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Dáil Éireann díospóireacht -
Wednesday, 5 Mar 1997

Vol. 475 No. 8

Private Members' Business. - Credit Union Bill, 1996: Second Stage (Resumed).

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

In my contribution on the last occasion I congratulated the credit union movement and its membership. The movement has been a success story and every encouragement should be given to ensure that continues. I said that we were speaking in a vacuum in so far as I understand the Minister has agreed to table a number of amendments but we have not been fully briefed on their contents.

For some time I have been closely monitoring the situation relating to the promised legislation on credit unions, An Post and the third banking force. I have received various replies. To illustrate my point, the Minister for Finance in reply to my Parliamentary Questions Nos. 7 and 64 of 12 March 1996 said:

The issue of how the State banks might be restructured in order to achieve our objective of a vibrant and competitive banking market is such a complex and difficult one that I refuse to be rushed into recommending to the Government a particular solution to it. We will only have one chance to get it right, and getting it right must, therefore, be given priority.

I had tabled another Parliamentary Question No. 81, to the Minister for Finance on the same day. His reply was as follows:

In addition to consolidating and updating existing legislation, the Credit Union Bill proposes to allow credit unions to expand their range of financial and advisory services...

His reply to my Parliamentary Question No. 60 of 12 December last was as follows:

Finally, a Credit Union Bill, which is currently being drafted, will broaden the range of services which credit unions can offer, thus contributing further to competition in the market.

Those extracts clearly indicate that whenever Members of the Opposition manifested an interest in this long promised Bill they were led to believe the priority was to get it right. We were informed its provisions would allow for the expansion of the financial and advisory services of credit unions, thus contributing further to competition in the marketplace.

In the light of the debate since its publication I am sure the Minister will readily acknowledge the Bill, as it stands, will not achieve any of the objectives outlined in the extracts I have quoted from replies to parliamentary questions. The Minister must come clean as quickly as possible vis a vis his intentions in this respect, clearly enunciating what conditions he is prepared to accept to meet the requisite expansion in the delivery of credit union services.

I received a communication dated 26 February 1997 from the Irish League of Credit Unions on this Bill which touches on many of the issues of which the Minister and others will be aware, such as amendments sought to further enhance the success story that is credit unions. For example, the Irish League of Credit Unions wants a ceiling of £30,000 on shareholdings, recommends that deposits be the greater of 2 per cent of total shares or £50,000 and loans the greater of 5 per cent of total assets or £30,000.

That communication refers to self-regulation, new services, offences and penalties and clearly demonstrates the level of thought given by the members of the credit union movement to the need for this Bill, the level of debate and contribution devoted to preparing their proposals and their vision for the future, which they enunciate as follows:

Our vision is that credit unions will satisfy the social and economic needs of their members, with dignity and integrity by offering, in the co-operative manner and on a not-for-profit basis, full financial services for everyone in the community who wishes to join.

No doubt the Minister received this communication from the Irish League of Credit Unions. It goes into great detail on limits on savings and loans and the impact of this Bill, as it stands, along with the need to have its recommendations and suggestions taken into account.

In recent days I was in communication with a voluntary member of the Artane-Coolock Credit Union. We owe a great deal to the credit union movement, its membership and volunteers for their excellent work. He highlighted the fact that the movement is prepared to accommodate its members and be more flexible than any other financial institution in meeting their requests. Within my constituency there are credit unions at Clontarf, Coolock-Artane, Donnycarney, Beaumont and District, East Wall, Fairview and Marino with a massive membership and an enormous level of activity.

Assuming the Minister was serious in responding to my parliamentary questions last year in relation to the expansion and broadening of the range of services provided by credit unions, I am impatient to see an amended Bill. I plead with him to take into account the submission of the Irish League of Credit Unions dated 26 February 1997.

Like all other Members I welcome the opportunity of contributing to this debate which I hope will lead to the further development of the credit union movement. I congratulate the Minister of State, Deputy Rabbitte, on introducing this Bill which had been a long time in gestation.

Members of credit unions in all constituencies, quite rightly, have been lobbying all Members of the House in recent months. Within my constituency there are credit union branches in Tipperary town, the village of Bansha, Clonmel, Cahir, Cashel and Carrick-on-Suir in addition to some subsidiary offices, all of whose members were concerned that, in the event of any further delay, this Bill might not see the light of day.

Whenever Members of the Opposition raised the matter of its introduction on the Order of Business, there was always a positive reaction from the Government. Any perusal of the Bill, as it stands, would lead to one readily understand the delay involved in its preparation. We have endeavoured to reach some measure of consensus among all those involved. I congratulate the Minister on achieving that, and on his extensive consultation before its final drafting.

