Léim ar aghaidh chuig an bpríomhábhar

Dáil Éireann díospóireacht -
Tuesday, 15 Feb 1994

Vol. 438 No. 7

Consumer Credit Bill, 1994: Second Stage.

I move: "That the Bill be now read a Second Time."

There are no simple solutions to the problems — many of a complex social nature — associated with moneylending and particularly with illegal moneylending. It has been a problem in society from biblical times and I cannot guarantee legislation to wipe it away overnight.

However, this Bill will introduce to law a body of reforms which go beyond the minimum requirements of the directives. It will repeal all existing consumer credit law and provide unified legislation.

Essentially the consumer protection provided for in this Bill will encourage consumers to have more confidence in obtaining credit by providing a discipline whereby the achievement of a high level of consumer satisfaction will be of advantage to credit institutions and credit intermediaries.

The primary purpose of the Bill is to give effect in Irish law to two European Union Directives. They are, Council Directive 87/102/EEC of 22 December 1986 and the amending Directive 90/88/EEC of 22 February 1990 on the approximation of the laws, regulations and administrative provisions of the member states concerning consumer credit. The Directives require member states to provide a minimum level of consumer protection in the area of credit.

The Consumer Credit Bill will establish throughout the State what might be called the new approach to the regulation of credit. In the past, Ireland adopted consumer credit legislation on a piece-meal basis, dealing mainly with instalment sales, hire-purchase and certain types of personal loans. The result was to channel the supply of credit from regulated forms of transaction into unregulated forms. This fragmented form of statutory regulation distorts competition between suppliers of credit and creates artificial distinctions between different types of transaction. In recent decades the banks and finance houses devised new forms of lending. Suppliers of credit for instalment sales witnessed an erosion of their market share, not through any relative inefficiency in their operations, but through the advantages enjoyed by those suppliers of credit able to avoid the piece-meal regulation of credit in Ireland.

The new approach will close this loophole by ensuring that virtually all forms of consumer credit — including mortgage credit — will be regulated on a comprehensive basis. It will also enable comparisons to be made between competing sources of credit by requiring disclosure of the Annual Percentage Rate of charge.

In order to ensure that the Bill strikes the right balance and addresses adequately the deficiencies and gaps in the present legislation, I have engaged in extensive consultations, as have the officials in my Department with the Consumers Association of Ireland, other consumer interests, the banks, building societies, finance houses, insurance industry, insurance brokers, moneylenders, IBEC, Incorporated Law Society, Irish Centre for European Law, ICTU and, most importantly, those representing the disadvantaged and vulnerable in our society, i.e. the Combat Poverty Agency, the Society of St. Vincent de Paul, money advice and budgeting service officers under the Department of Social Welfare.

Press, radio and television are being resorted to increasingly as a powerful instrument of product sales and promotion. On television and radio and across the pages of our local and national newspapers are advertisements offering what seem like unbeatable credit bargains. But what is missing very often from these heavily sold offers are adequate and clear details of many of the important loan conditions to enable the consumer to make an informed and rational decision.

The legislation provides that the selling message must be accompanied by information on the cost of the credit and a statement of any restrictions on the availability of such credit. There will also be a legal obligation that, where goods are offered on credit, the cash price, the total credit price and the number and amount of instalments must be clearly shown.

Equally the Bill lays down detailed requirements on the form and content of credit agreements. It is true to say that generally consumers are not being afforded sufficient time or opportunity to study and, if necessary, take independent professional advice on agreements governing the granting of credit to them. Apart from mortgage documents, the invariable practice has been to produce the loan agreement and have the consumer sign it on the spot. Many of these agreements are weighed down by language which is scarcely intelligible to the legal and financial profession — which leaves little hope to the consumer of understanding their terms and implications.

In addition to providing for greater transparency and intelligibility, the Bill stipulates a cooling off period of ten days for all credit agreements, except mortgages. It is clear that if you were to distort the market with regard to a cooling off period for mortgages you would distort purchasing and selling arrangements and leave many people in a serious situation.

It is up to consumers to make use of this important breathing space to ensure, if they want to, that they are fully acquainted with the extent and nature of their obligations.

Sometimes problems only manifest themselves when the consumer has already entered into a credit agreement. The goods or services purchased and financed by credit may be found to be defective, unsatisfactory or not in conformity with the supply contract. The Bill provides — as it did in the Sale of Goods and Supply of Services Act, 1980 — that where there are pre-existing arrangements between the supplier of the goods or services and the creditor, both parties shall be jointly and severally liable in such circumstances.

It is also not uncommon for creditors to pursue consumers who may have fallen into arrears by phoning or otherwise contacting consumers at their place of employment. Many of these contacts are not exercised with due discretion or regard for the privacy of the consumer. This legislation will forbid such practice.

The Programme for a Partnership Government committed the Government to introduce legislative provisions regulating most forms of consumer spending by: introducing new and stronger provisions in the area of moneylending; regulating matters arising during and at the end of credit agreements, for example, early repayment or prohibiting increased charges in the event of default; setting down parameters for the content of credit advertisements and credit agreements; and strengthening the Office of the Director of Consumer Affairs to allow for easier access by consumers throughout the country.

That is taken directly from the Programme for a Partnership Government. The commitment was made earlier with the Central Review Committee, again in the Programme for Government with the Progressive Democrats and also when Fianna Fáil were in Government on their own. It was repeated in 1989-90 and also when I became Minister of State at the then Department of Industry and Commerce, following certain events in 1992. The then Leader of the Progressive Democrats said to me: "This is a Bill you can get your teeth into, it is an important piece of legislation and I would like if you would look after it". At that vulnerable time I was glad to get hold of it. I have been involved with it since.

The Consumer Credit Bill will deliver on that commitment and, in addition, contain features related to mortgage credit. The EC Directives were in connection with transparency and related to various matters but did not include matters relating to mortgages. In my pursuit of the Bill I was conscious of the fact that the biggest, in a domestic consumer sense, purchase a consumer is ever likely to make is his or her home. I did not see why the transparency and various other forms of financing should not apply also.

The main effect will be that when a consumer takes out a loan or otherwise avails or credit, he or she will be given the maximum amount of information to ensure full awareness of the commitment being undertaken.

The Irish law on moneylending passed its "sell by" date aeons ago. The Moneylenders Act, 1933 — which had built on the none too solid foundations laid by the Moneylenders Act, 1900 — was designed primarily to control the rapacious activities of loan sharks, although finance houses without banking licences or the benefit of a ministerial exemption were also caught by its provisions. The Irish legislation in this area bears a close resemblance to the legal regime which obtained in the United Kingdom before the enactment in that jurisdiction of the Consumer Credit Act, 1974. That Act was subsequently updated. In the early 1970s the authors of the Crowther report on Consumer Credit identified the weaknesses in the UK system. Some of their criticisms are worth reproducing here because they highlight the special difficulties faced by legislatures in regulating moneylending. The report of the Committee on Consumer Credit (Cmnd 4595, London, 1971) volume 1. paragraph 6.6.4. states:

Most people borrowing from a moneylender are in a low income group and cannot readily obtain credit elsewhere. They frequently lack the ability to budget and ... they are not motivated by the rational considerations which might usually be expected to influence the selection of purchases. Moreover, such persons are likely to be ignorant of their legal rights and when proceedings are taken will usually allow those to go by default.

The new Bill will go a long way towards remedying the social ills inherent in moneylending. When I talk about moneylending I want to differentiate clearly between legal moneylenders — collected credit as their activity is sometimes referred to — and illegal moneylenders. I hope the effect of this Bill, as it is debated, talked through, disseminated and put into practice, will be that people will be strongly aware that there is coherence and shape to the collected credit movement. I am referring here to legal moneylenders. There is incoherence, chaos and all sorts of evils associated with illegal moneylenders. Sometimes people rant on about moneylenders without specifying that there are legal and illegal moneylenders. This Bill will include strong licensing and enforcement arrangements with regard to legal moneylenders and strong prohibitions against illegal moneylenders.

I will deal briefly with other outdated legislation, the Hire-Purchase Acts, 1946-80. Although hire-purchase transactions are subject to quite stringent legal controls, finance companies, in liaison with dealers, have devised new methods of providing goods and services on credit to consumers. This enables them to fall outside the catchment area of the Hire Purchase Acts, 1946-1980. For example, personal loans not linked formally to the purchase of specific goods or services — but required by consumers for those purposes — increased markedly after the enactment of the hire-purchase legislation. The Consumer Credit Bill will remedy this mischief by adopting a broad spectrum, or all embracing approach to the regulation of consumer credit. This will ensure truth in lending. When I was researching this somebody from the co-operative movement wrote and drew to my attention an American Bill passed perhaps 20 years ago, called the Truth in Lending Act which is very much along the lines of what we are doing here. It was very interesting to read it. This Bill will ensure truth in lending and preclude many of the objectionable trade practices to which consumers have been subjected in the context of credit transactions.

The purpose and thrust of the moneylending provisions in this Bill is fourfold; to implement the directives; to review and update the Moneylenders Acts; to deliver on the Government's commitment in the 1988, 1989 and other programmes and to address in an innovative and effective manner the scourge of unlicensed moneylending.

When talking about the role of the Director of Consumer Affairs I will use the word "he" all the time. Lest I be pounced upon for being sexist, I use that word because the present director is male.

The Director of Consumer Affairs is empowered to grant a moneylender's licence on the terms and conditions he sees fit to engage in the business of moneylending in a District Court area or areas as authorised.

