Select Committee on Enterprise and Economic Strategy díospóireacht -
Wednesday, 27 Jul 1994

SECTION 54.

Mrs. O'Rourke

I move amendment No. 164a:

In page 34, subsection (1) (c), line 39, after "deferred" to insert "other than the right to use an overdraft facility without the consent of the creditor,".

Section 54 limits a creditor's rights to enforce an agreement. It requires that in future, a consumer must be given notice before the creditor carries out certain actions, including demanding the early payment of the sum; that is the provision as that section stands. The amendment involves a change because to date overdrafts have been considered by credit institutions as payable on demand. I do not know whether all members realise that. Section 54 is a good provision.

When the provisions of this Bill come into force a creditor will be required to give a consumer ten days notice regarding the enforcement of any provision of a credit agreement which will include an overdraft facility. There was a lot of debate about this. I became aware of a number of consequences which could follow from this section because a consumer would still have the right to use an overdraft facility and draw down on it during the ten day notice period. If the credit is demanding payment of an outstanding sum on an overdraft, he or she is in difficulty and, therefore, the consumer, by exercising his rights under this section in relation to an overdraft, might increase his or her liability and create further difficulties.

Mr. R. Bruton

By way of explanation, is the Minister saying that a bank can restrict some term in an overdraft agreement and go back on something they have agreed?

Mrs. O'Rourke

Up to now if one had an overdraft with a bank or credit institution, it can be foreclosed without any warning. A person can be told that their overdraft facility is being withdrawn. That is the position. There is no need for notice.

Mr. R. Bruton

And we are allowing them to continue that?

Mrs. O'Rourke

No, we are providing that they be given ten day notice that their overdraft is being withdrawn. We included that in the Bill, which represented a huge change, and it was drawn to our attention that if we allowed that ten days grace period, the consumer could use that period to further increase his indebtedness.

Mr. R. Bruton

We are doing the opposite. At present the bank can, at the drop of a hat, withdraw the overdraft facility without ten days notice. The Minister is saying that a creditor shall not enforce provision of a credit agreement by doing any of these things — the Minister is giving an exception — other than the use of an overdraft facility. The Minister is giving an exemption from all the provisions of this section to the overdraft facility.

Mrs. O'Rourke

No. If one has an overdraft facility now, that can be withdrawn without notice. I did not know that. I thought that if one had an overdraft, one had to be told that that facility was no longer available. This section provides for ten days notice to be given to a customer that a bank or credit institution is intending to foreclose on an overdraft facility. Under this amendment a customer will have a deferred period of ten days but one cannot draw down any further on the facility, otherwise one would get into a greater degree of indebtedness within the ten days notice period.

Mr. Connolly

I welcome the amendment because generally banks do not withdraw the overdraft facility without notice and that will be now re-enforced. Of course, that is subject to a differential on the interest rate. What will be the fluctuating base if they decide on the ten days? Will there be a penalty imposed within the ten days period because there would have to be uniformity in regard to interest rates? When they send out the notice will they introduce the penalty clause?

Mrs. O'Rourke

The Deputy has made an interesting point but we have discussed various aspects of interest rates here since we first debated the Bill. I am not in a position to do anything about interest rates on what interest banks, building societies or institutions, other than the ones listed, are charging. The Deputy has asked me if, in the period of ten days, they will include the penal penalty clause but I do not know the answer to that.

Mr. Connolly

I do not wish to open the interest rate debate again but I am concerned that these institutions may decide, within ten days of the notification, to include a penalty clause. If an individual has £1,000 in a bank and is charged £200 interest, have the banks a right to increase the interest on the other money by a substantial amount? That is general practice in the banking arena at present. Will there be a penalty clause within ten day notice period? Will there be a side door with regard to interest charges? I am talking about all financial institutions. I can see that being the case if they so desire. If a bank decides to withdraw an overdraft facility, it has a reason for so doing.

A Deputy

The Deputy will not be affected, by that problem.

Mr. Connolly

Up to now I have been lucky, in that respect.

Mrs. O'Rourke

I would call the Deputy prudent if he has never had to avail of an overdraft facility.

Mr. Connolly

I have never got to the stage where I was not able to claw back from disaster. I am talking about account holders with all financial institutions, especially people with current accounts which is where the overdraft facility comes into play. Will those institutions apply the penalty clause within the ten days period?

