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Seanad Éireann díospóireacht -
Wednesday, 4 Jul 2001

Vol. 167 No. 11

Dormant Accounts Bill, 2001: Second Stage.

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

For about a decade or so, the issue of dormant accounts in finan cial institutions has attracted casual but sustained interest from Members of both Houses of the Oireachtas in the potential there might be for the State to put these funds to good use. Investigation into the matter raised complex constitutional, legal, operational, prudential and investment considerations – the right to private property, rights on foot of the Succession Act, 1965, and the State Property Act, 1954, the bank-customer implied contract of confidentiality, and the implication for banks' solvency and liquidity. The Minister for Finance also had to consider the public perception impact of introducing such a scheme, and what effect this would have on potential investors both domestically and overseas.

The main concern was that there was no onus on credit institutions to trace the owners of deposits lodged with them. It was up to clients or their next-of-kin to come looking for their money. The days of personal banking, in which bank staff knew their clients and notified their dependants in circumstances where the account holder had died, for instance, have long passed, and no system was in place which guaranteed next-of-kin their rightful inheritance. In addition, there are many instances where people have chosen to remain secretive about their financial affairs, in which cases dependants or next-of-kin have found it impossible to trace the relevant accounts.

This failure to trace account holders has long been a matter of public conjecture and concern. Demutualisation of the Irish Permanent and First National Building Societies in recent years indicated the extent of the problem. In the Irish Permanent flotation, in 1994, almost half of those people entitled to free shares did not initially take up that offer. However, by the time the process was completed in 1997, and following the extensive advertising campaign, the percentage of non-claimants had fallen to 8% of customers. Nevertheless, this still numbered about 12,000 accounts.

The momentum for reform in this area increased with the publication of the report, Parliamentary Inquiry into DIRT. Senators will recall that the Committee of Public Accounts sub-committee on certain revenue matters recommended that, as soon as was feasible, legislation should be prepared by the Minister for Finance so that funds in dormant accounts could be used for specified purposes of societal and community benefit. The sub-committee considered that the money in these accounts represented "free capital" for financial institutions, in that deposit takers had free use of these funds and in effect the moneys had become part of the capital base of these institutions. The sub-committee was anxious that the benefit of these funds, which seemed to lie unclaimed for long periods of time, should accrue to society as a whole, and not just to the financial institutions.

Having regard to the various considerations mentioned above, last November the Minister proposed the outline of a scheme to deal with dormant accounts. The Government accepted the proposals and gave permission for legislation to be formally drafted. This proved a long and challenging task, as many issues came to light in the drafting process that had not previously been considered. The Minister was aware that the successful development and implementation of the proposed scheme would require the full co-operation of the financial institutions and their representatives, as well as the advice and co-operation of the Central Bank and the National Treasury Management Agency, whose assistance was always forthcoming and of enormous benefit.

The proposed legislation is without precedent in this jurisdiction. There was no other statutory scheme that could be used as a template to guide us along the path we wished to take. Nevertheless, this legislation gives the most equitable balance between the rights of account holders and the desire that neither the credit institutions nor the State should be burdened with an unduly bureaucratic scheme. In addition, the Bill fully addresses the recommendation of the Committee of Public Accounts for the use of the moneys in dormant accounts, in that charities and the community at large will, once the scheme is operational, benefit from the moneys.

The Department of Finance has attempted to estimate the amount of dormant funds held in accounts with credit institutions, on the basis of information supplied by the banks, building societies and An Post. After much discussion of the parameters, the institutions agreed to supply information relating to the number and value of deposit accounts dormant for various periods of time. An Post also supplied relevant information relating to savings bonds, savings certificates and instalment savings schemes. A period of 15 years of dormancy, when there has been no customer initiated transaction on an account for at least 15 years, was decided upon. A lesser period might cause disquiet among account holders and lead to an inordinately high level of reactivation of accounts. This could have created an unsuitable workload for all concerned. It should also be noted that 15 years is the shortest defined period for dormancy in the European Union.

Given the large volume of dormant accounts initially identified by credit institutions, the Minister had to settle on a dormancy period manageable by the institutions. The Bill provides that the timeframe settled on can, at a later date, be reduced by way of ministerial regulation. Once the backlog of dormant accounts has been reduced, the Minister for Finance and the Minister for Social, Community and Family Affairs will consider whether the timeframe is still appropriate, given that the public will be well aware of the new regime. Given a period of dormancy of 15 years, the Minister was advised that the number of such accounts could be more than 840,000 and their value about £130 million. These figures are estimates of the amounts involved and do not take account of the likely level of reactivations once the institutions in question bring the proposed scheme to the attention of their customers. They represent the best estimate of the institutions and provide sufficient evidence for the Minister to pursue his stated aim of bringing forward proposals to deal with dormant accounts.

The Government decided that the scheme would also apply to mature, but unclaimed life assurance policies. The Minister is still pursuing this matter with the insurance industry and intends to bring forward proposals later this year. The proposals in the Bill are more modest than what the Government originally envisaged, but more achievable. The Bill is a good first step on the issue of dealing with funds long neglected by owners and will help to establish the basic framework within which other dormant products can be dealt with. The Government also agreed that the Department of Finance should continue to hold talks with the Irish League of Credit Unions with a view to reaching agreement, on a formal basis, for the treatment of dormant accounts in credit unions. Such discussions are ongoing and the Minister hopes to provide for the inclusion of dormant credit union accounts at a later date, possibly through an extension of the current scheme by way of ministerial regulation.

The scheme, which will come into effect on 1 April 2002, will provide a legislative framework which will improve regulation in relation to the handling and management of funds in dormant accounts in credit institutions. Such institutions will be required to actively take all reasonable steps to identify the beneficial owners of dormant funds, with a view to alerting them to their existence, or repayment if the customer wishes. If the owner or owners cannot be traced, dormant funds will be taken into the care of the State, although the owner will be guaranteed the right to seek a refund. The moneys will be held in a separate fund to be established by the National Treasury Management Agency, whose remit will be to invest the moneys prudently, especially given the possibility of claimants seeking a return of their moneys at a later date.

