Dáil Éireann díospóireacht -
Wednesday, 26 Feb 1997

Vol. 475 No. 5

Credit Union Bill, 1996: Second Stage (Resumed).

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

Mr. Nolan

I welcome the main thrust of the Bill which has taken a long time to produce. While we on this side of the House had an input into its drafting prior to leaving office, some aspects are causing concern and we intend to table amendments on Committee Stage to deal with them. The Irish League of Credit Unions has lobbied successfully on behalf of its 427 units throughout the Republic to have changes made.

The credit unions promote the concept of self-reliance and to empower their members to provide for their needs through their own efforts. This ethos, which is based on co-operation, was uppermost in the minds of the founders of the movement in the 1950s. We tend to overlook the motives which prompted these pioneers to establish credit unions. The next phase of development should proceed in a structured way. It is to facilitate this that this legislation has been introduced.

We are all aware of the effect credit unions have had on the social fabric. Some tend to think of them as rural based organisations but there is no major town without an active and vibrant credit union. New credit unions are springing up throughout the suburbs of Dublin city. Many people do not realise the extent of which credit union members give of their time voluntarily. This is underestimated.

Legislation which hinders or frustrates the development of credit unions will prove damaging. The restrictive caps that the Minister of State proposes to impose on shares, deposits and loans will have a serious effect. The right of credit unions to own property will also be restricted. They will no longer be allowed to buy and sublet property to community organisations. The Minister of State should seriously consider amending these provisions on Committee Stage.

In certain areas the Bill will be intrusive and tend to centralise control. This is unwarranted. The credit unions are self-regulated, have acted responsibly and demonstrated the value of the co-operative approach in resolving problems. They have managed their own affairs successfully. Any attempts to make changes by way of legislation should be discouraged.

There are few individuals and families whose lives have not been affected and improved by the use of credit union facilities. With more than 1.65 million members, the credit unions have grown not by way of a major marketing campaign or sophisticated advertising but through the service they offer and deliver to their members. Credit unions are owned and run by their members and set out to serve their needs. That is the basis of their success. The credit union movement is one of the most successful co-operative movements this country has witnessed. Credit unions do not make profits. They are owned and run by their members for the good of their members. A cornerstone of the movement is that anyone can join a credit union and that distinguishes them from other financial institutions motivated by profit. One notices the difference in walking into a credit union and walking into one of the commercial banks.

I know of the work of the credit union movement on behalf of the community. It serves its members in a number of ways including its involvement in sponsorship. Recently a school principal told me she was amazed at the amount of support the local credit union gave her school. Students go on to be active members in their credit unions.

The involvement of credit unions in supporting and sponsoring various sporting events reflects well on the movement. The community games is one of the major events supported by the Irish League of Credit Unions. The finals of the games are held annually in Mosney in September and are enjoyed not only by the participants in the sports events but by the parents and the organisers. The league's involvement in that successful sports weekend is a credit to the movement.

I have seen the valuable input of credit unions to rural and urban society. They have had a great impact on large urban areas and towns in my constituency, like Carlow, Tullow and Bagenalstown. Members of parishes and rural communities are brought together by involvement in their credit unions and that should be supported. People's lives have been changed by their involvement in and the assistance given by credit unions. Some people who would otherwise be driven to approach greedy moneylenders have received assistance from credit unions. They were given dignity and credit union money breathed new life into communities whose outlook has been changed by the facilities offered them.

I am concerned about a number of aspects of the Bill. The limit applying to loans, shares and deposits is too restrictive and I ask the Minister to reconsider it and table amendments on Committee Stage. The Irish League of Credit Unions lobbied for the introduction of this Bill and gave the Minister of State and the Department detailed submissions of amendments to the restrictions applying to shares, deposits and loans. It requested that the maximum level of shares should be increased from £20,000 to £30,000 and the maximum level of deposits from £20,000 to £50,000. That proposed maximum limit for deposits may be too high, but the current maximum deposit of £20,000 should be increased. The maximum limit applying to loans should also be increased. Credit unions have been successful in granting loans to fund house extensions. With relatively ordinary houses in Dublin selling for £90,000 to £100,000 and house extensions and improvements costing in the region of £30,000 to £40,000, the maximum loan of £20,000 is too low. Will the Minister give serious consideration to reviewing those limits on Committee Stage?

The Bill restricts the amount of savings a member can have with the credit union. I fail to understand that restriction as members are entitled to only one vote, irrespective of the amount of money they have on deposit. Under current legislation a member may save as much money as he or she wants to save with a credit union. The cost of materials, particularly in the housing area, is expensive and for that reason the maximum loan of £20,000 should be reviewed.

There is a serious anomaly in credit unions investing in property to benefit the community. Having regard to the work they do in the community, the provision in that regard should be changed to assist them.

The Bill brings into play the role of the Irish League of Credit Unions which, to date, has been largely supervisory, but it will change under this Bill. There are 427 credit unions affiliated to the Irish League of Credit Unions and it has expressed to the Minister of State its disappointment about certain aspects of the Bill. It has asked that amendments be introduced in line with its views expressed at a recent meeting. Those views should be given serious consideration. It is anxious that the limits on shares, loans and deposits are increased.

We recognise the important role played by credit unions in society for the past number of decades. We should encourage and support the credit union movement in any legislation enacted by this Oireachtas. The Minister of State should seriously consider tabling amendments in line with what is sought by the Irish League of Credit Unions, which is acting on behalf of its members. I appreciate his intention to table some amendments. Limits should be a percentage figure taking account of the size of a credit union. The right of credit unions to decide what their members want to do with surpluses should be provided for.

The procedures set out in section 48 covering the provision of new services are daft. If we were to follow them, it would take more than two years to introduce even the smallest new service to credit union members. Is the Minister of State seriously suggesting those detailed procedures are necessary before a credit union makes even the smallest new service available to its members? There is a difference between the development of a major new service and meeting the simple needs of credit union members.

Some credit union officials are upset by the provisions on regulations. Not alone does the Bill provide for the proper regulation of credit unions, it seeks to take over and run the movement, which is wrong. Until now credit unions have been successfully self-regulated. How will the Registrar of Friendly Societies police the credit union movement, given that at present he has considerable difficulty reporting his work? The last report he produced covered a number of years ending with 1993. Without providing a major increase in resources and finances to that office, the registrar will find the increased workload under this Bill unsupportable. It takes the registrar two years to process the annual returns of credit unions and only rarely does he inspect a credit union. The control and supervision of credit unions has been successfully done by the movement through the Irish League of Credit Unions.

The movement is self-regulated. Every credit union operates under rules approved by the registrar; every loan or amount saved is insured; every person who works in a credit union is bonded and the movement has its own savings protection scheme. It is to be commended on all these matters. The Irish League of Credit Unions inspects almost every branch annually and audits its activities professionally. Despite that it is disappointing to note that the Bill does not recognise the rule of the league in the overall scheme of things.

I express my appreciation of what credit unions have done for society over many years. There is much merit in most of the provisions of the Bill but others are disconcerting for credit unions which because of their track record, particularly in supporting rural society, should be encouraged rather than discouraged from taking on additional services.

Mr. S. Ryan

With the permission of the House I should like to share my time with Deputy Theresa Ahearn.

An Leas-Cheann Comhairle

I am sure that is agreeable to the House.

Mr. S. Ryan

As a member of a credit union, as a founding member of a study group established almost 30 years ago, the forerunner to the Donabate and District Credit Union established in 1968, I am glad to contribute to this long promised, overdue Bill.

I am pleased that the Government and, in particular, the Minister of State at the Department of Enterprise and Employment, Deputy Rabbitte, responded to the many representations received from all sides of the House and from the Irish League of Credit Unions to introduce this Bill as a matter of priority. In its frequent meetings with politicians the Irish League of Credit Unions clearly enunciated the movement's urgent need for a legislative framework within which to service its members' present and future needs.

The purpose of this Bill is to update and consolidate the body of the existing legislation, some of which dates back to 1893, in a single Bill to protect the ethical principle espoused by credit unions, of community self-help on a non-profit basis.

This Bill covers all aspects of the activities of credit unions from registration and membership issues to operational and management procedures, to their overall scope and the supervisory role envisaged for the Registrar of Friendly Societies.

