may be discussed together by agreement.
I move amendment No. 70:
In page 54, to delete lines 1 to 5 and substitute the following:
"(3) In appointing persons as members of the Consultative Consumer Panel, the Minister shall ensure that at least 50 per cent of the members of the panel have experience in the provision of advice and information to consumers in relation to the core financial services areas under the Regulatory Authority's remit.".
The initial paragraph on page 54 outlines the Minister's formula regarding appointing persons as members to the consultative consumer panel. It states: "... the Minister shall ensure, as far as possible, that those persons have knowledge or experience of or as consumers." I am not sure about the actual wording there, but its vagueness as regards the level of knowledge and experience is clear. This is the area I seek to address. My amendment seeks that at least 50% of the members of the consultative consumer panel would have experience in the provision of advice and information to consumers as regards the core financial services areas, such as people who have been advocates and who have worked in the whole advocacy field as regards those areas.
They should make up at least half the number on the panel. They would have to be people who were familiar with dealing with financial institutions on behalf of consumers and should bring a guaranteed expertise to the panel, which is absolutely required. I have no doubt that this is the Minister's intention, but what I am asking him to recognise is that the formula of words he employs in this particular section does not meet the requirement. Amendment No. 70 and the wording I suggest addresses this in a much more substantive way. It leaves no doubt and eliminates the vagueness and uncertainty. It ensures that there is at least a 50% membership with expertise and knowledge of the provision of advice and information. Only in that way can the success of the panel be guaranteed.
Regarding my two amendments in this group, there is a need for people with experience in systems of consumer protection to be on the panel. Hopefully, the Minister will give some ground on that aspect. I believe we should ensure that those who supposedly represent consumers do not have ties with providers of financial services. In amendment No. 75 I have sought that those who are chosen because they are representatives of consumers would not also have ties with providers of financial services, so that they would not experience conflicts of interest.
We have all had an opportunity to reflect on yesterday's discussion. The Minister's response to this group of amendments will determine how the Bill is perceived. Is he, in effect, caving in to the vested interests of the banks and the financial services industry or is he setting up a genuine regulatory mechanism which is reflective of consumer interests in Irish society? To simply use the word "consumer" as he uses it repeatedly in the Bill is grossly inadequate. Nowadays two year olds are consumers. There is nobody in this room or in Ireland who is not a consumer. It effectively means that if the sole criterion for being a member is simply to be a consumer, it could be someone who goes occasionally to the corner shop for a bottle of milk or someone who does the weekly shopping. These are valuable experiences.
It may be that some Ministers and bankers are so far removed from these type of experiences that they do not get those opportunities. However, most people have experience of these matters. The net point is will there be champions within the framework of the new structure who, by virtue of their experience and background, are able to put forward the case for consumers and take on the banks and the financial service providers who are basically ripping off the public? The framework of this Bill is social market capitalism regulated by the Dáil. If one looks at the United States, people who abuse consumers or little people who are shareholders or account holders in banks regularly end up behind bars there, although it is a capitalist country. In this country there is a series of golden circles. Many people would argue that the banks and financial institutions are part of that scenario. The Minister's mettle will be tested and his bluff called as to whether this regulation will seriously address the rights of consumers and whether the power of the new structures will act vigorously on their behalf.
This is related to the other amendments we discussed yesterday. I want to reiterate those now. It would be shameful and a disgrace if in selecting the people to go on the boards as consumer champions the Minister does not find it possible to have a high percentage of women. It would be perverse in the extreme. I want to repeat what I said yesterday as regards the Labour Party using the term "consumer protection" in its amendment. A number of organisations have distinguished themselves in this area, such as the Consumers Association of Ireland, the Society of St. Vincent de Paul, the credit union movement, the money advice and budgeting service, the free legal advice centres and so on. All have championed the issue of consumers who have encountered difficulties with banks and financial services providers and who have acted to provide information, protection and advocacy to consumers. The Minister's response to these amendments will test whether the Bill is simply an effort to put a legal framework on the voluntary system that banks and financial services operate or whether the new institutions will have real teeth and actively champion the cause of consumers.
It is essential that members of the consumer panel have broad knowledge of consumer issues in the financial services area given the wide remit of the financial regulator in this area, including the important area of consumer education. It would not be wise to lay down the criteria as being just people with knowledge or experience of consumer protection. The purpose of my amendment No. 73 is to specify that members of the consumer panel should have knowledge or experience of or as a consumer of financial services. I hope in that light the Deputies can withdraw their amendments. We had a long debate yesterday under various headings from amendment No. 1 onwards about the panels and the qualities required of those on the panels and I gave my views on that matter.
Despite the effect of amendment No. 73 in the name of the Minister, there is still a vagueness to the effect that appointments to the consultative consumer panel are vague and open to almost any person being appointed. We should remember that it is a consultative consumer panel. It is important that those appointed, or at least a significant number, have been at the coalface of advising consumers on financial services and the options available to them through the various institutions. They must have experience and an expertise in advocacy. It is important that we recognise that, if the consultative consumer panel is to have any real teeth and is not parked on the margins of the Bill's provisions, it must have people who will bring some dynamic to its work and will be able to play not only a fulfilling role for themselves but will also bring the momentum necessary on such a panel if it is to play a serious or substantive role.
The Minister has gone some way to recognising the deficiency in the original drafting by tabling amendment No. 73. What members ask is that he further strengthen the wording in the legislation to ensure that the consultative consumer panel comprises people who will bring that knowledge and expertise to the panel's work. There is no point in labouring the issue. I have made the case and, while I acknowledge that in his amendment No. 73 the Minister seeks to improve on what clearly needed to be improved, I urge him to consider his disposition towards the other amendments. I recommend the phrasing in amendment No. 70, as a means of ensuring that at least 50% of those appointed will bring the necessary expertise to the panel's work.
I favour the amendment that states there should be some people at least on the panel with experience of protection of consumers. Even if the Minister does not accept our amendments, I hope he will ensure that some such persons are appointed. I ask the Minister to consider my amendment No. 75 as an addendum to his amendment if he is going that route. We need to be sure that those appointed have knowledge or experience of the position of consumers of financial services and that they are not themselves providers of financial services or have links to the providers of such services. Perhaps that is still worthy of consideration by the Minister.
I will bear those matters in mind and will take them into account at the appropriate time.
The Minister will ensure by——
I will ensure there are some people——
So far as amendment No. 75 is concerned the Minister will ensure——
In regard to a phrase such as "do not have any ties with the providers of financial services", I can see lawyers fighting about what a tie with the financial services could mean. While I would not like to be tied down, I know what the Deputy has in mind.
It is clear from the section that members of Dáil Éireann are excluded from membership of these groups. Is amendment No. 70 being pressed?