Applicants for moneylenders' licences must pay a fee of £1,000 for a licence to trade in one District Court district and a further fee of £500 for each additional district in which they intend to operate.

If the Director refuses to grant a licence or decides to vary, suspend or revoke a licence, he must inform the applicant or the holder of the licence, as the case may be, of his decision and there is a right to appeal.

The court may on hearing the appeal, confirm the refusal or decision or may allow the appeal, whereupon the Director shall grant the licence or, as the case may be, will not revoke or vary the terms and conditions of the licence.

This part of the Bill also contains provisions to deal with a number of practices which, it is alleged, are currently used by moneylenders and which result in the borrower not receiving the full amount of the loan, although on paper it would appear that this is the case.

A moneylender may not advance a loan while retaining a portion of it in respect of repayment instalments or charges and base the charges for the loan on the full amount advanced. Equally, the practice of retaining from a "top-up" loan an amount in respect of an earlier loan while still basing the charge on the full loan being advanced is prohibited.

A moneylender is obliged to keep a record of all transactions in a "repayment book". Many legal moneylenders are already operating properly and the purpose of this provision is to ensure that others do so. This ensures that the consumer has at all times an up-to-date record of the position with regard to repayments under the moneylending agreement. It will also provide authorised officers of the Director with a simple and straightforward way of checking that matters are in order.

The repayment book must contain the name and address of both parties to the agreement, the amount of credit advanced, the date on which it was advanced, the number and amount of each repayment instalment, the rate of interest charged, the total amount payable in respect of the loan, the date of expiry of the loan and the agreement number or other reference which identifies the loan. The manner or form in which repayments are to be recorded is also set out.

This section of the Bill also covers the collection of repayments at certain times. It will not be possible for such calls to be made between 9 p.m. and 10 a.m. on Sundays or public holidays.

The impact of the legislation is greatly enhanced by the inclusion of a specific role for the Garda Síochána in helping to stamp out illegal moneylending. Under the Bill the Garda Síochána are empowered to request persons engaged in collecting credit to provide a moneylenders' licence or authorisation; to arrest, without warrant, persons engaged in unlicensed moneylending and to seize any document belonging to another person being held by those engaged in moneylending.

This latter power is designed to eliminate the practice by unlicensed moneylenders of holding and encashing social welfare payment books belonging to their clients.

The Director of Consumer Affairs will have responsibility for the functioning and enforcement of the legislation. As outlined he will be responsible for the licensing of moneylenders. In addition the Director will be responsible for the authorisation of mortgage intermediaries and credit intermediaries. He will oversee the advertising and operation of credit agreements generally and pursue those whom he believes have committed offences.

The Director will have extended powers and increased resources which will enhance his scope in the regulation of the credit industry. He will investigate the workings of the credit system and monitor the practice of the financial institutions; go to the court for orders to stop breaches of the Consumer Credit Act on behalf of borrowers and consumers; give information and advice; apply to court to have excessive rates of interest charged by moneylenders and creditors, other than banks and building societies, declared illegal and unenforceable; licence moneylenders; authorise persons to act as credit or mortgage intermediaries; investigate credit information given about borrowers; direct financial institutions or lenders to withdraw advertisements or modify them.

The Office of the Director of Consummer Affairs will be provided with additional staff and, in furtherance of the commitment for regionalisation in the Programme for Government will, on a phased basis, have branch offices located in Cork, Limerick, Athlone and Sligo.

Will there be any in Sheriff Street?

The Director of Consumer Affairs is in Dublin. A primary aim of this regionalisation is to give consumers easier access to advice and redress.

Member states are allowed to retain or adopt more stringent measures for the protection of the consumer and this has been done in relation to the upper and lower limits of 20,000 ECU and 200 ECU respectively envisaged by the Directive. Expanding the scope of the Bill beyond those limits has enabled the inclusion in the Bill of measures to deal with housing loans.

Housing loans are the single most important financial outlay for most consumers. In this area also, the protection of the consumer needs to be strengthened.

The legislation will provide for early repayment of a variable housing loan without the liability for a redemption fee; a formula indicating the total cost of credit; freedom of choice for the consumer in taking out house insurance; a prohibition on the lender from passing on to the consumer the cost of legal investigation of title to the house; the outlawing of the linking of services to the grant of a loan; a predetermined and clearly laid out format for housing loan agreements and the disclosure of all fees, charges and commissions in connection with a loan and any associated insurance policy.

To date only some of these requirements have applied to housing loan transactions. Indeed such requirements as did apply only covered building society loans. The Bill ensures that uniform and far reaching rules and procedures must be observed by all house mortgage lenders. This again is a significant advance on the present position. By requiring greater openness and transparency, the consumers will be much better placed to assess and determine the best form of mortgage suitable to their needs and circumstances.

The level of statutory regulation of the selling activities of financial intermediaries in the area of mortgages is extremely light and in most cases non-existent. The Consumer Information (Consumer Credit) Order, 1987, regulates the display of APR but does not adequately cover many aspects.

Most consumers prefer certainty to uncertainty and for a mortgage simply to enable them to buy their own homes. Endowment mortgages are complex financial products. In deciding to take one, a consumer has to decide on credit, insurance and investment criteria, usually at the same time as making important decisions on property and home ownership. It can be difficult to make such decisions. It is for this reason that the emphasis throughout the Bill is for transparency and fully understandable information. Expert advice is needed and this is usually provided by a mortgage or insurance broker. I would not wish to reflect unfavourably on the manner in which such advice is given. However, the position has been put to me by many that the high level of commissions paid in respect of such policies has led to a situation in which many of them are sold rather than bought.

The directives are without question the most significant measures to emerge so far in the European Union in the area of consumer protection and rights. Equally, the changes in our national law, resulting from this Bill, will have important implications for the legal process in the area of consumer credit. Thus the position of Irish consumers will be advanced in a very significant way by providing additional legal redress to those already available under existing tort and contract law.

While this measure is aimed primarily at improving the position of the consumer — this it does in a considerable way — I emphasise that it is not intended as being loaded in any way against lenders or financial establishments.

Clearly one approaches the Bill from the point of view of the consumer. In the preparatory stages, we took soundings from everybody. Of course, we did not agree with everything that was said and we did not have full agreement for our views. However, we engaged in a wide-ranging consultative process. I have written to those involved in that process offering them the services of my office and to meet with them during the debate on the Bill with a view to accepting reasonable points provided they are in accord with the main thrust of the Bill which is one of openness, transparency, full disclosure of information and empowerment of consumers.

I would like to conclude by outlining the main benefits of the legislation. First, it will introduce a high degree of transparency into the consumer credit field, thereby enabling consumers to choose the credit packages which provide them with optimum value.

Second, it will afford the consumers of credit important contractual rights designed to safeguard them against commercial exploitation.

Third, it will protect particularly vulnerable and disadvantaged consumers by subjecting moneylenders to a very strict licensing regime.

Fourth, it will open up the financial services marketplace by introducing provisions which will ensure a more competitive environment in the consumer credit area.

Finally, when the licensing system that will be introduced following the passing of the Bill is fully operational, the fees generated by that system will be used to fund the implementation of enforcement of the new legislation. This is vitally important in an era in which public spending is under increasing scrutiny.

I am confident that these wide-ranging and long overdue changes will benefit the consumer significantly and bring about a more balanced and fairer relationship between lender and borrower.

Generally I prefer to speak without a set script and those who know me are aware of that. However, this is a complex Bill and I want to set out clearly the philosophy behind it and the rationale for it. This Bill is about material needs and consumers' rights but I see the issue of consumers' rights as having a deeper philosophy and base than it can encompass. People should have confidence in conducting their business.

We as a people do not complain enough — it is not that we want to be moaning minnies — and stand up for our rights. We do not seek information or engage in counter debate on the merits of a product. Indeed, we do not ask, why not? often enough. Why should purchasing credit be different from any other purchase? To some people, finance is a mystery which they cannot understand and which is deemed impossible for them to understand.

If people set out to purchase a product, they will ask about its durability, its make-up and whether it will serve a certain purpose. However, when we are availing of services we do not put across our viewpoint clearly. How often have people not taken the opportunity to complain or to challenge the provider of the product simply because it is not in our nature to do so? I accept this Bill will not achieve this change overnight but there is a great need to empower consumers in a democratic way. Consumers need to know and be fully informed of their rights and need to be free to ask about different products.

This Bill — lest there be any misinformation on any aspect of it — sets out to ensure transparency and that transparency requirement applies to all credit purchases, from finance houses, building societies, mortgage intermediaries, moneylenders and so on. The transparency arrangements apply to every institution.

I look forward to hearing the contributions on Second Stage. The Committee Stage debate should be very interesting and challenging. Those who were involved with me in processing legislation in recent weeks will know that I am prepared to consider all amendments.

I will be bringing forward ministerial amendments, in particular one on bank charges in which I will suggest that the Director of Consumer Affairs should have the right of consultation with the Central Bank on the question of bank charges. The Bill because of its size and complexity is not held to be the optimum on every provision. We do not pretend to have the optimum knowledge on every matter relating to the issue in the Department. I look forward to the cut and thrust of debate in the Chamber.

I commend the Bill to the House and look forward to its passage through the House.

This debate is taking place on a difficult day for a Fine Gael Deputy——

How is it going?