Mrs. O'Rourke

If they are giving ten days notice of withdrawal of the overdraft facility — up to now they can telephone and say the overdraft facility has ended — they could not bring in a penalty clause in that ten days.

Mr. Connolly

They do not do it now because they ring the customer overnight and the computer simply indicates that the overdraft of Mr. X or Mrs. X has been withdrawn. Under the terms of the Minister's amendment, they cannot take away that facility without giving notice but in the ten days period can they decide to increase the interest from 10 per cent to 15 per cent?

Mrs. O'Rourke

It is not the amendment that is giving ten days notice but the section. If they give ten days withdrawal notice, it is sensible to assume that within that ten day withdrawal notice they cannot include the penalty clause to which the Deputy refers.

Mr. Connolly

But the section does not say they cannot.

Mrs. O'Rourke

No.

Mr. Connolly

Therefore, they are free to do so.

Mrs. O'Rourke

I would not think so.

Mr. Connolly

It has to be in the Bill. I do not want to complicate things — it is not in my make up to do that — but the Minister will forgive me if I do. What I am asking will the status quo remain until the ten day’s notice expires?

Mrs. O'Rourke

An overdraft facility is usually negotiated between the bank and the customer on a one to one basis. If the bank does not like the way the customer is behaving and decides to withdraw the overdraft facility in ten days, it stands to reason that the arrangement made with the bank does not fall until the ten days are up. The customer goes on penalty after that. That is the position.

Mr. Lawlor

The penalty is already in the agreement. The banks can do as Deputy Connolly says.

Mrs. O'Rourke

The customer now has ten days before the bank can withdraw.

Mr. R. Bruton

Only in respect of those three items, not the penalty clause. The Minister does not specify that the bank cannot impose a penalty.

Mrs. O'Rourke

The customer makes an arrangement with his bank for an overdraft facility of, say, £5,000 and a penalty clause comes into effect if he goes over the stated amount or is found to be in bad shape financially. He does not get to that point if he has ten days' notice of the breaking of the arrangement.

Mr. Connolly

The bank decide to penalise the customer so heavily as to prevent him using his overdraft. It is copping out of the agreement on the terms of the overdraft facility, detailed in writing by it. If the financial institution then inform the customer that it is withdrawing the overdraft facility and will not extend it for the remainder of the term, it can then say this is a variation of contract which was covered in the letter it would have sent the customer an arranging the overdraft. This is highly complex.

Mrs. O'Rourke

It is not. I understand quite clearly. This section of the Bill provides that a bank has to give ten day's notice before foreclosing on an overdraft. Is the Deputy saying that, during that ten day period, the bank could break the original agreement effected with it regarding the rate of interest?

Mr. Connolly

No. I am saying it has already broken it because it has stated in a letter that it is withdrawing the overdraft facility within ten days under the terms of the Act. Then it can decide from the date on the letter or during the next ten days to increase the interest rate accordingly.

Chairman

Other Members have indicated that they wish to speak. Perhaps the Minister would give some consideration for Report Stage to what Deputy Connolly said.

Mrs. O'Rourke

First, the section is a good one because it is now mandatory for——

Mr. Connolly

There should be a provision — and maybe the Minister would look at it for Report Stage — that interest of a penal nature should not be charged within the ten days because if a company's overdraft was very high, it could be serious.

Chairman

The Deputy has made the point.

Mrs. O'Rourke

This has to do with consumer credit, not industry.

Mr. Connolly

An overdraft could be used in industry.

Mrs. O'Rourke

It is a Consumer Credit Bill, not a Bill relating to commercial or industrial matters.

Mr. Connolly

An account can be used to support an industrial account.

Chairman

We are straying off course now.

Mr. Noonan (Limerick East)

The provision relating to ten day's notice is a good one but it should be teased out to see what is the difference between theory and practice. Deputy Connolly made a strong case and, even though the burden of his case was about how a company or a shop would run a significant overdraft for cash flow purposes, it is correct that personal overdrafts can be used to underpin businesses as well and are frequently so used. In the case of ordinary consumers, banks do not like giving overdrafts to individuals, and their practice is to give a one, three or five year term loan.

Mrs. O'Rourke

What about an operating overdraft?