I do not want to press for the sake of it. I have listened to the Minister say that he is prepared to take on board the points made. I presume his reply to Deputy Bruton referred to the earlier points made about ensuring——
Deputy Bruton's amendment No. 74 seeks to ensure that "... at least two members have knowledge or experience of systems for the protection of consumers". That is the amendment to which I referred.
It is in that context that the Minister is indicating his willingness to——
There is no point in my saying I will set out to ensure there will be 50% or any other percentage on the panel. My intention is to have the panel as broadly based as is possible in line with the ideas I put forward yesterday. Everybody should be happy then, although politicians make the mistake of not realising that one can never make everybody happy. The second mistake is to try to make everybody happy.
The Minister's response is as vague as the original text that I am trying to strengthen. I will await his comments on Report State. I will withdraw the amendment but reserve the opportunity to come back to it and see if he is as good as his word.
Amendment, by leave, withdrawn.
Amendment No. 71 not moved.
I move amendment No. 72:
In page 54, lines 4 and 5, to delete "or as consumers" and substitute "consumer protection".
I seek clarification from the Minister because yesterday he appeared to accept that the term "consumer" was a far weaker term in the context of the Bill than the term "consumer protection". The Minister indicated in some of the discussion yesterday——
I will bear those matters in mind when these panels are being appointed.
The Minister is not prepared to write into the legislation——
No.
——that the person purchasing a bottle of milk will have equal status. There is nobody in society, bar an infant, who is not a consumer.
These are consumers of financial services. In amendment No. 73——
Where is it?
in my name I am inserting the words "of financial services".
What does "consumers of financial services" mean? The point is we want people who are champions. Almost everybody in this society is a consumer of financial services.
I will not allow a debate on this matter.
I wish to press my amendment.
Amendment put and declared lost.
I move amendment No. 73:
In page 54, line 5, after "consumers" to insert "of financial services".
Amendment agreed to.
Amendments Nos. 74 and 75 cannot be moved as they are alternatives to amendment No. 73.
How are they alternatives?
The Minister's amendment No. 73 proposes inserting words after the word "consumers" and the Deputy's amendment No. 74 proposes inserting words at the same point.
Okay.
I hope that clarifies the position.
It is amazing what financial institutions can do to pre-empt investigations.
Amendments Nos. 74 and 75 not moved.
Amendment No. 77 is related to amendment No. 76 and they may be discussed together by agreement.
I move amendment No. 76:
In page 54, line 37, after "Authority" to insert "and the Sanctions Panel".
This amendment relates to appointing members to the consultative consumer panel. It proposes inserting the additional words "and the Sanctions Panel". The Chapter states "the Minister shall ensure as far as possible that those persons have knowledge or experience of or as consumers". This cuts to the heart of the legislation. If the Bill is not simply to serve the interests of the banking and financial services industry, will consumer champions be represented at the different levels provided for in the Bill? The sanctions panel will be empowered, should it be constitutional, to make significant and swingeing penalties. It would be appropriate for representatives with experience of consumer issues, consumer protection and so on to be on that panel.
The Deputy's amendment refers to some other section, but not this one. As the sanctions panel is constituted as a committee of the financial services authority, an amendment is not necessary to allow the panel to comment on its activities. If the amendment were accepted, the section would read, "to monitor the performance by the Regulatory Authority and the Sanctions Panel of its function". The Deputy is referring to something that has been covered by another amendment; this amendment is not appropriate to this section.
Is the Minister saying the amendment is directed——
The sanctions panel is constituted as a committee of the financial services authority. Therefore, it is not necessary to have an amendment to allow the panel to comment on its activity.
No, but the purpose of the amendment is to ensure that people with a background in consumer protection comprise part of the panel. Is the Minister saying that I inserted the additional words in the wrong place?
The Deputy is proposing the amendment to the rubric functions of the consultative consumer panel. The section states that: "The functions of the Consultative Consumer Panel are as follows: (a) to monitor” etc. That is not the appropriate place for the Deputy’s amendment.
I will reintroduce the amendment on Report Stage in regard to the sanctions panel.
Amendment, by leave, withdrawn.
Amendment No. 77 not moved.
Amendment No. 79 is related to amendment No. 78 and they may be discussed together by agreement.
I move amendment No. 78:
In page 54, line 43, after "responsibilities" to insert "and with respect to the performances of the Finance Services Sector itself".
This amendment seeks to ensure that the consumer panel would be in a position to make comments and suggestions on the performance of the financial services industry as well as the regulatory authority's activity. I am glad the Minister has taken on board the principle of my amendment in his amendment No. 79. Therefore, I will withdraw my amendment.
My amendment is a slight rewording of the Deputy's amendment No. 78. I am happy to accept the principle of it. My amendment adds to the functions of the industry's consultative panel that it will provide the regulatory authority with comments in regard to changing trends in financial services which will have implications for its functions and responsibilities.
Amendment, by leave, withdrawn.
I move amendment No. 79:
In page 54, between line 43 and 44, to insert the following:
"(ba) to provide the Regulatory Authority with comments and suggestions with respect of the performance of the financial services industry;”.
Amendment agreed to.
I move amendment No. 80:
In page 54, lines 50 and 51, to delete "when the Regulatory Authority so requests,".
This amendment is to allow the consumer panel to comment on policy regardless of whether it is requested to do so. The wording of the section in this context is "when the Regulatory Authority so requests". If those words were deleted, that would leave the consumer panel with an independent capacity to do this.
I notice that later in the section it states that, if the regulatory authority introduces a measure in an emergency, it can proceed but must report to the consumer panel afterwards as soon as is practicable. Provision for comment on a body of policy by the consumer panel seems to have been omitted. It seems that only new policies enunciated will go to the panel rather than it having a general power to reflect on an existing body of policy that has been developed. Perhaps the framing of this provision is too restrictive.
The obligation of the consumer panel to comment on policy documents from the regulatory authority is matched by an obligation on the authority in section 57DF as inserted by section 11 to consult a panel on such documents. Therefore, the amendment sought by the Deputy is not necessary.
Deputy Burton's point is covered in the earlier part of the chapter under section 57CY, paragraphs (a) and (b) as inserted by section 11. Paragraph (a) refers to the monitoring of the performance by the regulatory authority of its functions etc., and paragraph (b) refers to providing the regulatory authority with comments with respect to the performance of its functions and responsibilities.
In regard to my amendment, section 57CY paragraph (d), as inserted by section 11, states: “when the Regulatory Authority so requests, to comment on a policy document or regulatory document, or a proposed policy document or proposed regulatory document, prepared by that Authority”. It will do that only when the regulatory authority so requests. The effect of my amendment would remove the request and allow the consultative consumer panel to comment on policy not only on request but as of a right.