——to prepare detailed comments on a Bill of this complexity but in broad terms I welcome it given that it has been in the pipeline for 15 or 16 years. Since legislation was passed in the United Kingdom in 1974 we have been continually chiding ourselves about the inadequacy of our consumer legislation. For five brief months in 1986 I had responsibility in this area when I attempted to do some of the things that are being done today, particularly to update the legislation relating to moneylending. I was disappointed that officialdom was sluggish in tackling this issue despite the fact that it was of importance to the community. While I am delighted the legislation is being updated I am genuinely frustrated that it has taken so long, I think other observers feel the same way.

On the issue of moneylending, I am not 100 per cent satisfied with the provisions. It was never a criminal offence under the Moneylenders' Act to lend at exorbitant rates although that Act provided that if one lent at rates in excess of 39 per cent it would be an unenforceable loan. That was a hopeless provision in the protection of consumers. No effort is being made to make it a criminal offence to lend at excessive rates. We are still depending on the Director of Consumer Affairs to pursue cases where he believes money was lent at an excessive rate and take them to the courts. However, a consumer will have no right of redress to the courts, which is surprising.

The big problem is that many people who deal with moneylenders are unlikely to make it known to the Director of Consumer Affairs that they are experiencing problems. Therefore, their cases are unlikely to find their way to his desk and then to the High Court to challenge those who lend at excessive rates. The Minister should set up a forum to which the people would have access to make complaints and which would ensure fair play for those who have to deal with moneylenders. We will have to establish such a forum to deal with this problem successfully.

In that context the community welfare officer is the obvious preson to deal with such complaints. Up to last year the community welfare officer provided support to those facing difficulties in regard to lending. Without making a political point it was a very foolish decision by the Government to change the provisions under which community welfare officers could help those experiencing problems with ESB and other regular bills and running into debt. Many community welfare officers had successfully developed a system of home budgeting with clients who came to see them on a regular basis by saying, first, that they could only help a person once a year and then requiring them to prove that something exceptional has happened.

Is the Deputy talking about social welfare?

Yes. Under the rules this could not include what one would regard as normal payments such as First Communion and back-to-school expenses. I am disturbed by this change as it removed an important prop for those in difficulty with moneylenders.

There is an onus on the mainstream financial institutions to provide alternative sources to which persons who do not fit their normal description of a person with a good credit rating would have access. The banks will always like to see that a person held a deposit or current account with them during the years. In this way they have effectively ruled out most of the people about whom we are talking and prevented them from gaining access to the mainstream banking and financial institutions. There is an onus on those large institutions to provide such a service to the community. When I had responsibility in this area I made an attempt to get the financial institutions to recognise this and provide some system to which people would have access to ensure they would not be forced into the hands of those likely to charge excessive rates of interest.

In relation to the provisions relating to moneylending, as I already mentioned, I am disturbed at the procedure for enforcement given that it will not be open to the consumer to take such action and that he will have to go to the Director of Consumer Affairs. It seems that it will only be a criminal offence to engage in moneylending activity without a moneylender's licence. While a licence may be revoked if people do not play by the rules we should take the question of abuses under consumer credit arrangements by licensed persons more seriously instead of challenging them when a licence comes up for renewal at some future date. If we are to build up the confidence of consumers to complain about breaches we will have to do something to ease their problems; in other words, if consumers are being exploited they should be entitled to relief. Last week we dealt with the issue of compensation for people who do not receive payment in accordance with their terms of employment. In this instance if it is established there has been abuse under the terms of the Moneylenders Act a person should be entitled to relief and compensation. This is not a feature of the Bill and we will have to build it into it if we are to build up the confidence of those who have to deal with moneylenders to assert their rights.

As the Minister is aware, I am concerned about the decision to exclude the banks and mortgage lenders from section 46 under which the Director of Consumer Affairs will have the power to challenge those who lend at excessive charges and interest rates. Under section 48 he will have the power to change the terms of credit agreements he views as unfair. I cannot understand why the banks and mortgage lending agencies should not have to succumb to the same disciplines as everyone else. The Minister said she is creating a new atmosphere for consumers in relation to credit but I cannot understand why we should exclude the banks and mortgage lending agencies given that they are the mainstream lending agencies with whom consumers deal in the main. We should have a provision under which consumers can challenge the terms of such agreements. For far too long one sided non-negotiable diktats have been handed down by the lending agencies and if we want to change this we must include the banks and all lending agencies under the terms of the Bill. That is not an anti-banks or an anti-lenders agencies statement. It is a question of ensuring fair play and that agreements are two sided. This legislation is supposed to be the vehicle through which we can ensure this. The Minister should reconsider the matter.

The most valuable features of this Bill are that clear information and contracts must be presented to consumers. There must also be a cooling off period. These are welcome provisions but the Minister is selling her legislation short by not making all lending agencies amenable to these provisions.

In the past less information was available about consumer lending, insurance and financial dealings generally than about the contents of a tin of beans on the side of which one can read the most copious detail about what has gone into the can, while, at the same time, decisions involving hundreds of thousands of pounds are not subject to the same obligations. The changes in regard to information are welcome.

I cannot understand why the Minister has decided to exclude local authorities from the section dealing with mortgages. What is good for the goose should be good for the gander. If consumers are to have rights in relation to lending agencies they should also be exercisable in relation to local authorities. I admit that local authorities are generally sensitive to the needs of the people with whom they are dealing but that does not give them the right to be exempted. We have learned in the context of the Planning Acts that although exemptions can be defended on the basis that public agencies will act in the best interest of the public, if they are exempted people will rightly feel they have not had fair play. The exemption of local authorities and credit unions from the provisions is a mistake. Both would be well able to stand four square beside any lending agency and beat them in terms of the way they deal with consumers, but that does not justify an exemption.

Let me turn to a contentious issue, that is, bank charges. As she did in regard to the Apprenticeship Bill, the Minister is promising an amendment at some future date that will deal with this. However, it is not good enough to introduce a Bill that has taken 14 years to prepare and not include the one element she has made a public issue and for which she gained a great deal of support from the public, and expect us to wait and see what she might produce at a later stage. The Minister has allowed to go unchallenged newspaper reports in which she said this Bill would control bank charges. There is considerable public frustration with the welter of bank charges being levied on customers.

We understand the Deputy might have to leave the Chamber.

May I share my time with Deputy Quill and hope for some time at a later stage?

We would like to accommodate the Deputy.

That would be a pleasure as far as I am concerned. I am sure everybody else will co-operate as well.

Is the Deputy serious about this proposition?

I am serious in that an important vote is about to take place in my parliamentary party.

Is that proposal agreed? Agreed.

Deputy Richard Bruton withdrew.

This Bill is a major and progressive piece of legislation. It is innovative and far reaching in its provisions, comprehensive in the areas it seeks to address and utterly praiseworthy in intent. As it stands, however, it is not perfect nor without its share of shortcomings. Accordingly, my party will be seeking to make changes by way of amendment on Committee Stage. Having said that, the Progressive Democrats support and warmly welcome the main thrust of the Bill and commend the Minister on the work she has done in putting together this complex legislation which entailed much work.

Society has come a long way since the time Christians were prevented from practising usury and the ultimate villain, Shylock, was parodied for seeking to extract his pound of flesh. Credit has become the lifeblood of a modern economy. Millions of transactions, big and small, are made possible every day because of access to credit. Items ranging from the simple and everyday, like paying for a meal in a restaurant or a hairdo to purchasing a family home or starting up a business, are conducted mainly on the basis of access to credit.

For reasons ranging from the security risk to sheer sophistication, citizens are moving towards an almost cashless lifestyle. This has brought about a huge sea change in banking and in the provision of credit. Intense competition between lending institutions for clients has generated a minefield of confusion for even the most street wise consumers. At the same time families on low incomes are ruthlessly exploited by illegal moneylenders. It is high time we regularised the whole business in laws that will strike a just and fair balance between the rights and responsibilities of the consumer on the one hand and of the lending institutions on the other.

At the heart of this Bill is the right of consumers to basic information that will enable them to understand from the outset the full extent of their liabilities and to make informed judgments about what competing lending institutions have to offer so that they, the consumers, can evaluate fully whether they are getting value for money.

An old Irish proverb says knowledge is power. That being so, the information in this Bill will be hugely beneficial to consumers. A majority of the population feel utterly powerless in the face of the complexities of the modern financial service world and it is high time we remedied this deficit. I have said many times before that it is not unusual to meet somebody who can quote a passage from Shakespeare or deal with the more detailed grammar in Latin or Greek but who is powerless in the face of banks, negotiating a loan or filling in an income tax form. That tells us something about the need to bring knowledge up to date. That is what the Minister meant when she spoke of information that leads to consumer power.

It is difficult to exaggerate the havoc caused to families by the activities of illegal moneylenders. It is inevitable that families on very low incomes will be forced to borrow at certain times — for example, for first Communions, Confirmations, funerals or weddings. The habit of saving seems to have died and since the weekly income is so small that it is not possible for families to save for these occasions, it is inevitable that families will go to moneylenders for credit. However, it is up to us to ensure in so far as possible that they do not go to illegal moneylenders, but to those who operate within the law as it stands and as it will stand when this legislation becomes law.

In relation to the misery inflicted on families because of the activities of illegal moneylenders, if it were not for the exceptional good work done by credit unions and the sensitive approach of members of the Society of St. Vincent de Paul that misery would be more widespread. I hope this legislation will provide maximum protection for those families and that the activities of illegal moneylenders will be stamped out.

