Amendment No. 101 is in the name of the Minister. Amendments Nos. 102 and 103 are related and may be discussed together.
SECTION 31.
I move amendment No. 101:
In page 24, before line 1, to insert the following subsection:
"(1) Subject to subsection (6), a credit agreement and any contract of guarantee relating thereto shall be made in writing and signed by the consumer and by or on behalf of all other parties to it, and—
(a) a copy of the credit agreement shall be—
(i) handed personally to the consumer upon the making of the agreement, or
(ii) delivered or sent by prepaid registered post within ten days of the making of the agreement by the creditor to the consumer, and
(b) a copy of the credit agreement and any contract of guarantee shall be
(i) handed personally to any guarantor upon the making of the agreement, or
(ii) sent within ten days of the making of the agreement by the creditor to any guarantor.".
The section is intended to give effect to Article 4 of the Directive and provides for the essential elements of what will constitute a contract. It requires that credit agreements must be in writing and signed by or on behalf of all the parties involved; the consumer will be given a copy within ten days of signature and may exercise the right to withdraw within a ten day cooling-off period and then lists what must be stated. If the Chair is agreeable, I will deal with amendments Nos. 101 to 109.
They redraft into a new format the provisions contained in the section but within the minimum of alteration to the content. The redraft we put forward was recommended by the Attorney General on the grounds that the sequence of the actions and their requirements were not logical as framed. Although the thrust and content are the same the chronological sequence was not logical. Other groups also agreed with this view.
Amendment No. 105 is in the name of Deputy Bruton.
We are able to take that amendment on board. We will accept it when we come to deal with it.
We will deal with the amendments as the Minister outlined.
The first change arises in amendment No. 101. Line 1, page 24, subsection (2) becomes subsection (6). This is a textual amendment updating the cross-referencing of subsections but it does not affect the impact of the text. The second change adds the word "or" after "agreement". The effect is that a copy of the credit agreement may be handed to the consumer upon making the agreement or delivered or sent to him or her within ten days. The purpose is not to impose an onus on the provider of credit to supply a second copy. I did not know what the second copy was for. It is unnecessary and I could not see how it would benefit the consumer.
The third change introduces a new subsection 1 (b) which provides that a copy of the agreement be handed to the guarantor on signing the agreement or posted to him within ten days. During consultations on the Bill it emerged that some credit institutions make successive loans on the basis of a contract of guarantee without the knowledge of the guarantor who may consider he is acting in that capacity on a once-off basis. If you were a guarantor for one loan you could also be guarantor for a successive one without your knowledge. The consumers' association brought that to our notice. It happened to me when I was guarantor for a constituent because of the term "successive credit agreements". Under the section the guarantor will be aware of any further liability imposed on him and may take such action as he deems appropriate. He may wish to continue to be the guarantor or decide he has had enough of that kind of philantrophic exercise.
Unless the guarantor advises the finance institution it is only for that explicit case.
Some credit institutions make successive loans and in such cases they take the original guarantor to again be the guarantor. It is rather like where you take out a standing order for your favourite charity which continues to be paid until it is cancelled, irrespective of whether the charity remains your favourite one and whether you wish to keep contributing to it.
Amendments Nos. 102 and 103 delete from the text in their previous format the provisions contained in amendment No. 101. The fourth change appears in amendment No. 104 which provides that a consumer cannot be penalised for withdrawing from the agreement within the currency of the cooling-off period provided for in subsection 1 (d). It was pointed out that without such a wording a creditor might raise a charge on a consumer for utilising the cooling-off provision. Such a charge would defeat the whole purpose of the section and inhibit consumers from exercising their rights to withdraw.
Amendment No. 105 in the name of Deputy Bruton expands the requirement to indicate the security for the loan on the credit agreement to include cases where deeds of property are lodged without registerable interests being secured on them. That is an acceptable amendment and perhaps the Deputy would like to comment on it.
I will be happy if the Minister accepts it. I will comment on the section as a whole.
The sixth change is in amendment No. 107 where paragraphs (1) and (m) on page 25, lines 30 to 39, become two stand alone sections which do not alter the substance in any way. It is an editorial change.
