This draft report has already been before the Joint Committee and it was decided that it be referred back for consideration by the Statutory Instruments and Legal Affairs Sub-Committee in consultation with Senator Mulcahy's own Economic Commercial and Financial Affairs Sub-Committee and it is now in an amended form. Senator Mulcahy and Senator Molony have done a good deal of work in the process and the whole aspect of it is covered in this report which I now ask Senator Mulcahy to open.
Consumer Credit.
I gather that Senator Molony has sent apologies. He was most helpful in consideration of the initial draft and that led to very important amendments. Initially I propose briefly to set the scene for the report and maybe then we can go back over it and take specific aspects and talk around it a little more. It will be seen that the proposal was sent to the Council on 28 February 1979. This is one of many reports in relation to the protection of the consumer with which the Joint Committee have been dealing both during the period of the present Joint Committee and the period of the past Joint Committee. I thought it might be worth while to draw attention to the volume of material which has been generated around this subject by the Joint Committee. The present Joint Committee have reported on Common Standards for the Water Content of Frozen and Deep-Frozen Chickens, Hens and Cocks, Doorstep Sales, Unit Pricing, Home Study Courses, Misleading and Unfair Advertising, Energy Labels for Electrical Household Appliances and Plastic packaging. In the period of the previous Joint Committee we reported on proposed Directives on Packaging, Labelling, Presentation and Advertising of Foodstuffs and Ranges of Nominal Quantities, Produce Liability, Amended Proposal for a Council regulation laying down Common Standards for the Water Content of Frozen and Deep-Frozen Fowl Carcases, and so on. A lot of material has been considered by the Joint Committee and we should note it.
This proposal addresses the way that the consumer should be protected in relation to entering into agreements for credit. As can be seen in paragraph 2 of the draft report we conferred with a wide range of interested parties including institutions and companies who provide finance and also those who have an interest in the product side such as the Confederation of Irish Industries, and I would like to acknowledge the work they have done and the help they gave.
The proposed Directive would oblige member states as a minimum requirement to apply some common rules to consumer credit agreements with stated exceptions, the main ones being in relation to land or buildings or credit for renovating or improving a building. The main provisions then are: (i) information relating to the total cost of a credit agreement and the effective annual rate of interest—we will have to speak about this in more detail—(ii) member states may prohibit unsolicited visits to consumers to propose credit agreements (iii) all credit agreements are to be in writing, must contain certain specific information and must be signed by both parties (iv) overdraft agreements are to be in writing and changes of interest rates are to be notified (v) credit agreements would be void from the time goods are repossessed (vi) obligations under a credit agreement may be discharged before the time fixed in the agreement (vii) in the case of tripartite agreements the creditor and supplier will be jointly liable for breaches of the credit agreement, (vii) member states would be obliged to set up a body to examine complaints. Those are the basic issues.
As well as that, it is important to recognise that the proposed Directive on contracts concluded away from business premises—that is the Doorstep Sales Directive which is dealt with in our report of 26 April 1978—will be adopted as a framework directive. In effect the provisions in it in relation to transactions would be subject to the cooling off period referred to in our report, so there is a link there.
The general views expressed in the Draft Report are supportive of this legislation and we are pleased as a group that further protection of the consumer in relation to credit in this area is on the way. Some members of the sub-Committees felt very strongly about some aspects of it, as will be seen. We believe that it would be acceptable generally that better protection of the public is desirable, particularly in relation to the many new available forms of consumer credit, and we are satisfied that the consumer does need that protection and that the protection in Ireland is not on a par with that in other EEC member states. We thought that the consumer credit proposals were in line generally with the total consumer protection movement of which we have become more aware in our business with the EEC over the last couple of years.
Although we welcome the proposed Directive, we believe that some provisions may need amendment and perhaps clarification. We will go into that. We were made aware of the fact that legislation was under consideration in the Department of Industry, Commerce and Tourism but we were agreed generally that it is reasonable to defer going ahead with that legislation until the fate of this proposed Directive would be known. At the same time we would hope that it would be dealt with as soon as possible, and we will take another view if it should be held up at the EEC end. That is the general aspect of the report.