The credit union movement has evolved from the many varying forms of credit co-operation that have obtained worldwide over the past 150 years or so. It could be argued that its origins are to be found in the German people's bank founded in 1850 to enable tradesmen to obtain much needed credit for the purchase of supplies. The first Canadian credit union was formed in 1900. The movement soon spread to the United States where a national organisation was established so that today, worldwide, the credit union movement prospers in some 84 countries.

The credit union movement was first introduced here in 1958. It is appropriate to acknowledge the excellent work of the late Nora Herlihy who, as a teacher, daily witnessed the effects of unemployment and poverty on her students, particularly within the poor, working class areas of Dublin. At that time money lending, loan sharks, pawnbrokers and hire purchase were the only means by which ordinary people could raise the necessary funds to buy essential commodities. Unfortunately, many of them found themselves in the clutches of those loan sharks whose so-called loans, in most cases, carried exorbitant rates of interest, sometimes ranging between 100 per cent and 400 per cent. To her eternal credit Nora Herlihy took up the challenge, resulting in the first credit union being established in Dublin. Since then approximately 422 branches have evolved throughout the 26 countries, their membership now stands at approximately 1.6 million and savings amount to a staggering £1.8 billion, clearly demonstrating the outstanding success of the movement.

It should be noted also that the Irish League of Credit Unions is a 32-county organisation, another example of how people, North and South, can work in harmony for the benefit of the greater community.

The credit union movement, with the Society of St. Vincent de Paul, have been and continue to be to the forefront in the battle to rid Dublin of the scourge of moneylenders, some of whom are still active. As legislators it is incumbent on us, through the various statutory and voluntary organisations, to get the message across to those unfortunate people still caught up in this barbaric system that help is available within the credit union movement.

Where were the other financial institutions in that period, particularly throughout the 1950s, when the banks would not even consider giving loans to ordinary people? Thankfully that has changed in recent years. I am firmly of the view that that changed attitude of the banks is due largely to the work done and competition posed by credit unions. Has the Minister of State received any representations from the mainstream financial institutions on the provisions of this Bill?

Within the financial services area huge changes are taking place daily which will have a significant effect on the credit union movement. In the beginning credit unions were dependent more on the co-operative, trusting relationship between their members and volunteers which I hope will continue to be a core policy within its movement. We must publicly acknowledge the role played by the many volunteers, in many cases the public face of credit unions, who work for them. There are in excess of 10,000 active volunteers engaged in this work without whose commitment and dedication the movement and its attendant philosophy would not be as strong as they are today.

Our young people are among the best and brightest in the European Union. It is imperative that many more of them should be encouraged to save and become involved by giving their skills and expertise voluntarily to the movement.

The Minister of State confirmed he was open to suggestions from Members by way of improvement of the Bill. I have a number of reservations about its provisions, particularly about section 27 (4) which stipulates that the maximum shareholding of a member of a credit union is £20,000; the same applies to a member's deposit account. Any member who has deposited £40,000 in a credit union is committed to its philosophy. I see no reason any credit union could not lend such an individual between, say, £25,000 and £30,000. Other amendments have been put forward by the Irish League of Credit Unions and I ask the Minister to take them on board. I commend the Bill to the House and hope it will give the credit union movement even greater strength so it can move into the next century and beyond.

Mrs. T. Ahearn

It is rare that a Bill comes before the House which strikes a chord with all Members as this one does. All of us are aware of the tremendous impact the credit union movement has had throughout Ireland. It is surprising that it has taken almost 30 years for legislation on credit unions to be introduced but that speaks well of the movement, which has served its members magnificently over the years. Its growth is remarkable but we must never forget that this was achieved because it served the needs, demands and requirements of its members and the community.

The credit union was aptly described as the working person's bank. It provided loans to many people who would not dare darken the doors of the main banking institutions, who would not have welcomed them in any case. Many lessons can be learned by our major financial institutions from the ethos which has driven the credit union movement. Families met emergency bills, bought their own car, built a much needed extension to their house or were able to go on a well-deserved holiday because of the existence of the credit unions. Over the past 30 years they have been the only financial institutions to tailor their services to the needs of lower income customers. They did everything possible to ensure their service was not prohibitive and did not scare people but rather encouraged them to become members.

They should be complimented for their ethos and their belief that when one borrows one must also save. That has not been encouraged by any other financial institution. Every young person should start his or her savings with the credit union movement, as it would instil in him or her that saving will enable one to borrow and one can save while also paying back a loan. It is a tremendous ethos and credit unions should be complimented for it. If young people became used to dealing with the credit union movement, far fewer people would have crises of bad debts or inability to meet their financial commitments. The credit union also inspired confidence in people who would feel intimidated by other financial institutions. They felt that the credit union was on their side so they were not afraid or ashamed of admitting how small their income was or how little capacity they had to save. They felt the credit union was their house.

We must examine how credit unions served the needs of their members. It is a pity that our major financial institutions learned this lesson much later. In my constituency, the town of Cahir is regularly packed on Monday nights with people making their weekly credit union lodgements. What other financial institution has business hours totally geared to the customer rather than itself? That is the strength of the credit unions — they made it their business to be available when people were able to visit them. Up to two years ago, many of us had to spend our lunch hour or take time off work to transact business in the major banks. Until they changed their practices, people found it almost impossible to deal with them.

The ethos of the credit union was to serve the needs of its members, recognising the demands within their daily lives and leaving the door open when it suited people to come in. The most important reason they were able to do this was the volunteer element within the movement. They could run a business at times which would be called unfriendly within the normal working regime. Volunteers ran the credit unions during what many would call unsocial hours. It is great to think we had a financial institution with a non-profit making ethos. Credit unions never departed from this principle, although the temptation must have been there when they saw their business go from strength to strength. At all times their thought was to serve the community.

Credit unions are an integral part of Irish life, rural and urban, and they continue to grow and prosper. It is extraordinary that £2 billion is currently invested in 434 credit unions. I am glad that the Bill first and foremost protects the essential ethos of the movement. It would be detrimental or at the least a backward step to damage that ethos, which has been so vital over the years and formed the basis for the success of the movement.

I am also glad that the Bill provides for additional services such as insurance and foreign exchange. Why should customers not be able to avail of those facilities in their credit unions, when customers of other financial institutions can avail of such facilities where they do their business? Why must credit union customers go elsewhere for foreign exchange? The credit union is their bank and I am delighted the Bill caters for extended services.

The Bill is necessary because of the success of the movement over the past few years. I congratulate the Minister of State, Deputy Rabbitte, on introducing the legislation, whose purpose is to provide a statutory framework for the development and growth of the movement and to enable credit unions to provide an enhanced range of services to their customers. I am delighted that the Minister had wide-ranging consultations with the movement before bringing the Bill to the House.

However, for that reason and because of the movement's success, we should consciously do everything to meet its concerns. These concerns have been raised by people who worked within the movement and steered it through a successful period. For that reason we should respect their concerns. It is not enough to compliment them for what they did in the past. If they have serious concerns about some areas of the Bill, they deserve a good hearing from us. My local credit union in Cahir was most concerned about the proposed limit on shares, deposits and loans. The Minister was generous in the consultation process and I am sure he will be open to reasonable amendments relating to the concerns of the credit union movement. These are the people with success behind them. They know the needs of the credit unions and have the necessary experience. We should heed their concerns.

They are also concerned with other aspects of the Bill. While limits on shares, deposits and loans are under consideration, we should ensure credit unions do not become banks. They must remain as they are while operating within the realities of the current economic situation. We must take the escalation of cost factor into account. It is pointless to cap their loan capacity at limits which do not reflect reality.

If the congratulations and compliments expressed in this House were enough, the credit unions should continue to prosper into the next century. However, their success depends on the manner in which we legislate a framework within which they must operate. Their success depends on this Bill meeting their needs. I know the Minister of State will be conscious of the concerns raised by many Members regarding only a few sections of the Bill.

I look forward to the credit union progressing from strength to strength following the implementation of this legislation. I also took forward to their concerns being heard and to the introduction of amendments which will take cognisance of the need to serve the customer at all times and maintain the ethos of this great movement.

Mr. Killeen

The purposes of the Bill, set out in the explanatory memorandum, are receiving widespread support. These include an attempt to consolidate existing credit union legislation, to provide an updated framework for the development and regulation of the movement and to safeguard community self help principles to which the movement is dedicated.

