I invite the Minister of State to make his opening remarks.
Consumer Credit (Amendment) Bill 2018: Committee Stage
I thank the committee for inviting me to attend today. Deputy Doherty's Bill addresses an important issue in seeking to reduce the cost of credit for moneylending borrowers. I must commend him on championing this issue for a number of years.
Can I just make a point? I wish to ask about the procedure. Why does the Minister of State make an opening statement on this legislation-----
I have the brief in front of me-----
I am not opposing it. I am curious just in relation to-----
Clerk to the Committee
He is not obliged to, but he can.
The Minister of State is attending as an ex officio member of the committee. I did not even think officials would be here with him. This is not his piece of legislation and, indeed, the Government is not co-operating with this piece of legislation, unfortunately. Therefore, the Minister of State should not be afforded an opportunity to outline why the Government is not co-operating with this piece of legislation. The Minister of State is here as a member of this committee in his capacity as himself. I do not have any officials with me at the committee. I am not sure if I am entitled-----
I will make the judgment on that in a second.
As the sponsor of this Bill, I am not sure if I am entitled to-----
We will hear from Deputy Doherty as well.
It is a query that I have.
I will answer that in a second. I do not agree. The Minister of State is welcome here, as is the mover, promoter and proposer of the legislation. Each will have a time of his choice to speak and address the committee. End of story.
I understand that it is a Private Members' Bill and I understand the point the Deputy makes. I am quite happy to move straight into discussing the particular amendments if the members present are happy to do so. I was just going to say a few small introductory words. There is other legislation coming down the track. I am quite happy to get into the specifics of the Bill straight away if the members are happy to do that.
The Chair has allowed it.
Well, that was my opening statement.
I have no problem with the Minister of State articulating the Department's view on this Bill. Indeed, I look forward to hearing it. My query was just on the procedure in terms of a Private Members' Bill before committee. Is the sponsor entitled, as the Minister or Minister of State is, as a member, to have officials present?
I will allow that, as I have said. I will allow both sides to speak. I do want to go on into a debate if I can help it.
I know. I was just about to finish if the Vice Chair would let me.
I know the Vice Chair is not feeling too great but just please try not to take it out on me. As I-----
Do I not look too great?
As I said, I am delighted, if I can say my cúpla focail, that we are here on Committee Stage and that the members of the committee have provided quite ample time since 2020 to go through a very lengthy pre-legislative scrutiny process in terms of this Bill. This Bill was published back in 2018. It is an ambition of my party's and mine that the excessive charges that are being applied by moneylenders to, in some regards, very vulnerable people are dealt with. We should not be allowing the type of rates that are applying. While we have had support at different levels, including on Second Stage, there is a clear kind of cat-and-mouse game, which I think is disappointing for the body politic, because sometimes this committee works well. We have a piece of legislation that was published four years ago, it comes to Committee Stage and, just like that, we have the Government then publishing its own piece of legislation and taking it to Second Stage before this week is out. That is disappointing because we hear sometimes that we all work together and all of this, but it does not always work like that, at least when it comes to a Bill that we have produced. It is not the first time. We have seen the same with the lobbying Bill and we have seen it with other pieces of legislation. That being said, I am very grateful to all of the people and, particularly, our witnesses, who contributed during pre-legislative scrutiny to this piece of legislation, which has improved and shaped the amendments that we put forward. I note that some of the issues that were discussed in relation to my Bill in pre-legislative scrutiny have found their way into the Government’s Bill. As we go through the amendments, we will come to those in time.
Is it agreed we now proceed? Agreed.
Section 1 is a new section. Acceptance of this section involves the deletion of section 1 of the Bill. Amendments Nos. 1 to 5, inclusive, will be taken together.
I move amendment No. 1:
In page 3, between lines 7 and 8, to insert the following:
“Amendment of section 93 of Consumer Credit Act 1995
1. Section 93 of the Consumer Credit Act 1995 is amended, in subsection (10), by the substitution of the following paragraph for paragraph (g):
“(g) in the Bank’s opinion, the cost of credit is usurious, excessively high or any of the terms or conditions attaching thereto are unfair, or”.
Amendment No. 1 is a definitional amendment. It amends the definition by which the Central Bank may refuse to grant a moneylender's licence under subsection 10(g) of section 93 from the existing text, which is: "the cost of credit to be charged is excessive or any of the terms or conditions attaching thereto are unfair" to the new text that this amendment proposes: "the cost of credit is usurious, excessively high or any of the terms or conditions attaching thereto are unfair".