We go on now to deal with some of the specifics. The definition of "consumer" is a matter which has been touched upon and it is one of the items that we have amended as a result of the coming together of the two Sub-Committees. We say in paragraph 7 that "consumer" is defined as meaning "a natural person not acting predominantly in a commercial or professional capacity." We noted that this definition was wider than the corresponding provision in section 3 of the Sale of Goods and Supply of Services Act, 1980, passed recently. The Joint Committee does not object to the definition on that score but it has received representations that the interpretation of the word "predominantly" could give rise to difficulties in practice. We felt that in the case of doubt the onus of proof that a creditor had acted predominantly in a commercial or professional capacity when obtaining credit should rest on the lender. Would anybody like to ask a question at this stage?
Paragraph 8 deals with credit agreements. Reference is made to repayment of "the credit, including any interests and charges, in more than one instalment". It becomes credit in the sense that it is a deferred payment when more than one instalment is involved. An agreement for the supply of goods or the provision of services is itself to be deemed to be a credit agreement for the purpose of the Directive, if finance by means of a separate credit agreement with either the supplier or a creditor co-operating with the supplier is involved. The question of co-operation comes in here.
The Joint Committee agrees that the Directive should apply to those types of transactions by which consumers normally acquire credit for the purchase of goods and services. It is concerned, however, that certain other transactions seemed to be covered where the application of the Directive may not be appropriate.
Paragraph 10 says that when credit cards are used for the purchase of goods it would seem that the proposed Directive could have the effect of making each separate transaction a separate agreement. It goes on to say that it can scarcely be the intention to require all such transactions to be in writing and an amendment of the proposed Directive would seems therefore to be required.
I noted in The Sunday Times, under the heading “Death and Rebirth of the credit card”, that President Carter when trying to reduce the consumer boom made some statements which made it appear almost unpatriotic to use credit cards. New arrangements were made for annual charges and increased interest charges. That led to misunderstandings. People felt it was illegal to use credit cards and there was a 25 per cent drop in consumer expenditure. I hope the credit card question will be looked at and that it will not be handled badly by the EEC.
Given that the repayments have to be not more than one instalment and that repayment would not exceed three months, do you think credit cards will come within this Directive?
Only in the sense that each one would be a separate transaction which would have to be signed.
As I understand it, if you pay for something with a credit card you get billed at the end of a month or in a couple of months for the amount for which you are credited, whether it be for one or more transactions. The credit card facility does not envisage paying in instalments.
It could.
Paragraph 11 refers to life assurance and non-life insurance contracts. The Joint Committee cannot believe it is the intention that such contracts should be covered and a specific provision excluding them would appear to be necessary.
Paragraph 12 covers short-term agreements. The proposed Directive is not to apply to any agreement where the period for repayment is not to exceed three months. In our opinion it is reasonable to exclude from the formalities required by the proposed Directive agreements where the danger of disadvantage to the consumer is minimal. It is also desirable to ensure that the availability of short-term credit is not imperilled or made more expensive. This point was given a great deal of attention by the people we consulted because there was a danger that more bureaucracy would be introduced. We are saying the proposed Directive should be amended to exclude from its provisions agreements where the number of instalments does not exceed four, irrespective of the period of the repayment.
This was the paragraph I felt needed a good deal of explanation. I have not put down an amendment but I am not happy about what the Joint Committee are proposing here. May I refer back to a fairly strong statement made in paragraph 5 where we say:
The Committee is satisfied that in this area the Irish consumer does not enjoy protection on a par with that available in many of the other EEC Member States.
We are recommending exclusion of credit cards, life assurance and non-life insurance contracts from the provisions of the proposed Directive in relation to short-term agreements. The proposal in the draft Directive is that it would apply to agreements where the repayments would be in more than one instalment but it would not apply to an agreement where the period for repayment would be within three months. I think we are extending that exclusion very dramatically in this paragraph by recommending, as we do at the bottom of page 6 and at the top of page 7, that the draft Directive be amended to exclude from its provision agreement where the number of instalment payments is not to exceed four, irrespective of the period of repayment. The effect of that might be that you would have a practice of consumer credit agreements which would always have a maximum of four repayments, that could be over any period of time and would be outside the protection of this directive.