Under the legislation, the penalty for engaging in unlicensed moneylending will be a fine of £50,000 or a term of imprisonment of five years, but that should be reviewed every two or three years to ensure the fine keeps pace with money values and to establish if the penalty is having the desired effect and acts as a deterrent to the ghoulish practice of fleecing vulnerable and unsuspecting families. At the end of the day, illegal moneylenders are the real scourge and one of the failures of this legislation is that it does not make a clear distinction between the activities and the rights of legal moneylenders, and those of illegal moneylenders. The legislation is blurred in that regard. That matter should be tightened up on Committee Stage because it is fundamental that a clear distinction is made.

I will refer later to the powers envisaged for the Director of Consumer Affairs, a cornerstone of this legislation and a very wise move by the Minister. However, the director will not be in a position to investigate unlicensed moneylenders. Under the legislation powers are given to the Garda to prosecute offenders, but with respect to them, there has been a pitifully small number of prosecutions to date despite the fact that it is well known that the ratio in respect of legal and illegal moneylenders is 3 to 1. We should bear that in mind as we seek to frame the powers that will be effective in dealing with illegal moneylenders.

We, in the Progressive Democrats, will propose specific measures on Committee Stage, including placing an obligation on chief superintendents to make a public annual report on the prevalence of unlicensed moneylending in their areas and to provide an account of the measures taken to curb the activities of illegal moneylenders. Furthermore, we will propose that the Garda have a positive duty to receive and investigate reports of unlicensed moneylending from voluntary agencies and other sources. We will table amendments to make detection, prosecution and conviction of unlicensed moneylenders easier and more efficient.

As the legislation stands very few legislative aids are provided for the Garda to deal with unlicensed moneylending. Stiffer penalties are not enough. Nearly all the changes in this Bill relate to licensed moneylending and these lenders will be subject to the supervision of the Director of Consumer Affairs. A clear distinction must be made between the functions which lie within consumer law and the activities which belong in the area of criminality. At present the Garda do not have adequate powers to deal with this matter and if the aspirations of this legislation to deal with illegal moneylending are to be effective, increased powers will have to be given to them.

Unlicensed moneylenders are the real scourge. They can act outside the law in respect of lending, the rates of interest charged and the recovery of loans and they frequently operate by means of threats and violence. We need powers of arrest and search, statutory presumptions and to create a new offence which can curtail unlicensed moneylending. We cannot rely on existing legal prohibitions.

In regard to licensed moneylending, we must face up to the fact that a certain section of the community does not have access traditionally, culturally or economically to credit via the banks, building societies or credit unions. Yet those people need credit, and one way or another they will get it. Our duty is to make the provision of credit services to them transparent and to bring those services under the correct supervisory authority. They are a higher credit risk than "bankable" people or members of credit unions. They often need to have collected credit agreements to bring them within the credit net. I have spoken to members of the Society of St. Vincent de Paul, the Combat Poverty Agency and a number of other voluntary agencies in that regard who have acknowledged that fact. Collected credit is a fact of life; it is more expensive than credit from banks or credit unions. Of necessity and by its very nature it will incur a far higher APR than many other forms of credit.

If a licensed moneylender lends, say, £100 and collects it over a six month period, it may involve 26 or 30 visits to the borrower's home. If the total collected over six months is based on a cost of, say, £1 per visit a charge of £26 applies before interest. If interest is charged on top of that, the total re-collected could amount to £136 or £140. Because the £100 is recovered week by week, the average amount outstanding during the six months will be £50 and with charges of £36 the APR will appear to be enormous. Nevertheless, which of us would advance, say, £100 to a person with a very poor credit reference, employ a person to visit the borrower's home for £1 per week and be happy with a credit risk which might mean we might get no more than £10 or £15 in return? Would any of us go into competition with unlicensed moneylenders to do that? Would any of us go into the business of licensed moneylending at all?

One of the advantages of this Bill is that it will oblige licensed moneylenders to state clearly their APR. When the legislation is enacted borrowers will be able to see the real cost to them of borrowing from one licensed moneylender as opposed to another or from a licensed moneylender as opposed to a credit union. That is an important development. That facility has not been available to date.

We can posture in public and decry all moneylenders, that has been a feature of society in recent times, but we cannot honestly condemn if we will not acknowledge that moneylending will continue in one form or another and that the existing credit institutions will not facilitate less fortunate people who borrow from licensed moneylenders. The best we can do is to control licensed moneylending, insist on high standards of fairness and transparency and prevent abuse or exploitation. We must not drive out moneylenders because that would leave the field wide open to unlicensed competition and that would contradict what is intended in this Bill.

I wish to draw attention to a number of matters in the Bill in regard to which my party and I will be tabling amendments on Committee Stage. Section 91 deals with the prohibition of collecting repayments at certain times. The provisions in that section are not practical or feasible. The ratio of unlicensed moneylenders to licensed moneylenders is 3 to 1. We cannot afford the sad spectacle of licensed moneylenders waiting until 10 o'clock in the morning to offer their services while unlicensed moneylenders, in regard to whom no time restriction applies, can knock on doors before that time. That provision must be considered. It is right to seek to control the calling time in a certain way but that is already catered for under section 44 which relates to the visits and telephone calls by creditors. Section 44 states, "A creditor or a person acting on his behalf shall not visit or telephone — (a) a consumer without his consent—"

That relates to his place of employment. Paragraphs (i) and (ii) relates to section 44 (a).

Could that subsection also include his home?

His place of employment.

People may not have telephones in their homes. I will reconsider that matter. I would be concerned that the licensed person might be put at a disadvantage vis-à-vis the unlicensed person. Unfortunately, I did not read through the section fully. I will consider that section and will frame a practical amendment to it on Committee Stage.

We will spend many a day and night debating this Bill.

I am sure we will. Section 92, which relates to the prohibition of selling goods while collecting payments, is not practical. I know of a number of decent, above the board operators who provide both services in tandem and for whom it would not be possible to segregate the selling of goods and the provision of credit. I am aware of the type of service which such persons give their consumers. I considered tabling an amendment to the section, but I will propose deleting it on Committee Stage.

We are lucky we are not being voted on today.

We are slightly more distracted this afternoon than we would normally be. A key cornerstone of this Bill is the increased powers to be given to the Director of Consumer Affairs. His office is to be responsible for the operation and enforcement of the new law. That is a wise move. The Office of the Director of Consumer Affairs should be responsible for consumer protection law. My party and I fully support that provision. It is important that the director be given sufficient additional personnel to enable him to ensure that all the elements of the provisions of the new legislation will be fully enforced. We should allocate additional powers to the Director of Consumer Affairs as we did at one time to the Ombudsman when we did not provide additional necessary resources. We must make proper provision in respect of additional personnel and sufficient resources to ensure that all provisions of this Bill are fully policed and enforced. It is important that such resources are provided at the outset, otherwise we will have a good law on the Statute Book which is not effective on the ground. I know the Minister would not intend any law she introduces to be ineffective. It is important that the Office of the Director of Consumer Affairs be decentralised. An office in Dublin is not satisfactory to my constituents in Cork who have a grievance against a lending agency or institution.

I have addressed that matter in the Bill.

I welcome that provision. It is important that such decentralisation takes place at the same time that this Bill becomes law. Decentralisation should not take place on a phased basis. Decentralisation and the increased Garda powers which I will seek under another heading are important and those measures will ensure that this Bill when enacted will be enforced. A Cheann Comhairle, how much time have I remaining?

The Deputy was entitled to 30 minutes in the ordinary way. Deputy Richard Bruton asked permission to complete his address.

I am somewhat confused in that regard.

I do not believe he will come back.

In so far as the Chair is concerned, the Deputy may utilise the 30 minutes available to her. She may continue until 5.44.

I wish to refer to some general issues relating to the Bill. I support the main thrust of the Bill, but it needs to be tightened up. It tends to meander and is loosely drafted in regard to certain provisions. There are inherent contradictions in some of the definitions. There is a need for greater clarity in regard to the definitions and I will table an amendment in that regard. There are other areas of confusion in relation to the Bill.

Are all electrical shops selling goods through hire purchase agreements to be included within the scope of the Bill? Will the retail side of the ESB's activities be included? Why is it proposed to exclude the housing loan section of local authorities as the people who receive those loans are also consumers? Why are the banks not included? Are we creating categories of consumers? The most streetwise of people find it difficult to keep pace with the different types of loans and terms being offered by banks. Transparency in respect of all transactions must be provided for under this Bill.

Banks are included on all transparency options.

I accept that. I wish to refer to the section of the Bill dealing with house loans. As the Minister said, the purchase of a house is likely to be the largest single transaction which most people make in their life and it is important to give such consumers maximum protection under law.

This Bill goes a long way to reinforcing the rights of mortgage holders. It is crucially important that all reasonable advice and support be given to all mortgage holders. It is more important that such support be given to those who fall into arrears with their repayments and that every conceivable effort be made to avert repossession. There are few eventualities, apart from sickness or death, in a family that creates so much anguish as the loss of a home by way of repossession. At the minimum an early warning mechanism must be put in place and strictly enforced. A clear warning ought to be issued after the first payment is missed. The consumer should have access at that point to debt advice services. I would like the passing of this Bill to be reinforced with the provision of debt advice and debt management services. Such services should be independent, accessible and user friendly. Ideally they should be incorporated into services such as those provided in family resource centres or citizens advice bureaux.