Amendment No. 1 proposes to amend section 93 of the Consumer Credit Act 1995, which deals with the granting of moneylending licences by the Central Bank. It replaces "the cost of credit to be charged being excessive" with "the cost of credit being usurious or excessively high", terms which are then defined under amendment No. 3.
I oppose amendment No. 1 first on the basis that, taken on its own, it does not add any value to the Act of 1995. I have a note that combines this amendment with amendment No. 3 and if the Vice Chairman is happy to do it, I can deal with amendments Nos. 1 and 3 together because they are connected. When taken with amendment No. 3, I must oppose amendment No. 1 on the basis that it does not represent the most effective way to cap the interest charged on moneylending loans. I do not say this to be obstructive but because officials in the Department of Finance considered this approach of tying the cap to the licensing framework, and this method was included in the general scheme of that Bill last July. Essentially, the Government's approach last July was similar. However, in the meantime, and with the benefit of the involvement of the Office of the Parliamentary Counsel on the drafting, the Government Bill published recently refined its approach.
Section 93(10) provides for the grounds for refusal to grant a licence only and it would therefore have no effect once a licence has been granted. The rates proposed to be charged in the licensing process must accord with the caps under the Government Bill, but it also goes much further. The Government Bill now makes the cap a standalone requirement in respect of each loan offered, as opposed to the original licence application, and it makes it an offence for a moneylender to provide a loan above that rate. This is more straightforward and meaningful for individual customers as it is a requirement in respect of each loan and not a general matter considered with regard to the licensing process.
From the consumer's perspective - many of these people are vulnerable people who have had to borrow in a difficult position - in dealing with the loan and asking people with an issue to go back to how a licence was granted to the institution in question is very complex and it would be a very difficult process. We are linking the interest rate to each individual loan, saying that under the licence it would be an offence to charge above the rate in respect of that loan.
The setting of the numerical values of the rates in subsections (1) and (2) is also at odds with the power of the Minister to adjust the rates by regulation under subsection (7). We also consider this significant as asking the Minister to adjust rates by regulation would not conform with original numerical values set in primary legislation. There could be a difficulty if regulations were not in exact conformity with primary legislation. Again, I say this as the Government's drafting process has benefited from engagement with the Office of the Parliamentary Counsel and there is a risk that the method proposed by the Deputy would constitute an amendment of primary legislation by way of secondary legislation, which would be ultra vires the authority of the Minister under secondary legislation. We have had the benefit over recent months of refining and examining what we think is the most legally sound basis to deal with the matter.
With regard to the level of the rates themselves, while lower interest rates are of course the preference for consumers, there is a need for balance in setting the ceilings to ensure consumers do not face the difficulty of having to go without credit where providers leave the market either suddenly or en masse. We have had some withdrawals from the market. The moneylending industry remains an important source of credit for a significant number of people. The rates proposed for the first three years and the period thereafter set a rigid approach, which presupposes the level of reduction that the market can take in three years' time without any analysis and which would require primary legislation to amend in any event.
The Government Bill, in contrast, sets ceilings above which the cap can be set and provides for the Minister to have regard to a number of principles and policies set down in the primary legislation when making regulations to set the specific caps. This provides more flexibility to amend the caps in response to relevant policy factors while ensuring that the rate can never be set at such a level as to make it an artificial cap. The Government Bill also incorporates the consultation with the Central Bank which the Deputy and the committee favours.
The legislation passed Second Stage in December 2018 and in May 2021 there was a consultation process. In June 2021, Deputy Doherty made a submission to the committee outlining that he would move away from the annual percentage rate cap to an index cap on the total cost of credit over a timeframe of three years. In November the Oireachtas committee published a report of detailed scrutiny of the Bill. Deputy Doherty has proposed amendments to the Bill to cap interest rates, including a similar calculation method but at a lower level than what the Government is proposing. His method of implementing the cap does not make it an offence to offer credit above the rate and it links to the licensing process rather than the individual loans. It is one of the key issues and it is something we want in the separate legislation that has been published and will be discussed in the Dáil separately later today. We will deal with the interest charged on loans during the lifetime of a licence rather than referring back to the licence. People should be able to understand the interest rate they are being charged on a loan but asking people to go back and check the licence as issued by the Central Bank several years earlier, and them trying to work it out on that basis, would be very difficult for many people.