The Bill also makes provision for the introduction of a scheme for the disbursement of surplus dormant funds for the benefit of charities and the community at large. The purposes for which this money may be disbursed are set out in section 41. The projects or programmes to benefit will be those designed to alleviate poverty or social deprivation or to assist those who are physically disadvantaged. However, in particular, it provides that special priority for funding is to be given to programmes or projects designed to assist primary school children experiencing learning difficulties. Once organisations involved in the design or implementation of such programmes become aware of the scheme, and I hope apply for funding, it is hoped this will help minimise the number of children leaving primary school with literacy or numeracy problems below standard for their age. The public will be pleased when the signal goes out that these moneys are to be spent on worthwhile projects.

The legislation also provides that moneys currently vesting in the intestate estates fund deposit account may be transferred, henceforth, to the dormant accounts fund on foot of an amendment to the State Property Act, 1954. I would like to clarify for Deputies that, while the Minister for Finance is bringing forward the framework legislation, the Minister for Social, Community and Family Affairs will have the primary ministerial responsibility for the scheme once it is up and running, especially for the disbursement aspects.

The Minister is extremely conscious that the moneys being dealt with derive, in the main, from private bank and building society accounts and that, as such, they must be handled and invested prudently, having regard to the constitutionally guaranteed right to private property and the confidential nature of the relationship the credit institutions enjoy with their customers. His concern that customers should be reunited with their moneys, including all interest due thereon, is reflected in four key features of the Bill.

First, the term "dormancy" will be statutorily defined and, therefore, applied uniformly by all institutions that fall within the ambit of the scheme. This will provide clarity for customers in that they can be certain that if they have not carried out any transaction on their accounts for 15 years or more, as and from 31 March next year, the money in the account is due to be dealt with in a defined manner. This should also encourage account holders to make contact with their bank or building society to ascertain whether they have an account at that institution.

Second, the institutions in question will be required to make best efforts to contact their customers. This may be done in one of two ways. Banks and building societies will be required to personally contact those account holders whose accounts are valued at or above 100, making them aware of the scheme and their rights and obligations under it. Notification will be by way of advertisement in two or more national daily newspapers for accounts valued at less than 100, as well as for so-called "non-correspondence" accounts. "Non-correspondence" accounts are those in regard to which the account holder has requested that no correspondence be sent to his or her home address or where correspondence sent to an address has been returned to the credit institution.

These annual advertisements, the first of which is scheduled to take place in April next year, will generate public awareness of the scheme. In this regard, members will be pleased to know that subsequent to the drafting of the legislation, the Department of Finance finalised discussions with the Central Bank that have resulted in the application of a new, statutory code of practice on licensed credit institutions. This code of practice provides that credit institutions issue statements on all accounts valued at or above 20, at least once a year. Everybody will agree that this is a welcome development within the banking sector and will go even further down the road started with this Bill in attempting to reunite customers with their moneys.

Third, the legislation provides that the National Treasury Management Agency will establish and manage a dormant accounts fund into which moneys from dormant accounts will be transferred from April 2003. The agency will be required to invest these moneys prudently, based on guidelines which the Minister will help to draw up but having regard to the need to meet the costs of making repayments to valid claimants seeking a return of their moneys. The main issue in this regard is that not only is a claimant entitled to a return of the principal transferred from his or her account, he or she is also entitled to any interest that he or she would have been due on that principal had the account remained with the institution. The moneys in the fund will generate an investment income, some of which will be used to offset the costs of interest payments to claimants and the rest of which will be reapplied to the fund.

Fourth, the legislation will give the Minister for Social, Community and Family Affairs authority to appoint not only the members of the disbursements board, but also inspectors for the purposes of ensuring compliance with the scheme on the part of the institutions. These inspectors, who will essentially be professional accountants hired on contract, will be empowered to examine the systems and practices which an institution employs to ascertain if they are adequate for the purposes of identifying and notifying the holders of dormant accounts. They will also ascertain whether all moneys due to be transferred to the dormant accounts fund have been transferred and properly recorded and will report back to the Minister.

Having highlighted these main features, I will now set out the main provisions of the Bill. In summary, the Bill provides for identification of the types of accounts and institutions to be covered by the scheme; the period of dormancy; the obligations of the institutions in relation to notification of account holders that their accounts may be deemed dormant; the establishment of a dormant accounts fund to be managed by the National Treasury Management Agency and the procedure, including the timeframe, within which moneys are to be transferred to that fund; the rights of share account holders in building societies on foot of the legislation; a new recording procedure to be adopted by the credit institutions in relation to the holders of dormant accounts; the introduction of a scheme whereby institutions will be obliged to complete certificates of compliance with the provisions of the legislation so that any failure on the part of institutions can be quickly identified; a new role of inspector whose remit will be to check compliance with the legislation on the part of the institutions; amendment of the State Property Act, 1954, so that moneys from the intestate estates fund deposit account can be transferred to the dormant accounts fund; the appointment by the Minister for Social, Community and Family Affairs of the dormant accounts fund disbursements board, whose remit will be to disburse moneys from the dormant accounts fund for specified purposes on receipt of successful applications for such; accountability of the chief executive of the National Treasury Management Agency and the chairperson of the dormant accounts fund disbursement board to the Committee of Public Accounts for the functions of the agency and the board, respectively – this includes provision for annual reports from each of those bodies; maintenance of confidentiality in relation to ownership of the moneys in dormant accounts and extension of the scheme to other classes of product and-or other classes of institution at a later date by ministerial regulation.

While this Bill does not purport to address all the issues or to provide for a complete solution to the issue of dormant accounts, it makes an ambitious start down that road. It enables us to begin to provide for a systematic approach to the regulation of these accounts in the strive for transparency of their treatment, as well as providing for an equitable and socially beneficial use of any surplus moneys identified. The Bill is innovative and I commend it to the House.

