Dáil Éireann Debate, Wednesday - 25 April 2007
35 Mr. Stanton asked the Minister for Social and Family Affairs if his attention has been drawn to the Financial Regulator’s report (details supplied); his views on the findings; the reason for his delay in introducing new Money Advice and Budgeting Service legislation to combat the growing levels of personal debt here; and if he will make a statement on the matter. [15574/07]
Amharc ar fhreagraThe Money Advice and Budgeting Service, MABS, provides assistance to people who are over-indebted and need help and advice in coping with debt problems. There are 53 independent companies nationwide operating the service. The credit union movement has been a key partner in MABS since its inception. Many local voluntary and statutory bodies, such as the Society of St. Vincent de Paul, the community welfare service, citizens information centres, centres for the unemployed and local authorities also work closely with the programme.
The issues that give rise to problems of over-indebtedness are highly complex. The cost and availability of credit for people on low incomes and the barriers they face in accessing mainstream and cheap forms of credit add to the difficulties people on low incomes encounter in managing their finances.
I am particularly concerned about the level of interest rates currently being charged by some financial institutions, loan companies and legal moneylenders in cases where people have no alternative source of credit available to them. My concerns in this regard are borne out by the Financial Regulator's report on the licensed moneylending industry, published last week. It shows that moneylenders may be charging interest rates of up to 188%. Most significantly, 71% of people surveyed did not know what interest they were paying on their loans.
I have held discussions with a number of interests, including the Irish League of Credit Unions, the Irish Bankers Federation and the Financial Regulator about these issues. The outcome of these consultations, the latest report of the Financial Regulator, together with the Combat Poverty Agency study, Financial Exclusion in Ireland, and the statistical data now emerging from the new MABSIS information system will make a significant contribution to our knowledge about the problems of debt in Ireland. These provide a solid evidence base on which to develop the strategies that need to be put in place by Government and the providers of payment services such as the banks and credit unions to promote greater financial inclusion in Ireland.
Proposals to establish the MABS on a statutory basis will be considered by the Government in the near future. My intention in this regard is to build on the best features of the MABS model of service to the public, combining a continuation of local voluntary involvement with strong national leadership to ensure a high quality consolidated MABS for the future. Measures to address concerns about excessive loan charges for people on low incomes are important in this context and the MABS could play an important role in this regard. Officials of my Department have been working closely with the Financial Regulator and the Department of Finance on the detailed arrangements that might be put in place to achieve this.
I also want to take account of best practice in corporate governance for a customer focused service that provides value for money for the taxpayers' investment and meets the challenges posed by the rapidly changing face of debt in 21st century Ireland.
I thank the Minister for his response. Is it true that his Department issued a press release on 12 May 2006, the same one on 18 September 2006 and the same again on 23 October 2006 in which the Minister is quoted to the effect that legislation would shortly be introduced to strengthen and streamline the money advice and budgeting service, MABS? That is almost a year ago and we have had at least three identical press releases from the Minister in different parts of the country saying that he is going to do this, and we have the same today. What is the reason for the delay? Why has the legislation not been introduced at this stage? Has the work been completed? Has the Minister brought proposals to Government or what has gone wrong?
As regards the Minister's meetings with the Irish League of Credit Unions, the Irish Bankers Federation and others, what specific actions may we expect eventually from some Department of Government on this issue? Does the Minister agree with the statement in the Financial Regulator's report, for instance, that 30% of borrowing is for clothes and household items, and not as he suggested in response to a previous parliamentary question I tabled, for luxury items? Many people are now being forced to go to licensed and unlicensed moneylenders to borrow money for day-to-day expenses. I asked the Minister before whether research had been done into why this is happening in an economy which the Government claims to be one of the strongest in the world. Given that there is enormous inequality in our society, with many people being forced to go to moneylenders, will the Minister not agree something is radically wrong?
I have held up the legislation because of the complexity of trying to get around this issue. The legislation allows moneylenders to charge up to 188%. The Financial Regulator's report on the licensed moneylending industry, published last week, shows that they charge this amount. The legislation allows them to charge even higher rates in certain circumstances. The report shows that 71% of people did not know what interest they were paying.
I took the time to get it right and the legislation is now completed and will shortly be considered by Government. What took the time were discussions with the Irish League of Credit Unions, the Irish Bankers Federation and the Financial Regulator. It was also necessary to have sight not only of the Financial Regulator's report, but that study in tandem with the Combat Poverty Agency study, Financial Exclusion in Ireland. I wanted to go through all that data to see what type of solution we could come up with. Obviously, it is not possible simply to introduce legislation to fix interest rates. That is a complex and difficult area involving the economy generally across the board, so that is not an easy option.
As I hinted in my reply, the model I looked at seeks to bring the expertise of the MABS organisation to bear on the whole area of licensing of moneylenders. That is the approach I am hoping to adopt in the legislation, giving MABS some input into that process. Owing to the complexity of the issues, however, it has taken longer than I thought. I believe the result is a good one. Whether it is I or someone else who will introduce the legislation, it is now on a very solid footing. It will make a real difference and will give MABS, which has frontline experience of poverty, direct involvement in interest rates on some basis yet to be determined.
On the Deputy's reference to luxury and clothing items, the view I expressed was based on what MABS, the Combat Poverty Agency, the Financial Regulator and the banks tell me, that the nature of credit is changing. There would not have been credit card debt ten or 15 years ago, but it is now a major feature. Some credit card debt is for motor cars and other items regarded in some ways as essential, which ten years ago would not have appeared on any list in the same way as would, say, clothing and food items. All the expertise indicates that the nature of credit is changing as expectations rise. The line between absolute poverty and lifestyle is becoming more blurred every day. That is based on all research. Some goods, which would have been regarded as lifestyle items in the past, are now included as poverty items. Regardless of this, our job is to try to make an impact on the problem. The different welfare and economic policies of the Government have made substantial progress on the poverty area in recent years.