I commend the Deputy on raising this matter and there is consensus in dealing with this but because of the passage of time we have had the advantage of input from the Parliamentary Counsel, scrutiny provided by the Oireachtas and the involvement of the Central Bank and Attorney General. It is about improving what is a very important issue and everybody agrees with the principle of what the Deputy is proposing. We hold the view that enhanced legislation published by the Government is more comprehensive.
The Minister of State has spoken to amendment No. 3 so I will make the following point. If the Government was willing to work with me as the sponsor of this legislation over the past four years, there would have been a different approach. A contracts Bill was passed unanimously by the Houses of the Oireachtas and I was a sponsor of that, and there was also legislation relating to the Financial Services and Pensions Ombudsman, which saw real engagement. Through all the process, and even when the Government put forward its proposals, we offered amendments to try to sharpen the legislation. Often, these are rejected but on a number of occasions amendments have been accepted or the Minister has agreed to sharpen the legislation as a result on Report Stage. That approach was not taken by the Government with this legislation and the Government is more interested in having its moneylender Bill.
That said, I do not give a damn whose stamp is on the legislation at the end of the day. The Minister of State speaks of dealing with drafting issues and the benefit of the Attorney General or other advices, which we do not have. As an Opposition party, we nonetheless expect the process evident in two other pieces of legislation that have been enacted would be seen here. Unfortunately, that did not happen over four years with this legislation.
That said, outside the drafting issues there is a core issue in the Government's Bill, which is that it does not do enough. It barely scratches the surface on the question of moneylending. The Minister of State mentioned that people would not have credit and all the rest. The largest moneylender in this country left the State, as it had hundreds of thousands of customers and many of them were intergenerational. What did the Government do to create awareness in those consumers about where they could get credit? Point me to one initiative or press release. Point me to anything the Government did.
A major player may have left the market but there are still 36 licensed operators in the market, with 32 actively providing credit in the market. One loss is significant because it was a substantial company but there are still 100 different registered products out there and available to people outside of those offered by the company that has left. It is important to point that out. We want to ensure the majority of the companies lending here to continue, although some might leave after we introduce a cap that is not there now.
That sums up the Government's approach, which was not to do anything because there was another hundred licensed moneylenders in the market. Many of them are unique and catalogue operators and not lenders that provide loans to cover the communion or birthday party costs. I am glad the officials are starting to brief the Minister of State on this big issue. The Government did not do anything on this. It should have introduced an initiative to encourage the customers of that largest moneylender in the State to go to the credit union where they could get lower cost loans at a fraction of the cost charged by the moneylenders. That has not happened. The Government took a hands-off approach in that regard.
As amendment No. 3 is being discussed with amendment No. 1, amendment No. 3 proposes to delete section 103 of the principal Act, which sets out collection charges, which would be abolished under amendment No. 2, if they were to be administered. That is what the original section provided. The proposed new section 103 would provide for a cap on the rate of interest moneylenders are permitted to charge. The interest rate cap would be based on simple interest with an initial cap which would then be reduced further after a period of three years. It would also separate cash loans from loans provided on a running account. The new interest rate cap as it applies to cash loans would be as follows: a simple interest rate of no more than 0.75% per week up to a maximum of 36% per annum for a period of three years, which is the initial cap in the proposed amendment. It is proposed there would a simple interest rate of no more than 0.35% per week, which is a reduced rate, up to a maximum of 18% per annum after a period of three years. That would be the secondary reduced cap.
The impact of this cap for borrowers with reference to a €1,000 cash loan over a 12-month term by a credit union compared with the largest moneylender in the State, which the Government should have done something about when Provident pulled out of the market, would be that the total repayments on the loan would be €1,060. The borrower would be charged €60 in interest. A moneylender would charge the borrower €1,560, which is €560 in interest. The ratio of interest charged by the moneylender compared with the credit union is nine times more. The initial cap proposed in the amendment would be mean the €560 in interest that would be charged would be reduced to €360. The ratio of interest charged compared with the credit union would be six times more, which is still an very expensive type of credit. The secondary cap we propose would reduce the initial moneylender's interest from €560 to €180, bringing the ratio between what a credit union would charge compared with a moneylender after three years down to 1:3.