I thank the Minister of State for presenting the Bill to us. For many years discussions have taken place about dormant bank accounts and how they could be dealt with. My first experience of unclaimed funds goes back to the Funds of Suitors Act, which was passed in the early 1980s to deal with funds lodged in the courts for the benefit of clients which remained unclaimed. That Act specified how the money could be used. A disbursement board was set up similar to the board the Minister is setting up under this Bill. The amounts to be disbursed were smaller. Because there was a connection with the courts the disbursement board recommended that a major part of the funds should be used for the refurbishment of the premises at the Kings Inns. I refer to that case to show there is a precedent for the disbursement of unclaimed funds.

I understand the definition of a dormant account is a fairly grey area as far as the banks are concerned because each bank has a different opinion of the length of time before an account becomes dormant. It would probably be after six or seven years if a transaction has not been registered. However, even when a bank labels an account dormant, the depositor retains the legal right of ownership. There is also a legal view that the State does not have a natural or statutory entitlement to funds in non-active accounts. For the State to suppress a person's bank account by virtue of it not being used could raise serious legal and constitutional issues about public property. This difficulty could apply if the owners of the account or his or her heirs or successors are still alive.

The treatment of moneys in these accounts varies between member states of the European Union. I want to reflect on how other European countries deal with this matter. A number of European countries have made arrangements, such as those proposed in the Bill. In Portugal, where an account is not used for 15 years, the balance becomes the property of the state. The period of inactivity used to define an account as dormant is 20 years in Spain. In France, after ten years of inactivity, the funds in the dormant accounts are transferred to a holding agency which manages the money for a further 20 years, after which it becomes the property of the state. In the District of Columbia, in the United States, financial institutions are required to submit an annual report on accounts that have not had any owner transaction activity for five years and if these accounts show no activity within the next year, they are seized by the district.

There would appear to be many reasons accounts become dormant. This is mainly due to forgetfulness, emigration, death and change of address. It is interesting to note, however, that in the District of Columbia, many accounts opened on behalf of children are forgotten over the years. That trend runs through dormant accounts. Grandparents, on the birth of their grandchildren, open accounts on their behalf but when the grandparents pass on, these accounts are forgotten.

While the issue of dealing with dormant accounts has been discussed over many years, the matter came to a head with the recommendation of the sub-committee of the Committee of Public Accounts which recommended that as soon as it was feasible, legislation should be prepared by the Minister for Finance so that funds in dormant accounts could be used for specific purposes to benefit society.

There are many legal difficulties in drafting this legislation. Nevertheless, I am pleased that the Bill the Minister has brought before the House today fully addresses the recommendations of the Committee of Public Accounts on the use of money in dormant accounts in that charities and the community at large will benefit from these moneys once the scheme is in operation.

There have been varying estimates of the amount of money lying in dormant accounts. The amounts depend on the number of years one considers an account dormant. Under the Bill, the period of dormancy is 15 years, that is where there has been no customer initiated transaction in an account for at least 15 years. As the Minister of State stated earlier, any lesser period of time might cause disquiet among account holders.

Given the period of dormancy of 15 years, it is estimated that there could be at least 800,000 accounts with a value in the order of £130 million. When the measures proposed in the Bill are put in place to try to trace the owners of these accounts, the number of accounts and the amounts will be substantially reduced. The Mini ster of State made further reference to that this morning.

It is the Minister's intention that strenuous attempts have to be made to reunite account holders with their funds. The underlying objective of this legislation is to ensure that funds in dormant accounts are returned to their rightful owners. A number of measures are proposed in the Bill to bring this about. For example, institutions will be required to make the best efforts to contact their customers. The Bill makes a distinction between accounts over £100 and those under £100. For customers who have accounts over £100, the banks and building societies will be required to personally contact these account holders and make them aware of the scheme and their rights and obligations under it. For accounts under £100, notification will take place by advertisements in national newspapers. These annual advertisements, which are scheduled to commence next April, will generate public awareness of the scheme.

The legislation before the House also provides that the National Treasury Management Agency will establish and manage a dormant accounts fund into which moneys from dormant accounts will be transferred. The money will be prudently invested by the National Treasury Management Agency so as to provide an investment income. If the depositor turns up after a number of years to claim that account, they will be able to claim the account with interest.

The legislation provides that the Minister for Social, Community and Family Affairs may appoint a dormant accounts fund board whose remit will be to disburse moneys from the dormant account fund. Will the Minister of State clarify this issue as it is not clear from the Bill where the division lies between the investment fund and the disbursement fund? The Bill stipulates the mechanism under which the NTMA is obliged to invest money. However, what mechanism will be used to transfer moneys from the investment fund to the disbursement board so it can allocate funds as outlined in section 42? There is an obligation on the NTMA to invest moneys and on the disbursement board to spend moneys. Will the Minister of State clarify the balance between the two?

The definitions in section 41 are weak. The section states that funds shall be used for reasons of social inclusion. Health care is a priority, particularly in Dublin, where a woman recently had to go to court to secure chemotherapy treatment. Many areas of the health service have been neglected and underfunded, including services for people with disabilities, mental handicap and special needs. Funds should also be refinanced so they can be spent on the elderly.

This Bill provides an opportunity to fund a pet subject of mine, namely, education. In the Dáil, the Minister accepted an amendment regarding children who leave primary education with serious literacy and numeracy difficulties. However, many young people in areas which suffer social exclusion and deprivation leave second ary school at 14 or 15 years without qualifications and become involved in crime or drugs.

Figures indicate that, in one of the most deprived areas in Dublin, 51% of the school-going population leaves school at 14 or 15 years. These children are assisted in primary school by remedial teachers, but no such support is available in secondary school. As a result they are unable to compete with their peers and drop out. The disbursement board should examine this problem when considering the disbursement of funds. I have tabled an amendment for Committee Stage regarding this matter.

I welcome the Bill which has been a long time coming. The legislation was difficult to draft and I congratulate all involved in its production. The Bill has been given a boost by the recommendations of the Committee of Public Accounts.

I welcome the Minister of State and the Bill. We must put this legislation in perspective. When the Minister for Finance, Deputy McCreevy, initiated public debate on this issue, many figures were mentioned in the press as to how much money might, or might not, be held in dormant accounts. We are now down to realistic figures in that there may be up to one million accounts, but the amount involved may be only about £130 million. However, it is important that we deal with this matter.