This Bill will have an impact on all our local communities, yet it is under-rated by the media and political commentators. A true indication of its significance is to be found in the number of Members who have already contributed to this debate and others who no doubt will want to contribute reflecting their constituents' views. This is a testament to the impact of this legislation on the whole credit union movement since its foundation in 1958. No social movement has had such an impact on the lives of so many citizens as the credit union movement. It is in daily touch with the ordinary people in towns and villages in times of need and when the moneylenders are creating havoc in households on the periphery of society. This is important legislation for an important social movement which has an impact across both urban and rural society. No movement has been so successful and so in tune with the needs of the people as the credit union movement.

I listened to the debate last week and I join with my colleagues in paying tribute to the founders of the credit union movement and others involved in developing small credit unions throughout the country. The society we represent and those involved in credit unions owe them a deep sense of gratitude.

I welcome the remarks of the Minister of State, Deputy Rabbitte, that the Bill will continue to emphasise the community spirit which has motivated the credit union movement since its inception in 1958. There is a fear that it could forget the reason for its existence. Without a legal framework or constraints in this legislation what would prevent the development of credit unions into commercial banks? I doubt that would happen. We are providing a statutory framework for a movement which has grown enormously with popular support and will continue to develop apace. It is right that the embodying principle of the movement is again enshrined in statute.

All sides will welcome the Minister's willingness to consider amendments on Committee Stage. It is consistent with the open and inclusive manner in which the Government has operated in consultation with the people directly involved at the coalface. The Minister's response is reassuring in that the Bill as published is now before the House. He is conscientious enough to realise that sections of the Bill need clarification, if not amendment. Some reservations have been raised by the credit union movement and the Irish League of Credit Unions.

My colleagues have addressed some of these issues, including the maximum limits on shares and loans. I listened to the Minister's contribution on Second Stage and his explanation of the reason limits were chosen. One can understand there are legal constraints in setting limits and perhaps the Revenue Commissioners had some reservations. These fears have been raised by the Irish League of Credit Unions and those of us who are dealing regularly with people who use the facilities of the credit union movement. They are real fears and the limits will impinge on some of the movement's more recent activities which are consistent with their founding principles. I am worried that they may be stymied by limits set down and may not be able to expand into our booming economy by playing their rightful role in the area of financial transactions and in the provision of funding for housing projects, house building and house purchase. We recognise the need for direct involvement by financial institutions in the Government's programme of social housing. This aspect alone is an important factor in communities everywhere. If we do not shackle the credit union movement it will play an important role in the future financing of the housing sector, which is only one aspect of its operations. It assists people who would not be listened to or recognised by some of the commercial banking institutions. These are areas for the small investor and the small borrower. Due to the changing values of money and the booming economy and people's ability to repay reasonable percentages of their total income I have no doubt the limits set down in the Bill can be examined by the Minister. I hope he will treat that aspect of the submission from the Irish League of Credit Unions with the seriousness it deserves.

I thank the Minister for his response to representations I made to him on behalf of various bodies in County Tipperary. I have no doubt he will be amenable to suggestions when the Bill goes to Committee Stage. The credit union movement can be involved in all areas of economic development. The movement represents an emerging force in the housing sector and a considerable assistance to the Government's policy. It would not be appropriate for any Bill to stymie the efforts of the credit union movement to develop into this sector. Given the representations made to me it is essential to ensure the credit union movement is able and, by statute, capable of delivering a service into new areas of finance and financial assistance. I am sure the Bill will not stymie developments in this sector. It is not beyond the powers of the Minister of State, Deputy Rabbitte, to conceive of regulations to ensure this does not arise. The Irish League of Credit Unions has raised its concerns about section 41. Its view appears to be that if the House is putting a registrar in place to regulate the development of the credit union movement along guiding principles, why not give him or her the leeway to do so?

I welcome the broad terms of the Bill. No other industry in the State is developing as rapidly as the financial services sector. My colleague, Deputy Gallagher, said during this debate last week that he saw potential for the credit union movement to become a benevolent third banking force. The Minister of State, Deputy O'Sullivan, has advocated the need for a third financial services institution outside the commercial banking sector which will meet the needs of smaller borrowers and depositors, one that is friendly and understanding of their needs and not seek guarantors and the other requirements sought by commercial banks.

If one is a depositor with the credit union, regardless of the size of the deposit, one is considered favourably when one seeks to borrow, whether the amount is a fraction or a multiple of one's deposit. It is possible through this legislation to ensure the credit union movement, together with An Post and other agencies of the State, becomes a third banking force in Ireland. It can be regulated and user friendly and it will not cream off millions of pounds in profits, which other financial institutions do with little regard for the social consequences. That development would not be possible under the 1966 Act, which is why it was necessary to update the legislation in this new dynamic form.

We have the basis of good legislation and the credit union movement recognises this. Most of its proposed amendments should not present difficulty for the Minister of State. I look forward to the Bill being suitably amended on Committee Stage to take on board the reasonable suggestions of the Irish League of Credit Unions. I support the Bill and I hope the Minister of State will respond favourably to the views expressed by all sides of the House.