That is covered in the last line of the paragraph.
Is it? I do not accept that it is.
It says "Provision should also be made to ensure that the Directive is not circumvented by substituting a series of exempted agreements for a single agreement".
How does that make the point? Is it not perfectly justifiable for a company extending credit to say they will do it only on those terms—that there will be four repayments over four years, 14 months or any other period?
May I remind Senator Mulcahy that the genesis of this alteration was made when the report was resubmitted. The submission by the Irish Bankers' Federation made the point that a wider definition including other lending would unnecessarily lead to management complications and either lead the banks to abandon this kind of credit or make it considerably more expensive for the consumer. Their idea was to reduce the expense of managing the credit.
That is why I said earlier that there was a big worry about the bureaucratic costs.
I am not sure that that particular recommendation was not supported by others because I think it was—I do not have my papers with me, but I think the CII supported it.
They were worried that it would restrict credit. That was the danger.
I still go back to the point that the Joint Committee are satisfied that the Irish consumer does not enjoy protection on a par with that available in other EEC member countries and we are going to exclude credit agreements from the protection of the Directive. In other words, we are going further than the proposed Directive and we are doing it on the basis of submissions made by the Irish Bankers' Federation.
And supported by the CII.
Yes, but——
We made a judgment that the Irish consumer was not getting as much protection as consumers in other EEC countries, but we are recommending that they get most of the protection, and even more protection than is proposed in this draft Directive. We are taking note of Irish circumstances and considering recommendations submitted by responsible bodies. Incidentally the CII are not, naturally, in the same company with the Bankers' Federation on all points. On this particular one they do concur.
Even accepting those points, the proposed Directive, for reasons of ensuring availability of short-term credit, excludes short-term agreements but it is done on the basis of a cutoff; agreements where repayments have to be made within three months. It is very clearly justifiable and would be in the interests of credit being available and not being too bureaucratic. However, we are recommending, in my view, a very dangerous extension of that. We are having no time limit on it, provided there are only four repayments. I have not put in an amendment to it, but I am certainly not happy about the provision. Is it open for us to oppose a paragraph of this report, if there is no amendment in?
While I ponder that grave matter of procedure which the Senator has raised I shall look at another document from the secretariat.
Perhaps, while the Chairman is doing so, I may just remind Senator Robinson that the Chairman does have procedurally, as far as I remember, the right to allow an amendment on the spot if the Joint Committee wish to take it, so the matter is in the hands of the Chairman to deal with it if we have to deal with it. I think we had better discuss it a little more. I must admit, at the moment, to seeing Senator Robinson's point.
I just wish to draw the Joint Committee's attention to the fact that the House of Lords have recommended precisely as we have with regard to this matter, as being less open to abuse.
This is the matter of the four instalments?
Yes. The exemption under the Act of agreements under which the number of payments to be made by the debtor does not exceed four is considered less open to the possibility of abuse and they consider the exemption under the Act is greatly to be preferred. Presumably this is a reference to their own Consumer Credit Act, in which they are well in advance of ourselves, I hear.
I am not quite sure on this matter. Are they saying that they would not exclude short-term agreements on the basis of the repayment being effected within three months?
I shall read the entire paragraph giving the recommendation, which is in the Eighth Report which I have not seen before. This recommendation was made on 3 July of last year.
Of 1979?
Yes. This would have been an earlier draft, presumably, of the Consumer Credit Act, commenting on the definition of the consumer which makes our point. Paragraph 14 refers to Article 2 giving the five categories of exemption, one of them being agreements under which consumers are granted a period of less than three months in which to pay. On that particular exemption, the Committee heard evidence of considerable hardship suffered by consumers under short-term loans, with repayment periods of as little as eight or ten weeks at very high rates of interest, often by small money-lending businesses. These would escape the provisions of the proposed directive. Exemption under the act of agreement—that is, presumably, their own Consumer Credit Act—in which the number of payments to be made by the debtors does not exceed four is less open to the possibility of abuse. The Committee considered the exemption under the Act is greatly to be preferred to the exemption under the draft directive.