Banks have assessed these funds for many years and, if nothing else, this legislation will compel them to contact the account holders. This is the most important provision in the Bill. I do not wish to take from the opportunities being created to disburse funds to charities and social inclusion programmes, but we must appreciate that the funds involved will be limited in so far as the Bill provides that people may reclaim the principal and the interest accrued. This provision requires that a sufficient amount of money is retained to meet the demands of the rightful account owners if they claim these funds. It should be made clear that the State is not confiscating money from private individuals. The money is available to them in the event of their claiming it, with the interest that has accrued. The legislation compels financial institutions in this regard, as a certificate of compliance must be provided by them.

Every attempt must be made to contact the rightful owners – or their next of kin – of accounts containing sums over 100 that have lain dormant for many years. There are various reasons people might have set up accounts many years ago in the midlands, west and other regions, yet at a later stage did not access them. For one reason or another, thousands of people who left for England and America deposited money before leaving, or brought back money when they returned on holidays. Such accounts have lain dormant for years. I know of many families who have received letters concerning accounts from banks which are obviously pre-empting the provisions of this legislation. Prior to the Bill being enacted, the Minister has already kick-started the financial institutions to respond to a large number of dormant accounts. The banks could readily have made contact with the account holders during the years but it was in their own interest not to do so. To some extent, it may have been a matter of greed. I welcome the fact that the Bill will compel financial institutions to do so now.

I also welcome the provision for certain moneys to be paid to charities and advances in social inclusion – such proposals are both laudable and worthwhile. We all wish to see young people remaining at school to finish their secondary education, as well as entering third level education. Unfortunately, however, that is not the case and there are many reasons this legislation will not resolve the difficulty of children abandoning their studies. In many cases, those reasons have little to do with finance. They have more to do with child abuse, parental neglect, mental illness, alcoholism and drug addiction, all of which contribute to an unstable home or community environment. These are major contributing factors to early school leaving, homelessness and crime. We should not consider that the money in dormant accounts will resolve such social ills because it will not do so. Such sums would only amount to window dressing. Early school leaving and associated health problems are matters of far deeper importance which require greater analysis and resources than this Bill can provide.

The Minister of State mentioned the intestate estates fund deposit account. He says that the dormant account fund will be amalgamated with this fund. What type of money is in that account? Is there a similar amount or is it greater or less? While I have a relatively good idea how this fund came into place, I ask the Minister to explain a little more about this and its operation.

It is important that the National Treasury Management Agency will be involved in the investment part of the fund because that is where the expertise is. I compliment that agency on the wonderful work it has done on behalf of the nation. It reinvested and moved around the funds, which saved the country millions of pounds in interest. The former Taoiseach, Deputy Albert Reynolds, set up this agency when he was Minister for Finance. It was an innovative idea which has proved very worthwhile.

I ask the Minister to comment on dormant accounts within health boards. I am not sure if this has been dealt with under any other legislation. There were millions of pounds in dormant accounts of people who were in long-term care institutions. Is there any provision in this legislation for dealing with that? In the 1970s and 1980s, I had direct access to what was happening within the health board structures and I always found it extraordinary that at a time when money was extremely scarce, we had this large amount of money which could not be touched. I felt that health boards should have moved forward and sought temporary use of the money in the best interests of the people for whom they were providing the services. Perhaps the Minister might address that. If it has nothing to do with this legislation, I will accept that.

The Minister for Social, Community and Family Affairs will have responsibility for the charity funds. The voluntary sector has had a major involvement in providing services, which is almost exclusive to this country. Some of the problems in the education and health systems relate to the religious orders leaving both of those important areas of public life and the transition to direct departmental involvement in the control and resourcing of those services. In the past, not only did many religious orders provide the service but they also ploughed their own salaries back into it. That is part, but not all, of the reason for some of the great problems in the health service today.

The same is true to some extent in education. Part of the reason we have so many people in our prisons may be due to the closing down of so many care institutions provided by religious orders. Of course some were out of order and were found to have been guilty of abuse rather than providing care, but there were only a limited number of them.

The voluntary sector is becoming thinner on the ground because people have so many other activities. However, a large number of people give their time on a voluntary basis and they are doing great work at parish and community level using a bottom up approach. I am talking about associations for the mentally handicapped and others who are doing wonderful work and are complementing, supplementing and in some cases providing the only services available in some communities. I call on the Minister to ask the Minister for Social, Community and Family Affairs to ensure that these groups get some of the funds.

I compliment the Government on bringing forward this legislation, without which the financial institutions would sit on this money. I am pleased that this legislation compels them to contact every person who has an account with more than 100. The most important thing is that both the principal and the interest are available to the rightful owners of these accounts. That is a safeguard that the public wants and I am pleased it is in the legislation. I commend the Bill to the House.

I welcome the Minister to the House. Everyone would have to welcome the principle in the legislation that money which has being lying idle in an account should be used and should not remain simply dormant within the confines of the financial institution. There are questions of constitutionality relating to the State taking possession of funds that belong to private individuals. However, within this legislation, all the pitfalls that might have been perceived to be in the way have been overcome by the commitments that are given. It is merely a transfer from the coffers of the institutions to the care of the State.

When the trawl takes place, I imagine we will find that accounts go back inordinate periods of time. I wonder what onus there will be on the financial institutions to go back to the beginning of the 20th century. How far back are the banks and building societies expected to go? I presume that at present every financial institution has a computerised database but what exactly do they contain? Questions have to be asked of the financial institutions to discover whether or not their databases are comprehensive. Have all the accounts of under and over £100 been transferred into the database? Have there been transfers from the time of the previous administration? Financial institutions could have funding in their coffers dating from the 19th century which we are only beginning to ask about. There is a question mark over that and I ask the Minister of State to indicate how far back in time he expects financial institutions to trawl through their accounts. Will computer databases be accepted or will institutions be expected to go back to pre-electronic accounts?