The Deputy will note Chapter 4, section 57DF(1), as inserted by section 11, reads: "Before making or issuing a policy document or a regulatory document, the Regulatory Authority shall consult each Consultative panel" etc. That is what I said in my contribution on this amendment. This has been dealt with. Therefore the amendment sought by the Deputy is not necessary.
Is the Deputy withdrawing her amendment on that basis?
I will withdraw it, but I consider my format of wording stronger.
Amendment, by leave, withdrawn.
Amendment No. 82 is an alternative to amendment No. 81 and they may be discussed together by agreement.
I move amendment No. 81:
In page 55, between lines 9 and 10, to insert the following:
"(f) to prepare an annual report on its activities in the preceding year.”.
This amendment proposes to make specific provision for the regulatory authority to prepare an annual report on its activities in the preceding year. It is a reasonable request and would enhance the independent standing of the panel.
Section 57DE already obliges both panels to produce an annual report. There is no necessity, therefore, for this amendment. The provision states that the regulatory authority shall arrange publication of the annual report of each panel.
It is the regulatory authority as opposed to the panel.
Section 57DE(1) provides that each consultative panel shall prepare an annual report.
Amendment, by leave, withdrawn.
Amendment No. 82 not moved.
I move amendment No. 83:
In page 55, line 26, after "members" to insert "At least one third of the members must be women.".
Amendment put and declared lost.
I move amendment No. 84:
In page 55, line 33, after "providers." 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.".
Amendment put and declared lost.
Amendments Nos. 86 and 87 are alternatives to amendment No. 85. Amendments Nos. 85 to 87, inclusive, may be discussed together by agreement.
I move amendment No. 85:
In page 56, to delete line 41 and substitute the following:
"providers;
(e) to provide the Regulatory Authority with comments with respect to changing trends within the financial services industry that have implications for the functions and responsibilities of that Authority.”.
This amendment is a slight rewording of amendment No. 86 submitted by Deputy Richard Bruton, which I am happy to accept. The amendment adds to the list of functions of the industry consultative panel, namely, providing the regulatory authority with comments with respect to changing trends within financial services which have implications for the functions and responsibilities of the authority.
With regard to amendment No. 87, the existing mandate of the industry panel is sufficiently broad without giving rise to concerns on competition policy grounds about potential regulatory capture. I cannot accept the amendment. I am accepting the substance of amendment No. 86 with my rewording in amendment No. 85.
Amendment No. 86 was my preferred amendment so I am pleased the Minister is accepting it. The reason I tabled amendment No. 87 was to explore this matter. I agree that, in establishing an industry panel of this nature, we must protect against regulatory capture. At the same time, however, when one looks at the powers of the consumer panel and the industry panel, the extent to which the powers of the latter are curbed to prevent regulatory capture is obvious. There should be some provision for comment by the industry on the performance of the regulatory authority that could be protected from regulatory capture. Why set up an industry panel if there is extreme concern about regulatory capture? One could simply decide to keep the panel's hands out of it.
Clearly, the motivation of the Minister in establishing the industry panel is that he believes the sector and independent persons from the sector can bring some value to the operations. As of now, it appears to be restricted to comments on the levies, fees or specific documents released. This group might be able to add extra value and, through the Minister's acceptance of amendment No. 86, we are providing an opportunity for it to comment without crossing the line. How does international practice define crossing the line to run the risk of regulatory capture?
I appreciate the Deputy's comments. With regard to amendment No. 87, the consumer panel has those functions while the industry panel does not. The Competition Authority, whose response to this Bill is published on its website, does not want amendment No. 87. That is in its published comments. In its unpublished comments it is not too happy that there is an industry panel. It is of the view that any meetings of industry members might be of a collusive nature.
That is what Adam Smith said in 1776.
Mr. Smith was not far wrong. That is the situation.
I accept the Minister's argument.
Amendment agreed to.
Amendments Nos. 86 and 87 not moved.
Section 11, as amended, agreed to.
SECTION 12.
I move amendment No. 88:
In page 59, line 32, to delete "(No. 2)”.
This is a technical amendment correcting a reference to the Central Bank and Financial Services Authority of Ireland Act 2003.
Amendment agreed to.
Section 12, as amended, agreed to.
SECTION 13.
I move amendment No. 89:
In page 60, line 29, to delete "personally".
This is a technical amendment to remove the word "personally" which appears twice in paragraph (c)(i).
Amendment agreed to.
Section 13, as amended, agreed to.
Sections 14 to 20, inclusive, agreed to.
SECTION 21.
I move amendment No. 90:
In page 73, lines 27 to 30, to delete all words from and including "that" in line 27 down to and including "auditor" in line 30 and substitute the following:
"where, at any time during the financial year, both firms were under common ownership and control".
This arises from a concern in the Institute of Chartered Accountants. It believes that the definition in the Bill of an affiliate of an auditor is wider than the definition included in the Companies Act and that it is too onerous in defining connections between auditors. The institute is of the view that the Minister has exceeded even the regulatory requirements of the Companies Act and that it is not a sensible approach.
A number of amendments relate to the recommendations of the review group on auditing with regard to financial services providers. I am introducing discretionary powers for the Irish Financial Services Regulatory Authority, IFSRA, in obtaining compliance statements. The IFSRA will publish guidelines in this regard. This contrasts with the auditing and accounting act in the companies area where an obligation to provide compliance statements has been introduced.
Part IV as inserted by section 21 implements the recommendations of the review group on auditing with regard to financial services providers. Section 24(2) of Chapter 1 of this new Part lays down who is to be regarded as an affiliate of an auditor for the purposes of the provisions of this Part and section 24(1) of the same Chapter states that, where the auditor is a firm, an affiliate would be any other firm that had a partner in common. Many of the provisions in this Part give powers to the regulator with regard to the auditor or any affiliate of the auditor of a regulated financial service provider. The amendment seeks to make this test of an affiliate less onerous, which might weaken the powers of the regulator. Accordingly, I cannot accept the amendment.
Why does the Minister believe there should be more onerous obligations in this legislation than in the Companies Act?
That is a good point. The Deputy is referring to the Companies Act as passed rather than the Companies Act as initiated. There were some changes on Committee Stage which improved the Act in my view. In this area, we are dealing with financial institutions and financial service providers, which are not small entities. I submit that we are dealing with a more serious level in every respect, either collecting or giving out other people's money. I take the view, therefore, that higher requirements should apply. There are discretionary powers in this area.
I can see that but this amendment came in very late in the day.
I know, it arrived very late in my Department as well. I am aware of the submissions to which the Deputy is referring.
Yes.
Maybe we can return to it on Report Stage.
Yes, I think that is the best way of dealing with it.
For the record, we should point out for the benefit of those institutions which said they were not given enough time that the Bill was published on 5 December 2003. Therefore, they have had a good deal of time but I am sure they were busy with other matters as well, so perhaps that is why the submissions came in late. I am prepared to have a discussion on this matter again on Report Stage, but that is the general principle that I am applying to this.