Amendment No. 108 is self-explanatory. Where previously the thrust of the section was contained in subsection (1) it will now be contained in three subsections. The last change substitutes "credit institution" for "bank" and is a follow-on from an earlier agreed amendment.
As regards the insertion of "or", the original provision was that the person would have the credit agreement handed to them and would then have confirmation of that posted within ten days. They would have another ten days' cooling-off period. I presume the Minister changed this because she felt it was too onerous for the lender to post the agreement.
As well as hand it personally.
When you receive a letter in the post there is certain gravity about it compared with putting a piece of paper into your back pocket. A letter stating that this is the agreement and that you have tens days in which to respond puts the consumer on formal notice of the cooling-off period. There was merit in that. Now they can hand the letter out.
It must be done personally.
Yes but there would not necessarily be an attempt to alert the consumer to the fact that he has been formally put on notice that as and from today he has ten days to make up his mind. However, I am prepared to hear the Minister's view on why this was not considered a good idea.
I thought there was nothing more serious involved than handing it to the person, involving a direct interchange between the lender and borrower, given personally by the lender or somebody acting on his behalf, to the borrower; a very explicit act. Postage is not an explicit act but rather at several removes from the lender to the borrower, the sender to the receiver. I did not see the need for it in terms of its intensity or importance; I thought what was important was the handing of the document to the borrower.
Is there an obligation, other than having it incorporated in the small print in the agreement, to alert a consumer that he or she does have a cooling-off period——
Ten days.
——because many consumers will not go through these extraordinarily dense pages or terms of an agreement? Effectively this means that, if the cooling-off period is hidden in the small print of an agreement, it may be lost to the consumer whereas, if there is a provision that it must be sent to the consumer by post, it could be required that part of the letter would indicate to the consumer — in the opening letter, so to speak — that he or she had this cooling-off period.
In order to clarify the stipulation that a copy of the credit agreement shall be "delivered or sent by prepaid registered post within ten days of the making of the agreement", if the copy of the agreement does not arive for, say, four days, is the cooling-off period then reduced to six days? How exactly do those interlinking days work?
There was much debate about that. I hope An Post will not become alarmed by such stipulation because we have had plenty of such examples in recent times. The cooling-off period begins the day the consumer receives the letter——
At the end of the day, a person posts the reply, or must he receive——
The cooling-off period is ten days from the date the consumer receives the copy of the agreement until it is received back by the lender.
I see.
Whatever way one chooses to do that; for example, one could hand it back.
These things need to be made clear to the consumer.
I agree. We spent much time thinking about this; in fact much of our deliberation focused on the matter of delayed post when it struck me that one could not be subjected to that condition. Therefore, the cooling-off period runs from the date on which the consumer receives a copy of the agreement to the date on which it is received back by the lender.
Section 31 (1) (d) (i) says "or sending written notice"; even a layman could interpret that to mean the day on which the letter came in the letterbox, not the day on which the borrower reeived it. The stipulation is vague within the terms of this section. These are things which need to be spelled out carefully because there is no doubt they will become the subject of considerable litigation.
The Deputy will be familiar with the problems encountered annually vis-�-vis the odd case of CAO applications brought to our attention — an applicant will have missed the deadline and the date of postmark is taken to be the relevant date if it is within reasonable limits.
Merely using the words "or sending" does not seem to me to imply what the Minister says.
I tabled amendment No. 105 because there was a fear that, if there was this written obligation to describe security that might force people to register interests thereby adding significantly to their costs, the fact that the Minister is accepting my amendment does represent an improvement in that consumers will not be forced to go to the Land Registry to have something put on the relevant deed.
We interpreted the Deputy's amendment in the spirit it was intended and thought it was sensible.
It is fairly common practice for banks to request people, when they enter into credit agreements, to sign a sort of disclaimer, something to the effect that "I realise my obligations under this agreement and I do not wish to consult a solicitor". What I am saying is that, when people sign credit agreements, very often, at the end of the document the banks ask them to sign something to the effect: "I realise the implications of this credit agreement and I do not wish to consult a solicitor"——
How odd.
These people are asked to sign these declarations.