I find it hard to follow.
Let us look at what we have done.
We seem to have combined the two. We do not seem to be disagreeing with the idea of excluding short-term agreements where the repayment has to be done within three months, but are recommending that it be amended to exclude from its provisions agreements where the number of instalments exceed four.
Irrespective of the period of repayment?
Yes. I should imagine in the case of a very short-term repayment there is unlikely to be a large number of instalments because the period would be very short.
There might be a ten-week loan, with ten instalments.
I think this is a reasonable provision.
My view of the matter is greatly affected by the two bodies which have made the recommendation in this case, on the basis of the additional cost caused by having additional administration.
The emphasis—and this is obviously where the report has laid the emphasis in the paragraph I have quoted—is on the protection of the consumer and this is excluding agreements from that——
The consumer does finally pay the expense.
Whoever is providing the credit has to comply with the directive and has to gear himself to do that. It should not add that much more to the cost.
It has not been quantified. We are told it would cause administrative expense and, by definition, that would go on to the consumer.
Were the two groups who made submissions to the sub-Committee asked about the question of repayments, irrespective of time?
Senator Mulcahy is the one to respond to that question.
If my memory is correct, they knew about it. They were aware of the House of Lords' report and were in favour of the same arrangement.
Was the specific point put to them?
Yes. We did not discuss that at length. They obviously were aware of it and they had a view. Certainly, the sub-Committee felt it reasonable at the time. We did not give it the analysis that you are giving it now.
To clarify my own mind on this matter, at the moment the proposal by the Commission is that this Directive will apply to credit agreements where there is more than one repayment, excluding where the repayment is within three months. We are changing the whole terms of reference and excluding all credit agreements where there are four or less repayments—no more than four repayments. That could be a very, very large exclusion. It could mean that a great number of agreements will only be available to consumers on the basis that the pay-back would be by not more than four instalments. That might make it much more difficult for the individual consumer to get credit except on the basis of a maximum of four repayments. It is to avoid the very things that the association——
We are told by these people that the effect of this in terms of management complication will be either to lead the banks to abandon this type of credit of else to make it considerably more expensive. In the absence of evidence to the contrary, with a recommendation of that kind, which we are told is agreed to by the European Community's Banking Federation as well —that particular recommendation—which is independently supported by CII, my withers would be unwrung by the Senator's remarks with regard to this. The very people who are in the business say that they are going to get out of the business and that will not help the consumer.
They are saying that it would be administratively costly and awkward and the cost would have to be passed on to the consumer. They are persuading this Committee to exclude potentially a very substantial range of credit agreements from the protections in this proposed Directive. All they have to do is ensure that they do not exceed four instalment payments. That seems to me to be a very substantial recommendation and I am not satisfied that we have sufficiently examined all the potential effects of it.
Senator Mulcahy's sub-committee have seen and heard on this subject the Confederation of Irish Industry, the Irish Bankers' Federation, the Irish Finance Houses Association, the Law Society, the Irish League of Credit Unions, the Irish Insurance Association, the Central Bank and the Department of Industry, Commerce and Tourism. Two sub-committees have considered the matter. We have before us a recommendation in the draft report to which Senator Robinson has not submitted any amendment.
I made the point earlier that I have not submitted an amendment. I understood from the chairman of the Sub-Committee which dealt mostly with this matter that this precise issue was not discussed in detail and was not put in detail to the people who made submissions.
I would have to admit that we did not give it a great amount of attention. We accepted the view and the advice we got. I am not aware just how much credit would come into that bracket. Most credit is advanced on a basis which would allow for more than four repayments. I feel that consumers would be well able to protect themselves in the case of any large amount of credit to be repaid in four major instalments over a long period. The slogan "Truth in lending" has become popular and anyone undertaking to repay a large amount of credit in four instalments would know what he was about, but it would be unreasonable to make this apply to the total credit business. That is the way we interpret it. I cannot quantify it any more than that.