Is amendment No. 90 being withdrawn?
I withdraw my amendment and intend to resubmit it on Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 91:
In page 74, line 36, after "section" to insert the following:
"without prejudice to the power outlined in subsection (1) the Bank shall develop a policy document on compliance requirements under this subsection".
This amendment recognises the Minister's approach that there will be discretion on the part of the regulator in respect of these compliance requirements. The amendment seeks an explicit policy document, as we have just been discussing. It would go to the consultative panels and as the authority draws up the compliance requirements under the discretion it has, there would be consultation, which is implicit in the Bill.
That sums it up well. This part implements the recommendations of the review group in all things relating to financial service providers. Section 25 introduces an obligation on regulated service providers to provide a compliance statement when required to do so by the bank. Subsection (1) empowers the bank, the regulatory authority, to serve a notice on a financial service provider requiring it to comply with this section. As I pointed out in my earlier remarks, this is a discretionary power which I am giving to the bank. I fully expect that the regulatory authority would develop a policy on compliance statements. However, I do not see the need to push this amendment into primary legislation.
That is fair enough. I will probably withdraw it with leave to resubmit on Report Stage. One other comment that seems to have arisen from this source is the fear that the regulatory authority will be able to include guidelines which do not have statutory recognition, and make them into the subject of compliance statements. That would be expanding the remit of these compliance requirements into uncharted areas.
In general, we do not think the concerns expressed by that particular body — we are referring to the same body — are well founded. They may have unnecessary worries. Since the Deputy may reintroduce these matters on Report Stage, I will give it further consideration in line with the general principle I have outlined in dealing with service providers.
Amendment, by leave, withdrawn.
I move amendment No. 92:
In page 78, lines 17 to 19, to delete all words from and including "3" in line 17 down to and including "provider" in line 19 and substitute the following:
"1 month of the date of the auditor's report on the financial service provider's accounts".
This amendment is from the same source, which, essentially, states that the schedule the Minister is inserting, requiring these compliance statements within three months, is extremely short. It states that it should be within a month of the auditor's report instead, which does not seem unreasonable to an outsider.
Section 27(b)(i) requires that external auditors of financial institutions supply an annual positive statement to the Central Bank on whether anything has come to their attention that gives rise to a legislative duty to report to the Central Bank. This section implements recommendation 15.2 of the review group on auditing. Section 27(b)(ii) sets a time limit of three months from the end of the regulatory financial service provider’s year for the audit of the report of the bank, or such time limit can be extended at the bank’s discretion. I am anxious that tight deadlines for compliance be implemented in legislation, rather than accepting the amendment where the deadline is set by the auditor. As the Deputy will appreciate, therefore, I cannot accept his amendment.
That does seem a bit harsh because it may be expecting a positive compliance statement before the auditor's report has been completed. That seems to be the implication.
It could happen, I suppose, but three months in which to get it done is a reasonable period. I submit that the audit should be done in that period as well.
Should it?
I would hope so
It is not required by statute.
No. The Deputy's point could arise but in dealing with these issues one has to demand a particular stand.
I do not want to labour this point because I do not know enough about it. The Minister must know much more than I do but if someone is given a certain amount of time to complete an audit, it seems a bit unreasonable.
I will come back to it on Report Stage.
Perhaps the Minister will comment on an allied point. One of the requirements is that the auditor would lay a copy of the report before the company's general meeting so that where there is this positive compliance statement or if the compliance statement has some qualifications in it, these would not only go to the regulator for appropriate action but would also go before the company's annual general meeting. A concern has been expressed that hysteria could be generated by matters that, of their nature, are minor.
I will re-examine that point on Report Stage. I have often noted that, in political circles, hysteria is inclined to become prevalent and widespread when a few innocuous lines are taken out of some report.
Amendment, by leave, withdrawn.
I move amendment No. 93:
In page 78, line 23, to delete "or not".
Section 27(b) of the recommendations of the review group and auditing recommendation 15.2 state that the external auditors of financial institutions should provide an annual positive statement to the bank on whether anything has come to their attention that gives rise to a legislative duty to report to the Central Bank. Subsection (2)(a) provides that within three months of the end of the financial year of a financial service provider, the auditor of the provider must provide a written report to the bank stating whether circumstances have arisen that require her or him to report a matter to the bank under a prescribed enactment and what those circumstances are. Deputy Bruton’s amendment would not implement the recommendations of the review group on auditing and, therefore, I cannot accept it. I am sure he will raise this matter in line with the others on Report Stage.
Yes. The concern was that they had to make statements that went beyond what was required. At the moment one is required to say whether circumstances have arisen that require the auditor to report a matter to the bank. Is the Minister requiring the auditor to certify that no such circumstances have arisen, rather than only cases where breaches have occurred?
Yes.
The concern is that a higher level of certainty and compliance is required.
As I outlined at the start, I think that has to be the case with financial service providers.
Amendment, by leave, withdrawn.
I move amendment No. 94:
In page 79, line 5, to delete "33" and substitute "33(3)".
Subsection (4) lists the financial services legislation under which an auditor has a duty to report to the bank in circumstances specified in legislation. The Bill lists section 33 of the Investment Intermediaries Act 1995, which deals with auditors and their duties relating to investment business firms, which are not incorporated bodies, that is, brokers. The Deputy wants to limit the application of this provision to subsection (4)(iii) only, which deals with the duty of an auditor to report to the regulator. I am satisfied that the duties to report should extend to the entire section and not just to the more limited subsection, as sought by the Deputy.
I will withdraw the amendment but I would like to give it some more thought and perhaps resubmit it on Report Stage.
Amendment, by leave, withdrawn.
Amendments Nos. 95 and 97 are cognate and they will be taken together by agreement.
I move amendment No. 95:
In page 81, lines 9 and 10, to delete "service provider" and substitute "auditor or affiliate".
These are technical amendments. The reference to "service provider" in the paragraph is clearly wrong. The correct reference is to "auditor or affiliate".
Amendment agreed to.
I move amendment No. 96:
In page 81, line 17, after "affiliate" to insert "and that is reasonably required by the Bank for a specific purpose".
This amendment provides that where the bank requires an auditor to provide working papers, it must have some reasonable grounds for requesting them. There should be prima facie grounds for concern before the bank looks for large volumes of working papers.
Section 27F of the Bill states other papers should be available on the request of the Central Bank. Under the provision of section 27F(1), the bank may require an auditor or affiliate of the auditor to provide it with a copy of any record related to work carried out for the service provider that is in the possession of the auditor or affiliate. I am satisfied that the thrust of this Part and the provisions therein make it clear that the regulator will use the powers being provided only where there is an express need to do so. The amendment is unnecessary.
Amendment, by leave, withdrawn.