Mr. Noonan (Limerick East)

By and large, they are reluctant. Drawing on my constituency experience I have noticed a practice in recent years whereby the overdraft agreement is reviewed in 12 months. I do not know whether this is general practice or not becausse it is very often difficult to go from the particular to the general on issues such as this. I have heard of people on holidays going to a cash machine and attempting to draw out up to £2,000. From their own point of view they have plenty of credit, having an overdraft of £5,000, but no money comes out of the cash machine. What has happened is that the 12 month period has elapsed. There is no notice from the bank and because the information is written up on the computer it is taken out of the database and when the customer uses the machine no money comes through. That is outrageous. The Minister may have to look again at this between now and Report Stage. The same banks honoured cheques but automatic transactions could not be carried out after the end of the 12 month period. When they subsequently went back to their banks they had no difficulty in renewing the overdraft facility; they got a half-hearted apology and were told the bank had not got round to marking up all the accounts. That is very peculiar practice and people have been embarrassingly caught by it, particularly on holidays.

Mrs. O'Rourke

That is where the electronic machines had each met and matched one another.

Mr. Noonan (Limerick East)

Will the Minister look at that on Report Stage to see if she can strengthen the section? I do not think the ten day notice provision would be sufficiently strong for that.

Mr. Connolly

Generally speaking the lender warns the customer to notify the financial institution a month before the overdraft is due for renewal.

Mr. Flood

In fairness, we have been trying to develop this legislation as it applies to the lender and to the consumer. We have to be fair to both sides. If a consumer has an agreement of 12 month's duration with a lending institution at the end of that time the agreement comes to an end. There is then an onus on the consumer to renegotiate the agreement. On this section we are talking about the ten days' notice. I accept that, in the case of the electronic lending facility, it is much speedier to put in the stop about which Deputy Noonan speaks. I hope, generally speaking, that the ten day notice would be sufficient to indicate to clients that such an eventuality could take place. In addition there is that onus on the consumer to keep his or her financial affairs in order. We have to be fair to the lending institutions, and ensure we support them where they need it. From talking to bank managers I understand that much of the problem arises from the fact that communication tends to be in one direction whenever a client is unable to keep his financial affairs in order when he tends to stay away from the bank. Am I correct in understanding that the Minister's amendment No. 164a gives the lending institution the right to stop further use of an overdraft facility without the ten day notice?

Mrs. O'Rourke

Yes, during the period in which notice has been given that an overdraft is about to end; during that period you cannot drawn down funds.

Mr. Flood;

The problem is it could well be that a consumer has already embarked on the further use of that credit facility which has not yet surfaced at the bank. For example, one could be drawing cheques on the basis that they would be honoured. There is a hiatus of a couple of days between drawing a cheque, its being lodged in another bank and finding its way back to the account of the customer. In such circumstances I predict a consumer being caught out unfairly by the action of the lending institution. That is an eventuality the Minister might consider tightening up as well as the other aspects about which Deputies have spoken.

Mr. R. Bruton

Deputy Connolly highlighted an important issue here in that we are saying a credit institution cannot demand early payment, recover possession of goods or terminate some element of the agreement without giving ten days' notice, but we are not saying that it cannot impose penalties. If the lending institutions stated in the original credit agreement that such penalties were a possibility it is covered without the ten days' notice. The Minister's clear understanding was the opposite, and they could not trigger these penalty clauses——

Mrs. O'Rourke

——because of the original agreement made with the borrower.

Mr. R. Bruton

Presumably the penalty clause would have been written into the original agreement; if one searched far enough one would have found these penalties — interest charges, the £3 per transaction, all these penalties they impose without notice.

Mr. Connolly

They call that the variation clause.

Mr. R. Bruton

If an overdraft limit is exceeded a £3 charge for every transaction is imposed, regardless. They do not inform the customer that he or she has exceeded their limit. It is not unreasonable to request that a lending institution would inform the customer if and when it is proposing to trigger such penalties. If that is what Deputy Connolly is proposing——

Mrs. O'Rourke

Is the Deputy talking about interest rates?

Mr. R. Bruton

The penalties could be either; an interest rate penalty merely means they relate the penalty to the amount of the sum outstanding, whereas a transaction penalty is related to the frequency of the transaction but they are not interest rates, they are penalties. I see merit in considering, on Report Stage, whether the ten days should limit action in relation to such penalties.