Crucially for the moneylender, the total interest payable does not include the impact of collection charges, which we deal with in amendment No. 2. Those collection charges push up the cost of credit much further. Therefore, this cap would slash the total cost of credit a moneylender can charge by more than one third and the further cap that would be in place after three years would slash it by more than two thirds. That would radically reduce the cost of credit moneylenders can charge, thereby protecting consumers, many of whom are vulnerable to vicious cycles of debt, and reduce the interest they are charged.
Further provisions of amendment No. 3 require the Central Bank to produce a report at least every three years assessing the cost of credit in the moneylender market and to make recommendations to the Minister for Finance, where they are warranted, to protect the interests of consumers. There is a requirement for the Central Bank to produce a report within three years. This is about sending a very clear signal that we are reducing the cost of credit moneylenders can charge, including abolishing collection charges and, after a three-year period, that cost will reduce further. That is what is necessary to protect people. It is not what the Minister of State has just told the committee, namely, that if your moneylender has gone, you should go to one of the other 100 moneylenders. That is not what we need.
Most of the reports that comprise studies that have been done in this sector show people who go to moneylenders can access credit from credit unions. A large number of them also access credit from credit unions. The issue is the convenience, the door-to-door sales, the fact the operator knows Sheila has John and Mary at home and John is about to make his first holy communion, or that people are asked on their doorstep if they are going on holidays. The issue is the in-your-face sales because of the convenience and short-term nature of the loans, as a result of which people get trapped into a cycle of high interest rate debt. I strongly commend amendment No. 1 to the committee.
I understand what the Deputy has said. One of the key elements of what we propose builds on the original legislation, the Private Members’ bill drafted some time ago. It goes without saying that the longer the period a person has a loan from one of these moneylenders, the more interest he or she will pay over time. One of the proposals we suggest is the loan would be restricted to 12 months. That would reduce the amount of interest people would pay over a period of time rather than having loans with a significant high interest rate running for a period of two or three years.
Second, we believe the issue of the credit unions in this regard is vital. I think we are all ad idem on that with respect to credit unions providing more unsecured loans, which they are very good at doing. It is the biggest sector in the economy providing unsecured loans. I will be meeting the credit union movement tomorrow to encourage it to lend more in that area given it has such a big footprint with approximately 400 branches around the country.
Up to now, many moneylenders have charged for the door-to-door collection of money. Every time a moneylender sends somebody out to collect money, that incurs an expensive charge. The moneylender can charge €40, €50 or €60 for a visit. We are banning that practice. All the operator's costs will have to come in under the interest rate.
The views behind the Private Members' Bill are well motivated and are all in the right place, but there are significant extra items that could and should be taken into account regarding this issue and that is why the Government published its legislation. The Government approved the heads of the Bill last year. It is not something that has just emerged now. Pre-legislative scrutiny of the Government's proposed legislation was carried out by this committee last October. Having completed that process last autumn, we listed it as priority legislation on 21 January of this year. The final text of the Bill was agreed with the Attorney General in mid-February. It was approved by Government quite recently and has now been published. The Second Stage debate on the Bill is scheduled for later today.
Overall, the theme behind what the Deputy and the Government are saying is similar but the Government probably has had the advantage of the extra time and extra pre-legislative scrutiny, the excellent paper produced by the Oireachtas Library and Research Service on the Government's proposal, and the benefit of the Attorney General, the Central Bank and the various organisations that made submissions to the pre-legislative scrutiny process. We believe our legislation, as proposed, is the best way to move forward.
When this committee considered the detailed scrutiny of the Consumer Credit (Amendment) Bill 2018, the Bill before us, some time ago, it was clear in its report when it stated:
Based on its consideration of the Bill, the Committee is of the opinion that there is a need to cap the interest rates which are currently being experienced by often financially vulnerable users of moneylenders.
The provisions contained in the Bill are a possible approach to affording borrowers necessary protection in this regard.
The committee went to state: "The Committee therefore recommends that the Bill, if proceeded with, be amended to include a provision that caps such fees and additional charges", which is happening. This committee was highly supportive of the Bill and of a cap but it did not come down on what that cap should be. I have just read from the committee's report on the pre-legislative scrutiny of this Bill. There is general agreement across the House on the introduction of a cap and the issue is the precise level of that cap The annual percentage rate, APR, of interest was mentioned. While that is not appropriate in this legislation, we are proposing a maximum period of 12 months for loans.