The Credit Union Bill was a long time in preparation and its publication was as a result of pressure from this side of the House and the legitimate lobbying of the credit union movement, its volunteers and members. Our task is to ensure it will provide a basis for the movement to develop in a sound but workable regulatory environment. The tragedy is that the Bill will not allow such development and it is thus unacceptable to the credit union movement.

Various fundamental issues must be addressed. The credit union movement has done an excellent job in briefing Deputies on all sides of the House on how these issues should be handled. In the first instance, the Bill does not provide the flexibility that is necessary for development. The absolute monetary limits are unrealistic and have no rational basis. These restrictions do not currently apply and limits expressed in percentage terms are required to cater for the range and diversity of the credit unions. Second, the regulatory powers in the Bill go far beyond the requirements of prudent supervision and extend to the internal affairs of credit unions.

The credit union movement is not opposed to regulation. It has put forward a basis on which the respective roles of the registrar and the movement can be fully recognised. Section 94 of the Central Bank Act, 1989, provides a basis for coexistence and co-operation between the movement and the registrar and is, in the opinion of the credit union movement, the only workable and acceptable solution. I support the movement's case. The practical implications of the provisions relating to the new services are unrealistic and need to be amended. The over-emphasis on, and repetition of, offences and penalties in the Bill needs to be reconsidered to ensure the operation of credit unions is not seriously impaired.

The movement has submitted 82 amendments which they view as fundamental. I hope the Minister of State will listen to the opinions of the credit union movement. If not, the Bill will be detrimental to the movement and ultimately to the country. That must not happen. I am not exaggerating when I say that. This movement has branches in every parish and they have done extraordinarily good work. There are many strong credit unions in my constituency which are well supported and utilised by the local communities.

The vision of the Irish credit union movement was illustrated by its strategic plan which was presented at the annual general meeting of the Irish League of Credit Unions in 1996. Its vision, with which every Member can agree, is that credit unions will satisfy the social and economic needs of their members with dignity and integrity by offering, in a co-operative manner and on a not-for-profit basis, full financial services for everybody in the community who wishes to join. That vision embodies the philosophy and ethos of the movement but it is undermined by this Bill. That is a tragedy. It is a tragedy that Deputies on all sides of the House must ask the Minister of State to amend this legislation. Having waited so long for this Bill, it is a tragedy that the Minister of State and the Government should make such a fundamental error in its drafting that the vision and philosophy of the credit union movement will be undermined by it. How out of touch can a Government be? There is great need for the Minister of State to listen carefully to Members of the House and to the representations made by the credit union movement.

Many features of the Bill will hinder the development of credit unions and frustrate the work of their 12,000 volunteers who demonstrate the value of the co-operative, self help approach to economic development in local communities. While the credit union movement has excellent permanent employees, its real strength lies in its core of volunteer workers who are willing to use their expertise in various areas to benefit their neighbours and community.

The credit union movement has identified a number of issues which it believes are of paramount importance. In this context, it is important to remember that the movement represents 427 credit unions which have assets of between £500,000 and £55 million, no mean sum. This diversity is an indication of the strength and representative nature of the movement which should not be threatened by the Minister or Government of the day or by this House. We must have faith in the credit union movement, give recognition to its achievements and introduce the amendments it regards as essential to meet its future needs.

The success of the credit union movement lies in its voluntary and community nature. The movement wants to move forward and, in this respect, it has identified certain sections of the legislation which need to be fundamentally amended. It is incumbent on us to introduce these changes and not argue against them on some ideological grounds, as the Minister is wont to do. The credit union movement deserves our trust and support.

I appeal to the Minister to accept the amendments which will be tabled by us on Committee Stage. The Irish League of Credit Unions has made the not insignificant statement that it is worried many of the proposals in the Bill will pose a threat to the unity of the credit union movement. No Government should contemplate the enactment of legislation which threatens the unity of the credit union movement. It is, therefore, incumbent on the Minister to accept amendments to the Bill.

I know from my experience in Government that the Minister discussed the legislation in detail with the decent men and women in his Department who try to do their best in preparing legislation and offering advice. In most cases they are wedded to their conclusions and are reluctant to change them. However, this issue is too important to adopt such an approach. The credit union movement is important to every parish and most citizens. I appeal to the Minister to listen to the credit union movement; it deserves nothing less.

