Seanad Éireann díospóireacht -
Friday, 30 Jun 1995

Vol. 144 No. 5

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

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

Mr. Daly

I find it almost impossible to deal effectively with a Bill of this nature, which is very complex and detailed and which to a large extent has been dramatically changed since its introduction. As with another recent piece of legislation, the Government is proposing a huge number of amendments to the Bill on Committee Stage. In view of this the proposed legislation should be withdrawn and reconsidered to see if more comprehensive legislation can be presented for discussion in a more sensible and reasonable way.

The Bill attempts to modernise consumer affairs, including consumer information, with regard to those dealing with financial institutions, money lenders or whatever. There is a grave necessity to do this. We are all aware of the amount of damage done, especially by money lenders, in the small towns and cities where people have been ripped off for years by those who have been treating their customers in a shoddy and unfair manner.

There has been much debate and discussion in the House on money lending and how it is possible to deal with rogue money lenders who have been ripping off people. Nobody is more aware of this than the Minister himself. When I was the Minister for Social Welfare he was in communication with me on a regular basis because of the activities of these pirates who were putting enormous pressure on people, especially on families on occasions of first communions, confirmations or whatever.

Were it not for the support given by the Minister for Social Welfare to the Society of St. Vincent de Paul to enable these rogue villains to be dealt with they would continue to run riot in urban areas, to exert enormous pressure on people and to send them huge bills. The interest rates they charge are incalculable. For example, they run one loan into another, make all kinds of offers and engage in all kinds of wheeling and dealing. They still appear to get away with it.

If the Government is serious about this issue it is essential that it establish a subcommittee to deal with it as it is one which involves the Minister for Social Welfare and the Minister with responsibility for this area of legislation. In many cases it requires a more positive and involved attitude from the Department of Justice. Some of the people responsible for moneylending operations are criminals who are walking the streets. They fall into the same category as the drug pushers and hooligans who seem to be running our towns and cities at present.

I do not wish to pursue this any further. I appeal to the Minister to spell out how he proposes to protect people from the rogue and disgraceful tactics of moneylenders. At present it is not being dealt with effectively despite the best interests and intentions of the Society of St. Vincent de Paul and other organisations who are involved with this problem on a daily basis.

I want to ask the Minister whether or not it will be possible to have more detailed information available for people who are in the process of negotiating loans, particularly hire purchase and leasing agreements, with some of the financial institutions? Without trying to identify particular cases, I want to inform the House of a recent situation where an individual borrowed in the region of £8,000 last February to buy a Land Rover. That person paid £700 during the first number of months and then his payments went into decline. He had made no further payments, up to last week, on the £8,400 he originally borrowed. The hire purchase company seized the property some weeks ago and sent him a demand for something in the region of £13,000 which they claimed had accumulated in that space of time. I have not gone into the details of calculating interest in this kind of situation. It would be unfair to put the name of such a well known and well established company on record without knowing the full details of the case. However, the fact of the matter is that this individual, who borrowed £8,500 and paid £700 between February and June, is faced with a bill of £13,000 to redeem his property under the leasing agreement he entered with a well known financial institution.

The individual involved in that particular incident contacted me to speak to the company on his behalf. What bothered me most about it was that not alone were they not prepared to negotiate an arrangement with him to finalise the matter, but they actually felt it was their business to decide whether or not his property should be returned to him, despite the fact that he was prepared to pay the full amount due to them. I find it extraordinary that a financial institution, which deals with people on an individual basis and negotiates payments over long periods, should decide, when repayments are not made, that the person involved should pay the full amount due and that the property should not be returned even if the full amount due is paid. Unless this legislation can deal with the interest levels involved in such a situation, we might as well go home and not waste the Minister's time.

I would like to know if the legislation can deal with that kind of situation and if the Director of Consumer Affairs can give some satisfaction to clients or customers who are deeply aggrieved by the behaviour of such institutions. It seems that the company in this particular case were unwilling to make arrangements with the individual involved — despite the fact that he was prepared to pay the full amount due — because he had not dealt with them fully during the loan period and had not returned their telephone calls. Not only did the company believe they had a right to make decisions about the money owed but they believed they had other rights also. For instance, they felt they could decide, even though he was willing to pay the full outstanding amount through other arrangements, they were not even willing to give him back what he felt was his property. All such agreements which are couched in all kinds of small print need to be put in large print.

We find this even in international airports. I was deceived in Heathrow not so long ago and had to take it up with the authorities there. Special offers are on display but are dependent on the purchaser meeting some conditions that are totally beyond anybody's reach. Is such misleading advertising covered by this legislation?

I also want to deal with the question of door to door salespeople. Does the Bill cover this situation? The Minister will be aware that quite an amount of business is done by people who travel from door to door. They sell books, magazines and so on. From my reading of the Bill, it is not clear whether this is covered by it.