As I see it the Minister's exemption, does not apply to the further use of an overdraft but to the entire overdraft. In other words, the Minister is granting a total exemption to overdrafts in respect of this section.

Mrs. O'Rourke

No.

Mr. R. Bruton

If she rephrased her amendment and said: "other than the right to further use an overdraft", to continue to use an overdraft without consent that would make sense. However, as I understand it, when the Minister's amendment states "other than the right to use an overdraft facility without the consent of the creditor" it seems to me that that exemption is applicable to overdrafts, so that they could withdraw one's entire overdraft overnight without ten days' notice. Lending institutions can say that they always had their right of consent and are now saying: "Without ten days notice, you have zero overdraft, you are entirely out of kilter and you do not have any of this ten day protection". If the Minister's sole concern is with the ten days' hiatus, the wording should specify "further use" rather than "use".

Mrs. O'Rourke

Accelerated use or whatever, yes. The first provision was to extend the ten days into an area where it did not apply heretofore, that is the overdraft facility, knowing that it could be pulled from beneath one immediately. Having done that, and having made it public — the Bill was freely circulated — there was a lot of furore about it, as the Deputy knows. Then it was put to us that, from a prudent point of view, the consumer who had so borrowed and was now given ten day's grace before his overdraft was foreclosed, could go on a spending spree within that period because he or she had received notice to that effect. That made sense when it was put to us. I understand the Deputy's point but if an overdraft is about to be foreclosed, one must have already reached the limit in any case, so "further use" would extend the provision further beyond that. Metaphorically speaking, if a bank was about to call in an overdraft — being compelled, under the provisions of this section in the Bill, to give ten days' notice of their intention to do so, one must have exceeded the limit because notification would have been received from the bank.

Mr. R. Bruton

Judging by the manner in which the section is drafted my understanding was that——

Mrs. O'Rourke

They do not ever want to foreclose unless one has exceeded one's limit.

Mr. Rabbitte

I thought the intent behind the Minister's amendment was that whereas the financial institutions at present have the right to withdraw an overdraft without notice, this provision would impose a requirement that they give ten days' notice and that Deputy Connolly's point was that no additional penalty be imposed during these ten days. If there are provisions within the terms of the agreement itself——

Mrs. O'Rourke

If they have broken the terms of the agreement——

Mr. Rabbitte

I should have thought there was a necessity to make it explicit in the Act that, merely because they are now required to give ten days' notice, they cannot impose an additional transaction cost, of whatever nature.

Mrs. O'Rourke

In other words, they do not run riot during those ten days.

Mr. Rabbitte

Yes, they could circumvent the purpose of the legislation by rendering it so costly to the consumer that the ten days is of no value.

Mr. Connolly

That is my main concern.

Mrs. O'Rourke

We have all entered into such agreement with banks from time to time, although Deputy Connolly appears to be very prudent and has not. The banks stipulate the terms of an agreement initially. If they predict that one may well exceed that limit, they feel they have a right to insert other clauses, penalty rates, or however one cares to describe them. We must remember that the agreement will not terminate until the ten days have expired.

Mr. Rabbitte

It is being suggested here that they could be free to impose an "additional" charge or an "additional" penalty.

Mrs. O'Rourke

In which case they would have broken the terms of their agreement. We addressed that point this morning under section 48.

Mr. Rabbitte

Well, one would have to prove it was not "fair or reasonable."

Mrs. O'Rourke

Is that the one with which we dealt this morning?

Mr. Rabbitte

Yes, that was about imposing a new term that could be considered unreasonable.

Mr. Noonan (Limerick East)

The Minister said that the only circumstances in which a bank would notify the withdrawal of an overdraft facility would be when a customer reached the limit, perhaps a little beyond it, that it would never happen that a prudent lender would have overdraft facilities withdrawn——

Mrs. O'Rourke

That is what I would have thought.

Mr. Noonan (Limerick East)

Therefore, the idea of going on a spending spree to reach one's limit during the ten days is more notional than real. I do not think that is right. Practice is changing rapidly in financial institutions and it is impossible to be up to date on it but as I understand it, the banks do not like to give overdraft facilities to somebody who will be in the red for the 12 months——

Mrs. O'Rourke

And paying heavily for it.