It is not in the legislation.
Many people have talked about the APR of interest in this debate. It is not appropriate when we are dealing with loans of a duration of fewer than 12 months, which are covered in the Bill we will be discussing later.
Some loans might only be for three months or six months, and one cannot do the equation of an annual interest rate on a loan that is not an annual loan. Generally, and the Deputy has the same approach, that is why we are sticking with the simple rate based on the original amount, depending on whether the loan is for two months, six months or three years. We want to limit the loans to 12 months. That is why APR will never apply. The Deputy agrees with what I am saying. It will not be part of the legislation even though it is part of common currency when people talk about these matters. On that basis, we are not in a position to accept the amendment.
I commend Deputy Doherty on bringing forward this legislation. It is important that the select committee appraises and considers legislation that comes from the Opposition. I remember when I was in the Opposition not long ago I managed to get many legislative measures to the justice committee but, unfortunately, I could not always get them through that committee because we did not get a money message. In fairness to the Government, at some stage it must have provided a money message.
Everybody here is agreed that the most important thing is that we get the legislation right and that rates of interest for moneylenders are applied properly and fairly. It needs to be properly regulated and controlled. Amendment No. 1 is proposing to amend section 93(10)(g). Subsection (10) deals with the grounds on which the Central Bank may refuse a moneylender's licence. It can refuse it on one or more of the grounds set out in the subsequent paragraphs. At present, section 93(10)(g) states that in the bank's opinion the cost of credit to be charged is excessive or any of the terms and conditions attaching thereto are unfair. Deputy Doherty's proposed amendment is that we would leave in the word "excessive" but that we would change and enlarge it by inserting that "the cost of credit is usurious, excessively high or any of the terms or conditions attaching thereto are unfair". When I looked at this first, I wondered how a court would interpret "usurious" or "excessively high". In fairness, Deputy Doherty has included that in section 103, but that requires us then to consider amendment No. 3.
My view, and I say this with respect to Deputy Doherty, is that the definition set out for "usurious" and "excessively high" is quite difficult to assess and evaluate. In the first instance, section 103(1), paragraphs (a) and (b) set out what should be the rate of interest for the first three-year period and in subsection (2) the intention is to refer to a second three-year period but it states "no later than three years after the coming into operation of this section" that the terms shall be defined. I interpret "no later than three years" is that it must be within the three years, so there is some overlap between subsections (1) and (2).
I also believe we are better off with a situation where the Central Bank can, by regulation, specify exactly the rate of interest that can be applied by moneylenders, and it should be small. We cannot have situations where exorbitant or usurious, to use Deputy Doherty's word, rates of interest are being applied. However, once one stitches it into legislation, it is then very difficult to change. One must go through the process of the Houses changing the legislation whereas if the power is given by regulation to the Minister or the Central Bank in this instance, that can be changed just through statutory instrument. My view is that we should be careful in terms of the manner by which legislation is enacted. This will be considered at some stage by a court and lawyers will be arguing about the meaning of usurious and whether it comes within subsections (1) and (2). I know from my experience introducing Private Members' legislation, and I am sure Deputy Doherty will accept this, that there is an advantage in having the back-up of the Department of Finance, its endless number of advisers, the Office of the Attorney General and all the apparatchiks of the State working on it. Ultimately, political credit will be decided elsewhere, but the most important thing we have to do is to get it right and make sure the legislation is correct. For that reason, I go along with what the Minister of State said.
I thank Deputy Jim O'Callaghan for his contribution which focused on the definition of the amendment which contains the term "usurious". He rightly pointed out that subsection (2) deals with that issue and defines it as the rates, the simple interest rate or the nominal interest rate. He made the point then that there is the second step which has different rates and has the term "no later than three years", which would mean that the transitional arrangement would cease to exist after three years. However, the issue of "no later than three years" raises the question of whether it could go before that. Deputy O'Callaghan made the point about having to come back to the House to deal with this. That is why subsection (7) is in the amendment. It allows for the Minister to make regulations to adjust restrictions to the cost of credit to the consumer under a moneylending agreement, including those specified in subsections (1) and (2), which are the two subsections the Deputy referred to. We have tried to deal with that there. That allows the Minister, if he or she so wished, to change subsections (1) and (2) in terms of the rates or in terms of the period that they take effect.