I personally raised this matter in the light of these observations and initiated the point which was made because of the weight which should be attached to these two bodies.
Deputy Leonard
If the repayments are large they would have to be based over a long period rather than a short period.
Our recommendation does not limit and we say "irrespective of the period of repayment". If a large amount of credit were involved four fairly large repayments would be made to meet that requirement.
Deputy Leonard
It would need to be spread over a long period because the whole purpose of credit would be defeated over a short period. Perhaps there should be a time limit.
I am not sure whether this would be the situation in practice but it could happen that if a company in the business of affording credit to consumers knew that instead of requiring eight smaller payments they required four large payments they could avoid all the protections of this proposed Directive. If, as the submissions say, this proposed Directive imposes administrative burdens and possible layers of bureaucracy on these companies, will they not seek to avoid it and can they not do so much more under this formulation than under the Commission's proposals?
I would have thought that the actual experience in the market place and the requirements they are prepared to meet in the matter of providing credit would be an effective determination of whether or not they can do such things. In effect their being involved in the alternative but administratively costly compliance will be reflected in the cost the consumer will have to pay.
Senator Robinson has raised enough doubt in my mind about this matter. I would be happy to let the Sub-Committee look at it again because I can see some problems.
I appreciate that a great deal of work has gone into this. It is a difficult area. I am slightly apprehensive that we as a Committee recommend that the Directive be amended. Perhaps we should recommend the alternative that this be examined by the Commission. That would be a different way of going about it.
That is a very constructive approach. I was about to tell the Committee that I was not prepared to agree to this because I think it would be irresponsible of us to ignore bodies of this kind. I do not believe the Bankers' Federation would have told us this would lead to complications if it were not true. Can we amend this in some fashion which will preserve that view?
We state the objective that it is also desirable to ensure that the availability of short-term credit is not imperilled or made more expensive and it would follow from that that we could recommend——
The possibility of excluding provisions for agreements be examined and so on.
Yes, to achieve the objective of ensuring that credit is available but not endangering the protections in the Directive.
That is a constructive way of dealing with it, if it would suit the Chairman. I would not feel as strongly as he does because if I am not happy about something I am quite prepared to go back and reconsider it.
I would not be happy with the expression of an opposite point of view to that contained in the document but I am content to take Senator Robinson's formulation. We will go back to this paragraph later.
I will now deal with the matter of the credit unions. We are recommending that they be excluded as well. They are voluntary bodies and the need is to keep expenses to a minimum. We had a very good discussion with them during which they told us about their plans for the future and the differences between what happens in the Six Counties and the Twenty-Six Counties, the type of dividends they pay—8 per cent in the Twenty-Six Counties and 6 per cent in the Six Counties—and the maximum 12 per per cent per annum interest. Given all of that and the fact that they are not profit-motivated and are there to promote thrift amongst their members, to provide them with credit and encourage savings, we felt that they should be excluded.
The next heading was the Effective Rate of Interest and this is a point which gave rise to a lot of discussion. This is defined as "the total cost of the credit expressed as an annual percentage of the amount of the credit granted, including interest and all other charges." It can be seen from paragraph 15 that the Joint Committee consider it is absolutely essential that the true cost of the credit be made known to the consumer before he enters into or is invited to undertake any obligations. Members of the Sub-Committees were most vehement that the practice of showing interest which did not reflect the true cost of the credit was an extremely reprehensible practice and, therefore, the suggestion that it was difficult to arrive at a formula to express the true rate of interest should not override the need to inform the consumer what the consumer is letting himself or herself in for. There was also the question about displaying notices clearly. We added to that that not only should the notices encouraging consumers to take on credit be clear but that they should be prominently displayed showing what the true cost of the credit was.
You note that in paragraph 15 in the light of your other remarks about the paragraph that it was suggested to the Joint Committee that the cost of credit in some forms depends on the use the customer makes of the facilities and that it was also represented to the Joint Committee that there are technical problems to overcome in relation to calculating the effective rate of interest and that it is difficult to arrive at a formula. The Joint Committee are only making this recommendation and they are not ignoring the point with regard to the difficulty of arriving at a formula. They are only making this recommendation because of the benefit of the discussions which they have had with the Central Bank.