The proposed limits on shares and deposits are unacceptable to the movement. It is proposed to increase the limit on shares from £6,000, as set down under the 1966 Act, to £20,000. The limit of £30,000 which we seek is not unreasonable. Under credit union rules deposits may not exceed 100 per cent of shares. No monetary limit was set on deposits under the 1966 Act and it is proposed to set a limit on these of £20,000. The proposal by the credit union movement that the limit should be 2 per cent of total shares or £50,000, whichever is the greater, deserves our support. The reason given for this proposal is that while the bulk of savings in credit unions are held by small savers — the average is £1,300 — some individuals have savings in excess of £40,000. At present 68 credit unions have members with savings in this region. Any unnecessary restriction on the credibility of a credit union to raise funds will impede its growth. It is of fundamental importance that the limit on deposits reflects a percentage of shares and is not an absolute monetary limit.

Unlike banks, insurance companies and building societies, credit unions do not want to make commercial gains, rather they want to look after their members' interests. The credit union movement has never incurred a loss, which is more than can be said for some financial institutions. I remember when it was thought State institutions would fall as a result of the Allied Irish Banks-ICI affair. We had to use taxpayers' money to prop up these institutions. The credit union movement is concerned only with community development and it deserves our support.

Deputies have referred to the proposed limits on loans. The 1996 Act limits credit union loans to a term not exceeding five years. It is proposed that 20 per cent of loans should be for a period exceeding five years and 10 per cent should be for a period exceeding ten years. I welcome this relaxation but not the proposed limit on loans. There is currently no monetary limit on loans but a £20,000 limit is proposed in this legislation. The credit union movement is suggesting a limit of 5 per cent of total assets or £30,000, whichever is the greater. It argues that while the vast majority of credit union loans are small, to be paid back over a short duration, there is a substantial market for loans in excess of £20,000. Currently, 132 credit unions give loans in this category and, given the potential growth in loan demand as a result of the extension of the loan terms, it is more appropriate to consider the current number of loans in the £10,000 to £20,000 category which are given by 293 credit unions. It is clear that demand for loans in excess of £20,000 will increase. I appeal to the Minister of State to listen to the representations from the credit union movement.

The proposed monetary limits on savings and loans are unacceptable to the credit union movement. A compromise solution which raises the monetary limits, without allowing for the percentage solution indicated, will not be acceptable because it would impede the development potential of credit unions and divide the movement, with larger credit unions in particular seeking a different legal framework in which to operate. If that happened it would be a tragedy because the unity of purpose and vision of the credit union movement, as outlined in its 1996 AGM document, Protecting the Future Together, should not be damaged by legislation which is intended to improve the potential for development of the credit union movement.

For 38 years the credit unions affiliated to the Irish League of Credit Unions were subject to self-supervision through a comprehensive self-regulatory system. This is operated centrally by the league through the management of the movement's savings protection scheme which has strict rules and procedures. I hope the Minister of State listens to the proposals put forward by the movement in that regard and in respect of new services, offences and penalties.

The Minister of State brought forward the Bill as a result of pressure. We welcome it but, in its present form, it is unacceptable to the credit union movement which has proposed 82 amendments. As a former Minister I recognise that in publishing the Bill the Minister of State would have discussed it with his officials, who would have given their own views, and then published the legislation. To some extent Ministers are married to the legislation they produce because it is the result of cogent, well argued points. I appeal to the Minister of State not to allow the fact that he brought forward the Bill blind him to the issues raised by the credit union movement. I ask him to listen to the reasons put forward by the movement for the changes and to accept those changes as an act of faith in a movement that has done such a wonderful job for the people of this country and, in a special way, for the people.

As my party's spokesperson on social welfare, and a former Minister for Social Welfare, I have a particular interest in credit unions and their work. Credit unions form an enormous voluntary co-operative. They play an important part in the development of our country because they have helped people who started out with small savings become substantial savers. They taught them how to make use of the funds available in an organised way.

Many Deputies came forward to speak on the Bill because they know credit unions play a vital part in their local communities. They know they have contributed substantially to the development and modernisation of those communities.

Credit unions have played an important part in tackling issues of poverty and disadvantage. I know that from my work as a public representative and, before that, as a worker in the community. In those early days, the banks played a part in tackling those issues through their individual managers. It was possible at that time to negotiate with an individual bank manager to get a family out of difficulty. It is difficult to do that today unless the credit worthiness of the individual is well established. I brought many families to the banks 20 or 30 years ago, and the banks established the credit worthiness of those families merely by the honesty of the individuals concerned. They took a chance on them and it was rare for the banks to be caught out. When they were, it was only for a couple of hundred pounds.

People learned to save with banks in those days, as many learned to save with the credit unions. However, banking has changed. Local managers have less authority and autonomy in dealing with their own local communities. I realise banks are part of a world of competition, investment, return on investment and profit, but we meet the people on the ground and know the difficulties they face.

The credit unions helped in tackling the problems of people in need who could not get support. They developed that work and gave succour to the population to discourage them from going to moneylenders. There were more moneylenders in those days than people realised. We carried out a study which showed the extent of the moneylending problem. People did not understand the percentages being charged by moneylenders. They thought 25 per cent over six weeks seemed like a reasonable deal but, when taken on an annual basis, it was enormous. To the person who needed money urgently and who had nowhere else to go, the moneylender had a role to play.