The Bill also provides for the development of a range of services which credit unions may offer to their members. In addition, the role of the registrar of friendly societies is to be substantially expanded. There is a welcome across party lines and within the credit union movement for the approach undertaken by the Minister of State. It is a large undertaking and it is perhaps surprising that it is being done with such a level of public and political support.

The Bill arose in response to requests by credit unions to update their role and the legislation under which they act. They have actively and effectively lobbied politicians. We have been reminded of their role and many members of the unions have extolled the virtues of the movement. Not being a member of a credit union, I am not in a position to do this, but I have learnt more about their role.

As an element in the credit facilities market, the credit union movement is unusual in that it enjoys a strong level of public support. Many of us are forced, often too often, to do business with banks. While we may pretend on the occasions when we engage them in business that we appreciate their services, most people would not extol the virtues of the banking system in private. I do not know whether this is because the banks usually announce huge profits on a bi-annual basis, or because many of those working for them consider themselves poorly paid. Perhaps it is nothing more than begrudgary. However, I suspect it is more than that and that many feel excluded from the general banking, and even building society system. Given this, it would be a great pity if, arising from this legislation or other factors, the credit union movement was to be put in a similar situation to the banks, especially as they have traditionally played a constructive role, which we are seeking to continue, improve and expand. It would be a pity if the legislation undermines the reputation they have acquired and their extraordinary high standing in the community.

Given the size of the Bill it is very difficult for legislators to come to an informed opinion on it. I am indebted to the movement for assessing it in the context of its experience. Presumably parliamentary draftsmen and others have acted similarly. The scale of the Bill draws attention to the huge workload which falls on Deputies. Given the scale of constituency business it is hardly practical to expect them to consider a Bill of this size, even though it is very important legislation.

It appears that the league of credit unions is in favour of the legislation, with some caveats. There is a fear that some provisions would attack the voluntary ethos of the movement. This ethos is extremely important. In many respects it is the bedrock of its success.

The raising of the ethos argument in any area worries me because it sometimes leads to extremes of emotions and expression which do not reflect reality. However, the credit union movement has been driven by the effort of individuals who have been prepared to give of their time and talents voluntarily. It would be a pity if they formed the view that the regulatory provisions appear to be heavy handed. A recent editorial in the magazine of the league of credit unions pointed out that it could be construed as an attack on the self help ethos of the movement. This would be a pity and perhaps it could be addressed by amendment.

Unfortunately in recent time, the Oireachtas and the Government appears to attack the self help ethos in rural Ireland, for example with regard to group water schemes and certain aspects of the Education Bill. I know it is not intended that this would happen in this legislation, yet some of those with an excellent record of involvement in this area appear to believe this could be the case. They point to their excellent record over 35 years in self regulation in co-operation with the registrar. A number of speakers, including some on the Government side, said that if something is not broken there is no need to fix it. They get much the same message I get from people prepared to play a part in developing their communities.

The delay in bringing forward the legislation was seen as a failure of the establishment and the Government was seen to be controlled by the credit unions' competitors. The size of this complicated comprehensive legislation has allayed those fears somewhat although some of the provisions appear to have reactivated suspicions. I thought the Minister of State, Deputy Rabbitte, would have been above suspicion. I do not know which of the partners in Government is open to influence from certain quarters particularly in the capping of loans.

The limit on property holdings has come under attack and is raising hackles. On a first reading, the Bill seems to outlaw certain joint ventures or local development initiatives in which the credit union might be involved in providing equity, buildings or whatever. There is a fear that activities of this nature which have already been undertaken may become illegal if the Bill, as drafted, is passed. As the credit union is part of the local community and depends on it for funds it is important that such a self-help philosophy would not be outlawed but encouraged.

The raison d'être or the background to the limit on property holdings is not entirely clear. I presume there is fear that a credit union might be manipulated in such a way as to get involved in property speculation. If that is a genuine fear it could be addressed firmly in a better way than in this Bill.

On the £20,000 cap on loans, the Minister believes the social and mutual character of credit unions is helped by the limit. His view is that the average worker or member of a credit union is unlikely to need a loan of £20,000. There are many people in need of a loan of £20,000 who may not be in a position to take it up or repay it. It has been pointed out that a person who received a redundancy payment might be in a position to make a substantial amount of money available to a credit union or that a person in a position to start a new business may need more than £20,000. In one of his replies to the credit unions the Minister said he wants to exclude the credit union movement from the house purchase area, the area in which the building societies deal mainly.

A number of speakers referred to the need for house extension or refurbishment, for which the £20,000 limit is not sufficient. Some people say there should be no limit but the Minister has made a good case for it; it needs to be debated on Committee Stage. The Minister fears that a small credit union could be dominated by very large shareholders in the absence of a cap and they could use the credit union as a mechanism to avoid taxation. Either of those points could be dealt with in a slightly different way. He could have threatened them with the big bad wolf of the Department of Finance and no doubt he would have succeeded. This area needs to be dealt with in a different way from that proposed in the Bill. The Minister seems to say any large-scale competition with the building societies would damage the ethos of the credit unions. Perhaps there is a case for saying that, but I am not convinced. I would not be upset if the credit unions were in a position to compete at a certain level with some of them. I do not see it as damaging their ethos but as expanding and developing their role within the societies they serve. The Minister cleared up the confusion in relation to the £20,000 loan. The intention is that it is an indebtedness cap and cannot be in addition to the amounts held in shares or savings.

There is a difficulty about the regulatory mechanism. I agree with the Minister that the mechanism needs to be rigorous and tight. I am not convinced it is properly provided for in the Bill. Some of the suggested amendments may go some way towards redressing the balance, particularly in acknowledging the excellent record of the movement during the past 35 years. More than anything else this is what the people who have served in credit unions would want the legislation to do. It is a fair point and one that can be accommodated.

A criticism of the Bill is that it is too similar to the Building Societies Act. Those who drafted the legislation were probably not all that familiar with the ethos and the workings of the credit union movement. Credit unions are individual companies — some small, some large — but are not part of a national or international network. In that sense they are different and are locally based. There are some 434 units in the country. When dealing with that number of separate institutions an effective regulatory mechanism is needed and no one, including the credit union, says otherwise. What the credit union is saying is that for years it had an effective mechanism, in co-operation with the registrar, and that what is proposed is draconian and may be damaging in the long-term. We ought to take that on board.

This Bill attempts to cater equally for the needs of small and large credit unions. The Minister said some of the small credit unions may not have reached the standard of professionalism that is desirable. Perhaps that is so and, if so, it is a good reason for stringent mechanisms of regulation and control. However, it fails to adequately acknowledge the work being done by these people in communities, the effect of which is seen on the ground where the money has been earned and saved. Credit unions have excellent effect in terms of developing the community by catering for minor and larger scale matters. The role of the registrar can be effective without being intrusive.

Credit unions have managed to be more customer friendly and customer accessible than the large professional institutions. This is extraordinary because those running the credit unions do so voluntarily. The large banks and institutions have massive resources at their disposal and a huge level of control. That more than anything else points to the fact that banks see themselves as in control of customers while credit unions present themselves as being available for customers and their benefit. The difference between the two is in favour of credit unions.

An element which has not been mentioned much is the role of credit unions in combating poverty and in certain areas in combating the curse of money lending and moneylenders who operate illegally and are difficult to detect for a plethora of social and other reasons.

I appreciate the role of credit unions in parts of County Clare in enabling people, who had previously been in the grip of moneylenders, conduct their business with the credit union above board and in a manner which took their personal circumstances into account. The Bill should have provided for increased co-operation between credit unions and Departments in this area which is of major importance but which State agencies have difficulties in dealing with directly.

The Minister said he would consider constructive points put forward by credit unions and Members of the Oireachtas. I commend him on this but he must do more than listen, he must accept amendments proposed by the credit union movement and Members. I ask him, in a spirit of co-operation, to include some of the changes proposed by us in amendments tabled by him. This complicated Bill reflects the needs of the credit union movement and allows it to continue to develop and play a constructive role in society.

Mr. Boylan

I wish to share my time with Deputy McGinley. I welcome the opportunity to contribute to this debate and to pay tribute to the credit union movement for its work over the years. It is time to update the legislation governing credit unions to bring them into the next millennium.