I move amendment No. 97:
In page 81, lines 33 and 34, to delete "service provider" and substitute "auditor or affiliate".
Amendment agreed to.
Section 21, as amended, agreed to.
Sitting suspended at 2 p.m. and resumed at 2.20 p.m.
SECTION 22.
I move amendment No. 98:
In page 97, line 35, to delete "or".
This is a technical amendment to remove the word "or" which was inserted in error in the section.
Amendment agreed to.
I move amendment No. 99:
In page 98, between lines 31 and 32, to insert the following:
36N.—The Bank shall perform and exercise the functions and powers imposed or conferred on it by this Part in a manner consistent with the performance by the Governor of the responsibilities imposed on the Governor by section 19A of the Central Bank Act 1942.
This is the third amendment I have proposed in response to the opinion of the European Central Bank, which pointed out that "money transmission businesses may resemble features of payment and settlement arrangements which should fall within the oversight competence attributed to the Governor." The amendment achieves this by requiring the regulatory authority to act in a manner consistent with the performance by the governor of his responsibilities under section 19A of the Central Bank Act 1942, which refers to the responsibility of the governor in respect of payment and settlement systems.
Amendment agreed to.
Section 22, as amended, agreed to.
Section 23 agreed to.
SECTION 24.
I move amendment No. 100:
In page 98, line 35, after "23" to insert "of Schedule 1".
This is a technical amendment which corrects a reference in section 24.
Amendment agreed to.
Section 24, as amended, agreed to.
Sections 25 to 30, inclusive, agreed to.
SCHEDULE 1.
I move amendment No. 101:
In page 106, column (3), line 16, after "that" to insert "the".
I advise the committee that I will be introducing an amendment to Schedule 1 on Report Stage. This amendment arises from a technical error omitting the right of appeal to the appeals tribunal in section 16 of the Investment Intermediaries Act 1995, which empowers the regulator to revoke the authorisation of an intermediary. Amendment No. 101 is technical in nature and inserts a missing word, namely, "the" into the Schedule.
Amendment agreed to.
I move amendment No. 102:
In page 112, column (3), line 47, after "liquidator" to insert "or".
This is a technical amendment which inserts the missing word "or" from the relevant subsection.
Amendment agreed to.
I move amendment No. 103:
In page 120, column (3), line 7, to delete "up;" and substitute the following:
"up.
(2A) Without prejudice to the power of a supervisory authority to revoke an authorisation under subsections (1) and (2) of this section, a supervisory authority may apply to the Court in a summary manner for an order revoking the authorisation of an authorised investment business firm in any or all of the following circumstances:
(a)”.
Perhaps the Minister will indicate his thoughts on this matter.
Section 16 of the Investment Intermediaries Act 1995 empowers the regulator to revoke the authorisation of an intermediary. This section was replaced in the Bill arising out of the proposal to allow for certain decisions or actions of the Central Bank to be appealable to the appeals tribunal, which was put in place by the Central Bank and Financial Services Authority of Ireland Act 2003. This amendment seeks to reverse this proposal by replacing the appeal to the appeals tribunal with the court confirmation procedures that previously existed. I cannot accept the amendment. However, I accept that there is an issue with the version of section 16 of the Bill, as published, as it contains no right of appeal to the appeals tribunal and I will rectify this error on Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 104:
In page 121, column (3), between lines 48 and 49, to insert the following:
"(3A) When the supervisory authority proposes to revoke the authorisation of an authorised investment business firm or proposes to apply to the Court for an order to revoke the authorisation of an investment business firm, the following procedures shall apply, namely, the supervisory authority shall serve notice on the authorised investment business firm of its intention and shall state its reasons in the notice.
(3B) Where an application is made to the Court under this section the Court may make such interim or interlocutory orders as the circumstances may require.
(3C) Persons (being persons who were authorised investment business firms) whose authorisation has been revoked (in this section referred to as 'former authorised investment business firms') shall continue to be responsible for arranging the discharge of all contracts entered into before announcement of the revocation of the authorisation, unless the supervisory authority states otherwise.
(3D) Where the authorisation of an authorised investment business firm is revoked and the former authorised investment business firm, if a company, is not being wound up, or, if an unincorporated body of persons, is not the subject of a dissolution order, or, if a natural person, is not the subject of an adjudication of bankruptcy:
(a) the former authorised investment business firm shall continue to be subject to the duties and obligations imposed by this Act and any code of conduct or rules of conduct or client money requirement or any other conditions or requirements imposed by a supervisory authority under any section of this Act until all the liabilities, duties and obligations of the said investment business firm have been discharged to the satisfaction of the supervisory authority;
(b) the former authorised investment business firm shall, as soon as possible after the revocation of the authorisation, notify the supervisory authority and such other persons, if any, as the supervisory authority indicates are to be notified, of the measures being taken to discharge without undue delay the liabilities, duties and obligations of the said investment business firm; and
(c) in the case where—
(i) the former authorised investment business firm has notified the supervisory authority in accordance with paragraph (b) of this section, and the supervisory authority is of the opinion that the measures being taken or proposed to be taken for the purposes of this section are not satisfactory, or
(ii) the former authorised investment business firm has not so notified the supervisory authority and the supervisory authority is of the opinion that the former authorised investment business firm has failed to so notify as soon as possible after the authorisation is revoked, or
(iii) the supervisory authority is of the opinion that the former authorised investment business firm has failed to take all reasonable steps to notify persons which the supervisory authority has indicated, under paragraph (b) of this subsection, partly be notified;
then, subject to subsection (3H) of this section, the supervisory authority may give a direction in writing to the former authorised investment business firm for such period, not exceeding six months, prohibiting the former authorised investment business firm so directed from any or all of the following, namely—
(I) creating any liabilities,
(II) dealing with or disposing of any assets or specified assets of the former authorised investment business firm in any manner,
(III) engaging in transaction or class of transaction or specified transaction,
(IV) making payments,
without the prior authorisation of the supervisory authority and the supervisory authority may further direct that the former authorised investment business firm within two months of the initial direction to prepare and submit to it for its approval a scheme for the orderly discharge in full of the liabilities, duties and obligations concerned.
(3E) Where the authorisation of an investment business firm is revoked and the former authorised investment business firm, if a company, is being wound up, or, if constituted as an unincorporated body of persons, is the subject of a dissolution order, or if a natural person is subject to an adjudication of bankruptcy then—
(a) the liquidator or the official assignee or receiver of the former authorised investment business firm shall, in addition to his duties and obligations in respect of the winding up, dissolution or bankruptcy, be subject to the duties and obligations to which the former authorised investment business firm would be subject if it were an authorised business firm to which subsection (3D) of this section relates and that subsection shall for the purposes of this section be construed accordingly,
(b) the liquidator or the official assignee or receiver shall also be subject to any conditions or requirements imposed under this Act as if the liquidator or the official assignee or receiver were an authorised investment business firm, and
(c) notwithstanding paragraph (a) of this subsection, the supervisory authority may, where authorisation is revoked and where the supervisory authority considers it appropriate in the circumstances, remove, on giving notice in writing to the liquidator, receiver or assignee of the former authorised investment business firm or the official assignee, in the case of bankruptcy, the duties and obligations imposed on the liquidator, receiver or official assignee concerned to comply with paragraph (b) of subsection (3D) of this section and may impose, in writing, on that liquidator, receiver or official assignee such further duty or obligation which corresponds to that set out in paragraph (b) of that subsection.