The research indicated that the moneylending habit was passed on from mother to daughter. A culture of moneylending was clearly highlighted by the research. That problem had to be addressed but who was there to address it? The credit unions were there and they pioneered the work in tackling the problem of moneylending. The Lough Credit Union in Cork did great work in tackling moneylending problems and expended much of its facilities and resources in doing that. I am sure that, at times, they wondered what they were doing and whether they would be successful in helping people to break away from moneylenders — at times they had to face physical and other challenges and sometimes ended up in court. That is history now, but it was the voluntary non-profit-making credit unions who did that work. When we came to tackle that problem on a national basis, we turned to the credit unions. They are the salt of the earth. The Department of Social Welfare was able to work with them. A small scheme was devised which has now become the highly successful MABS — money, advice and budgeting system — as a result of credit unions, the local society of St. Vincent de Paul, community welfare officers and the Department of Social Welfare working as a team to tackle the issues. The credit unions played a central role in that.

I mention these issues because in speaking of the Central Bank, regulation and control, one is inclined to forget that this is about people. The Central Bank is far removed from the people but the credit unions are not, and those who work voluntarily to keep the credit unions going are on the ground working with people. The household budgeting system, under which deductions are made, originated in the Department of Social Welfare as did many such schemes. Necessity is the mother of invention and if one has initiative and is prepared to tackle problems, new systems will be developed. In Dublin, the household budgeting system has been effective in so far as the payment of rent, ESB and other regular household bills are concerned.

To operate properly in this area, credit unions need a number of facilities, including that of electronic fund transfers and the legislation that goes with it. The movement is developing and improving to meet modern needs. It is doing work which has a large voluntary element and has become much more professional. It is managing huge amounts of money. People are dealing with the credit unions and are happy with them. If people are concerned about elements in the Bill, it is only natural that Deputies in this House are also concerned. Some 80 amendments have already been suggested and there will be more as the Bill goes through Committee Stage.

There is concern about four key points — the limits on savings and loans, self-regulation, the ability to introduce new services, and offences and penalties. The Bill provides for 20,000 shares. Several Deputies have already mentioned that they would like to see this increased to 30,000. In this modern age it would be almost criminal to refuse such a request. Regarding deposits, the Bill provides for £20,000 and there is a demand that it should be £50,000 or 2 per cent of total shares, whichever is the greater. This seems reasonable. Under the Bill, loans are restricted to £20,000 but people want the limit to be 5 per cent of total assets or £30,000 in loans. Several Deputies have said that £30,000 does not constitute a very substantial loan nowadays. It is not exorbitant and there is still a reasonably controlled approach which is beneficial.

The credit unions have their own approach and vision. They operate in a co-operative way as a not-for-profit organisation offering the fullest possible financial services to everyone in the community who wishes to join. Their demands seem reasonable for people who have contributed so much to the country and its development — that hidden development which one does not read about in the newspapers or in Central Bank reports but which occurs. It is only when it has happened that we suddenly realise the difficulties and disadvantages people had to overcome and the credit unions had a major part to play in that.

The movement feels badly about the Bill. It believes its position is being undermined. However, the work of the 12,000 volunteers is worthy of support. There are some 427 credit unions with assets varying in amount between £500,000 and £55 million. There is huge diversity and great strength among credit unions. They have problems and there are issues to be faced. I am quite certain the Minister and his officials will identify these and put it to the credit unions that it is necessary to regulate them.

In practical terms, the limits which are proposed will have a detrimental effect on credit unions. It will result in some of their members turning away from them. It is fundamental to them that the limits set on deposits should reflect a percentage of the credit union's shares and should not be an absolute monetary limit. The current credit union legislation has no individual limit on deposits which a member can hold. This has not caused major problems over the years. The Minister should not jump to say that there was a little problem here or another problem there. The banks have huge problems; if this House and country did not support the banks they would have even greater problems. However, we all work within society and, at the end of the day, politics has a huge influence on all those activities. The credit unions wonder why the rules are being changed adversely.

I am sure the Minister has heard enough about this issue from both sides of the House to know that he must look at it very seriously. I will not repeat what has been said, but the question of self-regulation and proper recognition of the league and what it is doing is important to the credit unions. It must be recognised that all credit unions operate under rules which are approved by the Registrar of Friendly Societies.

In addition, for 38 years credit unions affiliated to the Irish League of Credit Unions have been subject to self-supervision through a comprehensive self-regulatory system which is operated centrally by the league through the management of the movement's own savings protection scheme which has strict rules and procedures. That was set up by the movement on a voluntary basis in 1989, which is evidence of the responsibility of the league. The SPS currently holds funds of £28.7 million, representing 1.2 per cent of savings, exceeding the actuarially recognised norm for credit unions worldwide of 1 per cent and far in excess of the 0.2 per cent represented by the deposit guarantee scheme of commercial financial institutions. Credit unions are careful and prudent; they are not spendthrift.

