Dáil Éireann díospóireacht -
Thursday, 17 Feb 1994

Vol. 439 No. 1

Consumer Credit Bill, 1994: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. D. Wallace

Before I make my brief contribution, I also wish to pay tribute to the Minister of State, Deputy O'Rourke, for bringing this legislation before the House. It is long overdue and will certainly impact on many people who deal with institutions in one form or another.

Most people have to obtain credit facilities at some stage in their lives. Newly married couples have a particular need for supplementary finance to purchase a home, furniture, or car. Later in life a family may require a loan to fund items such as house extensions, higher education for teenage children and unexpected financial burdens. Consequently, a very large proportion of our community has some degree of dependency on credit-giving institutions or individuals. It is, of course, vital that our legislation provides the maximum possible degree of protection to such people and prevents their abuse in any way.

I strongly welcome this comprehensive Bill which fulfils at least three distinct functions. Initially, it unifies all existing legislation regarding consumers' rights in the area of credit agreements. Second, by incorporating the objectives of the European Union's twin directives of 1986 and 1990, it allows us to benefit from the advances made by our European partners in this area. Finally, it incorporates a number of added features which complement existing national and European laws.

As I have already mentioned, this is an extensive Bill incorporating 121 sections. Later, I intend to comment briefly on the vital need to have the necessary mechanisms put in place to ensure that consumers are made aware of the many benefits bestowed on them by the Bill. Without such mechanisms it is obvious that the value of the legislation will not be fully exploited. Initially I would like to consider briefly some elements of the Bill.

I welcome the provisions which deal with licensing those who supply credit to consumers. They deal comprehensively with both primary and secondary lenders. It is vital that the procedures in place to provide licences be fully effective. This is particularly true in the case of moneylending. When a licence holder has been found to abuse his or her position, it is important that this matter is taken into account when any further licence application is being processed.

I particularly welcome sections 16, 77 and 82 which prevent the lender from enforcing a credit agreement under certain circumstances. Section 82, for example, should ensure that moneylending is carried out in an open and businesslike manner by properly licensed individuals.

Provisions to protect the consumer from unethical pressures are quite comprehensive. The nature and place of contact between lender and client are limited by sections such as 43 and 44. Thus written communication must be properly directed to the consumer while time and location restrictions are placed on person to person contact. I have a degree of concern in this regard in the case of section 44 where a lender seems to be allowed to visit and telephone a client at his or her place of work when "...all reasonable efforts to make contact with him have failed". While the intention of this clause is obviously reasonable, it may be open to a certain degree of abuse by a determined lender.

It is perhaps inevitable that a certain percentage of credit agreements will become the source of dispute between the two parties. While the lender may have legitimate cause for complaint in some such cases, it is nevertheless vital that he or she deals with any problems within both the letter and spirit of the law. In many cases the consumer is very vulnerable and may be open to exploitation. Section 49 provides a useful protection to such consumers in the case of agreements which may not be enforced under the Bill. While some unfortunate people may ultimately have to accept the confiscation of disputed goods or property, it is heartening that section 55 will help to ensure the total values recovered are limited to the consumer's debt.

The increasing use of computer technology in the financial institutions has contributed to a certain distance emerging between management and client. This can often lead to unnecessary embarrassment and upset for consumers in the operation of their credit accounts, especially in the case of overdraft facilities. The dilemma created by placing computer technology between manager and consumer cannot be solved by legislation alone. It is but a symptom of a wider problem facing modern society regarding the proper role of such technology. The provisions of section 33 should at least help to ensure that a consumer is made aware at all times of the specific nature of his or her credit limit with any financial institution. The provisions of the Bill deal at length with the need to ensure that the consumer is informed to the greatest possible extent before entering into any credit agreement. I particularly welcome the emphasis on ensuring that correct interest rates are displayed in any advertisements by financial institutions. In their haste to obtain the necessary funds, all too often customers rush into agreements carrying totally uncompetitive rates of interest, realising their mistake only when it is too late. The need clearly to warn prospective clients of the dangers associated with failing to honour a credit agreement is also covered in this Bill.

While a number of other sections contain provisions likely to render life easier for many hard-pressed consumers in the future, I stress the importance of section 46 which allows for legal redress in the event of excessive interest charges being levied. This will provide a much needed safety net for those who have entered into grossly unfair credit agreements.

A problem in a detailed Bill of this nature is that, while carefully planned and compassionate provisions may be enacted, intended beneficiaries are often partially or totally unaware of their value to them. This gap between the potential value of excellent laws and a population not sufficiently informed of their rights must receive increasing attention in the future. In the case of consumer protection I am of the firm belief that a summary bill of rights should be handed over to a consumer by any lender prior to the completion of credit agreement between the two parties. Such a bill of rights could easily be extracted from the detailed provisions of this Bill. Our educational system, especially at second-level, should concentrate more on ensuring that each school leaver is aware of the basics of dealing with personal finances and balancing their individual budgets. Too often people incur large debts through lack of elementary financial planning. The consequences can be disastrous for the individual and family involved.