The wider issue here is to get the legislation right, and there are ways of doing that. As I said, I have been here and done that. I recognise the Government has legislation now that is going to the House for Second Stage debate. I am not a fool. For three years when I was pursuing this legislation, that was not happening. There was a vehicle here which we put to the Government. The Government could amend this and do whatever is required, not tie us up with two separate sets of pre-legislative scrutiny and two sets of Committee Stage. This is going to pass. There is no way to stop this passing Committee Stage today. That is the problem we are involved in. I presume the Minister of State is going to vote it all down, but there is no final vote on Committee Stage of the Bill. We differ significantly on the rates, but both legislative measures have similar proposals in terms of the amendments. The Minister of State talked about collection charges, which we will come to momentarily. The issue of collection charges, as the Minister of State recognises, emanated from the consultation that happened in respect of this legislative measure.
There is a big fundamental difference between this Bill and what the Government has before the House, and I am sure the Minister of State is well-briefed on the legislation he is taking before the House. I will give an example of what my legislation would do for a borrower who borrows €1,000 over a 12-year period. The interest rate would go from €560 down to €360 in the first three years and down to €180. What will the Minister of State's legislation do for the same level of borrowing?
I am dealing with what is before us here. I will be happy to discuss that when it comes-----
Does the Minister of State know the answer to that question? That is the core of it.
The core of our legislation will be that it will be based on the rate set in the legislation.
The Minister of State does not know. He is waiting for his officials to hand him a piece of paper to let him know.
No, I am not-----
What is the answer to €1,000 over 12 months? What will his legislation do in terms of the interest?
It will be €1,560.
The Minister of State got that from his officials.
No, I did not. I have it in my notes. I am well aware of it.
It will be €1,560.
That is nine times what a credit union charges at this point in time.
Correct. It is obvious where people should go for loans of that nature. We agree that it should be the credit union.
However, the Minister of State is legislating for a moneylender to charge €1,560 for €1,000 of credit. That is €560 of interest when a credit union charges €60 interest. In fairness, that is not what is required here. It is €560 of interest for a moneylender when a credit union charges €60. That is the fundamental difference.
It would be in the order of €500, as I have said.
In the order of €500. However, the Deputy went on to make a point, and I thank the committee secretariat for advising the Department on this issue, that while we may oppose amendments and sections, it is important that the citation of the Bill remains here at the end of this process, so the Bill continues to be alive.
Is the Minister of State serious? He is going to vote down every word in this Bill bar the Title of it.
There are only two sections in the Bill as proposed.
The Minister of State is going to vote down all the amendments that flowed out of a period of two years of consultation with the stakeholders.
I am saying there are two sections in the original Bill. I am giving the Deputy my views at this stage. We will be retaining section 2 of the Bill on the advice of the secretariat of the committee so that the legislation exists.
The specifics with regard to the amendments will have been voted down but the Bill will not have been because, as the Deputy rightly pointed out, this committee cannot vote on this entire Bill. There is no final vote on the Bill on Committee Stage today. We will not oppose section 2.
The only reason the Minister of State and the Government will not oppose section 2 is that they would send back a blank piece of paper to the House and show up this farce and the fact that they refuse to co-operate. We will have a debate on the Minister of State's legislation. I am glad certain things will move on this. However, is the Minister of State serious about €560, with no agreement that it will come down at a later stage? It is ridiculous and the cap is too high. What does the moneylender currently charge for that loan?
As the Deputy is well aware, the reason we have the legislation is that there are many products on the market and many of them are above the cap that both the Deputy and the Government propose. The net effect of the legislation and even the legislation we will bring forward this evening will be an average of a 13% reduction in the current interest rate. Many moneylenders charge 60%, 70% or 80% and way above that. There will be a cap when this process concludes. Many people will see a significant reduction in the interest they pay on the loan under both caps proposed here.
There are no final contributions.
- Doherty, Pearse.
- Farrell, Mairéad.
- Durkan, Bernard J.
- Fleming, Sean.
- Matthews, Steven.
- O'Callaghan, Jim.
I move amendment No. 2:
In page 3, between lines 12 and 13, to insert the following:
“Amendment of section 102 of Consumer Credit Act 1995
2. Section 102 of the Consumer Credit Act 1995 is amended by the substitution of the
following subsection for subsection (1):
“(1) A moneylender shall not make or attempt to make an agreement with a borrower who has borrowed or intends to borrow credit from that moneylender for any sum, account of costs, charges or expenses incidental to or relating to the negotiations of, or the granting of, the loan.”.”.