The Central Bank were very much in favour of finding a suitable formula.
Which would reasonably accurately show the true cost.
They did not necessarily agree that the tables issued under the provisions of the British Consumer Credit Act, 1974, were necessarily achieving the right result. They felt that a formula could be achieved and I also believe this. I went to the bother of reading a paper on Observations on the Annual Percentage Rate of Interest Charged, required to be published by the Consumer Credit Act, 1974. One paragraph in the report influenced me to say that it should be possible to give the range. You might not be exact.
You have adopted that?
We have adopted that recommendation.
Because there could be differences.
Yes. The paragraph in the report which I mentioned said that legislation would allow a lender to state "the total charge for credit in this agreement is a minimum of X per cent and a maximum of Y per cent, assuming that the current market rates of interest remain constant." We said that it should be sufficiently explicit to make clear to the potential customer exactly what facilities are being offered and what these will in fact cost him or the range into which the cost might fall. Instead of having a situation where the interest rate is advertised at something like 12 per cent and it turns out to have a true cost of 30 per cent, which is almost getting to an order of magnitude of untruth, one would say that the interest rate was more likely to fall in the range of 28 per cent to 34 per cent or something like that. We prefer a uniform rule for the Community if this is possible in the light of the need for harmonisation. We recommend that efforts should be made to reach such agreement when the draft Directive is being considered at Council level. There is a very strong recommendation there.
The next heading is Joint and Several Liability. We say in paragraph 17 that where a consumer can prove the existence of co-operation between the creditor and the supplier the draft Directive proposes to make the latter pair jointly and severally liable for non-delivery or non-conformity of the goods or services supplied under the contract. This is an interesting one. If somebody had some sort of an arrangement with a finance house to provide credit to buy a motor car or some product, the finance house, without ever meeting the consumer, would suddenly find themselves liable for product liability as well as other things. There were several objections to it but nevertheless the Joint Committee are in favour of the principle of the provision. We feel that this is one way the consumer will get a bit of protection. We felt that in principle some of that protection is embodied in the new Sale of Goods and Supply of Services Act. We said at the same time that in the interest of not adding unduly to the cost of credit the Joint Committee would favour limiting the creditor's liability to transactions where the cost of the goods or services supplied did not exceed a prescribed amount. We agreed with the view that the concept of co-operation as expressed in the draft Directive is too vague. We recommended that the Directive be so drafted to allow pre-existing arrangements between creditor and supplier to be defined in national law along the lines of the relevant provisions of the British Consumer Credit Act, 1974. We are suggesting some modifications.
Senator Mulcahy said that there is a slight contradiction in this. We appear to be in favour of the principle which is now incorporated in the new Sale of Goods and Supply of Services Act, 1980, that there would be joint and several liability between the seller and the credit company who have advanced the money. Unlike in the Sale of Goods and Supply of Services Act, which does not have a prescribed limit in it, we are seeking to extend that limit in this EEC directive. This seems to me to be responding to very understandable submissions from bodies offering credit. If our priority, as I understand it, is to reinforce the protection of the consumer there is another recommendation which goes the other way.
It is perfectly entitled to go the other way. The British Consumer Credit Act, 1974, gives the limit as £10,000, which is presumably £30,000 now. The consumer is able to protect himself by getting law enacted in his favour.
That answers my next question, as I was going to ask, if we were preparing a report by reference to an English statute, what that limit is. Would it be preferable to make that clear? I wondered what the limit is.
I am giving that figure from memory, but I believe it is correct. We can have it checked.