The rules of the SPS set out prudential management procedures, standards and ratios which must be adhered to and require credit unions to carry fidelity bonding for all its employees and volunteers. Under the SPS a credit union will receive an inspection visit from the league's monitoring division at least once every 15 months, and in 1996, 317 credit unions received such an inspection. The SPS copperfastens the other levels of support to protect members' savings — these are numerous and are well known to the Minister.

Credit unions want to provide new services and regard as important the system whereby the registrar approves additional services, recognises that such services may be of many different types and introduces approval mechanisms which are appropriate to these differences. They would like to provide services such as ATM machines, with a body such as the league to develop the service, set up conditions and procedures and make a single application for approval.

In regard to self-regulation, the movement has two fundamental problems with the regulation proposed in the Bill. First, the Irish League of Credit Unions is not recognised as a supervisory body with the appropriate powers to set standards, carry out inspections and enforce the rules of the savings protection scheme, even though the league, on behalf of the movement, administers this scheme. Without such recognition, the movement will not be able to continue in the way in which it has operated for almost 40 years. That is a fundamental issue for credit unions. Second, while for the first time the Bill makes it obligatory for credit unions to be members of a savings protection scheme, it also removes control of the movement's scheme from itself and subjects it to the control of the registrar. That is a basic attack on the self-help, independent ethos of the credit union movement, about which it is very concerned.

The work being done in this area is valuable and important to the development of the credit union movement on an organised and regulated basis. The Minister should, however, listen to the credit union movement. As the practitioner in this area, it makes a huge contribution to the local community and the Minister should work with the movement rather than against it.

Will Deputy Ahern, whom I am anxious to hear, indicate whether we will move onto Committee Stage after his speech, or does he know whether he is the final speaker?

I am not sure. I welcome the opportunity to make a brief contribution to this long-awaited Bill, which has been in gestation for a number of years. Given all the discussions that took place between the Minister's office and the credit union movement, we would have expected general acceptance for the Bill, but unfortunately that is not the case. Notwithstanding that, I congratulate the Minister on bringing the Bill to this stage. In recent years we all had discussions with credit unions in our areas which were anxious that a Bill would be published. We have an opportunity now to get matters right for the years ahead to ensure the movement continues to grow and develop on the basis on which it was founded.

Since 1958 when the credit union movement was established there has been phenomenal growth. The credit union movement has a national profile, with 432 credit unions — the number is increasing all the time — membership of about 1.7 million people and £2 billion in savings. Considering that the 1966 Act impacted on only a small number of credit unions, there was need to update the legislation to ensure that credit unions were put on a solid footing.

We are all aware of the problems experienced by commercial banks over the years and we hope similar problems will not arise for credit unions, particularly given that the majority of people who have invested funds in credit unions are not well off but, without sounding superior, are mostly working class people. Nowadays white collar workers, people living in new housing estates who pay vast amounts of money for their houses, go to the credit union for money to furnish their houses and help finance the necessities such as televisions, cookers, furniture and so on. It is vitally important that rules and regulations are introduced to ensure the future of credit unions.

Some years ago there was great panic at the likelihood that Allied Irish Banks would go down the tubes, thereby causing great problems for the economy. If credit unions were to go under it would have a detrimental effect on the thousands of people who save with them.

The Credit Union Movement developed mainly through the work of volunteers' whom I compliment for giving freely of their time and effort over the past 40 years. While full-time workers are employed in some of the larger credit unions, the movement could not have developed without the unselfish effort of voluntary workers and directors.

I have first hand experience of the operations of credit unions through my profession as an accountant before being elected to the House and in my dealings with constituents. I appreciate the assistance provided by the movement to people who need finance. Some of those they assist would not be entertained by other financial institutions. In the 1960s and 1970s if one had a good reference one could get finance from a bank. However, nowadays when one seeks a loan from a bank one's details are put into a computer and sent to a central processing depot and unless one has a perfect financial record one will not be facilitated. There is no flexibility in the matter. Credit unions are able to help people whom the banks will not entertain because they fell behind in paying back loans. Credit unions have given many people back their confidence. Were it not for them many people would not have the necessities in life. Credit unions have helped people buy new cookers, kitchens, televisions, and to pay for funerals and school fees.

There are some excellent credit unions in my constituency. The Mitchelstown Credit Union was one of the forerunners.

Deputy Ned O'Keeffe paid it great compliments.

And rightly so. Mitchelstown Creameries provided a good deal of employment and cash flow in that part of the constituency when the credit union was first established. The credit union movement has spread to many small towns and villages and given a tremendous service to local communities. Credit unions have been set up in Fermoy, Midleton, Youghal, Carrigtwohill, Cobh and Mallow. There are also branch offices in smaller villages and I have not heard any complaints about the services they provide.