(3F) The supervisory authority shall publish notice of revocation of an authorisation of an authorised investment business firm in Iris Oifigiúil within 28 days of such revocation.
(3G) A former authorised investment business firm shall cease to operate as an investment business firm and it shall be an offence for a former authorised investment business firm to operate as an investment business firm.
(3H) Where the supervisory authority gives a direction under subsection (3D) of this section, it may apply to the Court, on being satisfied that the direction has not been complied with, and the Court may confirm, vary or set aside the direction on such terms and for such period as the Court thinks fit.
(3I) The supervisory authority shall not apply to the Court to revoke an authorisation on the grounds set out in subsection (2A)(l) of this section unless it has given an authorised investment business firm an opportunity to remove the director, manager or qualifying shareholder or otherwise deal with the concerns of the supervisory authority in relation to the probity or competence of the person concerned within such period of time as the supervisory authority may specify.
(3J) An application under the section may be heard otherwise than in public.".
Section 16 of the Investment Intermediaries Act 1995 empowers the regulator to revoke the authorisation of an intermediary. This section was replaced arising out of a proposal in the Bill to allow for certain decisions or actions of the Central Bank to be appealable to the appeals tribunal, which was put in place under the Central Bank and Financial Services Authority of Ireland Act 2003. The amendment seeks to reverse the proposal by replacing the appeal to the appeals tribunal with the court confirmation procedure that previously existed and, thus, I cannot accept the amendment.
Amendment, by leave, withdrawn.
I move amendment No. 105:
In page 133, column (3), line 38, after "to" to insert "the".
This is a technical amendment. It inserts a missing "the" in the subsection.
Amendment agreed to.
I move amendment No. 106:
In page 134, to delete lines 26 to 53 and in page 135, to delete lines 1 to 23.
This is a technical amendment. It deletes an amendment to section 144 of the Consumer Credit Act 1995, which would have the effect of making certain decisions under the section appealable to the appeals tribunal rather than to the court. Section 144 relates to credit intermediaries, which remain the responsibility of the Director of Consumer Affairs. Appeals should, therefore, continue to be dealt with by the courts, as per the current text of section 144.
This is a substantial section and I am trying to absorb the import of the Minister's contribution. The deletion of the section—
It puts it back in the position it was at always. The amendment to section 144 of the Consumer Credit Act 1995 was deleted when this legislation was drafted. The section relates to credit intermediaries, which remain the responsibility of the Director of Consumer Affairs. Appeals should, therefore, continue to be dealt with by the courts, as per the current text of section 144. We unintentionally wiped out a section of the Consumer Credit Act 1995.
Requirements are placed on the bank under section 144 where representations are made under a particular subsection. If the bank decides to refuse to grant an authorisation it shall by notice in writing inform that applicant of the decision and so on. Are the measures contained in the section confirmed elsewhere in the legislation so that the baby is not thrown out with the bath water?
No, the measures are related to the appeals mechanism under the Consumer Credit Act 1995, which is where they are meant to be. When this section was drafted, that mechanism was deleted.
I will trust the Minister's judgment.
I am also trusting someone else's judgment.
Amendment agreed to.
Schedule 1, as amended, agreed to.
Schedule 2 agreed to.
SCHEDULE 3.
I move amendment No. 107:
In page 159, column (3), line 7, after "one," to insert the following:
"granted by a company to the Central Bank and Financial Services Authority of Ireland for the purposes either of providing or securing collateral,".
I will introduce amendments to Schedule 3 on Report Stage. They arise from concerns that have been expressed about the replacement of sections 26 and 28 of the Investment Intermediaries Act 1995 in the Bill and I will address them on Report Stage.
This is a technical amendment, the effect of which will be that the registrar of companies will only be required to register so-called negative pledges in regard to financial services companies that provide collateral to the bank to secure lending under euro system credit operations.
Amendment agreed to.
I move amendment No. 108:
In page 162, to delete lines 21 to 24.
Deputy Burton's worry is that the years are removed and that will cause difficulty.
The amendment is incorrect but I will bring forward an appropriate amendment on Report Stage to deal with the Deputy's point.
Amendment, by leave, withdrawn.
I move amendment No. 109:
In page 172, column (3), line 51, before "subsection" to insert "delete".
This is a technical amendment. The word "delete" is missing. Section 58(4) of the Insurance Act 1989 is being deleted as it is obsolete.
Amendment agreed to.
I move amendment No. 110;
In page 173, to delete line 5.
This is a technical amendment. There is no need to amend section 16 of the Central Bank Act 1989, since this section was repealed by the Central Bank and Financial Services Authority of Ireland Act 2003.
Amendment agreed to.
I move amendment No. 111:
In page 175, column (2), line 24, to delete "252" and substitute "253".
This is a technical amendment. Section 253 of the Companies Act 1990 is being amended, not section 252.
Amendment agreed to.
I move amendment No. 112:
In page 181, between lines 40 and 41, to insert the following:
"SECTION 33
5A. Insert the following subsection after subsection (1):
‘(1A) Subsection (1) shall not apply to—
(a) intermediaries authorised under section 26, and
(b) authorised investment business firms, not falling into paragraph (a) of this subsection, whose only investment business service is acting as an insurance intermediary, and
(c) authorised investment business firms, not falling under either paragraph (a) or (b) of this subsection who are not authorised to handle client moneys and whose investment business services annual turnover does not exceed such limit as may be prescribed from time to time by Regulations.’.”.
Section 33 of the Investment Intermediaries Act 1995 deals with auditors and their duties in regard to investment business firms that are not incorporated bodies, that is, brokers. Section 33(1) specifies that unincorporated investment business firms must appoint an auditor to report annually on their accounts. The effect of the amendment would be to exclude certain types of bodies from this requirement. This issue has not been given consideration under this Bill at any stage and was not part of the public consultation process that we undertook before publishing it. Accordingly, I cannot accept the amendment.
I am not familiar with this territory. The concern is that a sole trader, that is, an insurance broker, is required to appoint an auditor and this is an excessive burden on small operations where the intermediary does not handle cash and the client is not at risk.
This is an existing requirement that certain bodies are trying to row back on.
How stands the amendment?
I will not press at it this stage but I will take further soundings regarding what is involved.
