Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

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 viresthe 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.