I support what the Minister is endeavouring to achieve. There is a grave necessity to conduct a comprehensive overhaul of the legislation in this area. I admit it is complicated as it involves a number of Departments and Government agencies but these matters must be dealt with thoroughly now. Can the Minister indicate whether it would be possible to have a booklet published setting out the precise details of the legislation? I doubt if many people, either in these Houses or outside of them, who could go through this detailed technical legislation and be able to put it into ordinary——

Miss Ormonde

Simple language.

Mr. Daly

——simple language that people could understand. Before we conclude examination of the Bill, the Minister should take steps to explain the detail of it to us in language we can understand rather than the technicalities of the amendments. Otherwise, what will we have at the end of the day when all this is concluded?

It is important that this legislation is brought forward; it will cover some of the gaps. Nevertheless, there is still a lot of carry on by reputable companies and others in relation to the small print in agreements and leases which needs to be fully explained to people before they sign on the dotted line for some of these deals.

Will the Minister clarify the situation where companies negotiate, especially with farmers, programmes of afforestation? Farmers have signed over their grants to private companies. I have had some complaints from individuals who were not fully aware that when they made arrangements with planting companies they were signing away their State grants. The grants were then paid directly to those companies. I am not sure whether this situation is covered in the Bill. Can the Minister of State indicate whether this type of situation can be dealt with by this legislation?

One old age pensioner who was in touch with me only yesterday, has a genuine grievance. This pensioner is in an institution. He was awaiting a grant from the Department only to discover to his amazement yesterday that the grant of £4,000 or £5,000 had already been paid months ago to a company. He was not aware of this and is distraught that in some way or other the company had managed to sign over his grants and entitlements. He was not able to get any satisfaction from the Department of Agriculture, Food and Forestry.

I am only giving instances of these cases so that the Minister can deal with them in a general way. He can clear my mind as to whether this legislation is the type that will effectively deal with these problems. First, the man planting his land and, second, the one leasing a Land Rover, who feels he has been robbed and denied his rights by clever interpretations of lease arrangements that do not tell the full story on the day a person signs on the dotted line.

Mr. Dardis

I welcome the Minister of State to the House. The way in which we have to deal with this Bill is unsatisfactory. I made this point to the Leader on the Order of Business and he agreed with me. I accept there is an urgent need for the Bill. There is a need to regulate moneylending and undesirable practices in financial institutions and to protect consumers. That is not in dispute. The way we have to deal with the legislation is in dispute and it leads to bad legislation when Bills are dealt with in this way.

I refer in particular to the number of amendments tabled in the Dáil and here. I have never seen a Bill in my time in the House with as many proposed Government amendments. I am prepared to accept the need for a Bill and I am sure the Minister's intentions are honourable. However, it could lead to a suspicion that something is being slipped in that we would contest hotly if we were in possession of more facts and had more time to consider the Bill.

There is a Government amendment to section 13 which states: "...in PART I, contravenes section 6 (2), 7 (10) or (11) or 11 (7), ..." and continues in a similarly obscure vein. As a humble farmer I am bewildered by it. Even the most eminent senior counsel — I have never heard of a senior counsel who is not "eminent"— would have considerable difficulty in grappling with the ins and outs of the Bill. The Bill has been amended in such an all-pervasive way that it should have been re-entered and we could then have considered it in a more balanced way.

Given the circumstances in the House this week, I am sure the Minister will understand that our attention was elsewhere. Members of the House were at the late Senator Wilson's funeral yesterday and, as a result, the business of the House was put off until today and we did not give the Bill the consideration it might otherwise have received.

There were about 310 amendments in the Dáil and there are over 100 tabled here. It makes it impossible to deal with the legislation in a detailed and coherent way. It imposes enormous pressures on the small staff of the House to try to take Opposition amendments. I tabled two amendments and when I read the Government amendments I discovered there was no need to table them because they were already incorporated. That is helpful, but it would have avoided a lot of problems had it been done in a clearer and less cumbersome way. I make this point to the Minister for future reference and that our lives might be made somewhat easier.

The legislation conforms with certain European directives. It is good to see that we are bringing our legislation into line with EU directives. We might not agree with all of the directives, because some of them unduly complicate life for citizens. However, in this case the directives are good and it is right that we should fall into line with them. Directives are mandatory and, as such, there is an obligation on Governments to implement them.

I agree with Senator Daly that an explanatory booklet should be circulated when the legislation is enacted to ensure consumers are acquainted with their rights in a simple straightforward way. It is difficult to go through the legislation and understand in every circumstance what its objective is. I recommend to the Minister that he do that.