There is an overwhelming need for a public education campaign to fully alert consumers to the possibilities and pitfalls of living in a consumer driven society and coping with credit and debt. As I said at the outset, knowledge is power, and lack of knowledge very often means that people have to go to others, mainly lawyers, for vindication of their rights, at a substantial cost. The fact that people will have recourse to the Office of Consumer Affairs is a major advance in consumer protection and service to the consumer.

There are a number of provisions in the Bill which we will be seeking to amend. It is very long, complex and tortuous legislation, but it will be worthwhile to invest time, thought and energy into getting it right.

I wish to bring one point to the notice of the Minister. The Progressive Democrats have grave reservations about sections 5 (3) and 5 (4) which seem to infringe on the Supreme Court decision in the Re. Haughey case, where the powers of the Committee of Public Accounts were found to be unconstitutional. I would like the Minister to consider that matter before Committee Stage. The Progressive Democrats welcome the main thrust of the Bill. I look forward to working on it on Committee Stage to ensure that when the Bill is finally passed it will be of enormous benefit to consumers.

I too welcome many of the provisions in the Bill, which are overdue and which no doubt we will have an opportunity to examine in detail on Committee Stage. Whereas the Bill is a reforming and modernising one, it entirely avoids the issue of credit discrimination. We are daily bombarded with advertisements which assume a minimum level of income on the part of the consumer that many consumers do not have. As a result of this Bill the consumer will undoubtedly be better informed, but I do not think many consumers in the latter category to which I referred will necessarily have better options open to them. Therefore I would argue that a more interventionist role by the State is required. For example, there is a need to enhance and promote the role of credit unions. In my experience credit unions tend to be most effective in long-established, stable working class communities; but they can be quite rare in some of the new urban working class areas, certainly in this city, and I suspect the position is no different elsewhere.

Generally speaking, banks will not lend to low income groups. Therefore there is no reason that they should not be levied, with the consequent revenue diverted to the credit unions to enable them to expand, develop and provide a service in the community that would prevent people from falling into the clutches of moneylenders. This should be the case since the banks, without the necessary collateral, will not lend even small amounts of money that could keep people out of the clutches——

Credit union legislation is upcoming; although it is not my responsibility but rather that of the Minister, Deputy Quinn.

I look forward to that. I would like to see some of the data on it because it seems that the newer areas do not have credit union facilities, certainly to the extent as have more established, stable communities. I am not clear why credit unions are excluded from the scope of the Bill.

It is for the reason that legislation with regard to credit unions is being updated. I will come back with information on that matter.

I look forward to seeing that legislation. However, I believe there is an argument for organisations such as credit unions to be included within the scope of this Bill, which has a special remit and which is different from other legislation. For example, local authorities in the UK have a role in the expansion of the credit union facility in major cities there. While consumers will have clearer and better information as a result of this Bill, there is nothing in it to provide greater protection to debtors.

I would like to take up the point raised by Deputy Quill about the distinction between licensed and unlicensed moneylenders. I accept the argument, although I might not put it in the same terms as outlined by Deputy Quill, that licensed moneylenders are inevitable. From experience in my constituency, and I am sure many other Deputies have had the same experience, for a variety of reasons — tradition, the demands of occasions such as First Holy Communion, Christmas or whatever — moneylending is regarded as an accessible and relatively easy, if not cheap, source of limited finance. Regardless of what we say in this House, that position will remain. As long as the moneylender is licensed and there are regulations to supervise and monitor the operation of the system I do not see a great deal wrong with it.

I was interested in the reference to the 10 a.m. start in terms of moneylenders. If one comes to my constituency at 10 a.m. on weekends one will see moneylenders at work, usually two people travelling together in big cars, one carrying data base, making their collections. Sadly, a great many of these people are not licensed, but in my direct experience they are parasites of the worst kind, who on occasion use intimidation and violence to get their money. The ordinary consumer who falls into their clutches through a crisis in the family — it is usually the woman who conceals the fact from her spouse — is terrified of the knock on the door. Very often one loan leads to another, the hole gets bigger and a major problem arises. However, if moneylending is licensed and monitored, if there are reasonable limits on the practice and if there is clarity in the exchanges that take place, it is a phenomenon certainly of urban life, that is likely to remain.

If moneylenders are going to stay with us, then, by definition, debtors are going to stay with us. There is nothing in the Bill which will give any greater protection to debtors. I question the efficacy of hauling people before the courts to discharge debts on the spot when it is patently evident to everyone that they cannot so discharge their debts on the spot. Yet people are regularly dragged before the courts to discharge their debts, because that is the way we do it. There must be a more efficacious way of doing this. Of course, the most serious incidents relate to people who are hauled before the court to secure an order for the repossession of their homes because they cannot discharge mortgages, etc. That area has to be looked at. Threatening vulnerable people with court action when it is manifestly the case that they are not able to discharge small debts is probably counterproductive.

The amount of data on this area available to us is very inadequate. We do not know the real extent of moneylending. I do not know the number of official licensed moneylenders. In the last booklet on this subject on which I could lay my hands it is estimated that there are three unofficial unlicensed moneylenders for every licensed moneylender. This booklet, which was produced by the Combat Poverty Agency — I am sure the Minister is familiar with it — is entitled Moneylending and Low Income Families and is written by Mary Daly and Jim Walsh. An extraordinary amount of information in that booklet is based on a survey of people in hock, so to speak, to moneylenders and explains the factors which caused them to get into that situation in the first place, etc. This booklet is very interesting. However, generally speaking, there is a gap in the information available about the extent of this problem. I suppose it is the case that the banks and other financial institutions have a very up to date data base on this issue; but, of course, they are especially secretive and they do not acknowledge that this is a question of public interest and, therefore, requiring transparency. Trying to get information out of the banks about one's state of indebtedness is bad enough but trying to get information from them in terms of formulating public policy and trying to cope with the problem of moneylending is virtually impossible. This is a gap which needs to be corrected.

Subject to these reservations and a few others with which I will deal later, I generally welcome the Bill. As has been said, the Bill goes beyond the requirements of the EU directive on consumer credit and will provide valuable protection for consumers in regard to advertising, information, rights of review, protection against exorbitant interest rates and unfair harassment. Arrangements on credit, whether borrowing money, taking out a mortgage, getting a bank loan to buy a new car or simply buying a new television on hire purchase, are not agreements between two equal parties. The lender will normally be a big company or financial institution, with all the considerable power and resources that money can buy. The borrower is normally an individual consumer with few resources and little support. In the context it is appropriate that the legislative protection available to consumers should be the strongest possible. The balance which has traditionally been towards the lender should now be tilted in favour of the borrower, provided of course that the resources necessary to enforce its provisions will be made available.

In some cases, as with mortgages, a consumer is entering into the biggest financial commitment he or she is ever likely to undertake. Mortgages of £60,000 and more are not unusual — I do not know what they will be like after the Finance Bill, but they have not been unusual up to now——

The RPT.

The RPT, APR, etc.

——with people entering into commitments on repayments extending over maybe 30 years. In many respects householders are mortgaging their lives to the bank or building society from which they borrow and they are entitled to the fullest legislative protection possible.

The idea of providing additional protection for consumers in terms of credit is a simple one, but the execution of the idea is a complex one, as the Bill illustrates. There is now a whole array of companies and financial institutions offering credit through a dizzying range of deals and arrangements and in many respects one would need to be a legal expert to negotiate one's through some of those deals or, as the current advertisement says, "Sure you'd have to".

Inevitably then the Bill is a complex one, as is illustrated by the fact that the definitions alone extend to almost five pages. These are complex mathematical formulae — to which I look forward to putting down amendments——

I will have to brush up on my maths.

——just to disturb the Minister over the weekend——

They will not disturb me one bit.

——dealing with the calculation of interest rates and related matters which are extremely difficult to understand.

I will bring in the financial experts for that.

I submit that these matters are not just difficult for the lay person but also for the Minister and Members of the Opposition who have to function without the necessary technical back-up. Presumably the necessary technical back-up will be made available to the Minister on the appropriate day.

Most of the provisions of the Bill are welcome and will greatly strengthen the hand of the consumer. I particularly welcome the enhanced requirements regarding advertising. Despite the existing legislation consumers are still bombarded with the advertisements which at best fail to tell the full story and at worst are deliberately misleading. We have all heard the radio advertisements offering new cars "from £30 per week" and it is only when the consumer responds to the advertisement that they find that this offer depends on them coming up with perhaps half of the value of the car "cash down". Of course, the aim of the advertisement is to attract the attention of the potential purchaser — and this is quite a legitimate objective — but it should not be permissible for it to be done in a dishonest or deliberately misleading way.

The context in which this Bill has been most often demanded and promised over the past few years has been moneylending. It is important when talking about moneylending that we should differentiate between legal and illegal moneylending. Illegal moneylending in working class areas is a social scourge which needs to be ruthlessly tackled. It is by its nature unregulated and the combination of hugely exorbitant interest rates and the culture of intimidation and violence which often accompanies it has brought untold misery to many families.

Legal moneylending could be regarded as a necessary social evil. People, rich or poor, will always want to borrow money. Credit and the power to borrow should not be the sole preserve of the better off. Moneylending has often been referred to as "the poor man's bank". My view is that provided it is strictly regulated and supervised and provided interest rates are limited to a reasonable level, legal moneylending is something that can be tolerated and which inevitably will be availed of in low income communities and unemployment blackspots. For some people on low incomes who do not have bank accounts, who have difficulties in making ends meet, who are not experienced at financial budgeting, who cannot meet the financial discipline required in a credit union and would not in any event be considered a "good credit risk" by a bank or financial institution, the system whereby somebody calls each week to collect a repayment may suit quite well.