Mr. Noonan (Limerick East)

——even if they are in the red to the tune of £1,000 when the facility is £5,000. The overdraft facility is provided, usually for good customers who will be in the red during periods of cash flow difficulty but are in the black for significant periods of the year also. They quite frequently try to move people who are constantly in the red, even though not up to their limit, into taking a term loan.

Mrs. O'Rourke

They prefer terms loans anyway.

Mr. Noonan (Limerick East)

In the case of somebody who is well short of thier overdraft limit at the end of the 12 months the practice can be to withdraw the facility and give them a notice to call in to see the manager to negotiate a term loan. There is that grace period——

Mrs. O'Rourke

It is not just the naughty boys who are——

Mr. Noonan (Limerick East)

No, it is not. As far as I can see the way matters are going with personal borrowing, there are hardly any naughty boys on overdraft any more.

Mrs. O'Rourke

Or girls; we cannot be sexist.

Mr. Connolly

The bank may decide to withdraw a £5,000 overdraft facility because the venture in which the person concerned is involved is not to the bank's satisfaction. Within the ten days it may notify the person. Generally the bank allows the overdraft facility for a year but if it decides to withdraw the facility, from a risk point of view, before the end of the 12 months period, it could decide, having the powers under the Act, to increase the rate of interest. A penal interest rate should not be charged within the ten day notification period.

Ms Keogh

When Deputy Connolly said is relevant. Many banks require people to clear their overdrafts for a period of 30 days per year. The issue, therefore, is not as simple as people appearing to be reneging on an agreement they have made with the bank. In terms of this amendment, there are other permutations to this that have to be addressed.

Mr. R. Bruton

It might be sensible for Fine Gael to introduce a Report Stage amendment extending the list by adding, "(d) they shall not be allowed to impose penalty clauses unless ten days notice is served.". In other words the ten days grace will be given before penalty clauses can come into effect. That would address the problem.

I continue to be concerned that in the drafting of the Minister's amendment — while I understand she is trying to prevent the customer running riot with the overdraft facility during the ten days — the wording she has used is much wider in that she is effectively granting an exemption from the entire ten day notice to the use of overdraft facilities. I suspect that when we see this in writing that is what will be given.

Mrs. O'Rourke

The Deputy's view is that having put in the ten days compulsion on the banks to let one know that they intend to foreclose on one's overdraft we are taking it away by saying this. Is that the Deputy's point?

Mr. R. Bruton

I am saying two things. The effect of amendment No. 164a is to withdraw again the ten day notice on overdrafts. That goes because they have this "other than" which gives them an out. Penalty clauses will now be triggered from day one in any credit agreement before the ten days are up and I do not think that is the intention.

Mrs. O'Rourke

The ten days is a bad idea and that is the conclusion we are coming to.

Mr. R. Bruton

The way to get over the problem is to put (a), (b), (c) and then (d) — they shall not invoke penalty clauses unless they give the consumer ten days notice before taking that action.

Mrs. O'Rourke

Obviously, I would have to take advice on the wording. The intention of putting in the ten days was to rectify the situation whereby one could be foreclosed upon without any notice. We must accept that that is a good intention.

Mr. Connolly

We appreciate that.

Mrs. O'Rourke

We appreciate the Deputy's comments which have resulted in a very wide debate. If we are to tie the hands of the banks during that ten days — we all seem to have strong suspicions that following those ten days things could happen to one's account which were not envisaged when one opened the account or the overdraft facility and which were certainly not envisaged by my giving the consumer the ten days grace period — it seems to have opened up a possibility that something could happen to one's account in that period.

Mr. Connolly

We are talking about financial institutions in general——

Mrs. O'Rourke

I know.

Mr. Connolly

——not banks alone. I am talking about all financial institutions.

Mr. R. Bruton

Even if they had written in the penalty clauses at the beginning, I am not sure that they still should not have ten days before they triggered them.

Mr. Rabbitte

They should not be allowed to invoke them even if they were in the agreement.

Mrs. O'Rourke

I do not know if it is explicit enough but section 54 (1) (c) states that "treating any right conferred on the consumer by the agreement as determined, restricted or deferred," I do not think it is precise enough to take in what Deputy Connolly is suggesting.

Mr. Connolly

I would like the Minister to have a look at that before Report Stage. I know it is complex.

Mrs. O'Rourke

We understand the Deputy.