The amendment abolishes collection charges by adding to the list of charges that moneylenders are prohibited from charging. It amends section 102(1), which currently provides:
A moneylender shall not make or attempt to make an agreement with a borrower who has borrowed or intends to borrow credit from that moneylender for any sum (other than a collection charge), account of costs, charges or expenses incidental to or relating to the negotiations for, or the granting of, the loan.
Basically, the amendment takes the words "other than a collection charge" out of the original text. The amendment to abolish a collection charge in moneylending agreements is made in response to concerns and recommendations of stakeholders prior to and during pre-legislative scrutiny of the Bill in November 2020. For example, in their submission and opening statement during pre-legislative scrutiny, Dr. Olive McCarthy and Dr. Noreen Byrne recommended that any interest rate restriction be coupled with a limit on other fees and charge to avoid circumvention through other or higher fees and charges. In her opening statement, Dr. McCarthy noted that although the highest rate currently being charged by moneylenders is 187% APR, collection charges can increase the cost of credit to 287% APR. Similarly, in its opening statement during pre-legislative scrutiny the Social Finance Foundation, which has done a significant amount of work in this area, recommended that imposing a cap on interest rates charged by moneylenders be coupled with the prohibition of fees and charges. The amendment acts on these recommendations made in November 2020 by prohibiting collection charges under a moneylending agreement.
As a footnote, I recognise the legislation brought forward by the Minister also incorporated the recommendation that arose during the scrutiny of this legislation in that Bill as published.
The amendment has the effect of adding collection charges to the list of charges that are prohibited under moneylending agreements. I am in agreement with the Deputy that collection charges should be prohibited. However, from a practical and procedural point of view, I object to the changes being framed as they are here and favour the more comprehensive Government Bill which also addresses the issue and is scheduled for Second Stage this evening. I think we are all agreed the exception in respect of collection charges should come out but the Government believes that should be done under the more comprehensive legislation that is currently on its way through the Oireachtas in parallel with this Bill. The Deputy acknowledged we have agreed on that and it is in the Government legislation. The Government believes it should be included in the more comprehensive legislation even though we are in complete agreement with the principle behind the amendment. It is a question of getting it into the more comprehensive legislation that will make its way through the Oireachtas. For that reason, I have to oppose the amendment.
I move amendment No. 3:
In page 3, between lines 12 and 13, to insert the following:
“Amendment of section 103 of Consumer credit Act 1995
2. The Consumer Credit Act 1995 is amended by the substitution of the following section for section 103:
“Restriction on Interest Rates and Total Cost of Credit on Credit made available by means of Moneylending Agreements
103. (1) For the purposes of section 93(10)(g), subject to subsection (2), “usurious” or “excessively high” shall, for a period no longer than three years after the coming into operation of this section, be defined as—
(a) a simple interest rate of 0.75 per cent per week up to a maximum of 36 per cent per annum on credit advanced for a cash loan, or
(b) a nominal interest rate of 1.92 per cent per month which is to be applied to the outstanding balance for loans provided on a running account.
(2) For the purposes of section 93(10)(g), subject to subsection (2), “usurious” or “excessively high” shall, no later than three years after the coming into operation of this section, be defined as—
(a) a simple interest rate of 0.35 per cent per week up to a maximum of 18 per cent per annum on credit advanced for a cash loan, or
(b) a nominal interest rate of 1.92 per cent per month which is to be applied to the outstanding balance for loans provided on a running account.
(3) The Central Bank shall make regulations for the proper and effective regulation of the obligations set out in subsections (1) and (2),
(4) Notwithstanding the obligations set out in subsections (1) and (2), regulations made under subsection (3) may contain any transitional and other supplementary and incidental provisions that appear to the Central Bank to be appropriate.
(5) Any transitional provisions referred to in subsection (4) and contained in regulations referred to in subsection (3) shall cease to have effect no later than three years after the passing of this Act.
(6) The Central Bank shall, from time to time and at least once every three years following the date in which this section is commenced, publish a report—
(a) on the cost of credit made available to borrowers by means of moneylending agreements and in the context of the cost of credit made available by other lenders,
(b) assessing the appropriateness of restrictions on the cost of credit made available to borrowers by means of moneylending agreements,
(c) containing advice or recommendations, as the Central Bank considers necessary or appropriate, to adjust restrictions on the cost of credit made available to borrowers by means of moneylending agreements.