However, I am concerned that far from increasing the level of supervision and monitoring of legal moneylending, this Bill will actually reduce it. This Bill repeals in full the 25 section 1993 Moneylending Act and replaces it with a relatively short 16 section Part in this Bill. The 1933 Act set an absolute upper limit of 39 per cent on the rate of interest which could be charged. No upper limit is specified in this Bill — the matter is to be left to the discretion of the Director of Consumer Affairs. I am concerned at how the concept of "excessive interest" will be defined in practice. Deputy Bruton referred to section 46 (4) of the Bill which provides that the section does not apply to any credit advanced by a bank or mortgage lender. That is a major question in itself.

I would ask the Minister to address the phrase, the concept of "excessive interest". I understand how that is supposed to work in theory but in practice I wonder how the Director of Consumer Affairs will deal with it. It is my advice — and I am open to correction — that this concept is imported from British law, that it has been on the British Statute Book for well over a decade and, despite that, there have been only two cases in the courts there over that 12 or 13 year period. It is a very important area. My mind is not yet made up; I do not know whether it is a good measure to remove the 39 per cent absolute ceiling but I would like the Minister to explain why that ceiling should be removed, why it should be left to the discretion of the Director of Consumer Affairs, how he will make his decisions in all the circumstances and how practical it is to enforce it. Under this Bill, no upper limit is specified, the matter is to be left to the discretion of the director and I would like to hear the Minister's view in this regard.

Under the 1933 Act, a person who wishes to apply for a moneylender's licence or who wished to have it renewed had to apply to the District Court for a certificate of suitability. When the certificate was issued, a licence was then automatically issued by the Revenue Commissioners. An applicant had to publish a notice in a newspaper that the application was being made to the court and had to go before a judge to establish his or her suitability. This procedure at least ensured that applications were a matter of public knowledge — or at least public record — and that people could and did go before a court and object to a certificate being issued where they believed this was appropriate.

On occasion, gardaí have gone to court and objected to a certificate being issued. In July 1990, the Society of St. Vincent de Paul in Cork objected to a moneylender's licence being renewed because the applicant had been charging interest rates well in excess of the legally permitted level. In that case it was 70 per cent as against the 39 per cent ceiling specified in the law.

The procedure under the 1933 Act was open and transparent and there is much to be said for it. Under this Bill it appears that the granting of a licence will be exclusively a matter for the Director of Consumer Affairs and that the procedures will be totally behind closed doors. It does not appear that there will be any requirement to advertise an application or that there will be any facility to object to an application. I do not in any way question the bona fides of the director or doubt that he will carry out his duties in anything but a conscientious way, but I wonder in what way does the Minister believe that the public interest is being served by these changes.

I am disappointed also that the Bill does not offer stronger measures to stamp out illegal moneylending. The penalties have been increased, with the possibility of jail for offenders, and the Garda have received some additional powers, but I doubt if they will be sufficient to stamp out the problems of illegal moneylending which is endemic in working class urban communities. Deputy Bruton referred to the efficacy of the remedy open to the consumer in these and, indeed, in other circumstances. Many of my constituents who are in the clutches of illegal moneylenders would be unlikely to resort to the Director of Consumer Affairs to prosecute a case on their behalf because the very nature of the illegal moneylending business does not lend itself to that.

Deputy Quill referred to additional legislative aids for gardaí to allow them to do their task in bringing a case to the stage where it might be prosecuted. Without that, we would not make much of an impact on the question of illegal moneylenders. The penalties have been increased but it is a question of detection, prosecution and conviction.

I accept there are no easy solutions. Huge profits are made by these illegal moneylenders. A few examples of court cases in recent years illustrate the sort of money involved. In January 1990 a court in Limerick was told that an unlicensed moneylender had charged an interest rate of 1,300 per cent. In December of the same year a Dundalk court was told how another "parasite" had charged an unmarried mother 375 per cent and 728 per cent respectively on two loans. The few cases which have come before the courts represent only the tip of the iceberg. Anyone who has experience of dealing with the unemployed or low income areas knows that illegal moneylending goes on but it is one of those social abuses on which it is extremely difficult to obtain specific information. The 1988 study undertaken by the Combat Poverty Agency, to which I referred earlier, estimated that for every licensed moneylender there were three unlicensed operators. Illegal moneylending is surrounded by a wall of silence because of the social stigma attached to it and the aura of fear that surrounds it.

It is also sometimes inter-family, as the Deputy is aware.

It is, and one of the factors identified in the Combat Poverty Agency report was the role that tradition plays in this area and the recommendation by a parent or another family member.

Those who borrow from illegal moneylenders suffer in silence. In many cases, husbands or wives borrow money without the knowledge of their spouses and then face the terrible ordeal of trying to make the repayments alone. Illegal moneylenders make hay at those times of the year when financial pressures on families are greatest — Christmas, back to school, First Holy Communions and so on. The Combat Poverty Agency study found that the greatest single reason for taking out a loan was Christmas but that a surprising number of people also had to borrow simply to meet regular household debts. People who take out one loan find themselves being pressured to take out another to finance the repayments of the first. If loan repayments are not met, people are threatened, intimidated and, on some occasions, subjected to violence.

That is why the particular cut of the "dirty dozen" that relates to the role of the community welfare officer is an unfortunate one in many respects. Whatever argument can be advanced for some of the other cuts, that particular one should be repealed. My favourite Minister of State, Deputy Burton, comes into this House, becoming more indignant on each occasion and tells us that it has been repealed. I am sure other Deputies present will agree that local community welfare supervisors in any of the constituencies will say that that has not happened.

We noticed the chemistry between the Deputy and Minister of State Burton.


Not everyone in the House can have the relationship that the Minister of State, Deputy O'Rourke, and I have. However, there is a real issue here and that is that many poor people previously had access to the community welfare officer for assistance with paying ESB bills and so on.

That is correct.

The Deputy is referring to the discretionary amount which people had.

And it has not been restored.

That is correct. Everybody is in agreement on this but with Minister Burton's indignation and the Minister, Deputy Woods, baffling everyone with science, nothing has changed on the ground.

If everyone knows that this business goes on, why are there not more prosecutions? That is a question that can be appropriately addressed to the Garda and whether they consider they have the wherewithal to enhance the prosecution rate. The traditional Garda response has been that they can only investigate specific cases where complaints have been made. I do not believe this approach is good enough. Nobody could imagine the Garda adopting a position in regard to the drugs problem, of saying that they can only investigate complaints. One of the specific recommendations of the Combat Poverty Agency report was that the Garda should be resourced to carry out an intensive campaign to identify and prosecute moneylenders and those who are operating unlawfully. That recommendation suggested that a senior officer could be appointed at both national and regional levels to oversee enforcement of the law and circulate information about the law in this matter.

The phenomenon of people being forced to resort to moneylenders will be with us until we, as a society, ensure that those on social welfare and in low paid jobs receive a decent income which can sustain them and their dependants adequately. Those who most frequently turn to moneylenders are people on social welfare. In many cases the social welfare rates are simply inadequate to maintain people in any reasonable degree of dignity and comfort. The general social welfare increases granted in the budget were minimalist. The policy of increasing payments in line with inflation would be acceptable only if the basic rates were adequate but that is not the case. While the rates have finally moved towards the priority levels recommended by the Commission on Social Welfare in 1986 — those levels were regarded as being urgent then — they are still below the minimum level set by the commission.

The virtual abolition of pay-related benefits will drive even more people into the clutches of moneylenders. Pay-related benefit, which was intended to be a cushion for those who became unemployed, before going onto unemployment benefit has been abolished.

A number of other general issues need to be referred to. Clearly under the Bill the Director of Consumer Affairs will have to take on a greatly enhanced role. I note that the Minister has promised him additional staff. I hope this will be done because a feature of successive reports of the Director of Consumer Affairs has been the complaint that he has been unable to satisfactorily discharge his functions because of staff shortages. For instance, in his 1991 report the Director of Consumer Affairs said he could not provide a breakdown of the outcome of cases due to the lack of staff resources. He said that more staff on the complaints line would allow more complaints to be processed and noted that a shortage of staff was causing problems for his mediation sevices.

The Director of Consumer Affairs also made the very valid point that his office cannot be as independent as it should be when the question of staffing and resources is out of his hands. While the Bill gives him a greatly expanded role, he will remain dependent on the Department providing the necessary resources. A malicious Minister — which, of course, the Minister most emphatically is not — could set out to frustrate the Director of Consumer Affairs in the exercise of his new responsibilities under this Bill by simply withholding staff or resources. Given the importance of his new duties I should like to see a provision in the Bill which would give the Director of Consumer Affairs a statutory right to all of the staff and resources he needs to reasonably discharge his duties.

I would like to have referred to bank charges. However, when Deputy Richard Bruton was leaving on his urgent and, I believe, successful mission, he was about to take up that point. I am sure he will now. The Minister of State has answered a series of parliamentary questions, including some tabled by me, on this issue. She has received tremendous publicity — of which she is a great exponent, as this morning's papers bear out — saying that she was going to address this question of exorbitant bank charges in this Bill.

Does the House hear who is talking about publicity?