Amendment, by leave, withdrawn.
I move amendment No. 113:
In page 181, column (3), between lines 49 and 50, to insert the following:
"(c) the supervisory authority may prescribe circumstances in which the provisions of paragraphs (a) and (b) of this section do not apply in relation to a discontinuance of an appointment in writing.”.
This amendment relates to people who discontinue business in respect of certain operations. The concern is that the requirement to provide written notice that they were discontinuing business is excessively onerous if it is being done for commercial as opposed to non-compliance reasons. The amendment was suggested to meet that concern.
Section 31 of the Investment Intermediaries Act 1995 provides that all product producers should have a substantial register of all its investment product intermediaries. Section 31(6) provides that where an insurance agency held by a broker is discontinued for any reason, such a fact should be publicised. The amendment seeks to create an exclusion from this provision. Such an exclusion is not desirable and I cannot accept the amendment. This is also an attempt to row back on a provision under the Investment Intermediaries Act 1995, which some people do not particularly like.
Amendment, by leave, withdrawn.
I move amendment No. 114:
In page 184, column (3), between lines 16 and 17, to insert the following:
"(ba) in subsection (1), to substitute the following definition for the definition of ‘housing loan’:
‘"housing loan" means an agreement for the provision of credit on the security of a mortgage of a freehold or leasehold estate or interest in land where the loan is made to the person to whom the credit is provided—
(a) for the purpose of enabling that person to have a house constructed on the land as the principal residence of that person or that person’s dependants, or
(b) for the purpose of enabling that person to improve a house that is already used as the principal residence of that person or that person’s dependants, or
(c) for the purpose of enabling that person to purchase a house that is already constructed on the land for use as the principal residence of that person or that person’s dependants, or
(d) for the purpose of refinancing a loan made for a purpose specified in paragraph (a), (b) or (c);’;”.
The purpose of the amendment is to ensure the protection of Part 9 of the Consumer Credit Act, which deals with housing loans, extends to any natural person who borrows funds on the security of the family home even where the funds are borrowed for business purposes. The present definition excludes such circumstances since it refers to the principal residence of the borrower. "Borrower" is defined as "a consumer acting as a borrower" and "consumer" is defined as "a natural person acting outside of a person's business". If the amendment were not made, forms of probatory lending targeted by the McDowell group and the Director of Consumer Affairs might not be captured.
Amendment agreed to.
I move amendment No. 115:
In page 184, column (3), line 32, after "loan" to insert the following:
", save where such introduction is ancillary to or otherwise than in the ordinary course of business of the person making the introduction".
Section 2 of the Consumer Credit Act 1995 provides definitions for terms used throughout the Act. The Director of Consumer Affairs had originally indicated that the practice of using mortgage introducers, that is, people who, although not authorised as mortgage intermediaries in their own right, introduce clients through authorised intermediaries in return for commission, was on the increase and that the lack of regulation gives scope for abuse. With the establishment of IFSRA, this will be a matter for the regulator rather than the Director of Consumer Affairs. The Consumer Credit Act 1995 is being amended by way of a replacement definition for mortgage intermediaries to bring introducers within the scope of this Act. The effect of Deputy Bruton's amendment would be to draw a distinction between categories of introducers. I am not disposed to accepting such an amendment.
Amendment, by leave, withdrawn.
I move amendment No. 116:
In page 185, between lines 2 and 3, to insert the following:
"Section 116
1A. Substitute the following subsection for subsection (7):
‘(7) An Authorisation shall be valid from the date specified therein and shall remain valid unless it is suspended or revoked under the provisions of this Act.'.".
Section 116 of the Consumer Credit Act 1995 deals with mortgage intermediaries and subsection (7) specifies that authorisation to act as a mortgage intermediary is only valid for one year. The proposed amendment seeks to amend section 116(7) to effect a change that would allow the authorisation to act as a mortgage intermediary to remain valid until it is suspended or revoked. The issue has not been a consideration in this Bill at any stage, therefore it was not part of the public consultation process undertaken prior to publishing the Bill. Accordingly, I cannot accept the amendment.
Amendment, by leave, withdrawn.
I move amendment No. 117:
In page 185, to delete lines 35 and 36 and substitute the following:
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Item |
Provision affected or inserted |
Amendment |
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1. |
Sections 37A, 37B, 37C, 37D, 37E and 37F |
Insert the following sections after section 37: |
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‘Member to receive written notice of loan approval. |
37A.—(1) On approving a loan in accordance with section 36 or 37, a credit union shall, in writing, notify the member who applied for the loan of the approval and of any time limit within which the approval will expire. |
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(2) A notice under subsection (1) may be in a form that, when endorsed by the member on accepting a loan offered by the credit union, constitutes a credit agreement for the purposes of sections 37B and 37C. |
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Credit agreement in respect of loans excedeeding €200. |
37B.—(1) If the amount of a loan approved by a credit union exceeds €200, the credit union shall ensure that— |
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(a) a credit agreement is entered into in writing and signed by the member concerned and by or on behalf of all other parties to the agreement, and |
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(b) a copy of the agreement— |
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(i) is handed personally to the member immediately after the agreement is entered into, or |
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(ii) is delivered or sent to the member within 10 days after the agreement is entered into and |
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(c) any contract of guarantee relating to the loan is in writing and signed by the guarantor and by or on behalf of all other parties to the agreement, and a copy of the guarantee and the agreement— |
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(i) is handed personally to the guarantor immediately after the contract is entered into, or |
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(ii) is delivered or sent to the guarantor within 10 days after the contract is entered into. |
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(2) For the purposes of this section, a contract of guarantee— |
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(a) includes the indemnity referred to in section 35(1), and |
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(b) may form part of the relevant agreement or may be in a separate document. |
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(3) A credit union that makes a loan without having complied with subsection (1) commits an offence. |
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(4) If a credit union is found guilty of an offence against subsection (3), the following provisions apply: |
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(a) the credit union is taken to have waived all interest agreed to be paid by the member in respect of the loan; |
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(b) the member, or the member’s personal representative, is entitled to recover as a debt, by proceedings brought in a court of competent jurisdiction, any interest paid in respect of the loan. |
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Contents of credit agreements. |
37C.—(1) When entering into a credit agreement with a member, a credit union shall ensure that it contains a statement setting out the following particulars: |
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(a) the name and address of each party to the agreement; |
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(b) the amount of the loan provided under the agreement and the total amount payable in respect of the loan; |
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(c) details of the security (if any) given in respect of the loan; |
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(d) the date or dates on which the loan is to be provided (unless unascertainable at the time of the agreement); |
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(e) the number of repayment instalments under the agreement and amount of each of those instalments; |
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(f) the date, or the method of determining the date, on which each repayment instalment is payable; |
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(g) the rate of interest charged in respect of the loan and the relevant APR; |
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(h) the circumstances in which that APR may be amended; |