Mr. Connolly

I would like the Minister to have a look at this before Report Stage. I am sorry if I raised a very difficult problem.

Mrs. O'Rourke

It is not too complex for us to understand. It is a complex problem because it has been thrown up by the section which sought to give protection in the case of overdrafts.

Mr. Connolly

That is correct and it is only when one sees the fine print that the problem arises.

Mrs. O'Rourke

Some are very suspicious about the Bill and sometimes can become paranoid about it.

Mr. Connolly

I always like to see the fine print.

Mrs. O'Rourke

That is part of another Bill. I am not satisfied that the wording of the amendment is correct and I will withdraw it. Having regard to Deputy Connolly's point, and in conjunction with Deputy Bruton, we will look at it again before Report Stage.

Amendment, by leave, withdrawn.

Mr. R. Bruton

I move amendment No. 165:

In page 34, subsection (1), line 40, before "days" to insert "working".

I suggest that "ten days" should be ten working days. Perhaps I am clarifying what the Minister already means and that they are working days but it would be clearer if we specified working days. People's rights would not be watered down just because there was a holiday period. It is over holiday periods that many of these agreements go wrong. People overspend at Christmas and then they find that the holiday period and the ten days are over. It would be better to state working days even if the Minister reduced their number to eight or nine.

Mrs. O'Rourke

During the debate on amendment No. 121 we spoke about consistency, uniformity and the numbers of days. I endeavoured to keep it at ten days and I consider that to be adequate. Everybody is entitled to a day off on bank holidays but some institutions do not work on church holidays so how would we describe working days? We wrestled with this when formulating the Bill and decided on ten days for warnings, notices, deadlines, etc. We have stuck reasonably to that and I am not disposed towards inserting "working" days.

Mr. R. Bruton

My point is that if a bank serves the notice on Christmas Eve, effectively there is no working day before it becomes effective.

Mrs. O'Rourke

The banks are open on New Year's Eve.

Mr. R. Bruton

Are the postmen back at work?

Mrs. O'Rourke

I think deliveries commence on 27 or 28 December.

Mr. Flood

It is better to choose a number of days and leave it at that. If the consumer must determine the number of days that are working days it will lead to confusion as they will not be familiar with the working arrangements of the lending institutions and whether weekend working is involved. It would be better for us to make sure that the consumer can easily calculate the ten days rather than complicate the matter by inserting "working days". I agree with the Minister that the ten days should be standardised.

Ms Keogh

I agree, I would not have any difficulty with ten days as long as it is standard throughout the Bill.

Mr. R. Bruton

I withdraw the amendment. It is not monumental even though there could be a few headaches with it.

Mrs. O'Rourke

Schools of a particular denomination are closed during church holidays while others are open.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 166 and 167 are related and may be discussed together.

Mrs. O'Rourke

I move amendment No. 166:

In page 35, subsection (2) (v) (1), line 26, to delete "21" and substitute "10".

The purpose of these amendment is to align the time periods for the remedy of the breach with the time prior to action at the beginning of which the creditor must serve notice. What is sauce for the goose should be sauce for the gander.

Mr. R. Bruton

I see the logic of the Minister's argument but it is a dramatic erosion of what was set out in the Bill from the consumer's point of view in that originally we were providing that if the breach of the agreement was capable of remedy the consumer had three weeks to deal with the matter. That seemed a generous enough provision to allow consumers to put their affairs in order. The Minister is saying that the 21 days will be changed to ten days and aligned with the serving of a notice. My understanding is that the bank serves notice on the consumer informing them that they will trigger a certain action. What the consumer has to do is not just respond but put their house in order.

Mrs. O'Rourke

Or seek remedies to do so.

Mr. R. Bruton

That is decidedly a larger task than simply issuing a notice. I see both sides of the argument but is the task of the consumer proportionate to the task of the lending institution in this instance? Is it reasonable that that is all the time that would be given?

Mrs. O'Rourke

The creditor and debtor have rights in an arrangement like this and it was for the sake of uniformity that we sought to insert "ten". I take the point that the demands on the consumer and the resources which he must employ are much greater than those of the creditor who has to issue a notice but it is the creditor who stands to lose in the arrangement. There are rights and obligations on both sides and while the consumer has a short period in which to act, if he does not do so the creditor stands to lose.