(7) The Minister may make regulations to adjust restrictions to the cost of credit to the consumer under a moneylending agreement, including those specified in subsections (1) and (2).
(8) Before preparing draft regulations under subsection (7), the Minister shall consider recommendations that the Central Bank may make under subsection (6)(c).
(9) Subject to subsection (8), before making regulations under subsection (7), the Minister may consult with any persons that the Minister considers should be consulted.
(10) If the Minister does not accept any recommendation of the Central Bank in the report published under subsection (6), or fails to make regulations giving effect to such a recommendation within one month of that recommendation being made, the Minister shall within two months of that recommendation being made prepare and lay before each House of the Oireachtas a statement of the Minister’s reasons for not accepting it.”.”.
We have teased out some of this ourselves, or at least I have done my best to tease it out. The Minister of State continues to make the point that his Bill is more comprehensive, although I level the charge that he does not even know what his own Bill does. In fairness to the Minister of State, when I asked him what the effect of his Bill would be on a loan of €1,000, he gave the wrong figure.
I said it was about €500.
He said it was €560. That is what moneylenders currently charge - €560. The Minister of State did not even know what the impact of his own legislation, which I presume he is taking through the House, will be or what is at the core of the legislation, which relates to requiring a cap. What his legislation will do is reduce it to €480.
I should not have to tell the Minister of State what his own legislation is and does, or how little it does, when he is using that as a stick to beat this legislation down. This Bill would reduce the cost of credit for borrowers by a far more significant amount. That is the form, however. The Minister of State just voted down a section with which he completely agrees. It is disappointing. Let us be clear that the Government's Bill will reduce the cost of a loan of €1,000 by €80 over the period of one year, still leaving interest of €480. This amendment would reduce the figure by €200 in the first three years and €380 thereafter. That is what the amendment does. This is the real effect we need in the context of interest rate caps. The Government has been forced into dealing with this issue. I have been putting it on the agenda for the past four years. I published the Bill four years ago.
The Government has refused to act on this despite the fact that so many vulnerable customers are being fleeced. We have forced the Government, through public opinion, to produce its own legislation which is before the House. However, the legislation does as the Government does, the bare minimum.
Even the Minister could not give recommendations to the public about shopping around. He would not even give recommendations to the public who were in the grip of moneylenders when they withdrew from the State. There was no advice, agenda or strategy to make sure that hundreds of thousands of people who were availing of high-cost credit, which should have warnings and all the rest attached to it, could avail of credit at a far cheaper rate, despite the fact that some of the initiatives being rolled out by the credit union are supported by the Department.
The Minister of State was of the belief that the Bill actually kept the rates at the same level that they were. It is very disappointing that the Government is doing so little.
Are there any other comments?
- Doherty, Pearse.
- Farrell, Mairéad.
- Durkan, Bernard J.
- Fleming, Sean.
- Matthews, Steven.
- O'Callaghan, Jim.
Acceptance of amendment No. 4 involves the deletion of section 2.
I move amendment No. 4:
In page 3, between lines 12 and 13, to insert the following:
“Short title, collective citation and commencement
2. (1) This Act may be cited as the Consumer Credit (Amendment) Act 2018.
(2) The Consumer Credit Acts 1995 to 2010 and this Act may be cited together as the
Consumer Credit Acts 1995 to 2018.
(3) This Act comes into operation six months after the date of its passing or on such
earlier date or dates than the said six months as the Minister may by order appoint and
different dates may be so appointed for different purposes and different provision.”.
I move amendment No. 5:
In page 3, line 6, after “1995” to insert “; and to provide for related matters”.
The Minister of State has made a dog's dinner of this legislation. It is one of the worst examples of parliamentary practice I have seen in the 13 years I have been here. It is legislation that has a commencement and a Title but nothing else. It is ridiculous. It just shows the Government is unwilling to deal with issues that are of benefit to consumers in a real and meaningful way. In this case, unfortunately, it is unwilling to co-operate with the Opposition to improve and enhance a Bill. Instead, it is now going through a whole new process of bringing in its own legislation. I thank the committee and all those who facilitated the Bill through the past four years.
I thank the committee for dealing with this matter today.
I thank the Minister of State for assisting the committee with our consideration of the Bill.