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(i) any charges that, although not included in the calculation of the APR, must be paid by the member in specified circumstances; |
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(j) the date on which the loan expires; |
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(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; |
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(l) any cost or penalty that the member may incur for failing to comply with the agreement. |
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(2) The credit union shall also ensure that the agreement specifies a cooling-off period under which the member— |
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(a) has a right to withdraw from the agreement without penalty if the member gives to the credit union a written notice to that effect within 10 days after the date of receiving a copy of the agreement, or |
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(b) may indicate that the member does not wish to exercise the right. |
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(3) The indication referred to in subsection (2)(b) must be in the form of statement signed by the member. The member’s signature must be separate from, and additional to, the member's signature to the agreement. |
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(4) A credit union that fails to comply with subsection (1) or (2) commits an offence. |
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Notice of important information to be included in credit agreements. |
37D. (1) A credit union shall not enter into a credit agreement with a member, unless the agreement and the notice referred to in section 37A (1) display prominently on their respective front pages, in a form approved by the Bank, the following information: |
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(a) the amount of the loan; |
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(b) the period of the agreement; |
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(c) the number of repayment instalments; |
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(d) the total amount repayable to the credit union; |
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(e) the cost of the loan to the member; |
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(f) the APR in respect of the loan; |
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(g) particulars of the cooling-off period. |
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(2) A credit union that contravenes subsection (1) commits an offence. |
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Definition and calculation of ‘APR’ for the purposes of sections 37C and 37D. |
37 E.—(1) For the purposes of sections 37C and 37D— |
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‘APR’, in relation to a credit agreement entered into between a credit union and a member, means the annual percentage rate of charge. |
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(2) The APR specified in a credit agreement must be that rate, on an annual basis that equalises the present value of all commitments (loans, repayments and charges), future or existing, agreed by the credit union and the member concerned, calculated in accordance with the mathematical formula set out in Annex II to the European Communities (Consumer Credit) Regulations 2000 (S.I. No. 294 of 2000) as in force from time to time. |
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Regulations for the purposes of sections 37A-37D |
37F.—The Minister may make regulations under section 182 as to the form and content of credit agreements and, for that purpose, may amend or modify sections 37A, 37B, 37C or 37D.’. |
The purpose of the amendment is to encourage credit unions to provide borrowers with a written loan offer in respect of all loans approved and to conclude a written loan agreement for all those exceeding €200. A copy of the agreement must be furnished to the member. A loan agreement will contain a statement of all the factors relevant to the loan and its repayment, including details of the APR and a ten day cooling off period.
Many elements of the agreement already are required in the standard loan documentation. Others, such as the right to early repayment or penalty, are implicit in the current credit union legislation and lending arrangements. They will now be brought to members' attention at the time of borrowing. This amendment is necessary to meet the obligations of the 1987 consumer credit directive. The credit unions representative bodies accept the need for this amendment and it has been drafted to facilitate them in the introduction of standard forms of agreement.
It is possible that my contribution is only to express some wonderment that the credit union would seek to have such a prescriptive section in regard to their business.
Under the Consumer Credit Directive 1987, this would have to be done in any event. We entered the consultation process to get an acceptable form that would be agreeable to them, but taking account of the Consumer Credit Directive 1987. Amendment No. 117 applies to credit unions the same conditions that already apply to banks, except it is tailor made to the needs of credit unions.
I express some wonderment. I checked this with the Irish League of Credit Unions and what the Minister said is absolutely the case. I do not deny that. In changing circumstances and in times of greater inflation, elements of it may require revisitation. They are creating some restrictions that may not make sense in practice and may need to be revisited, which means legislative repeal. In any event, I accept the Minister's remarks and confirm that the Irish League of Credit Unions supports the amendment. Therefore, who am I to argue with them. Perhaps I should have declared that I am just a member.
Are there special provisions in regard to the calculation of APRs in respect of credit union loans? Traditionally the system required the borrower to maintain a credit account as well as a loan account. It is slightly different from the standard provision whereby if one borrowed €1,000 in this instance one might have to borrow €1,250 and keep a credit of €250. How does one treat these sorts of provisions when publishing conditions, APRs and so on?
It must be the same form as applies in other lending institutions, a calculation of the APR.
Other lending institutions would not normally require one to keep a credit account or a share account.
I do not have a credit union account but many members of my immediate family do. As I understand it, the two items were included in one statement, but last year and the year before the items appeared in two statements. The share credit statement dividends were included on one page while the loan interest was included on the other page. The books appear to be operated separately, therefore there is an applicable interest rate on the loan, which is separate from the interest rate on deposit. The calculation of the interest rate and the loan is done separately. This must be the case to comply with this. It is easy enough to do it. Many people have money on deposit in banks while at the same time they have loans from the same bank.
If it is a requirement of the loan, does it become the subject of any of these terms?
It does. Paragraph 37C of the amendment refers to details of the security, if given in respect of the loan. That information must be given.
Amendment agreed to.
Amendment No. 118 not moved.
I move amendment No. 119:
In page 186, column (3), between lines 13 and 14, to insert the following:
"(c) provided that the complainant has exhausted all dispute resolution options available to the complainant under a credit union’s rules save the referral of the matter to arbitration or to the District Court for resolution.”.
Amendment put and declared lost
I move amendment No. 120:
In page 186, column (3), line 20, after "1942." to insert the following:
"This is provided that no such dispute shall be dealt with by the Ombudsman unless all dispute resolution options available to the complainant, save referral of the matter to arbitration or to the District Court for resolution, under a credit union's rules have been exhausted.".
Amendment put and declared lost.
Schedule 3, as amended, agreed to.
Schedules 4 and 5 agreed to.
Title agreed to.
We promised yesterday that we would try to produce a chart of the various functions of the different bodies. I am indebted to my officials and particularly the officials of IFSRA. They produced a document overnight which I will be able to circulate, with lovely colours and lines which make everything very simple. It is not as complicated as people think. Two and a half years ago when we announced, with great fanfare in the Government press centre, how we were going to implement the recommendations of the McDowell report, the charts we displayed had squiggles and lines far more complicated than this one. Things have improved over that period. I will circulate this chart to Deputies as requested.
I thank Deputies for dealing so expeditiously with this Bill. This legislation, like the other Act, is desperately complicated. Finance Bills are much simpler. As Deputy Ó Caoláin pointed out, we are amending sections which amended earlier sections and the structure of the Bill is very difficult to follow. I hope to produce the Finance (Miscellaneous Provisions) Bill later in the year and next year I hope to produce a consolidated Bill for the whole financial area. This will put all legislation dealing with the financial area into one Act and make it easier for everyone to access the legislation.
I thank Deputies for the detailed preparation they put into the debate on the Bill.