Yet there is nothing in this Bill that addresses that question. I am afraid the Minister will present us with an amendment on Committee Stage when there will not be adequate time to consult, obtain advice and so on. That is a major omission from the Bill. Indeed, the Minister of State has recently on introducing Bills and, on important matters, tended to ask us not to worry, not to criticise her because there is an amendment on the way and asks us to wait until we see the amendment when we will be very happy with it.

I do not talk like that; I talk more clearly.

The last thing I intended to do was reflect on the Minister's diction.

The Deputy is from County Mayo himself.

I would prefer to see the colour of the Minister's amendment before I would be prepared to take it at face value.

The Deputy should not try to be impolite to me whatever he does.

I have been extremely polite to the Minister. One of these days, if she brings a bad Bill into this House, she will know what I am like when I am not being polite. This is an important issue and we want to see the colour of the amendment to it.

On a point of order, I asked and got the permission of the House, to conclude my comments after the other speakers had spoken.

Not-withstanding anything in Standing Orders and, having secured the agreement of the House, Deputy Richard Bruton may resume his Second Stage contribution. The Deputy has 16 minutes remaining.

I can assure Deputy Upton that I will not use the entire 16 minutes.

Can the Deputy give us the result before he begins?

I am sure the Minister of State will be pleased to hear that I am still firmly in place.

It was not the Deputy about whom I was inquiring.

There will not be any change in the leadership of Fine Gael. I am sure the Minister will be pleased to know.

Well done.

As Deputy Rabbittee said, the issue of bank charges should be clearly addressed. Clearly the Minister of State made a promise, as reported in the Irish Independent of 23 October last, when she was reported as saying that there would be controls on the proposed bank charges in the Bill. That has not happened. She clearly indicated also that she believed that the charges on credit cards were excessive, leading the consumer to believe that this Bill would address this matter in section 46 where the Director of Consumer Affairs could take issue with the level of charge being imposed on credit cards.

The issue of bank charges has become extremely contentious with consumers. What we are having is a welter of charges stipulated by the banks that completely confuse the consumer as to the true value for money available from the different lending agencies. Indeed they are designed in that way. Clearly, it would be in consumers' interests to have charges at a minimum and let the banks live out of the margin they have between their lending and deposit rates. At present those margins are handsome. The annual report of the Central Bank showed the spread between lending and borrowing rates. On commercial lending at present the banks have a margin of almost ten percentage points between their lending and borrowing rates and, on house mortgages, almost six percentage points. The onus is on the banks to prove that any extra charges are necessary as well as this considerable margin. The Minister of State will know that the present arrangements are highly unsatisfactory and that the relationship between the banks and the Central Bank in regard to increasing these charges is a completely closed book. The Central Bank has no remit for the consumer. It sees itself as operating purely in terms of prudential risk and protecting——

It has a remit under legislation but it says it cannot function.

That is right. In practice no one knows the criteria on which it decides the reasonableness of charges. Many of the charges are perceived as unreasonable and in many instances are not brought to the attention of borrowers. Many borrowers on overdraft are amazed to discover that they are charged £3.50 per transaction if they exceed a certain limit on their account.

The need for such charges should be justified before a body that would assess consumer interests, just as is provided for under sections 46 and 48 of this Bill. That would ensure that the terms of the credit arrangement are transparent, are available to the Director of Consumer Affairs and be challengeable by him.

The Minister of State, in reply to a parliamentary question, pointed to some interview she gave as reported in the Sunday Press. I checked her reference to that. The amendment suggested in the article would be very unsatisfactory. It appears that the Director of Consumer Affairs will have an opportunity to talk to the Central Bank before it sanctions these charges. That is making a goose of one and a gander of the other in that we are providing that all other lending agencies should be subjected not only to scrutiny but challenge by the Director of Consumer Affairs. The Minister's first thoughts on this issue — which were behind her interview reported on 23 October last — were right, that she should not be deflected by arguments that must have been put to her in the meantime to back down on this. I hope she will not make do with the rather weak provision she appeared to be suggesting when she was interviewed by the Sunday Press.

We need transparency in this area. The consumer is entitled to it. The Consumer Credit Bill should make provision for codes for practice which the Director could lay down for the operation of credit in general. Under present law he only has that right in relation to information. This provision has been used to provide for the APR statement. Equally, people have a right to a code of practice in relation to the operation of credit. For example, they should be informed if credit rating or other such procedures are being used. Credit rating and credit scoring is a commonly used procedure in respect of income. In the UK rules regarding fairness in the operation of such procedures have been established. People must be informed if credit scoring is being used and they must receive written reasons as to why they have been refused credit.

There should be very strict control in cases where one credit institution is passing on information about the credit worthiness of a consumer to another.

We have that. Section 118 does not refer to codes of practice but to regulations regarding the passing of information.

That is an important provision but we should devise a code of practice for the Director to guide the way in which credit will be offered. At present he can only use the Consumer Information Bill.

Other issues have been raised which will need to be looked at on Committee Stage. Threshold has signalled the need for an early warning of difficulties in relation to unpaid mortgages. There should be a default notice which would alert people to the first appearance of arrears in payment and provide them with information on how arrears should be dealt with.

The Minister should take the initiative and disseminate information about credit options and how people can exercise their rights. They must have easy access to such information.

While there is much that is good in this Bill there is still a way to go before the Minister can satisfy us that the credit issue has been satisfactorily tackled and that consumers have equal rights in what has been up to now a very one-sided relationship.

Good but could be better.

I welcome the Bill and pay tribute to the Minister for her long-standing interest in consumer affairs. I remember speaking in a debate on consumer affairs in the Seanad and the Minister clearly signalled her intention to introduce legislation to deal with the problems in relation to credit. I am glad she has had the opportunity to bring this Bill before us. Very often, Ministers who bring legislation to a certain point do not get the opportunity to see it through.

The issue of credit is a complex one. Hardly a day goes by without some new credit product coming on the market. Very often the terms of such products are extremely complex, obscure and unintelligible to the consumer. They are defined in legal jargon which is beyond the understanding of the average person. I am talking about those parts of the contracts which are effectively written in small print.

The products are sold in simplistic terms using the experience and knowledge of psychologists and experts in market research. The big institutions have the capacity to research the market and understand the drives and impulses which entice consumers to use their products. The consumer is at the receiving end of this carefully worked out strategy. The dice is loaded against the consumer. To that extent, it is good to see that the balance is now being restored in favour of the consumer. However, the consumer will be inevitably at a disadvantage vis-à-vis credit institutions and there is nothing the Minister can do about that.

It is important that some effort be made to redress the imbalance. We live in a consumer society. In the words of the late John Healy, the precept in the consumer society is "thou shalt consume". That psychological drive in the human subconscious is exploited by various agencies who show people pleasant images and encourage them to aspire to their attainment. Unfortunately their efforts to do so can end in unfortunate circumstances.

I welcome the provision in the Bill that warning notices be put on contracts advising consumers that they risk losing their house and so on. Such warnings are a step in the right direction but their effectiveness is limited, given the experience with the health warning on cigarette packets. Nonetheless they are welcome and given that there is not the same sense of addiction involved they may be more effective. It is appropriate that some effort be made to tilt the balance back in favour of the consumer.

Most consumers now buy goods on the basis of credit. The days when people paid cash are to a large extent gone. It is a pity that that society has to some degree faded away. Those who worked on that basis and paid cash down were a worthy type of person. Many of these people built up the country in the past. They were people of commitment; they believed in honesty and in fair dealing. The modern world to some degree has moved away from that. It is a pity we have left behind some of the good things which were a feature of that society. Of course, time moves on and we cannot stand still. We have got to live with credit, and that is what this Bill is about.

It is noteworthy that the Bill is acting on the commitment contained in the Programme for a Partnership Government. Indeed, I compliment the Minister and Minister of State at the Department of Enterprise and Employment for fulfilling the commitment given in the Programme for a Partnership Government.

The old adage that one should neither a borrower nor a lender be is still worth thinking about, although society has moved on from those concepts. It is worth examining those concepts with a view to salvaging some of their valuable aspects; but of course credit is part of modern commerce and I am not making the argument that we should have a society which does not have credit. That would be ridiculous.

Some years ago an ombudsman for credit institutions was appointed to investigate complaints in respect of banks and building societies. That was a worthwhile initiative. It is important that some of the concerns which existed at that time should be catered for in this legislation. Deputy Quill made a valid point in regard to a debt advice service which I hope the Minister will examine with a view to acting on it. Unfortunately, the way in which people respond to the problem of debt makes it worse. I hope some type of advice can be provided for people who are in debt so that, as they say in politics, "When you are in a hole at least stop digging". Many people are in that position because of the unfortunate experiences they have had. Many are on low incomes and in difficult circumstances and are vulnerable to moneylenders and so on.

In her opening remarks the Minister of State said that moneylending was there since biblical times. It would be naive of us to pretend it would be possible to eliminate moneylending as a problem in society. The best that can be done is to try to reduce the undesirable aspects of moneylending to a tolerable level. The Bill makes reasonable progress in that regard. I welcome the initiatives contained in it to curtail and curb some of the more ugly aspects of moneylending.

I welcome the role for the Director of Consumer Affairs in relation to the control of moneylending and the licensing of people who will engage in moneylending. However, I wish to sound a note of concern in regard to the amount of resources available to the Director of Consumer Affairs. This has been an ongoing problem for the Director and the staff in his office for a number of years. I am pleased that the Minister has said that extra staff will be provided for him. Unless staff are available it will not be possible for the Director to deal with the problems. I experienced difficulty in getting through on the telephone to the office of the Director, either because there were not sufficient lines or enough people to answer the telephone. I admit that some considerable time has elapsed since I tried to telephone the office, but I hope that problem can be addressed. It is important that the public have access to the office of the Director of Consumer Affairs. In the case of small problems, most people nowadays are inclined to telephone the office rather than write to the Director. The average person can probably get that advice in a more coherent and useful way by way of interaction through a telephone conversation rather than setting down the problem on paper and waiting for the Director to respond.