The possible extent of funds was discussed at the Public Accounts Committee. The Minister gives figures of 840,000 accounts and £130 million but I do not believe it is anything like as small as that. The figures the Minister gave are the preliminary figures from the institutions themselves and we know how good the preliminary figures from them were when their spokespersons came before the Public Accounts Committee. It was not until the Comptroller and Auditor General had a closer look and they were pressed on the point that we began to see the truth about some of the accounts and the quantity of money in them. I do not accept the figure that has been given to the Minister of State and we will find it is not accurate.

Essentially, we are talking about the banks, building societies and the intestate deposit fund, to which Senator Finneran referred when he asked the relevant question as to what money is in that fund. We would certainly like to have that information. There are also credit unions and life assurance policies not covered by this legislation which have yet to be examined.

There are also prize bonds.

Senator Finneran referred to prize bonds and the health authorities as well. Money has been taken into care by the health authorities and has lain dormant for a period of time and I would like the Department to look into that too.

Off-shore accounts do not appear here and they are very interesting. There are many off-shore financial institutions in which Irish citizens hold accounts that may be dormant. Some of them are secret and have been hidden away. To what extent is there a dormant element? The Public Accounts Committee revealed the extent of off-shore accounts held by citizens from Miltown Malbay and Tralee. There are thousands from small villages alone and there may well be tens of thousands of dormant off-shore accounts. Is there any mechanism by which we can communicate to off-shore institutions the fact that we are about to pass legislation requiring domestic financial institutions to contact account holders and that if moneys are dormant for 15 years or more we expect them to be transferred to the State? That would be an interesting exercise and I am sure the revelations would be interesting too. In all seriousness, there is a vast quantity of money off-shore which may very well be dormant and waiting for the Minister for Finance's grubby fingers. It could doubtless be spent on very useful voluntary and community projects. I ask the Minister to come back to that.

Many financial institutions are not covered by the legislation and it would be interesting to look at how we can reach them all. We are putting the onus largely on the banks to do the work and that is proper. Banks hold the funds and should be the ones to identify and contact the owners of the accounts. They should produce an annual report of their efforts, success rate, percentage of account holders contacted and the method by which contact has been made. They should report if successful contact was made by letter or if they simply went to the last address they had for an account holder – dating from perhaps 20 years ago – and left it at that. The legislation provides that notification of dormant accounts containing under £100 will be by public advertisement. I am not happy with that. Every account, no matter how small, should be the subject of an attempt at direct contact with its holder. Many elderly people may not get the paper on the day the advertisement is published and they may have failing eyesight. There are many other reasons they might not become aware of the advertisement.

Contact identification is the key to the problem but the onus on the banks is fairly minimal. The Bill provides that each holder of an account shall be notified in writing of the account. Notification in writing is unsatisfactory. If there has been no contact over a period of 15 years or more, notification in writing can reach only a very limited number of the account holders. It is quite normal for people to change their place of residence and they may very well be out of the country. There is no requirement that any attempt be made to approach the next of kin or to meet the residents' association who might know where someone who used to live at an address might be now. There is plenty of useful information in the community where the person was living providing a great opportunity to identify them. The likelihood of identification taking place by a simple written notification is slight and I fear the banks and building societies will do the minimum because to do more than that incurs costs.

The last thing building societies and banks want is to reduce the profits of their shareholders, as we well know from the way in which branches are closing down all over the place. Personal services are being reduced and the more that happens the less contact is being made with account holders. As time goes by there will be even more dormant accounts because the nature of banking in the future will be entirely robotic. Banking will become entirely electronic if the banks have their way. They do not want to meet account holders as they are just trouble and mean overheads through the maintenance of offices and the employment of personnel. The result of this trend will be very little awareness of who account holders are. In the old days the bank manager knew a considerable percentage of customers. Had this legislation gone through 20 or 30 years I do not doubt he or she would have been able to identify many of the dormant account holders. That was the personal nature of banking then but things have changed entirely and for the worse. The service has been reduced enormously and the likelihood of anybody in the bank having contact with an account holder is diminishing rapidly.

In addition to the question of how comprehensive the notification process will be, there is the issue of sensitivity. Institutions are already contacting people about their dormant accounts. A number of institutions have presumed this legislation will be passed and have started to contact elderly people who can be worried by letters asking them to identify bank accounts. There is need for an awareness programme in order that people will understand what the Government is doing. As well as the banks publishing notices in the newspapers in relation to accounts of under £100, the Government should conduct a publicity campaign to reassure people that this is a confidential matter and that they need not worry about the fact that their account may be dormant for many years or what it might be for.

People might have opened an account ages ago for their burial, to buy a grave or for a similar purpose and might be concerned that tax might be due on it or that there is some other obligation in relation to the account which they have not fulfilled. There must be a degree of sensitivity about how the contacts take place as well as a degree of thoroughness in ensuring every attempt is made to identify the holders of these accounts. A huge amount of work will be required in that regard.

The other issue is what will be done with the money. I am pleased with the proposal that the funds be disbursed not by the Minister for Finance but by the Minister for Social, Community and Family Affairs. It is appropriate that the money be spent on projects dealing with social inclusion, communities that have suffered deprivation during the years and an anti-poverty programme. I am not convinced that it should go towards education. That is a let off for the Department of Education and Science. Education is an essential requirement in life.

There are two groups of absolute importance, the young and the old. Young people should have a thorough, adequately funded system of education. It is not good enough to talk about providing money for young people who fall out of the education system because of lack of funding and resources. A structural response with proper funding is required, not an ad hoc funding mechanism. Every community will welcome funding being allocated to the primary sector. Last week I raised on the Order of Business the loss of a teacher in an East Wall school. The primary school lost the teacher because numbers were decreasing but the result is that next year two classes will be combined into a class of 39 pupils because the teacher is gone.

That problem cannot be addressed by providing funds of this nature. If the funds are to be directed to dealing with problems such as this, they should be put into programmes and projects which support a pupil-teacher ratio that is so preferential it ensures there can be individual attention for students, particularly where they are at risk or have been disadvantaged and need special attention. If that is to be done, it should be done directly through the Department of Education and Science, rather than the Department of Social, Community and Family Affairs. Otherwise the programme will be an ad hoc rather than a structured arrangement which will end up being something like a slush fund that is allocated for some of the right reasons but will not be properly administered. It must be administered in a structured fashion.