It is correct that advertising in particular should be controlled. It is apparent from looking at advertisements on television that one needs to be quick and clever to read the little bit that is put down at the bottom of the screen. I can think of cases where policies that are linked to the performance of equity markets or of bonds are advertised in this way. Everybody assumes when they take out these particular policies that there is only one way that these markets move and that is upwards. History suggests that they have moved upwards, but in the more recent past the trend has in some cases been downwards. People buy these policies in the expectation, where loans were secured on them, that they would make repayments of the loans a lot easier. They get a terrible shock when they find that the performance of the market has declined within the previous 12 months and that therefore their exposure is increased. It would be welcome that when they get into these agreements, they would know from the beginning exactly what was at stake.

There seems to be an assumption within banking circles that they are almost benevolent institutions and they represent themselves well in media advertisements in that way. Of course they are not; they are hard nosed commercial businesses and that is what they should be. I do not criticise them for being hard nosed commercial businesses but their clients need to know this in all circumstances. We have to accept that there has been bad lending as well as bad borrowing and that in cases where there has been bad lending, the lending institutions have a solemn responsibility to help their clients and to sort out difficulties.

I can recall when we had the boom period for land prices. It was easy to go into one's local banker and not even ask for the money but to be asked if one wanted the money. It was almost expected of you that you would take the money. This was not offered on the basis of anticipated income but on the value of the security that was being offered. That has changed to an extent, but it is unquestionable that there were significant numbers of farmers who got themselves into trouble on the basis of bad lending by the banks. I was involved in trying to sort out some of those cases. The trauma for the families involved is absolutely colossal. Only a small minority of people actually found themselves out on the road, but the amount of pain people had to suffer over an extended period before a settlement was finally reached was quite extraordinary. People in banking are dealing with these things on a routine basis day in, day out. They do not fully appreciate what the human consequences are for people in that situation. It is something that needs to be looked at and regulated to the extent that it can be. Where there is a shared culpability — I will put it no more strongly than that — the pain should also at least be shared and not be all on the one side.

I welcome the provisions in the Bill in respect of moneylenders. This matter has been discussed at some length by other speakers and I do not intend to go into it. It is to be welcomed that we control what is taking place with moneylending and hire purchase. The latter is an area where there have been huge abuses in the past where somebody borrowed something in the order of £50,000 on an understanding that the annual interest payment would in the order of 16 per cent. It was not until they had paid their first instalment that they discovered how much interest they were paying and that within a short period of approximately three years they would not only pay back the capital but more than the capital in interest. Consequently, the machine was seized. This relates to the small print.

People who are trying to provide a service and do their business well often do not have the time or the professional backup from advisers, because they cannot afford it, to look at these matters in great detail. There is an onus on institutions to tell people in these circumstances at the outset what they are letting themselves in for. I have no sympathy for people who make such an agreement with their eyes wide open.

It is ironic that lending institutions are sometimes anti-enterprise. In many ways they are extremely conservative — I was about to suggest they are as conservative as some Departments, but I will not say that because it would be offensive to them as they are more liberal and open-minded that some of the lending institutions. Some are pro-small enterprise and we welcome that. Sometimes the ethos in banking circles is not as pro-enterprise as it is presented to be.

The way the Bill is being dealt with is unsatisfactory. It would have been more satisfactory to have reconsidered it and brought it back to us. This would have made our lives a lot easier and it would have removed any suspicion we have about aspects of the Bill. We could then have had a more realistic debate on the matter.

Minister of State at the Department of Enterprise and Employment (Mr. Rabbitte)

A number of Fianna Fáil Senators mentioned the role of the former Minister of State at the Department of Enterprise and Employment, Deputy O'Rourke, in initiating this Bill. I want to be associated with the remarks of commendation to her.

Senator Dardis and Senator Daly mentioned the amendments made since then. Senator Dardis said that 310 amendments have been put through the other House since I took over office and that I have a further 145 amendments here. I accept that looks like an unprecedented situation, but this Bill is a product of the committee system which was introduced in the Oireachtas. I do not think anyone from any political party will dispute the assessment that it is an immensely better Bill because it went through that process. My predecessor, Deputy O'Rourke, was open to taking amendments on board during that process and I have continued that practice. The new system of scrutiny of legislation has produced a better Bill.

I have initiated some changes in the Bill. Many amendments are of a technical nature designed to produce better clarity and transparency in terms of the type of transactions to which Senators referred. I am not trying to conceal the fact that I have introduced some fundamental changes, but they are few in number and they were clearly signalled in the other House. Although Senator Dardis did not allege this, I assure him I have no intention of putting through even one amendment because of the extraordinary circumstances in which we find ourselves today. The Senator will not find such an amendment if he goes through the list.

For example, the Senator mentioned the obfuscatory language in section 13. It appears an extraordinary piece of opaqueness but it does no more than draw a distinction and specify offences under the various parts of the Bill which are, on the one hand, summary and liable to penalties of up to £15,000 and, on the other, indictable. There is a great deal of that type of restructuring and reorganising in the Bill in terms of ultimately making it a more intelligible and useful document.