We all recognise the importance of this Bill. I hope the Minister will take note of the points which I believe would enhance the Bill and ensure that those most in need of its protection will benefit fully from the work undertaken by the Minister and Members of this House in this respect.

Minister of State at the Department of Enterprise and Employment (Mrs. O'Rourke)

I thank Deputy Wallace for his very thoughtful and well-researched contribution. I commend all those who contributed to the Second Stage debate, Deputies Richard Bruton, Quill, Rabbitte, Upton, Ó Cuív, de Valera, Flood and Wallace, all of whom are to be lauded for the research they undertook in preparing their contributions.

The committee system allows a complex and challenging Bill such as this, embodying 121 sections, to be fully dealt with. Participants on Committee Stage deal with the meat of legislation, as distinct from its philosophical thrust. Committee Stage of this Bill will be considered by the Select Committee on Security and Legislation when each of the 121 sections will be gone through with a fine comb. I have already had such experience in the case of the Industrial Training (Apprenticeship Levy) Bill, 1993 and the Terms of Employment (Information) Bill, 1993 and I know the committee system is well suited to intense scrutiny. While I applaud that system, we have tended to leave that entire operation to those committees. Therefore, I was very pleased to note the very fine contributions made on Second Stage and to have had the opportunity to hear all of them.

I will briefly answer some points raised by Members and allay some fears expressed. Deputy Richard Bruton, the Fine Gael spokesperson, highlighted the lack of a prohibition on banks charging excessive interest rates. We have gone further than the relevant directive required in this respect in the provisions of section 46, in that there is not a corresponding provision in the relevant directive. When implementing EU Directives in primary legislation one has the right to go beyond the remit of that directive in line with what the Government in a particular member state may want.

The provisions of section 47 give a court power to re-open credit agreements where the court has found, by virtue of section 46, that the charge is excessive. Section 82 gives the Director of Consumer Affairs power to request any undertaking. Deputies Richard Bruton and Rabbitte also expressed concern that the Director of Consumer Affairs only can take action under these sections. I have already considered this matter. I have come to the conclusion that, as the Director of Consumer Affairs will have an overview of the system through his licensing role, it is in the consumer's interest that he should have such pivotal role. For consumers to attempt in court to seek redress might cost them a lot more than they would have had to pay to clear the agreement. It will be of enormous help to consumers that they will have a champion such as the Director of Consumer Affairs to take up their case.

Deputy Richard Bruton also mentioned the criminal provisions in section 12. I am grateful to him for bringing this matter to my attention and it will be further examined.

Deputy Quill, the spokesperson for the Progressive Democrats, contended very strongly that the Director of Consumer Affairs under this Bill had no right to pursue illegal moneylenders and said she would be tabling an amendment. It is not my intention to demand of the Director of Consumer Affairs that he pursue illegal moneylenders. The people to pursue and bring to justice persons involved in illegal moneylending are the Garda who have such powers of pursuit. This will be followed through.

I agree with Deputies Quill and Rabbitte on the importance of bringing licensed moneylenders into respectability in law. When introducing Second Stage I made the point that one of the prime provisions of the Bill was to put beyond the pale unlicensed, illegal moneylenders and give authority and coherence to the operations of licensed moneylenders. Each Member who contributed acknowledged that whether we like it or not, licensed moneylenders have a role to play. We want to draw a clear distinction between the two. Moneylending always will be with us. One of the purposes of this Bill is to accept that fact and to establish high standards of moneylending. I am also aware of the anxiety on the part of Deputy Quill and others that, if we render it impossible for licensed moneylenders to operate, those who rely on them for credit will be driven into the very area from which we seek to protect them. It is a point which was put to me not alone by those in the legal field but also by groups who serve the disadvantaged such as the Society of St. Vincent de Paul and the Combat Poverty Agency. They impressed on me that I was not to fall into the trap of pivoting the legislation in such a way that it would drive people into the hands of illegal moneylenders.

Deputy Quill sought provision for a review of the penalties by regulation. I understand the Department of Justice plan to introduce legislation to update fines. However, I will examine the matter further in order to decide on the most suitable course of action on that point.

Deputy Rabbitte, spokesperson for Democratic Left, complained that the Bill did not allow for individuals to challenge the granting of a moneylender's licence. I assure the Deputy this has not been omitted. I considered the ways in which moneylending could be licensed and controlled and decided this might best be done by giving the Director of Consumer Affairs appropriate powers in that area. I considered the options regarding the rights of concerned individuals or bodies to contest the granting of such licences and decided it would serve the interests of the legislation if such contests were channelled through the Director of Consumer Affairs as the licensor. After all, he has taken the place of the court in this function. I would refer the Deputy to section 48 (1) (a) which reveals the whole process in action.