We will carry on until we get that information. Negotiable Instruments is the next category we looked at. The Directive proposes to prohibit the use of Bills of Exchange and Promissory Notes either as security or as a means of payment in credit agreements though cheques would be allowed as a means of payment. Our understanding is that prohibition on the use of Bills of Exchange would have little effect in practice in this country but as far as Promissory Notes are concerned the Irish Finance Houses Association point out that these form part of the ordinary personal loan agreements used by their members and if the proposed prohibition is adopted they will seek to have alternative remedies in domestic law made available. The Commission contend that "negotiable instruments place the consumer at great risk because the pecuniary claim based on them can be enforced without regard to his rights under the agreement." In other words, it is based on the face value of the document. We felt that it was unwise to disturb existing practices unless there is compelling evidence of abuse but we considered it essential to ensure that the use of negotiable instruments would not prevent the Irish consumer from enforcing the new rights against the creditor which the Directive proposes to give him.
What we are saying is not really clear. The Commission say that the consumer would be placed at risk because of the situation of a Promissory Note being capable of being enforced without regard to the rights under the agreement, in other words, without regard to the rights given by way of the Directive. If the approach of the Irish Finance Houses is to seek alternative remedies in domestic law, are they not in a position to make submissions along those lines? Basically, this is a consumer credit Directive.
What we are saying is that we do not wish to disturb existing practices in cases where there is not any abuse.
But we say that the Irish consumer is not protected to the same extent as are the other EEC consumers. When I read this report I thought that there was a certain contradiction between that statement, which I think is an important statement so far as the report is concerned, and almost all of the recommendations afterwards except that part dealing with the question of interest. Almost everything else is excluding, limiting or curtailing and in this instance appearing to waver on an issue on which the Commission are strongly of the opinion that to allow the practice to continue would undermine the protection of the consumer.
What we are saying is that we think it unwise to disturb. We are concerned about upsetting an on-going trading practice, but we are saying at the same time that it is essential to ensure that the use of negotiable instruments will not prevent the Irish consumer from enforcing the new rights. Whatever the EEC come up with must be guided by that phrase so far as we are concerned. We are drawing attention to the fact that there is an anomaly, that a Promissory Note can be used at its face value without question so far as the rights of the consumer are concerned. We regard that as a problem. It is essential that where a question arises, the right of the consumer should be the overriding consideration.
In implementing the draft Directive here we are saying in effect that Promissory Notes are continuing on the basis that the consumer will have his rights.
The draft proposal proposes to make a credit agreement "void" from the time a creditor repossesses the goods supplied under the agreement and it leaves it to member states to ensure that re-possession of the goods does not lead to "unjustified advantages". We had some difficulty with the word "void". It is used in some commission proposals such as the present one in a sense other than that attributed to it in our legal system. But in view of the technical meaning attached to the word in common law systems the Joint Committee recommend that the Commission be advised to avoid the use of this word except when referring to a purported agreement which is devoid of legal effect ab initio. This is somewhat out of my field but all the advice I have got from my legal friends has been taken into account in this proposal. The object of the provision is to prevent the consumer from being deprived of the goods because of failure to meet instalments but at the same time remaining under an obligation to pay the agreed price. We consider that the provision as drafted would not do justice to either party in that the creditor would not be in a position to recover arrears of instalments while the consumer would be liable to suffer the loss of the goods irrespective of their current value without warning. The Joint Committee assume that the provision would apply only to agreements such as hire purchase agreements and regard the existing provisions in the Hire Purchase Acts as providing superior remedies. Therefore, the Joint Committee recommend that the question of re-possessing be left to be regulated solely by national law.
What is the practice here in this regard?
The protection applies after one-third has been paid.
The next paragraph deals with overdrafts. Only one provision in the draft Directive applies to credit in the form of advances on current accounts. It provides that the customer be informed in writing of the credit limit, the annual rate of interest and other charges as well as the procedure for terminating an agreement. It provides also that during the currency of the agreement the customer would have to be informed in writing of changes in interest rates and charges as they occur or in a bank statement if such is supplied at intervals of one month or less. The Joint Committee believe that the current practice of Irish banks in publishing their interest rates is adequate and consider that if more onerous conditions are imposed on them they might be discouraged from extending overdraft facilities. In the view of the Joint Committee the requirement that each individual customer concerned be informed in writing of changes in interest rates or charges should be dropped.
