Terence Flanagan (Dublin North East, Fine Gael) | Oireachtas source

I welcome the Bill. It is a vitally important step in creating a more responsible banking system in this country. Any legislation that will addresses the historic bad practices, bad lending and bad banking should be welcomed. I trust that these new measures will go some way towards making the system clearer and more transparent in terms of borrowers. It is clear that reckless lending practices were largely responsible for the banking crisis in this country and under these new rules banks will have to report how much they are lending and to whom.

During the boom times, people were borrowing more than they could afford and banks were giving out loans too freely. As public representatives we are all aware of people taking out loans from various financial institutions in order to invest in property both in this country and abroad. Unfortunately, some of those people are now in negative equity, in some cases with large mortgage arrears. People find it extremely difficult to pay back their debts and some will face repossession, in particular of investment properties.

The Bill creates a central credit register to be maintained and operated by the Central Bank. It will encourage more responsible borrowing and lending. The overall picture in terms of borrowers will be blatantly obvious, which is good. Previously, banks shared information on customers but only those institutions that were members of the Irish Credit Bureau and not all banks were members. Lenders have had to seek permission from borrowers before reporting details of their loans on the system. They will no longer have to do that under the terms of the Bill as the information will be passed on automatically and banks will be required to share details of loans and borrowings. Loans of a value greater than €500 must be reported on the system. Lending institutions will have to ensure that customers are fully informed that the institution is obliged to store their information on the central credit register. In that regard, it is important that clear information about the changes being made are provided on a website or in literature to ensure customers are informed about the change in the law in this area of banking.

It is vitally important that there is a system in place to monitor how much credit institutions are lending and how much people are borrowing. In recent years people were borrowing far beyond their means to invest in property. Property developers borrowed large amounts of money to build developments all over the country, some of which, sadly, remain unfinished as a result of the property crash.

There have been reports that Irish Nationwide did not keep comprehensive records of the details of their loans. The previous chief executive officer, in effect, ran the bank as his own personal bank and he maintained the records himself. The bank had no one to assess the ability of borrowers to repay their loans. No underwriting of the loans took place and no basic banking principles were followed in that institution. The new register will go some way towards addressing the problem, which is good news overall, because we know what happened as a consequence of individuals running banks as their own personal institutions and the State was left to pick up the tab which is both unfair and unreasonable.

It is obviously important that a record is kept of large borrowers and high-value loans so that such credit histories can be accessed by any credit provider or financial institution. This new system will serve to build a record of overall borrowing in the State. The personal and credit information of individual borrowers and companies is to be held on the new register. At present, there is no statutory obligation on financial institutions to report credit data and no central repository for such data. The current credit rating system is provided by privately-run credit bureaus and only members are obliged to give information.

Section 5 of the Bill provides that the Central Bank will establish and maintain a database of credit and personal information on borrowers, to be known as the central credit register. A number of personal details will be captured on the system, including the name, address, date of birth, PPS number and telephone number of individual borrowers. The information captured for businesses will include the trading name, VAT number and the registration number issued by the Companies Registration Office. The system will also hold information on borrower's credit applications and credit agreements, including the nature and term of the credit, the rate of interest payable and the details of any guarantee or security on the loan. The register will mean that such information will be captured centrally for the very first time.

Section 9 of the Bill outlines the procedures for borrowers and lenders to apply for amendments to be made to the information held about them on the register if it is incomplete or incorrect. Borrowers will also be entitled to ask the Central Bank for a report on how many times information relating to them has been accessed in the previous five years and by whom. In this way, borrowers are being protected. They are being provided with an opportunity to change the data that is held centrally on them and to be updated on who is requesting that information. It is vital that borrowers are fully informed of their right to identify any incorrect information held on their file, to appeal and to have such information changed.

The Bill also includes measures to protect customers against identity fraud. It provides that lenders have a duty to notify borrowers if they suspect that they are being impersonated. Any details held on file about customers will be treated with the utmost confidentiality, with banks being penalised for the disclosure of confidential information, either by way of fines or imprisonment.

The fact that there was no central credit register in this country over many years meant that some individuals were able to take out multiple loans with various financial institutions and no-one had an overall picture of the level of their borrowings. The lack of a central register and abuses of the system of credit came back to haunt us, particularly when the credit bubble burst.

This is a sensible Bill, designed to help us to learn from the mistakes of the past and ensure they are not repeated in the future. The passing of this Bill is a requirement under the terms of our agreement with the EU-IMF programme of financial support. The troika pointed out that the quality and availability of the credit information at the disposal of credit providers in this country needed to be enhanced. The measures contained in this Bill will ensure that the mistakes made in our banking system will not occur again. The Bill will ensure a fairer and more transparent banking system in the future.

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