Mr. R. Bruton

I accept that argument. My concern is that, effectively, the consumer is asked to sort out the problem within ten days. I do not know from where the original 21 days came but we are dramatically diluting the consumer's side of the Bill as originally published. I do not know how widely the Minister consulted consumer associations, etc. It seems onerous for a consumer who has got into difficulty with a loan agreement to have ten days in which to get their act together. If they fail to do so court proceedings will follow. My impression of what many agencies dealing with consumers are saying is that this quick recourse to legal redress has not served either the financial institutions or the consumers well and that we should try to develop a system of mediation, etc. We are dramatically reducing the time available to any such mediation effort if we switch from 21 to ten days. If we hope that the 21 days will be used to develop a mediation service, perhaps the 21 days should be left.

Mr. Flood

The points made by Deputy Bruton are important in a case where a consumer finds himself under pressure. When difficulties have arisen between the institution and the consumer, it has been the tradition to get seven day's notice. One would get a letter saying: "If you do not sort out this matter within seven days we are going to court". Ten days notice is an improvement on that informal arrangement. Ten days is probably too short a time for a consumer to make adequate arrangements to sort out the situation but on the other hand, one could say 21 days is too long because things could begin to drift further creating difficulty for the consumer as well as for the creditor. On balance the middle ground of ten days is reasonable and if there is early communication between the creditor and the consumer on the basis of such notice being given, it is probably in the interests of the consumer not to put the 21 day period of notice into legislation as that allows things to drift on for a further 21 days, almost a month in terms of financial arrangements. Although I realise that ten days is tight, it is probably the best choice.

Mrs. O'Rourke

It was done in the interests of equity. Inequity creeps in because the demands on the consumer are greater than the demands on the creditor who must send out a bill and sit back and hope the money will come in. The consumer has to get the money. I wanted uniformity but that assumes there is a level playing pitch when there is not.

Mr. R. Bruton

Especially if you want people to look for mediation services and other sources——

Mrs. O'Rourke

Such as social debt management service? I am inclined to drop my amendment and leave "21 days". The efforts the consumer must make are far greater than the efforts which the creditor must make.

Mr. Flood

I accept the Minister's decision is based on what she heard. However, we are opening up a difficulty for the consumer who gets a letter and knows he has 21 days to sort things out. The natural tendency of a consumer is to let it drift so he gets into further serious difficulty before he sorts it out. We have postponed the day on which he should face up to his difficulties.

Mrs. O'Rourke

The urgency will be gone.

Mr. Flood

I think so. I am not sure it is a great idea.

Amendment, by leave, withdrawn.

Amendment No. 167 not moved.

Chairman

Amendments Nos. 168, 169 and 169a are related, it is proposed to take them together. Is that agreed? Agreed.

Mrs. O'Rourke

I move amendment No. 168:

In page 35, subsection (3), line 37, after "occurred" to insert ", in any records maintained for information on the consumer's credit record".

The purpose of this amendment is clarification. The purpose of subsection (3) is to ensure where a dispute has occurred between the consumer and the creditor and has been remedied in the time allowed, the consumer's credit record will not be affected. The text as drafted would make it necessary in such cases to falsify payment records, which was not the intention. The intention is that because there was a dispute and though it has been settled within the framework of the section, the creditor does not retaliate against a consumer by having his name placed on a list of defaulters. From my discussions with different groups during the formulation of this Bill I discovered that consumers who fall into this category are regarded as delinquent. The credit institutions do not appear to have any grey area in this regard. I accept they have to be able to identify consumers because such consumers perform a disservice to those who obey the rules and make their payments. On the other hand, if everyone who has a dispute or misunderstanding is labelled as a delinquent notwithstanding that the matter may have been settled, then such lists must be very misleading.

If one has an arrangement with a bank, is tardy in making payments but ends up in good shape with the bank, it seems wrong to be regarded as a delinquent consumer because of an abberation.

Amendment agreed to.

Amendment No. 169 not moved.

Mrs. O'Rourke

I move amendment No. 169a:

In page 35, between lines 37 and 38, to insert the following subsection:

"(4) Notwithstanding this section, a creditor may apply to a court of competent jurisdiction in any particular case to have the provisions of this section dispensed with where the court is satisfied that it would be just and equitable to do so.".

Amendment agreed to.

The Select Committee adjourned at 3.30 p.m.