According to a Mr. Paddy Conlon in New Ross, County Wexford, the ethos of the credit union is co-operation. In a letter to the Examiner on 13 February 1997 he stated the movement is a distinct socio-economic system based on a set of well defined principles which underpin three fundamental strands in the social and economic development of individuals and groups. He stated that they uphold the dignity of the individual, ensure a fair sharing of the fruits of labour and promote subsidiarity, encourage self reliance and empower people to provide for all their needs through their own efforts. He went on to state that this Bill would destroy the ethos of the credit union, but I do not believe it will. However, it should not interfere with those three fundamental strands. All co-operative movements are set up to develop local communities.

The main concerns about the Bill have been mentioned by many speakers and I am sure the Minister of State is familiar with them. I hope he will address them on Committee Stage.

If we ever reach it.

We will reach it tomorrow.

The Deputy might have to take Committee Stage.

The debate on this legislation has gone on for so long that a new Government may have formed by the time it is completed.

The limits imposed on shares, deposits and loans are unacceptable to the Irish League of Credit Unions. In 1966 a limit of £6,000 was put on shares. That limit is now £20,000, but the league wants it increased to £30,000. If indexation were taken into account I am sure that figure would be much higher than £20,000.

The £6,000 limit was set in 1986 and would be roughly £9,000 now.

What about the 1966 Act? The matter can be discussed further on Committee Stage. The league wants the limit on deposits increased to £50,000. I accept that if an individual placed a large sum of money on deposit in a credit union he or she could control it, but the £20,000 limit should not apply to all credit unions. Given the difference between credit unions in terms of deposits, placing a limit of £20,000 should be reconsidered on a percentage basis.

As regards the limit on loans, £20,000 is a substantial figure but some people could afford to borrow more. If they are willing to invest their money in the local community, they should be facilitated. The £20,000 limit should be reconsidered before Committee State to see if it is possible to increase it, although if we increase it the limit will become the rule rather than the exception. If we want to keep money in the community, we should make this facility available, otherwise people will lodge it in one of the large financial institutions.

We will discuss the Bill further on Committee Stage and I hope the Minister will take on board concerns expressed by the Irish League of Credit Unions about limits, self-regulation, new services and offences and penalties. We must ensure that when the Bill is enacted, it copperfastens the future of credit unions which have benefited the communities they served.

I am glad to have the opportunity to speak on this important legislation. I join Deputies on both sides of the House in welcoming the thrust of the Bill, although I have similar reservations to those expressed by most speakers so far. I compliment the Minister of State and his officials on introducing this detailed Bill. Obviously, much painstaking effort and work went into producing this comprehensive regulatory framework for the credit union sector. That the Taoiseach was asked so often on the Order of Business about the legislation illustrated the widespread interest in it. The Irish League of Credit Unions implemented a successful information campaign for the benefit of public representatives to highlight the need to introduce legislation and deal with the concerns it expressed to us at national and branch meetings.

In County Cavan credit unions are located in Ballyconnell, Cootehill, Cavan, Bailieboro, Ballyjamesduff, Kingscourt, Shercock, Ardagh, Killeshandra and Ballinagh. Such a considerable number of branches in a county with a population of 50,000 shows how important the credit union movement is not only to rural areas, but to urban ones. Recently, I spoke to members of a branch which was established about ten years ago. The chairman of the branch told me it had 2,077 members. A considerable number of people in a small sparsely populated community have shown their commitment and faith in the credit union movement. Its membership comprises people from all income groups and the typical borrower and investor represents all shades of opinion in the community. The chairman also told me that the bulk of borrowing is for productive purposes — for example, the provision of machinery on a farm, additional accommodation in a private residence or improvement works to a farm or a small business. It is, therefore, important the Minister gives favourable consideration to the league's request to lift the cap on borrowing.

Many young people are familiar with the credit union movement because of its sponsorship of the National Community Games. The members of the credit unions, like the members of the community games, give voluntarily. Great credit is due to people in both movements who provide an essential and formidable network of voluntary activity.

Unfortunately, the credit union sector is seen as the poor relation in the financial services sector, perhaps due to a perverse and misguided perception of big being beautiful in financial matters. The nature of personal and corporate finance has changed radically in the 30 years since the legislation on credit unions was last addressed by the Houses of the Oireachtas. The economic infrastructure underlying financial activity has also changed. We have moved from being a predominantly agricultural society with our trading activity unhealthily concentrated on transactions with our nearest neighbour to a modern industrialised economy with global trade and financial links. The electronic and information technology revolutions have made, and continue to make, significant changes in the way money transactions are effected. The cashless society has not arrived but cash on paper plays an increasingly less dominant role in how we manage our personal and collective financial affairs.