The credit union movement has served the country very well. While it is regarded as an urban based organisation it has been extended to rural areas in recent years. Credit unions are to urban areas what the ACC is to rural areas. The friendly approach adopted by credit unions has attracted many investors. Credit unions were set up to provide finance to people in need. While many moneylenders were reasonable, some of them had a stranglehold on families, used threats to get their money and charged inflated interest rates. Credit unions helped many households to organise their finances by encouraging them to save money and borrow sensibly. People mainly borrowed from credit unions for weddings, christenings and emergencies. As Deputy Theresa Ahearn rightly said, credit unions made themselves available to the public by opening their offices from 7 p.m. to 11 p.m.

The extension of the credit union movement to rural areas has enabled many farmers to invest their money with it. Credit unions give their investors important advice and play an important role in their local areas. In this context, the cap of £20,000 on the amount which can be borrowed will restrict the development of credit unions in urban and rural areas.

In the past the main investors in credit unions came from the lower income group but people in the middle and higher income groups now invest their money with them. I do not want credit unions to compete with building societies in the provision of mortgages but people will not be able to fully refurbish their house etc. with a loan of £20,000. Given that it is more than 30 years since we reviewed the legislation governing credit unions — it may be another 30 years before we review this Bill — a figure of £40,000 would be more realistic. It is important to remember that credit unions advise investors on the amount they should borrow and do not give out loans willy-nilly.

The banking institutions have treated their customers reasonably well. I do not wish to point the finger at any institution but the personnel in some institutions are not as friendly as the personnel in the ACC. Maybe the ACC has been able to develop this friendly approach because it is a voluntary organisation and does not have the same pressure as large banking institutions to make profits for its shareholders. The large profits of banking institutions have obviously been made at the expense of customers. While credit unions must be profitable, they do not have the same obligation to make extensive profit. It is therefore easier for them to conduct and control their business.

Farmers who wish to replace their tractors or buy cattle wish to invest in their farms, but £20,000 will not go far in this respect. I do not understand why there has to be a cap of £20,000 on the amount which can be borrowed when people can invest up to £40,000 with the credit union. People who have savings of £40,000 should be able to borrow £40,000. However, this should not be the yardstick used to grant loans in all cases.

It is proposed to restrict the term of office of directors to three years. The people involved in credit unions do excellent work. In this context I pay tribute to John O'Hara from Ballyconnell, Michael Reilly from Redhills and the many other people in my constituency who are deeply committed to their work and have devoted much time and effort to it. I have been told that the term of three years has been proposed to enable a director to be transferred to a new branch in another town. That man will only have got to know his customers when he will have to move on. It is good there is an option to remove an unsuitable person after three years. However, a person doing a good job would need at least seven years to get the credit union properly established and to get to know the customers.

Bank managers are only getting to know their customers when they are moved, which is a failure in the banking system. Perhaps there is a notion that bank managers might get too friendly with their customers. However, a good bank manager who is well established in his community will attract business. Similarly, if the director of a credit union is given a period of time to establish himself, build up confidence and get to know the people he will give a better service and attract business. The Minister of State should extend the period of the directorship.

The cap on loans should be increased to £40,000, given that credit unions might not be legislated for again for quite a number of years. There is broad agreement that the cap of £20,000 restricts the ability of credit unions to do a proper job. Increasing the cap will not impinge on the banks or building societies. If those institutions feel threatened by that, their ground must be very weak and they should examine how their businesses are set up and operate. Large institutions should not feel under threat if a voluntary organisation is in a position to make loans of £40,000 as they lend businesses hundreds of thousands of pounds.

I compliment credit unions, in which I have every confidence. They have done a marvellous job. They have looked after many families and removed them from the clutches of loan sharks. They are now moving into the new millennium as lending and saving agencies which can sustain their achievements. I wish to share my time with Deputy McGinley.

Mr. McGinley

Tá áthas orm deis a fháil labhairt ar an Bhille seo, Bille na gComharchreidmheasa. Cosúil le gach cainteoir a labhair go dtí seo, fáiltím roimhe: is fada muid ag fanacht le Bille mar seo le blianta fada agus tá creidiúint ag dul don Rialtas agus don Aire Stáit Rabbitte a thug an Bille seo isteach i ndiaidh an oiread sin blianta. Tá an-obair á déanamh ag na comharchreidmheasa ar fud na tíre: gluaiseacht í a chuaigh i bhfeidhm go mór ar phobal na hÉireann; is beag paróiste in Éirinn nach bhfuil craobh den chomharchreidmheasa ann anois. Is é an taithí atá agam féin ar chomharchreidmheasa ná an ceann i mo pharóiste féin, Comharchreidmheasa Ghaoth Dóbhair, atá bunaithe le 25 bliain. Is dóigh gur ceann neamhghnáthach é mar go ndéanann siad a gcuid oibre go léir agus go bhfoilsítear a gcuid tuairiscí trí mheán na Gaeilge. Feicim an tAire Stáit sa Roinn Ealaíon, Cultúir agus Gaeltachta ag croitheadh a cheann agus tá súil agam go bhfuil sé ag éisteacht leis sin. Sílim go bhfuil ceann eile i gConamara anois ach is cinnte gurb é Comharchreidmheasa Ghaoth Dóbhair an t-aon chomharchreidmheasa in Éirinn a rinne a chuid oibre go léir trí Ghaeilge ó bunaíodh é 25 bliain ó shin.

Bhí mé féin i mo Runaí ar an gComharchreidmheasa ar feadh dhá bhliain nuair a bunaíodh é agus an fear atá ina Chathaoirleach i láthair na huaire ná Pádraig Ó Dochartaigh, a rinne an-obair air agus a thug isteach sa pharóiste é. Tá sé anois ina bhall ar Údarás na Gaeltachta agus go leor déanta aige ar son phobal na Gaeltachta.

Timpeall 20 bliain ó shin thóg an Comharchreidmheasa seo oifigí a chosain a lán airgid ag an am ach tá sé tar éis éirí chomh mór sin agus tá an oiread sin ball ann — sílim go bhfuil cúpla míle ball ann anois — go bhfuil siad ag tógáil óifigí níos mó agus níos nua-aimseartha i láthair na huaire. Taispeánann sé sin an dul chun cinn atá déanta acu.

Aontaím lena dúradh faoi na comharchreidmheasa le cúpla lá anseo. Cuireann siad seirbhís an-mhaith ar fáil do dhaoine a mbíonn iasachtaí beaga ag teastáil uathu nó a mbíonn ag cur airgead beag i dtaisce. Daoine nach bhféadfadh dul go dtí go dtí na bancanna nó chuig na tairgintí iasachta eile, bhí siad ábalta dul isteach go dtí an chomharchreidmheas agus airgead a fháil don teaghlach fá choinne gnáthimeachtaí an tsaoil: an Nollaig, an Chéad Chomaoineach, gluaisteán úr. Bhí na comharchreidmheasa ag déanamh freastail ar an bpáirt sin den phobal nach raibh na bancanna ag déanamh freastail air.

Tá cúpla moladh agam. Luaigh Teachtaí eile an uasteora atá le hiasachtaí: tá sé £20,000 sa Bhille agus is dóigh le gach duine gur chóir go mbeadh sé níos airde ná sin. Tá a fhois agam go bhfuil an tAire ag machnamh ar an moladh sin agus go dtiocfaidh sé ar réiteach a bheidh sásúil don Credit Union League.

Bhí cruinniú speisialta cúpla seachtain ó shin ag Comharchreidmheasa Éireann i Luimneach agus bhí Teachtaí ó gach páirt den tír ansin. Rinneadh plé an-fhada ar an Bhille seo ag an gcomhdháil sin agus bhí an tAire Stáit ann ar feadh an deireadh seachtaine. Chuala sé na moltaí agus na gearáin agus tá mé cinnte nuair a bheidh leasuithe á gcur síos ag Céim an Choiste den Bhille seo go mbeidh an tAire ag cur síos leasuithe ón méid a dúradh leis i Luimneach.