If the money is transferred from the Minister for Social, Community and Family Affairs to the Department of Education and Science for a structured programme to deal with primary school children, I will welcome it but if it is administered simply on the basis of so-called social inclusion programmes under the sole auspices of the Department of Social, Community and Family Affairs, it will be the wrong way to deal with it. It will not be a satisfactory situation in either educational or community terms.

The legislation which I welcome is interesting. It is great that we will make use of this money. I also welcome the fact that it is only being temporarily held in care in order that if somebody becomes aware of their money in the future and wants it reimbursed, the State will do this. There will be no fear, therefore, that anybody will lose out. It is a win-win situation. However, more time must be spent determining how the money will be used.

I do not believe it will amount to £130 million; it will be a great deal more than that. Once the Minister gets around to considering the other areas to which we referred, such as the other institutions which have a considerable number of dormant accounts but are not covered by this legislation, and finding a mechanism to deal with offshore accounts, we will really hit the big time and a huge amount of money will flow into the coffers of the State.

I welcome the legislation and hope the Minister will take account of the suggestions we have made. The disbursement could be a little more flexible than the legislation seems to suggest. Both the Department of Finance and the Department of Social, Community and Family Affairs should be able to interact with the Department of Education and Science, given the Minister's focus in terms of the people who are to be the recipients of these funds, and put together a programme with a structured element to it which would not be an ad hoc arrangement that would disappear once the the dormant funds ceased to be available.

I congratulate the Minister on this innovative legislation which could have great potential. I welcome the intention of reconnecting people with their money and ensuring dormant moneys are put to public and social use and not used for the benefit of the banks.

I wish to discuss Parts 5 and 6 of the Bill, which are of particular interest to me. I can declare a peripheral interest in that I am chairman of the Ireland Fund, a charity. The Minister has a great opportunity with this Bill to do something imaginative to help the charitable, voluntary and community sector. This country lacks great foundations such as Gulbenkian and Ford in the United States and Rountree and Cadbury in the United Kingdom. These foundations, in a most unbureaucratic way, come to the assistance of groups which are otherwise unfashionable charities dealing with minority groups in society. They help innovative projects to get off the ground. This money could be used to set up a community chest or fund which would transform that sector of society which is crying out in need.

I am glad that Members of the Oireachtas, local authorities and health boards are excluded from the board. That is proper but I would go further. Civil servants and politicians should be excluded from having dealings with these funds. Civil servants protect their Votes while politicians protect their seats. It is a bad recipe for objectivity when one is dealing with charitable funds.

The amount of money is not enormous. Senator Costello may be right, but the Minister gives figures which indicate that the amount to be disbursed will be from £5 million to £10 million per year. That disbursal should be undertaken with a minimum of fuss. I would remove all Ministers from involvement with the funds, not just the Minister for Finance. A board should be set up, and while it should operate under set conditions and Government control, it should be for the board to decide priorities within the broad area of social inclusion. They should be allowed to get on with the job. This is truncated unnecessarily if a Minister retains the right to direct, even on the board's submitted plan.

There is a temptation to use these moneys to fund projects which should properly be funded through the ordinary Vote. I agree strongly with Senator Costello that the funding of literacy and education – teaching people to read and write in school – is a basic element. If we vote money for education, that is what we are voting it for. We should not use these "Band-Aid" type measures in addition.

It is important that people are given flexibility in their use of the funding. Considering some of the points made by Senators Costello and Finneran, the Minister would be wise to provide the board with the power to accept moneys from other sources. When dormant offshore accounts or dormant health board accounts are discovered, no further legislation should be needed. That is why I argue against the Bill specifying that areas such as education be funded. Social needs may change over coming years and it would be best not to have to return constantly to the House to address those changes.

The example of a similar scheme in Northern Ireland may prove a worthwhile guide for the Minister. It is a voluntary trust scheme which I was involved in setting up some 25 years ago. The scheme was established to assist bodies which find it difficult to access public or other funds because they do not have the expertise to do so. It attempted to give these groups a chance to survive until they qualified for statutory and other schemes. It has been remarkably successful in many ways. The groups were given clear determinants on how they should behave and they could then operate within those parameters. I will forward information on the workings of this scheme to the Minister and his officials, who may also wish to talk to the director of that fund, Ms Avila Kilmurray. She has long experience of dealing with these issues.

The Bill gives an exciting opportunity to re-invigorate the voluntary sector. It would be a pity to bureaucratise procedures or to see the Bill as a means to find additional funds to plug holes in public spending. Despite this, I commend the legislation to the House and congratulate the Minister on having taken it so far. The matters I raise can be dealt with at a later stage.

I welcome the Minister to the House, particularly as the Bill has now been extended to deal with educational matters. This Bill addresses a problem that has built up over the last 20 to 30 years and which was not a major issue prior to that. It has arisen due to the impersonal nature of banking today, which is caused particularly by the IT take-over of banking services.

Banks have for many years had full use of dormant funds. The Minister has described the funds as free capital for the financial institutions. There has been no onus on banks to seek out the owners of accounts. I am glad that this legislation means some effort must be made to find the owners of accounts over 100. It should go further and ensure that banks make every effort to trace the owners.

Some 30 or 40 years ago, every bank branch had a manager who, like the local parish priest or doctor, was a pillar of local society. The bank manager knew every family in the local community and because of this the difficulties experienced today did not arise. That system has now changed and computerisation has taken over. The closure of bank branches, which is a feature of our time, will exacerbate the problem.

When old people die, today's bank managers do not know them personally and because of this will not be able to trace their next of kin. In many cases, there is no local bank manager. The post has been down-graded and officials are in charge of branches. They have no way of identifying families. Banks only contact customers when they are in the red. The banks worry less when dealing with money on deposit or money that customers may have forgotten.