Do they not put the applicable rate on the overdrawn account as a matter of practice?
Article 6 of the proposed Directive provides that credit agreements should be in writing and contain the essential contractual terms. Among the latter the draft Directive includes "the amount of the deposit (if any), and the due dates as well as the number and amount of the instalments." The Confederation of Irish Industry have pointed out to the sub-Committee that at the time agreements are completed it is not always known when the goods will be delivered and, consequently, when the consumer's liability to repay shall commence. They suggest that the word "frequency" should be used in lieu of the words "due dates" and the Joint Committee support this amendment.
Article 10 of the draft Directive seeks to give a creditor the right to discharge his obligations under a credit agreement before the time fixed by the agreement. Incidentally, as the Chairman pointed out to me before the meeting, the word "creditor" here should read "consumer" and I should like to make that amendment. The Joint Committee consider that it should be obligatory to insert a reference to this right in the written agreement. Those are the main headings and I should like to acknowledge all the help that we called on for this work. Perhaps now we could go back and tidy up some of the items.
Paragraphs 1 to 11, inclusive, agreed to.
I am informed that earlier I informed the Committee correctly and that the amount concerned was £10,000.
PARAGRAPH 12
Perhaps we might refer first to paragraph 12.
I have a rather long-winded amendment. Because the sentence at the end of page 6 which begins with the word "the Committee recommends" is followed by the objective that we are all in favour of——
You are leaving everything stand after the last sentence?
Yes, but leading in from that last sentence it is desirable to ensure that the provision of short-term agreements is not made more expensive or is not imperilled. I am suggesting that we say that the Committee recommend therefore that the Commission be asked to examine whether it would be possible to exclude from the provisions of the Directive agreements where the number of instalment payments did not exceed four irrespective of the period of repayment without this exclusion forming the basis of a general evasion of the protection of consumers under the Directive.
Senator Robinson does not need that as the last sentence takes care of it already in the existing draft. Let us be clear on this point. The Directive should be so worded so that they cannot fiddle around with the four instalment agreements so that in effect they are getting a 24 instalment agreement.
Could we substitute Senator Robinson's words to say——
That the Commission be asked to examine. Yes, that is all right. I move:
In the fourth sentence, to delete "recommends that the Directive be amended to exclude from its provisions" and substitute "therefore recommends that the Commission be asked to examine whether it would be possible to exclude from the provisions of the Directive".
Amendment agreed to.
Paragraph, as amended, agreed to.
I thank Senator Robinson for raising that point because whatever happens it is on the record that we are aware of the issues arising from it.
It is nice to have evidence that people other than the chairmen of the sub-Committees are doing some work on the documents.
I thank Senators Mulcahy and Molony and their Sub-Committees for having laboured on this very difficult, technical and important area.
It is one of the most significant bits of consumer protection to come from the EEC. I hope that its existence will be brought to the attention of consumers.
In relation to the time scale, this proposal was put forward by the Commissin to the Council of Ministers on 28 February 1979.
It is due to come up after Christmas. The impression we got from discussions was that when the Dutch take over the Presidency they will be very keen to have this handled. In the Italian period there were some difficulties.
I hope we will be actively supporting it.
Paragraphs 13 to 17, inclusive, agreed to.
PARAGRAPH 18.
Senator Robinson asked for the amount in the British Consumer Credit Act and I said correctly that it is £10,000. Would the Senator like that figure to be put into the paragraphs?
Yes.
I will put in "eg. £10,000".
It should be put in in brackets.
It would be helpful because in 1980 terms it would be £30,000 or whatever.
We could propose that as an amendment as well.
Yes.
I move:—
In line 15, after "amount" to insert "(e.g. IR£10,000)".
Amendment agreed to.
Paragraph, as amended, agreed to.
Paragraphs 19 to 25 inclusive, agreed to.
PARAGRAPH 26.
I move:—
"In line 2 to delete "creditor" and substitute "consumer".
Amendment agreed to.
Paragraph, as amended, agreed to.
Paragraph 27 agreed to.
Draft Report, as amended, agreed to.
Ordered: To report accordingly.