Tá sé sa Bhille nár chóir go mbeadh gábhaltais ag comharchreidmheasa. Is dóigh go bhfuil fáth an-mhaith leis sin agus i gcás comharchreidmheasa Ghaoth Dóbhair atá ag fágáil oifig amháin agus ag dul isteach in oifig eile, cad a dhéanfaidh siad leis an oifig a fhágfaidh siad? Níor chóir go mbeadh riail daingean ann. Nílim ag iarraidh go mbeadh na comharchreidmheasa ina dtiarnaí talúin ach ba chóir go mbeadh an riail sin solúbtha.

Ar an iomlán, mar dhuine atá mar bhall de chomharchreidmheasa agus páirteach i mbunú comharchreidmheasa, fáiltím roimh an Bhille seo.

Mr. Browne

(Carlow-Kilkenny): I want to share my remaining time with Deputy Browne.

Acting Chairman (Mr. Leonard)

That is in order.

Mr. Browne

(Carlow-Kilkenny): Aontaím le gach rud atá ráite ag cainteoir i ndiaidh cainteora anseo inné agus inniu agus déanaim comhgháirdeas leis an Aire Stáit a thug an Bille os ar gcomhair.

I have listened to much of the debate and I do not intend to go over the arguments put forward by previous speakers. This is one of the best produced Bills as far as briefing is concerned. The credit unions lobbied every Deputy in the House and the question of the £20,000 cap was raised time and again. They also met the Minister of State who made it clear he is prepared to listen to their concerns and implement changes.

Credit unions have done tremendous work over the past 40 years. I was fascinated to hear that their assets currently amount to £2 billion and it is a major responsibility to deal with such amounts. Lest anyone think I have no interest in the work and welfare of credit unions, I join other speakers who paid tribute to the people who work in credit unions on a voluntary basis.

I congratulate the Minister of State on introucing the Bill and wish the credit unions well in future. I acknowledge amendments will be tabled on Committee Stage, particularly in regard to the capping which appears to be a major problem for credit unions.

Dr. Moffatt

I welcome the opportunity to contribute to the debate. It is difficult to say anything novel at this stage with all that has been said previously. For the first time in 30 years, all the legislation affecting credit unions has been brought together, and the Minister of State is to be congratulated in that regard. In general credit unions are happy with the Bill but some areas require further attention and modification.

Credit unions play a major role in the social and economic activity of the country. They are especially suitable for the small investor but some modification of the restrictions on loans, deposits, etc., is necessary.

Credit unions are not banks or building societies. They are operated on a voluntary basis by people who do not seek remuneration. People who do voluntary work do not like many constraints imposed on them in regard to their activities. We all accept a certain amount of regulation is necessary, but it must be flexible and suit the agenda. We do not object to the Registrar of Friendly Societies operating in this area as long as it is not too intrusive.

Credit unions wish to develop and provide a better service to their customers. They want to get involved in the insurance business as well as providing foreign exchange, ATM and other facilities. They have done a good job to date in serving local communities. They have assisted the Society of St. Vincent de Paul and the Department of Social Welfare in dealing with the problem of loan sharks operating in deprived areas. They have ploughed money back into local endeavours by small entrepreneurs and have assisted in areas in which the banks and building societies would not be readily involved.

It is appropriate that the Minister of State responsible for development in the west is in the Chamber because the credit unions have a special role to play in developing small rural areas. They have a great deal of money on deposit and it could be used for further development in rural areas.

Credit unions currently employ many people on a full-time basis in their offices throughout the country. They provide an excellent service and open on Saturdays, which is appreciated. Credit unions are exempt from corporation tax and the DIRT does not apply to most depositors whose savings are in the region of £1,000. There is no threat to the credit unions in relation to money laundering or from loan sharks abusing their services.

The track record of credit unions is good. Their service to the community is recognised by everyone. Their intention to expand should be facilitated by more flexible legislation than that before the House. The main complaints about the Bill concern the limits on deposits, which has been referred to by almost every speaker.

The criteria currently applied to credit unions are too restrictive. The cap of £20,000 is very restrictive, and anyone involved in farming will know that £20,000 does not go very far. Some Deputies referred to extensions to houses and other expenses that arise, particularly in rural areas.

The regulatory regime now proposed for credit unions is regarded as excessive and an intrusion into the affairs of a voluntary body. It will cause enormous problems, particularly in regard to the implementation of this legislation.

The question of credit unions owning property was also raised. I am aware the Minister of State proffered some responses in that regard but the whole area is a bit vague. If a credit union owns a large property in which it runs its business, it should be allowed to lease part of that property to earn additional revenue.

The proposed system of approval for new and existing services will be difficult to implement and is unrealistic in some cases. I ask the Minister of State to re-examine that area of the Bill with a view to amending it on Committee Stage.

Having highlighted some areas of concern I acknowledge the good work done in drafting the Bill. I am aware the Minister of State may take on board some of the concerns I have outlined. Having waited 30 years to consolidate all the existing legislation affecting credit unions, it is unfortunate that there is difficulty with areas of the Bill. Some of its recommendations will be difficult to implement, particularly if they restrict the further development of credit unions which want to provide a service more suitable to the new millennium and respond to the challenges of a modern society. It would be unfortunate also if totally different criteria applied to credit unions in the South compared to those pertaining in Northern Ireland, the United Kingdom and on the Continent. We must legislate for the likely economic social milieu that will pertain in the not too distant future. Flexibility and criteria that are easily modified should, therefore, be the order of the day. The Minister did a good job in bringing forward this legislation, but as has been outlined, a number of areas need further consideration, particularly the proposed capping and intrusion into running a voluntary society. I hope those matters will be dealt with on Committee Stage.

Mr. Creed

I welcome the opportunity to make a few brief comments on this important legislation. There are few Bills which excite the interest of Members across the board, as this one did, and that is recognition of the important role the credit union movement has played throughout the country, in urban and rural areas. It is important to note the legislation under which credit unions have been forced to operate, the 1966 legislation and, prior to that — the credit union movement predated that legislation — the Industrial and Provident Society Acts, 1893 and 1913. While a great amount of time elapsed between the 1966 Act and the previous legislation, so much has happened since 1966, particularly in the past ten or 15 years in the area of financial services, that the legislation is long overdue.

This is complex legislation. In recent years, because of the inadequate statutory legislative framework, credit unions have been forced to operate outside the provisions of the 1966 legislation. It is important that the activities of an organisation that is so deep-rooted in local communities are regularised and brought within the provisions of statute.

The previous speaker, Deputy Moffatt, said it is difficult at this late stage of the debate to make new points, but I wish to refer to Nora Herlihy from my constituency, a teacher by profession, who is recognised as one of the founding figures of the credit union movement. The ethos of the credit union movement today is not much different from that which motivated Nora Herlihy from Ballydesmond, County Cork, to establish one of the first credit unions, and the movement is still managed and operated by persons of similar background and motivation.

In Lower Mount Street there is a major development, the building of new headquarters for the Irish League of Credit Unions. Credit union offices exist in practically every large urban area and many smaller rural areas. In recent years in my constituency, the Macroom Credit Union renovated its property and a new headquarters is nearing completion. Kanturk Credit Union opened a fine new office where late last year I and other public representatives met members of all credit unions in the constituency. Because of the increasing interest in the service they offer, other credit unions in the constituency are in the process of acquiring new premises, and the same applies throughout the country.

Credit unions have been referred to, in a complimentary fashion, as the poor man's bank or the bank for the ordinary man in the street, but that is an out-dated description. Credit unions provide financial services the value of which is recognised by people from all social and economic backgrounds, and that is a tribute to the people working in the credit union movement.

It is important that the activities of the credit union movement are regularised and that, as we move into the new millennium, the necessary legislative framework is put in place to enable it to continue to develop and expand. The main purpose of the Bill is to put in place the framework under which credit unions will provide financial services. There has been criticism of excessive regulation, but it is important to consider the proposed regulations. Only recently a major financial institution, Taylor Asset Managers Limited, collapsed. On the international scene, there is uproar in Albania because of the collapse of a financial savings institution not under the auspices of the credit union movement. Those examples highlight the importance of adequate supervision and protection of investors' interests in organisations such as credit unions which are community based and motivated not by profit but by service to the community. While I have certain grievances with the detail of the regulations, because of what happened in the not too distant past, we should not balk at the idea of additional regulation.