The credit union structure has developed into a strong and essential component of our financial institution infrastructure. It is appropriate that the regulatory arrangements pertaining to it be renewed and undated to ensure it provides the appropriate climate for the credit union sector to continue to play its role. The credit union sector's importance lies not merely in that its assets have risen to £2 billion or that there are more than 400 member unions in the sector, but in its being the sole financial institution whose door is open to those on limited incomes.

Credit unions have played a valuable role in helping people on modest means to manage their incomes and expenditure prudently. There is a perception, which the banks do little to discourage, that the banking sector is not interested in customers dependent on a social welfare income or a basic wage. The bank and building society sectors target customers who are essentially in the middle income bracket. The local credit union has often stood between the hard pressed social welfare dependant and the clutches of the loan shark.

It has adopted a sympathetic and practical approach to the needs of the small investor and borrower and provided many a hard pressed family with a mechanism for clawing their way back from unexpected health or job loss crises and adjusting to living within their means. In so doing the sector has proved that providing a sympathetic approach to personal finance is not a risky practice. There has been a satisfactory safeguarding of the assets of credit unions. Confidence in the trustworthiness of customers has not been misplaced.

Much attention has been focused on the £20,000 loan limit. No one disputes the necessity to maintain the ethos of the credit union sector as a lender and deposit holder specialising in small personal and family transactions. However, £20,000 is not as considerable a sum as one might think. A modest development on the part of a small business or farmer could easily exceed that amount. One hopes it will not be another 30 years before this House revisits the provisions the Minister of State is proposing to enact. We should think of how low the purchasing power of that sum will have plummeted.

Has the Minister of State given any consideration to allowing himself and his successors flexibility in this connection? Would it be a feasible alternative to specify a higher limit, or perhaps none and allow the Minister of State to determine maximum limits from time to time by way of ministerial order? The limit could be set initially at his preferred level which I hope would be in excess of £20,000. Both he and his successors would have the option of reviewing the limit upwards in the light of experience. Unfortunately, the threshold set seems to have been interpreted in some quarters as an effort to spancel the credit union sector to some degree, which I am sure is a misunderstanding.

We live in an era of competition in which the traditional demarcation between financial institutions is becoming blurred. The demutualisation of one building society and the extension of others into activities which have traditionally been the preserve of banks has been a positive development as far as consumers are concerned. It would not necessarily be a bad thing to have the stronger and more ambitious credit unions diversify into providing a wider range of services. It is important to remember that the customers of credit unions to some degree are not customers of banks. They should have access to as wide a range of financial services as possible and to modern methods of completing money transactions.

I compliment the many people throughout the country who have given loyal and dedicated service to furthering the aims and workings of their local credit union network. They give of their time voluntarily for the benefit of the local community who share in its success. Without the voluntary effort, diligence and commitment on their part, the credit union movement would not be as successful. The fact that we are asking for the borrowing limits to be raised is an indication that the Oireachtas has the utmost confidence in its trustworthiness.

The Minister of State is quoted in a newspaper article as saying that he will consider increasing the loan limit of £20,000 by way of amendment on Committee Stage, provided the Irish League of Credit Unions makes a convincing case and he can be persuaded there is a significant number of ordinary people with more than £40,000 to invest in their local credit union. As the Minister of State is aware, there are 427 credit unions of varying size with assets ranging from £500,000 to £55 million.

The Irish League of Credit Unions has made the point that the loan limit of £20,000 will cause major problems, in terms of the range of services credit unions will be able to offer, and impact greatly on the number of people with a significant stake. A total of 132 credit unions have provided loans in excess of £20,000 while 293 have made loans of between £10,000 and £20,000 available. The demand for loans in excess of £20,000 is likely to increase.

I can understand the reasons the Minister of State does not want credit unions to compete with banks and other financial institutions but the imposition of a monetary limit will impede their development. The Irish League of Credit Unions has suggested a figure of £30,000 or 5 per cent of total assets, whichever is the greater. It has made a convincing case. The Minister of State should be amenable to accepting its proposition.

It is important to remember that credit unions operate under the rules of the Registrar of Friendly Societies. A total of £28.7 million is available under the savings protection scheme. This represents 1.2 per cent of total savings. Although self-regulated, credit unions have been well managed and there have been regular inspections. The money is in safe hands.

The Irish League of Credit Unions is seeking recognition by the Registrar of Friendly Societies. The Minister of State met its representatives prior to the introduction of the Bill. This provided an opportunity for a deep discourse on what the Minister of State is trying to achieve. Many of the Bill's provisions are laudable. There is such a measure of agreement on the Bill and such acceptance of its provisions that it would be appropriate in the circumstances if the Minister of State were to concede on the three issues outlined to him. He would not overstep the mark and would improve the Bill. In the circumstances, will the Minister accept amendments to this effect on Committee Stage?

Debate adjourned.
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