Many older people keep their affairs to themselves. In the past many people, particularly in rural areas, kept money under the bed in a biscuit tin. However, changes in society, including break-ins, encouraged people to lodge their money in bank accounts. Due to the secrecy of the operation of bank accounts, money has built up in some and, in many cases, little effort is made to trace the beneficial owner. This was noticeable when the flotation of the Irish Permanent and First National building societies took place. Initially, some 50% of customers could not be traced. Eventually, as the Minister has said, some 8%, or 12,000 accounts, remained in that bracket. I am glad the Bill provides that the shareholders will retain all rights even though the funds may go into the dormant account.

The legislation has been expedited by the DIRT inquiry and the identification of a fast-track in relation to banking in Ireland. That inquiry suggested that dormant accounts be used for the benefit of the community in general. The money should not be merely for the benefit of the financial institution. The intention is that charities and communities will benefit from the fund when the scheme is fully operational. This was the recommendation of the Public Accounts Committee. I am glad to see that this has been extended, after some debate in the Dáil, to educational projects.

The Government sought advice from the Central Bank and the National Treasury Management Agency in preparing the scheme. They will now require the full co-operation of the banks to get the scheme operational and to identify the moneys that can be transferred to the fund. While it would be preferable to see those who own those moneys claim them, it is good that moneys which are not claimed in the short term can be transferred to the fund. Section 6 deals with the penalties to be imposed on institutions or officials thereof who commit offences within the meaning of the legislation.

The Lower House also debated the length of the period to which the Bill should apply. The Government has been realistic in using a period of 15 years dormancy to gauge the level of dormant accounts. Only when the scheme has been in operation for a year or two will the real position will be revealed. It was suggested in the Lower House that a period of seven years dormancy should apply. However, it was also indicated that when a 15 year period is applied the number of dormant accounts could be in excess of 800,000 and their value could be in the order of £130 million, that when a 20 year period is applied the value is reduced to £54 million and when a ten year period is applied it rises to £402 million. This, when taken in conjunction with the five year figure, indicates how active are these accounts. Taking on board what has happened in other European countries, the Government was right to opt for a period of 15 years.

Many people do not take proper care of their financial affairs because they do not visit their bank on a daily basis. However, the advertising campaign that will be put in place and the media reaction to this scheme will lead to the identification of accounts which were, until now, treated as dormant but which are not dormant. When I played football over 30 years ago in my parish, a second team was established for those players who could not gain a place on the first team. As their fortunes began to decline, the two teams eventually amalgamated for the championship. I was treasurer of one of the clubs and the money taken at the gate for the new team's first match amounted to £7. The treasurer of the other club and I lodged that money into a joint account but neither he nor I has been near the bank in the interim, nor have we received correspondence from it.

I am glad the banks will be obliged to make every possible effort to identify account holders and alert them to the fact that they may have funds about which they have forgotten. Moneys belonging to those who cannot be identified will be transferred to the fund to which the Minister of State referred. However, I am concerned the legislation stipulates that the owners of accounts containing under 100 will not be notified but that information on these accounts will be printed in two daily newspapers and Iris Oifigiúil. Most holders of small accounts do not read Iris Oifigiúil and, as another Member stated, some of them do not even read the daily newspapers. Perhaps in the initial year of the scheme we should consider the possibility of placing advertisements relating to dormant accounts in one weekly newspaper in each county so that as many people as possible will be notified of their existence.

As stated earlier, the moneys in the dormant accounts fund will be distributed to relieve poverty and social deprivation and will also be spent for the benefit of the physically disadvantaged. According to the legislation, the scheme will be administered by the Minister for Social, Community and Family Affairs. I am delighted that moneys from the fund will also be used to assist primary school students with learning difficulties. In that context, should it be left entirely under the supervision of the Minister for Social, Community and Family Affairs? This funding is additional in nature and is not meant to get the Department out of a hole. As a result, another Department, perhaps the Department of Education and Science, should have a say in how the money is spent. Since I entered the House I have argued on many occasions on behalf of children with learning difficulties. I have witnessed the great success the Government has enjoyed in this area in moving from a static situation to one where progress is being made.

When we entered office, many schools had no special needs teachers and all of them have children with such needs. At present, school authorities are encountering difficulties in obtaining the services of psychologists. For example, my son sat the junior certificate last year and he was only assessed by a psychologist three weeks before his examinations began. That was unacceptable because it meant that he had no opportunity to practice with the tapes and equipment he would be obliged to use. There are huge delays in assessing children at present.

In my opinion, the moneys in the fund should be used outside the mainstream education system. I raised this matter with the Minister of State on previous occasions, particularly in the context of the great work the ACLD workshops are doing throughout the country. Many parents, including myself, have gained knowledge of this matter during the past four years and have come to appreciate the problems their children face. Most parents to whom I speak inform me that their children blossom outside the classroom environment while working in the type of groups to which I refer. Perhaps we should try to spend the moneys previously considered to be required in the mainstream education system on the type of projects I have described.

I welcome the establishment of the dormant accounts fund but I am somewhat confused with regard to how it will be administered. I understand how the reserve fund will operate, but I am in the dark in respect of the investment and disbursement fund. Initially I believed that, like the banks, only a certain percentage of the money could be released, based on deposits received. Now, however, I understand funding will be issued on an annual basis. The provisions in this area could be widened to allow loans to be given to community groups rather than their merely being given grants.

I welcome the fact that post offices will be included under the legislation, particularly because I believe that many dormant accounts are held in post offices. These accounts were often opened by mothers and fathers, who are now dead, for their children who never knew of their existence. Even though it is not the Government's policy, the provisions of the Bill should also be extended to prize bonds.

Will the Minister of State ask the Minister for Finance to consider extending the Bill to cover agricultural co-ops? Many of the older agricultural co-ops took deposits from their shareholders and many of those accounts are dormant. There is a discrepancy in the company law relating to corporate bodies and friendly societies and, given that most of the agricultural co-ops are friendly societies, perhaps this matter could also be investigated.