Although not a lawyer I imagine that would not be legally binding because everybody has the right to consult a solicitor if and when they want something interpreted on their behalf. I had not been aware of such practice.
They are certainly doing it. Of course, a person could refuse to sign such declaration——
But some institutions are issuing such clauses.
When a person is endeavouring to enter into an agreement with a bank, he will not be inclined to cavil at something a bank official writes in at the end of that agreement. I wonder whether such disclaimer clauses are legal, if we should be inserting a provision in these sections stipulating that such disclaimers on the part of banks or other lending agents can negative any of their legal obligations. Presumably, a bank or other lending agency will be endeavouring to safeguard itself against a consumer by saying they did not understand the full implications and now they try to get a consumer to sign such declaration to copperfasten that safeguard for themselves.
I was not aware that banks were engaging in that practice but, if Deputy Bruton says they are, they must be. A forthcoming directive will deal with fair terms of contract — it has been in existence for some time past and must be transposed into our law, probably by way of regulation. Such disclaimer clause would certainly fall within his ambit. I do not consider it right that banks would impose such terms on any consumer. As Deputy Bruton said, a consumer who is about to receive the cash into their hands will not want to rock the boat and so will be inclined to sign. I would not agree with such practice. We shall be able to pick up that practice when we come to deal with the directive to which I have referred.
These are general contracts, not necessarily consumer contracts?
They would all be consumer contracts——
Not necessarily credit contracts?
We shall be dealing with any kind of contract being entered into by a consumer or consumers——
Yes, and the Department will be introducing a provision——
——called the unfair terms of contract, a European Union directive. I feel sure we will be able to cover that disclaimer clause within its remit, or will form part of general regulations to be made thereunder, although I have not yet fully studied that directive.
My understanding is that the banks lost a case on the grounds of a consumer not knowing the full details of an agreement, not having been told by the banks that they should consult a solicitor, and that this is a reaction to this case.
If Deputy Bruton will refer to Part X of the Miscellaneous sections, he will see that section 117 states:
Any obligation imposed on any person, or any right conferred on a consumer, by this Act shall not be limited or excluded by any term in an agreement or otherwise.
Whether that provision is sufficiently wide to encompass the instance to which Deputy Bruton referred, I am not quite sure, but I think the unfair terms of contract directive would cover such——
What I have picked up is that the courts have found that the banks had an obligation to alert a consumer to the fact that they should consult a solicitor about the implications of the agreement they were entering into and that, if they failed to alert them to that fact, the court must have found that the bank was negligent and, as a result, the banks are inserting this disclaimer clause at the end of such agreements.
Of course, one thing leads to another. I am sure that requirement was stipulated in the Consumer Information Act but Deputy Bruton is now telling me that a case was taken in a United Kingdom court which presumably led to our banks — I have not seen that requirement — inserting that disclaimer clause. By the time we reach Part X, section 117, we shall have taken a more detailed look at the details of the unfair terms of consumer contract directive, when we shall ascertain whether that would better encompass that safeguard.
There may be a case to be made for having a covering letter issued with such copy of agreement stating explicitly to the consumer that he or she has ten days within which to decide whether to go ahead — it would be stated as baldly as that — when they would know the precise position.
They are informed of the cooling-off period.
Only in the terms of the agreement. It could be item 9 (a) of the agreement.
Does the Deputy want to make the issue of the cooling-off period very clear?
Yes. There is merit in that I suppose. We will look at it under the miscellaneous section and see whether there is a need to reinforce it.
In amendment No. 101 the Minister has not allowed for some of the other methods of document transfer such as fax machines. For many people involved in business it is just as easy for them to receive copies of documents through fax machines. There are also document delivery companies who specialise in delivering documents. It is not a postal delivery service in that they are not stamped or franked. Some of those rushing around the city on motor bikes are employed by documenmt specialist delivery companies. Where does that service fit in within the exchange of documents? This service could be of crucial importance in the event of a disruption in the postal services, for any reason, such as a labour dispute, weather problems or disputes not directly concerning postal workers.
While more people have a fax machine in their homes we are dealing with consumer — not business — credit. The amendment does not include documents delivered by fax but I am assured it includes documents delivered by courier.