Many Members dwelt on the fact that the credit union movement operates extensively throughout the country — there are more than 500 credit unions on the island, of which 427 are in the Republic, there are one and a half million members, with approximately £2 billion on deposit. Those statistics highlight the broad community support for credit unions and are recognition of the service they provide.

I have a reservation about the legislation, and I understand the Minister's difficulty in this regard. There is a danger that in our endeavours to meet the needs of leading credit unions, we will throw the baby out with the bath water. We may fail to recognise that some credit unions are not as advanced as others in terms of the services they provide. We are all familiar with the top 100 or, as the Irish League of Credit Unions stated in its briefing document, 81 credit unions which, to a large extent, motivated this legislation, but I am concerned about the smaller credit unions, the branches that open perhaps one evening per week and provide important services to their communities. I fear that facilitating the demands of the top 80 or 100 credit unions may be to the detriment of the smaller credit unions.

The Minister must endeavour to accommodate those top 100 credit unions while not adversely affecting smaller ones. Deputy Ring used credit unions as a stick with which to beat the banks. All of us take pleasure in beating the banks with as big a stick as possible from time to time, but if we overly compensate the top 100 credit unions, that dreaded term "rationalisation"— which has become the byword for closures and job loses in other areas of activity — may come into play for some of our smaller credit unions. A small credit union in a rural area cannot provide services, such as insurance and ATM machines, provided by those in large urban areas. The community base of many small credit unions could be eroded because members will vote with their feet and join a larger credit union in their area. The Minister has a difficult decision to make in this regard. Do large credit unions envisage an increase or a decrease in the number of credit unions as a result of this legislation?

While I support the Bill in general, I have reservations about its regulatory procedures and the capping on loans, shares and deposits. It is important that we do not throw out the baby with the bath water. While we should protect the ethos of the credit union movement and allow it take advantage of new technologies, services and so on, this should not have a detrimental effect on small credit unions. I would be interested to hear the views of the Minister and the Irish League of Credit Unions on this matter.

The Irish League of Credit Unions has circulated extensive documentation to Members of the House in which it emphasises that credit unions range in size from institutions with £500,000 on deposit to institutions with £55 million on deposit. Therein lies the dilemma for the Minister. It is difficult to frame legislation that will cover a credit union with £500,000 on deposit and one with £55 million on deposit which will not disadvantage either.

I share the views of Members who spoke at length about the advantages offered by credit unions over the conventional banking system. For many people a visit to the bank manager is an intimidating experience, but the credit union movement has to a large extent, removed that element of fear and restored people's dignity when dealing with financial institutions. The movement should not seek to imitate the services offered by banks and building societies. A credit committee report of a credit union with which I am familiar outlines the range of loan facilities offered by credit unions. They include housing, house improvements, furniture and fittings, motor purchase and repairs, car insurance and tax, education, consolidation of debts, house and health insurance, weddings, funerals, communions, agriculture, medical expenses, travel and leisure and Christmas and business loans. That covers practically the entire range of human activity.

The Minister for Enterprise and Employment should note that more than 20 per cent of loans given out in that credit union are to small businesses. As chairman of the Joint Committee on Small Business and Services, I know that one of the major problems facing business today is access to finance at terms suitable to one's business development. Many businesses now recognise that credit unions offer loans at competitive interest rates. In a tripartite effort involving the banks, the State and the EU, the Government has made a strenuous effort to make finance available at subsidised rates to small business. It is interesting that many businesses are voting with their feet and get their business loans from credit unions. This is particularly relevant in the context of capping the amount of loans under this legislation.

The Irish League of Credit Unions, the umbrella organisation that has overseen the development of the credit union movement since its infancy, should get special mention in the debate. I am pleased the Minister of State acknowledged its contribution by stating "the league is the representative body which has guided and overseen the development of the credit union movement since its foundation... with diligence and integrity". The development of the credit union movement is a tribute to its foresight and it should have been involved in the consultative process for this legislation.

My main concern with the legislation relates to its regulatory provisions. Over the past 40 years, since the foundation of the credit union movement, not one shareholder, depositor or member of a credit union has lost money. I am sure the same cannot be said of other financial institutions. That is a tribute to the self regulatory mechanisms that have been the hallmark of the operation of individual credit unions on a daily basis. Many people, not least Deputy Killeen, have quoted the maxim, "if it ain't broke don't fix it". This is sound advice in regard to credit unions. A fairly comprehensive system of checks and balances and audits takes place in each credit union and the savings protection scheme is policed by the Irish League of Credit Unions. Therefore, while acknowledging what has been achieved on a voluntary basis with the benefit of self-regulation, we must introduce a system that will put the Registrar of Friendly Societies at the apex of the controlling regime. It is important to recognise what has been achieved. There are other reasons why the self-regulatory regime should be incorporated into any new system.

The limits on savings and loans are giving rise to concern. The 1966 legislation had a £6,000 limit on shares and there is a limit of £20,000 proposed in the current Bill. A limit of £30,000 is being sought and it should be possible for the Minister of State to reach an agreement through compromise with the Irish League of Credit Unions.

I fail to see why we are proposing very strict limits on deposits. Those limits were not in the 1966 legislation. Why is it necessary to introduce them? It would be understandable if the aim was to avoid money laundering or tax evasion but I am informed that the present legislation is adequate to deal with those fears.

Another matter that will hinder the capacity of credit unions to attract finance from their natural hinterland is the limit being placed on loans. Rather than putting a monetary cap on these loans, we should apply a percentage of total assets in each credit union. That criterion should be the driving force. I also have reservations about the restrictions on owning property as I do not favour credit unions being involved in land speculation. However, some credit unions have embarked on very innovative community-driven projects. A credit union in my constituency is considering such a venture and it would pay strong dividends to the local community. The venture would be on a non-profit basis for that credit union. This legislation should not close the door on credit union participation in such projects, especially when the credit union is community-based and there would be a significant benefit to that community.

I welcome the Bill. It is long overdue and there is great credit due to the Minister of State, Deputy Rabbitte, for his exhaustive efforts to accommodate the frequently conflicting views expressed to him by various interest groups. I also welcome the Minister of State's openmindedness on accepting amendments.

It is essential we preserve the ethos of the credit union. Nobody wants to see the banks, building societies and credit unions lumped together. It is therefore essential that, as we try to accommodate the fast-track credit unions, the smaller ones should not suffer or disappear. It should be possible to find a balance between those interests and the Minister of State will find that compromise.

Mr. Power

The long wait is over, and I am not referring to Wexford or Clare hurling.

Mr. Creed

Or Kildare football. That wait is not over yet.

Mr. Power

We are on the crest of a wave at the moment and good things may be around the corner. The credit unions have not had to wait for this Bill as long as Kildare have had to wait for the Sam Maguire, but perhaps both will now happen in the same year.

Credit unions became very disillusioned with successive Governments as this legislation was promised for several years. The credit unions expressed their concerns about this to politicians and I am delighted the Bill has now been introduced.

Although they too were delighted to see the Bill, credit union members are concerned at some of its provisions. The Minister of State went to a credit union meeting recently in Limerick to allay some of their fears. He used the trick of warming them up with some stories before talking about the Bill. They were still unhappy with some of the restrictions the Bill will impose on them. The Minister of State in his speech said he was open to contributions. In general, when Minister of all parties bring Bills to the House they tend to view that as the end of the matter and are reluctant to accept Opposition amendments. I therefore hope the Minister of State is as good as his word and that common sense prevails.

This is a very complicated Bill. It is the first consolidated legislation for credit unions and when passed it will have serious implications for their future. I intend not to politicise the debate but to be honest about the Bill. It introduces some very welcome changes. It allows people under 16 years of age to join credit unions. That is very important, because materialism has taken over Ireland and the world. The old system of children saving in a piggy bank seems to be gone. Now, when the occasion demands, parents must provide the necessary funds. Encouraging young people to save is great training. If we start them properly it can prevent problems later. I welcome that provision as it shows common sense and realism.

The provision for more flexibility on withdrawing shares and deposits is also to be welcomed. The credit unions looked for this and are quite happy with the flexibility in that regard. The decision to allow loans to be repaid over a longer period is to the advantage of the credit union and the customer. It is a sensible approach. The Bill allows the credit union to provide additional services, which is also welcome. Credit unions have shown great initiative over the years and this provision will be used to maximum effect.