I thank Senators for their views, which I will convey faithfully to the Minister for Finance. This Bill represents a new chapter in the relationship between the State, the financial services sector and the consumer. Its provisions will invoke a new regime of transparency in terms of the methods used in dealing with account holders' money and will encourage the consumer to take more of an interest and responsibility in the administration of his or her accounts.

As stated at the outset, the issue of dormant accounts and how best to deal with them, both in terms of their administration and how to put moneys therein to best use, has presented a challenge to successive Governments for a long period. I am sure Members will agree it is no small achievement that the Government has formulated what is, on the face of it, a simple yet comprehensive scheme which will provide clarity and guarantees to consumers in relation to their accounts. The Bill provides for the best compromise between the rights of credit institutions and those of account holders. The co-operation and assistance of the credit institutions while the proposals were being formulated should not go unnoticed.

The duties and obligations which will be placed on the institutions will result in a new and heavy administrative burden for them, particularly in the first year of operation, 2002, when the bulk of dormant accounts will have to be identified and the relevant customers notified. However, the administrative tasks which comprise this process and which have been placed firmly at the door of these institutions are ones they have been willing to take up in the spirit of reuniting customers with their money. In addition, it is to be welcomed that the proposals set out an innovative and laudable scheme for the use of surplus money for these dormant accounts. This will be of great interest to the public at large and it will see many charitable and community projects benefit for years to come.

As Senators will know, section 41 of the Bill sets out the purposes for which surplus moneys in the dormant accounts fund can be used. By virtue of that section, the Minister for Social, Community and Family Affairs and the board, established under section 30, will have a broad mandate to benefit worthy causes.

Senator Joe Doyle raised a number of matters. Banks currently transfer a dormant account into a control account, called a petty balances account. This legislation provides for money in such an account to be transferred to the fund under the new definition of dormancy. The decision was that the money in such accounts should not be transferred to the State, as happens elsewhere. This was decided in the interests of equity, and following a Committee of Public Accounts recommendation that the money should always be reclaimable by customers. However, the account holder, or his or her beneficiary, must lodge a claim.

The fund will have two accounts, the investment and disbursement account and the reserve account. Money in the first account will be invested in order that disbursements can be made. The reserve account will be used to meet reclaims. Its level will be set by the National Treasury Management Agency based on guidelines from the Ministers for Finance and Social, Community and Family Affairs. It will be possibly 50% or more of the fund until a feel for the scheme is achieved. Section 41 provides for disbursements for educational advancement, which allows organisations designing secondary level programmes to submit applications which the board and the Minister will assess on merit.

Senator Finneran asked about the intestate estate fund, which holds approximately £2.7 million. It will not be amalgamated with this fund, but the Bill allows money from it to be transferred to the dormant account fund at the discretion of the Minister for Finance. Moneys in the former fund come from the escheated estates of the dead, much through health boards when patients die in their care. The Senator also asked about voluntary organisations. They can apply for funding and the Minister for Social, Community and Family Affairs, who recently produced a report on the sector, will consider these applications.

Senator Costello is concerned about the period which financial institutions must go back. They must go over all their accounts, both on computer and paper. The Department of Finance knows of accounts from the turn of the previous century being identified. We can only estimate the amount that will ultimately be in the fund, based on information supplied by the institutions. This does not consider the likely reactivation of accounts when the legislation is brought to the attention of customers. As Senator Bonner stated, we will not know the amount until next April.

The Government decided not to touch prize bonds because they are part of the prize fund. Extracting from them would deplete the value of the prizes and the bonds' owners could not be entered in the draw. We have no jurisdiction over off-shore accounts. We may extend the legislation by regulation when these come to light as the Bill takes effect. Banks introduced a new statutory code of practice whereby holders of old accounts, valued at or above 20, will be issued with a statement at least once a year. This goes further than these proposals. It must be sent to the last address given to the institution as it has no other means of tracing the account holders. If they were compelled to spend money to employ persons to investigate all avenues of inquiry to trace them, it would deplete the value of the funds. A balance must be found and the safeguards in the Bill, the obligations and inspections, for example, achieve this. The Minister for Finance also proposes running a public awareness campaign later this year.

Senator Costello raised section 41. Section 41(1)(a) outlines the parameters within which disbursements may be made, that is, the criteria to be met by a programme or project seeking funding. It must be designed to assist the personal education and social development of persons economically, educationally or socially disadvantaged. It can also be designed to assist those with any physical or mental disability. These wide parameters should encompass any project that the Minister or board considers worthy. The section also provides that special priority will be given to any programme or project to assist primary schoolchildren experiencing learning difficulties. Despite what Senators think, money will not be remitted to the Department of Education and Science but will be disbursed by the board.

I bow to Senator Hayes's expertise in this area. The Government's original decision was to make who benefits as wide as possible and at the board's discretion, but the Minister accepted a well argued Opposition amendment that there be particular reference to schoolchildren who leave the primary system without proper numeracy or literacy skills. He fought off another amendment to extend this to secondary level pupils, on the basis that it would be wrong to particularise the scheme too much and limit the board's discretion. I understand Senator Hayes's argument, but he envisages a different scheme from the Government's.

The proposal is that money from dormant accounts be used by the State for charitable purposes within certain guidelines, but anyone proving entitlement to it can claim it. Once the scheme is operational, the Minister for Finance will have a small role, but the Minister for Social, Community and Family Affairs will have an important one, given his portfolio for expenditure and meeting social need. He will guide the board on the nature of projects seeking funding. Considerable sums will be distributed and the Minister's Department has the requisite experience in this field.

I thank Senators for their eloquent, considered contributions and excellent ideas and suggestions which I will pass on to the Minister for Finance before Committee Stage later today. I commend the Bill to the House.

Question put and agreed to.

An Leas-Chathaoirleach

When is it proposed to take Committee and Remaining Stages?

As the Standards in Public Office Bill, 2000, cannot be taken before 2 p.m., I ask the House for agreement to continue with the Dormant Accounts Bill, 2001. I have got agreement from Senator Costello who is not here at the moment. I move: "That Committee and Remaining Stages be taken now."

Question put and agreed to.
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