Ten days of the date of receipt would mean a courier delivering a document for which he obtained a signature or a document arriving by post, other than by fax. It seems to be covered other than by automatic transmission.
The word "delivered" is contained in the amendment. The interpretation of "delivered" is another matter, it implies delivery by hand.
Followed by a signature on receipt, or courier service.
While you may have a guarantee that a particular delivery will be made by registered post, amendment No. 101 (1) (b) states that a copy of the credit agreement shall be sent within ten days of making the agreement but it could be sent to the wrong address. There is little or no proof that that happened whereas with a registered letter you have a statement from a third party — in this case the postal authorities — that the correct address was used. The Minister will be aware that in planning terms a person is entitled to a decision within 60 days from a local authority. If you are not properly notified that a decision has been made you have automatically got permission. There has been at least one case of this in my local authority.
We had a huge one.
Amendment No. 101 (1) (b) (ii) refers to the credit agreement sent but there is no guarantee or record that it has been sent to the correct address. Therefore, in this case the guarantor is put at risk.
We cannot legislate for every single aberration which may occur.
Why did the Minister differentiate between——
We said "delivered or sent by prepaid registered post within ten days of the making of the agreement . . ."
Does that not include the fact that somebody must physically get a signature for delivering it to the appropriate person?
The porcedure for registration is set down but that is not the case as far as the private organisations are concerned.
We have done our best. If we could exclude every single aberration which might occur it would be perfect legislation.
If it is handed personally rather than delivered and signed for by a receptionist, in a business, or handed to a child in the event that the consumer was not available on delivery would that satisfy the requirement?
Amendment No. 101 (1) (a) states:
(a) a copy of the credit agreement shall be—
(i) handed personally to the consumer upon the making of the agreement, or
(ii) delivered or sent by prepaid registered post within 10 days of the making of the agreement by the creditor to the consumer, and
(b) a copy of the credit agreement and any contract of guarantee shall be—
(i) handed personally to any guarantor upon the making of the agreement, or
(ii) sent within 10 days of the making of the agreement by the creditor to any guarantor.
There is no reference to registered post.
There is no cooling-off period. I think the Deputy is more concerned about the method of delivery and the evidence of same.
Yes.
We feel we have dealt with it as well as we can in the circumstances allowing for the fact that there is always the odd human error for which we cannot legislate.
I appreciate the Minister's attempt to make everything as clear and precise as possible. She referred to the curious role of the guarantor who can sometimes be rolled on from one specific guarantor to another for the same person. Under the provisions of amendment No. 101 (1) (b) (ii) that could happen. If a person was sufficiently bad minded to try to continue that process they could fail to properly notify the guarantor.
Is the Deputy speaking about the credit institutions?
Yes.
Yes, but we hope they will interpret the Bill correctly and that they will not wish to incur anyone's wrath. That would make a fine headline. We discussed this matter with the credit institutions because of examples given to us. I feel it will be interpreted correctly. It is of no benefit to a bank or a credit institution to have an unwilling guarantor who finds he is not liable even though they have rolled him on so to speak. Now they are left with the worst of all worlds: they are left with the guarantor who does not want to underwrite and they have public blame heaped upon them. I do not think they will go down that path. If they did it once or twice inadvertently that would be the end of it.
In amendment No. 101 (1) (b) (ii) would the Minister consider using prepaid registered post to the guarantor?
To tell the guarantor what he is now entering into if he was not aware of it. There is no cooling off period. The Deputy is concerned that the guarantor may enter into another agreement without knowing it. The original Act did not provide that he be told of this eventuality. The Deputy wants to hand on to the guarantor the same requirement as is handed on to the person getting the credit agreement——
That is correct.
——because, unwittingly, that guarantor could have entered into the agreement before receiving the information.
I had an experience like that recently. If the duration of the loan is over a period, you convince yourself when it is discharged that everything is in order, that it has come to an end and that that is the end of your responsibility in the matter. Unless you are actually advised you tend to overlook it.
In the case the Deputy described presumably the lending agency would rule that it is not a new credit agreement. Under this provision would he receive notification?