I welcome the provisions in the Bill in relation to controlling and curbing moneylending, especially those provisions which will now make it illegal for moneylenders to hold social welfare books and pension books as collateral against a loan. That is a highly desirable step and I welcome it.

I also welcome the fact that records of transactions with moneylenders will have to be kept and held for a five year period to ensure, in the event of a dispute occurring, that the interests of consumers are protected. I also welcome the fact that moneylenders will be obliged to spell out clearly to the consumer the terms of the agreement and that moneylenders will be precluded from giving false advice — for example, giving the impression that a certain amount of money is being lent when in fact that total amount is considerably less.

A number of speakers referred to bank charges. I would like to see the control of bank charges being assigned to the Director of Consumer Affairs and I hope the Minister will be able to make the necessary adjustments to ensure that that happens. It is important that the balance in relation to bank charges be tilted further in the direction of the consumer. The average consumer is completely bewildered in relation to bank charges. I do not understand them and I do not have the time to spend studying them in order to come to grips with their various aspects. I wish a simplified version could be provided so that the average person could understand what is involved. If that is not possible perhaps a basic guideline could be made available which would cover most bank charges. I understand there may be complex bank charges for those involved in major transactions. One would hope that a simple guideline, consisting of two or three points, could be provided for the average customer.

I said at the outset that there is an unequal balance between credit institutions and the consumer. The credit institutions work in mysterious and inscrutable ways. I have always been fascinated by the manner in which banks have used advertising. I have been particularly fascinated by the slogans that some of the banks have used in the past, and especially the call from one of the banks: "Come in and say hello".

It will cost the Deputy £30 now to say "hello".

Perhaps for £30 they will be inclined to say "hello" to you. Let us try to imagine the response if one were to visit a series of banks in the city, going from teller to teller, saying "I have taken up your offer, I am coming in to say hello". I presume they would have ways in which to curb that. Obviously, one is not expected to take those slogans literally and yet there is a driving psychology behind them. This slogan is not made up by some eccentric advertising person; it is designed to latch on to some deep anxiety in the human mind——

To seduce.

In a metaphorical sense.

——to sell a message or to create an impression. What is meant by slogans such as "The bank of a lifetime"? It is meaningless, but it touches a chord. Then there is the bank that takes one on a radio tour of potholes of County Cavan which, after the site at Mullaghmore, must be one of the great national tourist attractions. After the tour the car is wrecked and you will need an auto loan. You can say that this is a joke and fun, but it is not funny. These advertisements are designed to generate custom, they also include small print and carefully worded phrases, advice from legal and accountancy experts and various other marketing people who have all been drawn into this two pronged attack. People are encouraged to drop in but when things go wrong the customer is nobbled and on the wrong side of the counter. The bank manager will press a button and lo and behold the sheriff in full colour will arrive to look over the house to see if there is anything worth taking. I compliment the Minister on introducing the Bill and on her efforts in this whole area over the last five or six years, if not longer.

In common with other speakers I compliment and congratulate the Minister on introducing this substantial Bill. She has already indicated her determination to progress this legislation as quickly as possible. I am glad we are now discussing legislation likely to have major beneficial implications for those who obtain credit.

We all know that giving credit has mushroomed recently to such an extraordinary extent that it is a huge industry. A great many individuals live off the benefits of giving credit or arranging credit for others. All these intermediaries cost money and the person using the credit facility is usually the person who pays all the charges. The Minister has taken an opportunity in the Bill to tackle this issue and lay down very strict criteria for the performance of intermediaries.

Included in a number of areas associated with this legislation is the question of legal and illegal moneylending. Moneylending has been going on for a long time. There have been attempts to tackle the more notorious aspects of illegal moneylending over the years with some success, but, unfortunately, a great deal remains to be done. This legislation will make a major contribution to bring to heel those engaged in illegal moneylending which is causing great difficulties for families. Money is almost immediately available at very high interest rates from illegal moneylenders and difficulties arise for people in repaying the borrowings. I am pleased that the Minister has seen fit to ensure that it will be illegal for moneylenders to hold social welfare books. This practice developed in fairly recent times as it was obvious to the lender that the social welfare book was an asset that guaranteed not just eventual payment but payment in time. In our constituencies many of us have come across individuals who literally had nothing to live on because social welfare books were held by unscrupulous moneylenders. It seems to me that such people were breaking the law in relation to the holding and cashing of the sums in social welfare books. In any event, it was a deplorable practice.

There is a great temptation to seek credit because of the powerful nature of advertising which persuades people who may not be able to afford it, to buy a facility or goods. With the help of credit people believe that they can afford to spend when, strictly speaking, they cannot. The methods of providing credit have become extremely complex and advertising has become extremely persuasive.

Section 31 is devoted to credit agreements which have become extraordinarily complex. Any credit agreement worth its salt usually runs to a couple of pages, the typeface is very small and a tremendous amount of information is packed into it. Sentences, sections and paragraphs refer backwards or forwards to other parts of the agreement and affect the operation of sections of the agreement and language which is difficult for the ordinary consumer is used. The agreements are complex and difficult to understand and are placed before the borrowers who are usually ill at ease and unable to think clearly about what they propose to do and the type of agreement they propose to enter into.

Section 31 makes it quite clear that the consumer is entitled to certain specific information. Among the items of information to which the consumer is entitled are cash price and credit price. This is very important because many people enter into agreements which might extend over a number of years without understanding the precise amount of money they will have to pay. They may know the monthly amount but do not fully understand the agreement into which they are entering. This scenario relates particularly to leasing and lease purchase arrangements. Often the borrower will sit down with the provider of such a facility and the provider will say that he must pay £X per month over 24, 36 or 48 months and that at the end of that time the debt will be paid. However, when one comes to the end of the term of repayments one often finds that is not the case and one does not own the item for which one has entered a lease purchase agreement. The wrong impression is created from the start and one is faced with further fees in order to acquire an interest in the asset. These are complex areas which are not clearly spelled out in the agreements I have referred to.

Another question is the amount of interest to be paid. Sometimes there are difficulties because people are under the impression that they are making fixed monthly repayments over the period of the agreement. However, they may find for a variety of reasons they are charged additional interest. This may arise because the interest rate has changed or from slight delays in making repayments. The additional interest charged may seem punitive. Sometimes there are built in penalty clauses and one may find at the end of the first or second year that one still owes a substantial amount over and above what one agreed to pay back in the first place.

The credit card industry is booming and I welcome the provision for an agreement which will have to spell out in detail the credit card arrangements. The requirement that information be provided in the credit agreement makes a major contribution to the success of this legislation. I welcome also the Minister's decision to ensure that in most cases a ten day cooling off period for those who enter into credit agreements will apply. We all know that some individuals feel under pressure to enter into a credit arrangement as quickly as possible lest difficulties arise which will impede their ability to get the deal they are looking for. One is expected to take in two, three or four pages of complex information which may be couched in a strange and unfamiliar manner and one has no opportunity to withdraw from the agreement. On further reflection or having discussed the matter with a partner a person may find the deal is not attractive and difficulties that have not been thought of become apparent. The cooling off period will give the consumer a great deal of protection and gives him or her the opportunity to make choices after the immediate pressure of concluding an agreement in the first instance. The Minister is to be complimented for including this provision in the Bill.

A number of contributors who referred to moneylending also referred to the role of the credit unions. The Minister is particularly supportive of their work. The credit union is a financial institution which is close to the people and those who work in it are generally from the area and tend to be respected members of the community. One would like to see the continued extension of credit union offices to every parish in the country. The Minister for Social Welfare, Deputy Woods, has been to the fore in supporting the work of the Society of St. Vincent de Paul in assisting people to extricate themselves from the clutches of illegal moneylenders. It has enjoyed a substantial success, particularly in areas where there has been a tradition of using moneylenders and people have been unable to ascertain whether the moneylender is prepared to act in an honourable fashion. I know from discussions with various individuals involved in the credit union movement and in the Society of St. Vincent de Paul that they are supportive of the consultative process carried out by the Minister and welcome this Bill, which they believe will make a major contribution to the orderly extension of credit and to strengthening the rights of consumers when they enter into agreement of one kind or another.

The Minister is waging a campaign against bank charges and is committed to making changes in this area. If the banks do not come clean on the range of charges levied on customers and ensure that people are treated fairly and given all the information to which they are entitled, they may find themselves on the wrong side of the Minister.

I applaud the Minister for bringing forward this legislation which will be hotly debated. It will make a major contribution to the orderly development of credit facilities.

Ba mhaith liom fáilte a chur roimh an Bille seo agus comhgháirdeas a dhéanamh leis an Aire as ucht é a thabhairt isteach.

Is dócha go bhfuil taithí ag gach uile dhuine againn dul isteach i mbanc agus go ndéarfadh duine leat, "cén t-ús atá á bhaint amach agat?"

Déaneann an Bille seo iarracht a chinntiú nach mbeidh an custaiméir sa chaoi seo níos mó.

I welcome this Bill. Recently I compared the actual percentage rate of interest on two loans.

Debate adjourned.