Due to the diversity of the credit union movement, a legislative framework that would both accommodate such diversity and provide flexibility and development potential was required. The 1996 Bill does not achieve this. Many people complimented the credit unions for their tremendous work over the years. However, most people hoped this would be enabling legislation and allow credit unions to continue their work in a much more competitive financial arena. There was an opportunity to facilitate the development of the movement in the next century but we missed it. If anything, this Bill will set the movement back rather than bring it forward. The legislation is geared at small and medium sized credit unions with limited growth potential and this is regrettable. A number of credit unions have shown enormous initiative and have proved to be most successful. The Bill will restrict their capacity to continue in the manner in which they worked previously.

The achievements of the movement and its volunteers have received little or no recognition for four decades. It provides an essential economic, social and community service and that cannot be over-emphasised. It has assisted many families in circumstances where no other financial institution was prepared to meet their needs. We hoped the Bill would allow the credit union movement not just to survive in the market place but to compete. There have been many changes in the financial world and many different services are now available. More flexibility for credit unions is required to allow them compete. I hope the Minister will take this point on board.

A number of speakers paid tribute to the voluntary service provided by so many people to the credit union movement. The solid principles of mutuality, self-help and equality have been discarded in favour of an overall inclusive approach which interferes with the economic policy decision mechanism in addition to the already excessive supervisory and regulatory powers. The directors of the board will become quasi watchdogs and will be subject to heavy fines or possible imprisonment depending on the seriousness of a problem. Many directors are not aware of this aspect. They became involved in credit unions to contribute something to the community and they do good work. However, they are now in a vulnerable position and it is possible this measure will be an obstacle to attracting good people to become involved in credit unions in the future.

The Bill will impose restrictions on credit unions. It provides for an increase in the limit on shares from £6,000 to £20,000 and the introduction of a new cap of £20,000 on deposits and loans. However, in 1997, these figures are not sufficient. The Minister and other Deputies said they do not want credit unions to become involved in mortgage lending but I do not understand why they should not be involved in that area. One can be sure that most of the people who drew up the legislation have bank accounts but few of them have dealings with credit unions. However, the only financial institution many people will deal with are credit unions. They are more comfortable with credit unions because they have established a relationship with them over the years and feel their applications will be given the serious consideration they deserve.

Deputy Creed said people fear meeting bank managers whom they perceive as powerful people behind desks making decisions. Even major business people feel uncomfortable about dealing with banks. However, the same cannot be said of credit unions. This is not a criticism of banks, which exist to make money. If I had shares in a bank, I would be happy with the way they do their job. However, credit unions are a different kettle of fish and they must be considered in that light.

There have been major changes in recent years in work practices. Temporary and contract workers find it difficult to secure funds from financial institutions because of their insecure employment. However, credit unions have always looked favourably on them and treated them as they treat other clients. The £20,000 cap is much too low and it should be increased, perhaps to £50,000. I do not understand why credit unions should not be allowed to provide mortgages. They provide a tremendous service and it is important they are not restricted.

In the past year a number of Ministers said they hoped the legislation would allow small businesses to secure funds from credit unions but the ceiling of £20,000 will limit the scope in that area. It depends on the type of business but £20,000 is a small figure. If we are serious about helping small businesses, a step could be taken which would reap major rewards. Small businesses, particularly in the early stages, have great difficulty securing capital and this is one way much needed funds could be provided. I hope the Minister will consider this aspect and perhaps increase the levels.

The Bill is over regulatory. Credit unions have in the main operated self regulation for the past 40 years and we must accept it has worked exceptionally well. Many of the regulatory sections have been taken from the legislation relating to building societies and applied to credit unions. This is not right because they are two very different organisations. Credit unions are generally small, locally based organisations as distinct from large building societies and they should be treated differently. In specific areas the Bill does not go far enough and I hope the necessary changes will be made.

I pay tribute to the credit unions for the work they have done. At a time when the urban-rural divide is the subject of much debate, the credit unions when it comes to being community-minded have never been found wanting and have always come up trumps. Their decision to support the Community Games, possibly our greatest sporting success story, was an excellent one. The games epitomise what they are all about.

There are a number of credit unions in County Kildare. Newbridge Credit Union which moved to new office premises last year, a building of which any major bank would be proud, has been a tremendous success and has grown enormously in recent years. It is being run extremely well by the paid officials with the assistance of members who give of their time voluntarily. In general, the credit unions are community-minded and support many ventures that other organisations would be reluctant to support.

In an interview in the Credit Union Review the Minister of State, Deputy Rabbitte, asked what average member of a credit union needs to borrow more than £20,000 or has more than £20,000 to deposit in the normal course of life. Because of changes in work practices thousands of workers throughout the country have been offered redundancy packages. Members of the Defence Forces can avail of an early retirement scheme. Sizeable amounts of money are involved. It is at times like these that people need the best of advice. The credit unions should be allowed to provide such a service.

I thank the Minister of State for bringing forward the Bill and hope he will take into account the views which have been expressed. There is general consensus that the caps he proposes to impose are too restrictive. I thank the credit unions for the service they have provided to many households throughout the country and hope they will be enabled to continue their good work.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. Sargent

Tá suim mhór agam féin agus ag mo pháirtí, an Comhaontas Glas, sa Bhille seo. Tá áthas orm an deis a fháil ón Rialtas lathairt air.

I was grateful for the opportunity to meet directors, managers and members of the credit unions in my constituency of Dublin North which encompasses Fingal. At that meeting they called for the publication of the Bill which was long overdue and which they were awaiting with considerable patience. I understand, however, from comments made by representatives of credit unions in my own constituency and further afield, that there is considerable concern at the way it has been framed. It is important that the views of Members are listened to carefully as there are a great many items that need to be addressed and rectified on Committee Stage.

In playing their role in society the credit unions have literally put their money where their mouths are. They are prepared to co-operate to help build the community and, in doing that, help its weaker members. Credit unions by virtue of their existence in the workplace or in the community improve the quality of life of their members because of the quality of services they offer and the fact that they belong to their members, not to a boss or a local politician. Their services are short-term in the provision of savings-shares, deposits and loans and long-term in the accumulation of capital by a community based organisation for its use and benefit subject to the requirements of fiscal prudence.

I agree with previous speakers who said it was important to encourage savings, a habit that has waned in recent years, particularly among young people. It is important to send a message, not only to young people but to people living alone in rural areas, who are vulnerable and may be inclined to keep the few pounds they have in cash in the house, that savings in a credit union are secure and accessible and that membership of one better preserves the value of savings.

One hears anecdotes from the staff of banks and building societies of unclaimed credit balances in private or commercial financial institutions which a deceased's next of kin may be legally entitled to inherit but which the institution in question does not make any effort to draw to the attention of the potential legatee in the absence of probate and administration procedures being in place. One hears impressive figures quoted about the potential aggregate value of these unclaimed credit balances, but one assumes that type of thing does not happen in the credit union movement, principally because the measure outlined in section 23 exists in practice to protect the value of the member's savings and the interests of the member's survivors.

I particularly welcome section 82 with its restatement of the prohibition of proxy voting. The preceding section provides for an AGM quorum of only ten. That is a remarkable figure when one considers community credit unions with tens of thousands of members, but I suppose one would not wish to make it compulsory for members to contribute to the process by which their credit unions are governed. However, in many cases we would prefer they did.

Section 32(3) underlines the intimation throughout the Bill that civil servants, who have turned their attention to these matters in recent times, know better how to run credit unions than those who have been running them for decades in some instances. If the section is enacted, any person who has a loan outstanding with their credit union will be proscribed for the period of that loan from using their account on a savings and withdrawal basis. If an emergency arises and the credit union credit committee does not meet until the following Monday evening, a member will not be able to withdraw from shares the funds required to deal with it. Where is he or she to turn other than to the local moneylender? I met financial advisers who work closely with the Citizens' Information Centre which had its AGM in Balbriggan last night. Those helping the people who need the advice of financial advisers told me that moneylenders are still very much a central part of our communities. Even with the legislation in place and the Government's belief that this matter has been addressed, many moneylenders are still charging people interest on loans at the rate of 100 per cent or more.