In this instance we are legislating to ensure that he would not become a "roll on guarantor" because of the fact that he acted as guarantor for the person concerned with the same credit institution. Deputy Flood asked that the guarantor be given the same comfort as the creditor, that is, prepaid registered post. This is reasonable given that such an eventuality rarely arises. If there was a delay in notifying him the agreement would be unenforceable because the credit institution had failed to inform him early enough. He, however, would have to go to the bother of extricating himself from the agreement. As we are all aware — let us be open and frank about it — banks pounce in these circumstances and a person might be held responsible and thought ill of even though he or she did not invite the criticism, but rather the banks themselves. I can see no reason we cannot cater for this.
In this instance the creditor is entering into a credit agreement and we are legislating to cover an eventuality which arises from time to time. The Deputy is trying to ensure that the guarantor would be asked if he wished to enter into a new agreement and act as guarantor for the person concerned. Deputy Rabbitte and I have come across such cases and tales have been relayed to us at our clinics. I do not see any reason they should not be informed in the same fashion. We will have to provide for this in some way.
Under subsection (2) a consumer hire agreement will be exempt. What is the reason? I note also that while overdrafts will be exempt credit card accounts will not. In practice what will this mean? Will there be a ten day cooling-off period when a person is first issued with a credit card?
Consumer hire agreements are dealt with in a later section. We are examining the position with regard to credit cards which are also dealt with in a later section.
Overdrafts are dealt with elsewhere but credit cards are dealt with in this section. Is there a cooling-off period.
As the Deputy is aware, it is still possible to table amendments. We had a meeting yesterday to consider the credit card arrangements. This section has not been finalised yet.
Does the same apply to consumer hire agreements?
Consumer hire agreements are addressed in a later section.
As it stands, are we providing for a cooling-off period in respect of credit cards?
No. We had a meeting yesterday as we were unhappy about the credit card arrangements. The Department of Finance put it to us that it is responsible for such arrangements with the Central Bank and the banking institutions. We are looking at the matter but at present it does not provide for a cooling-off period.
My reading of subsection (2) (d) is that a cooling-off period is provided for in credit card accounts. Subsection (2) states that subsection (1) will not apply to an overdraft "other than on credit card accounts". This suggests that a cooling-off period is provided for.
It is my understanding that it would be very difficult to provide for a cooling-off period in respect of credit card purchases. There may be an error and we will have to look at the matter.
Amendment agreed to.
I move amendment No. 102:
In page 24, subsection (1), lines 3 and 4, to delete paragraph (a).
Amendment agreed to.
I move amendment No. 103:
In page 24, subsection (1), lines 9 to 14, to delete paragraph (c).
Amendment agreed to.
I move amendment No. 104:
In page 24, subsection (1) (d), line 16, after "agreement" to insert "without penalty."
Amendment agreed to.
I move amendment No. 105:
In page 25, subsection (1) (g) (iv), line 10, after "any" to insert "which shall include cases where deeds of property are lodged without any registerable interest being secured upon them".
Deputy Bruton has subjected the Bill to intense scrutiny. His amendment is sensible and straightforward and I am glad to accept it.
Amendment agreed to.
I move amendment No. 106:
In page 25, subsection (1), lines 30 to 39, to delete paragraphs (1) and (m).
Amendment agreed to.
I move amendment No. 107:
In page 25, between lines 39 and 40, to insert the following subsections:
"(3) A credit agreement operated by means of a credit card shall contain a statement of—
(a) the amount of the credit limit, if any, and
(b) the terms of repayment or the means of determining them.
(4) A credit agreement operated by means of a running account shall contain a statement of—
(a) the amount of the credit limit, if any, or the method of determining it, and
(b) the terms of use and repayment.
(5) A creditor who is a party to any credit agreement to which this section applies shall ensure that the agreement complies with this section.".
Amendment agreed to.
I move amendment No. 108:
In page 25, subsection (2), line 40, to delete "Subsection (1)" and substitute "The section".
Amendment agreed to.
I move amendment No. 109:
In page 26, subsection (2) (d), lines 5 and 6, to delete "bank or other credit or financial institution" and substitute "credit institution".
Amendment agreed to.
Section 31, as amended, agreed to.