Deputy Upton is the official spokesperson for the Labour Party on consumer matters so I was very glad to hear his contribution. He has a strong interest in this area and has always served the consumer. He made a very good and, at times, witty speech. His remarks were pointed and acute. He pointed out clearly the complexities of advertising a credit product and the number of choices. Not all advertising is complex — there is some simple, straightforward advertising of credit products. Sometimes complexity leads to confusion.

It is a truism that consumers are best served by choice but they are not best served if the choice is a confusing one, if the language is confusing, if the images painted are too glamorous, or if he or she stumbles unknowingly into a credit arrangement with insufficient resources or does not understand what they are entering into. The Deputy made a valuable contribution in that regard.

Deputy Ó Cuív spoke about the way credit unions serve their local catchment areas. He would know a good deal about this because he operates in the Connemara Gaeltacht and the western seaboard area where credit unions, co-ops and self-help groups are a strong feature of life. The scattered nature of the communities encourages them to seek credit from a source which is easily accessible and provides friendly advice. Historically, the credit union movement has strong links with the flowering of Irish independence, giving people the feeling that they could control their own affairs and could make credit arrangements which would best suit their local communities. The Deputy's words of praise for the credit unions were well taken. He spoke, too, about moneylending and emphasised the need to have clear differentiation between legal and illegal moneylenders.

Deputy de Valera, armed with knowledge, made a well researched contribution based on the operations in her constituency of the Society of St. Vincent de Paul and the Combat Poverty Agency, both of which were among the large number of groups I spoke with in relation to this legislation. I pay tribute to the Minister and to the Department of Social Welfare for the special arrangements they have whereby personnel in the Department give special budgetary advice and advance moneys to the Society of St. Vincent de Paul and other similar parish based organisations and groups. They meet people, talk through their difficulties with them and try to give a helping hand not just in a financial sense but in a psychological sense. They act as mentor and help people out of their difficulties.

The groups I spoke with were the Consumers' Association of Ireland, other consumer interests — the banks, the building societies, finance houses, the insurance industry, insurance brokers, moneylenders, IBEC, the Incorporated Law Society, the Irish Centre for European Law and those representing the disadvantaged and vulnerable in society — the Society of St. Vincent de Paul, the Combat Poverty Agency and money, advice and budgeting service officers in the Department of Social Welfare. I have paid tribute on radio to the Munster representatives of the Department of Social Welfare in that regard. I met some of them when I was in Cork and learned of the sound advice they give people.

This legislation is one of provision and prohibition. We must have regard to what causes people to get into difficulty and to vulnerable people who go down the road of illegal moneylending. They endure harassment, all kinds of indignities and physical danger in many cases simply because, through no fault of their own, they did not have knowledge of what they were getting into. Life is at the wire everyday. Bills have to be paid and people find they cannot cope.

Again, I commend the Minister for Social Welfare and his Department. In 1988 I was in Cabinet when the Minister put forward his ideas on what might be done. He fought for these kinds of measures.

Deputy Flood echoed what Deputy Rabbitte said. They spoke about legal and illegal moneylenders and how loan sharks prey on people's vulnerability and the immediacy of their difficulties. His contribution was clearly based on knowledge.

Deputy Wallace made a reasoned, knowledgeable submission to the House. He has spoken to me outside the House about provisions in the Bill which he would wish to see amended and I will look at his submission.

The Bill now goes to Committee Stage and that is where we will taste the meat. There are 121 sections. I do not believe that every Bill that is brought before Parliament is perfect, otherwise what would be the point of introducing it, what would be the point of legislation or democratic debate if everybody simply nodded their heads and went home?

The purpose of Committee Stage is to hear the views of Members and to consider the amendments put forward. Nobody is saying that my officials or I have all the wisdom in this area even though we have consulted extensively and have started on the second wave of consultations. We are prepared to consider amendments. I am not saying every amendment will be accepted — that would be foolish — but every amendment will be considered and I am sure some will be accepted.

The purpose of this toing and froing in debating legislation is to gain the wisdom of other people. Members engage in extensive constituency work. That is one of the reasons I have always said that elected Deputies should not only be legislators. We read articles from time to time by learned political commentators — I do not mean journalists — who say elected representatives should only be legislators, that they should concentrate on legislation and leave everything else to county and urban councillors. All Members when they return to this House on a Tuesday bring with them the thoughts and concerns of the people they meet during the previous weekend. All measures which come before the House are infused with thought by those who engage in the proper democratic process with constituents who bring their cares and concerns to us. Rather than be seen, as some people would like to paint us, as trying to get favours from people for which they are not eligible, I often find, through the concerns expressed to me — I am sure every Deputy has the same experience — an omission in a particular bureaucratic administration or in legislation or a thought that I can store and put forward to my colleagues in other Departments or in my Department to help the legislative process.

If we were to cocoon ourselves here and never meet constituents we would be arid and non-productive as legislators. It was evident from the contributions on Second Stage that people knew clearly what they were talking about.

I wish to pay tribute to the Members as I bring the Second Stage debate on the Bill to a conclusion. I look forward with interest and anticipation to Committee Stage.

Question put and agreed to.