The Credit Union Bill should help to keep people away from the clutches of moneylenders. Arising from that, what provision is in the Bill to allow a member to hold more than one account, for example a home loan account on which the interest paid is subject to tax relief, a shares account against which other occasional loans can be drawn and a savings account? Is the Minister saying to members who have a number of accounts with their credit unions that such arrangements must cease? That point was made in the submission of the Credit Union Institute of Managers and I hope the Minister of State had time to reflect on its implications.

I welcome section 35(2)(a) which is a prudent and intelligent provision and section 35(2)(b) is in like vein. What credit union worth its salt can accept section 35(2)(c) which would restrict the maximum credit union loan to £20,000, approximately one year's salary? That point was made by several Members and I am sure it will be hotly debated on Committee Stage.

Surely the registrar would have sufficient information to know that most credit unions with the wherewithal to employ management and staff will have loans on their books exceeding that figure. What should those credit unions do in future? Should they sell their loan books to the Union Bank of Switzerland or other such financial institution? Should they refer their members to the elusive third banking force? Surely credit unions should decide with due regard to prudence in lending, what they can commit themselves to and the member's circumstances — that is the underlying thrust of the Bill — how much it can lend. The assumption in the legislation is that the Minister, the registrar and the civil servants know best. However, for the past 35 years or so credit union boards and their managers have known pretty well where to set the limit in regard to the size of a loan. The record of credit unions speaks for itself in that people have not lost money and they have managed to survive by making balanced decisions.

There is a major omission in section 36. It is acknowledged that credit unions directly employ approximately 2,000 people in the Republic. It is estimated that they have a direct employment potential to recruit another 2,000 to 2,500 staff, yet the Bill does not make any reference to paid staff in credit unions at management or any other level unless one considers the potential of credit union managers to be miscreants, but that is not the point I am making here. While the indirect employment generated by credit union activities has not been estimated to my knowledge, one imagines that if the approach adopted by credit unions such as the illustrious ones in Kilkenny, Tralee, Clones, Blessington, Kilrush and Tallow are representative of the movement, the figure must be significant.

I referred to the arrogant tone of the framers of the Bill. It is exemplified in section 48(1) which states that a credit union may provide, as principal or agent, additional services of a description that appears to the registrar to be of mutual benefit to its members. Again we see the role of the registrar usurping that of the AGM and of the credit union boards. With due respect to the registrar, who is likely to be a senior career civil servant, there are other perspectives. Matters sometimes look different when viewed from outside the confines of the lower Castle Yard. The failure to acknowledge this and to show preparedness to give credit unions their head is a fundamental and indicative failure of this Bill.

Is section 49(7) an attempt to legislate retrospectively and, if so, what would be the effect of its enactment on credit unions which offer services such as the payment of bills, a Christmas club and foreign exchange? The real tension in this Bill arises from the relationship between sections 26(1) and 43. Section 26(1) states:

A credit union shall not carry on any business or activity which is not appropriate or incidental to the objects for which, in accordance with section 6, it is formed.

The intent of section 43 appears to be to allow the Minister, presumably through his or her agent, the Registrar of Friendly Societies, power to prescribe how a credit union may invest its surplus funds.

This represents a considerable qualification of the autonomy of annual general meetings of credit unions, the implication being that in section 26 the annual general meeting proposes whereas section 43 confirms that the Civil Service disposes. Just as in the case of universities, it appears the Government would like to usurp press space to ventilate its commitment to pluralism. Credit unions must cease to rely on their genius, their guiding light and revert to the pre-adolescent condition of being told what to do and how to behave by an excessively interfering parental State. The crux of the dichotomy between what the State wants from its relationship with credit unions and what the credit unions want from their relationship with the State is contained in section 41(1) — carrying the side heading "Acquisition, holding and disposal of land"— which states:

A credit union may acquire and hold in its own name any land for the purpose of conducting its business on the land (including erecting a building on the land for that purpose) but for no other purpose.

This type of decision was heretofore taken at annual general meetings. That such decisions will henceforth be taken by the Registrar of Friendly Societies is to be regretted. While it appears the State is prepared to follow the best credit unions in broadly interpreting the phrase contained in the explanatory memorandum on section 26 —"a credit union may do anything consistent with the objects for which it was formed"— there is the qualification with regard to the Registrar of Friendly Societies.

How will it serve the Minister's commitment to the principles of mutuality if some larger credit unions seek to escape the repressive environment heralded by this Bill by entertaining the possibility of demutualisation? Hopefully I am wrongly misinterpreting future plans.

If one's instincts in these matters are influenced not by the party politics of the right, with its ideological attachment to maximising the value to shareholders, nor by the party politics of the left, with its ideological attachment to winning control of the economy for the State, if one is committed to the concept of community economics, a political attitude that considers people in their daily lives to matter more than economic orthodoxies, then one must take a different view. One's instinct prompts one to predict that, in such circumstances, the power wielders, meaning the Minister and Civil Service, will interpret that phrase as narrowly as possible and individual communities and the credit union movement overall will be the poorer. Such an instinct would be buttressed by the attitude adopted by the Registrar of Friendly Societies and communicated to the boards of directors of credit unions in circumstances in which there will have been discussion about what is and is not the proper role for a credit union within its community.

Section 41(4) is particularly invidious. It states:

If the whole of a building held by a credit union ceases to be occupied for the purposes of the business of the credit union, the credit union shall dispose of its interest in that building as soon as it is practicable to do so.

That is tantamount to interference in the autonomy of credit unions. To whom should a credit union dispose of its property? I hope we would not seek to ensure the disposal of such property to a politically well connected entrepreneur. That would be a most sinister development.

Article 43.1.1 of the Constitution states:

The State acknowledges that man, in virtue of his rational being, has the natural right, antecedent to positive law, to the private ownership of external goods.

Article 43.1.2 states:

The State accordingly guarantees to pass no law attempting to abolish the right of private ownership or the general right to transfer, bequeath, and inherit property.

This leads one to question whether the constitutional rights of a duly established credit union are less valuable and worthy of protection by the State than the constitutional rights of other categories of property owners. It has to be acknowledged that even in an advanced democracy, such as this Republic is held to be, the interests of the State apparatus cannot always be ad idem with the interests of each and every one of the local communities comprising that State. Before and since the State first thought to legislate for them — the House will recall that credit unions were already well established and the Irish League of Credit Unions had been in operation for some years before the first Credit Union Bill was passed — credit unions' primary responsibility was to their membership and potential members. Sometimes that responsibility to a locality may be expressed by a credit union through the ownership of property above and beyond the banking hall required to transact the savings and loans aspects of its business.

During the Irish Press dispute I suggested the possibility that the credit union movement, or some larger ones comprised mainly of journalists, had an opportunity to invest in a community newspaper. I hope that type of possibility will be envisaged by those looking to the development of credit unions as an organ of community development.

The State ought not to criminalise actions undertaken by democratically structured civil organisations mandated by and acting in the interests of their local communities, yet that appears to be the precise intention behind section 41 of this Bill. A number of members of credit unions and some members of boards of directors have expressed the fear that the enormous power being vested in the Registrar of Friendly Societies to interfere in the activities of credit unions, even to the extent of holding such directors responsible for their actions or repercussions after they resign, may well prove ominous. In such circumstances the voluntary input, on which credit unions depend, will be made all the more difficult.

We hear some political parties describe how difficult it is to obtain candidates for elections. As this Bill stands my fear is that credit unions will begin to express a similar view, contending it will be difficult to find volunteers if they are to be subjected to the type of prescribed control envisaged in this Bill.

Mr. Callely

This debate gives Members an opportunity to devote due attention to the overall development of the credit union movement. One must congratulate them and their members on having brought our attention to the position in which credit unions find themselves.

While recognising the need for regulation, it is clearly acknowledged that credit unions represent a success story over many years. With a general election impending the present Minister may not be the author of the final regulations but whoever it is must ensure the credit unions receive support to create and enhance an environment conducive to their development and expansion.

The Minister has indicated his willingness to listen to some concerns expressed but is not prepared to say what amendments he will table on Committee Stage. This means we speak in somewhat of a vacuum. There is not much one can say except to clearly signal to the Minister that, because we know only half the story, we will be unable to give the Bill the attention it warrants. We want credit unions to be encouraged and enhanced and we want the regulations to assist them.

Debate adjourned.