I agree I have introduced changes but I think they are for the better, for example, bringing local authority loans under the purview of the Bill, bank charges as they now apply in the Bill — which many Senators mentioned — and advertising on which Senator Daly concentrated part of his contribution. There is an amendment before the House which would require financial institutions to advertise in terms of APR only so that consumers are aware and can compare like with like. Even if many people cannot readily give a definition of APR off the top of their heads, they know that if every financial institution is required to advertise in terms of APR, they can readily compare one with the other.

I am not trying to conceal the fact that I have introduced changes. However, I have also taken on board amendments from Deputies, including Senator Dardis' colleagues, and I have reflected other proposals in the amendments before the House. The measure to include local authority loans in the remit of the Bill was welcomed by the Opposition in the other House. The previous Minister of State agreed she sought to make this move but could not get Government agreement at the time. I was able to persuade Government to do it and all sides welcome it.

The position on bank charges is relatively radical. It is an immensely better deal for the consumer that the monitoring of bank transaction charges is now the responsibility of the Director of Consumer Affairs rather than the Central Bank. The Central Bank has many responsibilities with which it is preoccupied and it is correct to have a watchdog and champion of the consumer responsible for the monitoring of bank transaction charges. One of the most radical proposals in the Bill is that the financial institutions will be required to provide commercial justification for these charges.

The director will be required to assess whether a commercial case has been made and one can readily foresee a situation where a new product is introduced to the market which would be of benefit to the consumer. If that is the case, so be it but many people believe bank charges have increased in recent years and that new charges were introduced for which it is difficult to see justification. It is a way of making the consumer pay and contribute to the substantial profits of the financial institutions at a time when perhaps they have been less prudent in garnering profits outside this jurisdiction.

In respect of Senator Farrelly's queries, I assure him that the question of the remit of the Director of Consumer Affairs extending to all bank customers includes not just consumers but also small and medium enterprises and agriculture. The controls will be all embracing and applied in a more rigorous manner than heretofore. Business, consumers and farmers have welcomed this; it is a significant step forward.

Senator Ormonde, Senator Farrelly and others have raised the question of the educative and informative role of the director. The director has specific functions in that regard. Work on the preparation of a booklet, referred to by Senator Dardis, and leaflets, referred to by Senator Farrelly and Senator Ormonde, will be carried out. The director will engage on such a programme of public education and the process of opening regional offices will start in Cork this year. All that is in hand. I accept there is little point in conferring new rights and entitlements on consumers if they do not know about them. They will know and will be told about them as a result of what is happening here.

Senator Daly raised the question of illegal moneylending. I point him to sections 108 to 112 in Part IX of the Bill which gives the Garda extensive powers of questioning, arrest, entry into premises, seizure of documents, with or without a warrant, as circumstances demand, to tackle the scourge of illegal moneylending.

I have some difficulty with the ambivalence that exists with the official moneylending industry. Some contributors to this debate retain a residual doubt about whether we should be engaged in this practice at all. On the one hand, we are regulating, supervising, legitimising and licensing the practice but some people would say we should give more powers to the Garda and that we should not officially approve of it; after all, it is a necessary evil. Unless one regards all moneylending businesses as a necessary evil, and there is a strong philosophical argument for so doing, if we are imposing these new supervisory functions on the official moneylending industry then we accept it is a legitimate business.

There are large sections of consumers who would not get access to credit at all were it not for the official and properly authorised moneylending industry. The rest of us can get access to credit from our local bank or building society on the basis of our wages, salaries or assets, but we would be denying a whole section of the community access to credit were it not for the existence of this section of the credit market. In this Bill, we are trying to regulate the industry and ensure it operates on a fair basis, that the consumer knows what he or she is entering into, what their entitlements are, what their rate of interest is and what their repayments are, how many payments they have to make and how they are made. The Bill is going a long way towards addressing that situation.

I thank the Senators who contributed. I acknowledge we are dealing with this Bill in extraordinary circumstances which I emphasise is not my wish. I would like to take this Bill at a leisurely pace but in fairness, of all the Bills about which these arguments can be advanced — and I know Senators have to look at it in the context of the parameters of this House — this Bill has been fine tuned by the Oireachtas to a level of no other Bill I can recall in recent times. It has been scrutinised line by line in the process of that Oireachtas evaluation. However, that is not by way of excuse offered to the Members of this House for the speed at which we must proceed today. I regret this is happening. I would prefer if it was not the case but everybody agrees that there are extraordinary imperatives as to why this Bill should become law before the summer recess and before moneylending licences have to be renewed.

I thank the Senators who contributed.

Question put and agreed to.

Sitting suspended at 11.35 a.m and resumed at 12.15 p.m.

Agreed to take remaining Stages today.