Oireachtas Joint and Select Committees
Wednesday, 23 October 2013
Committee on Finance, Public Expenditure and Reform: Select Sub-Committee on Finance
Credit Reporting Bill 2012: Committee Stage
I welcome the Minister of State at the Department of Finance, Deputy Brian Hayes, and his officials. The purpose of the meeting is to consider the Credit Reporting Bill 2012 which was referred to the select sub-committee by Dáil Éireann on 18 April. Is it agreed to conclude consideration of the Bill today? Agreed.
I move amendment No. 1:
The proposed amendment to the definition of the word "credit" provides more clarity on the scope of the legislation. I have included the following exclusions in the definition. Subsection (1)(a) aims to exclude interbank lending, the majority of which is extremely short term, including durations of less than one week. A significant proportion of this lending takes place overnight and its purpose is to manage liquidity flows. It is not true lending in the sense of creating an exposure that is repaid over a period. It is considered highly liquid for reporting purposes and is captured through existing regulatory reporting. Attempting to capture this form of lending would create a significant operational burden for credit information providers, given the frequency of mandatory checks, associated costs and the delays caused by the need for such checks. Delays are particularly problematic when the lending is for short-term liquidity purposes.
In page 6, subsection (1), line 2, to delete “accommodation;” and substitute the following:“accommodation, other than any provided--
(a) by one credit institution to another,
(b) to any entity classified within general government in relation to the State within the meaning given by the Fiscal Responsibility Act 2012, the government of any other country or territory or any international organisation,
(c) by a company to a related undertaking of the company,
(d) by a person who does not provide credit except to the person's employees,
(e) in connection with the provision of a utility or other service on a continuing basis,
(f) for facilitating the purchase of goods or services from the person by whom the credit is provided, or
(g) without any requirement to pay interest or any other charge (in any circumstances);”.
Subsection (1)(b) aims to exclude from the register State borrowings or lending to international organisations defined in section 186B of the Social Welfare Consolidation Act 2005.
Subsection (1)(c) aims to exclude intra-group lending, for example, a parent company in a group lending money to a subsidiary. The register is unlikely to benefit from information of this kind. Many large firms will have a finance arm that handles most of the financial dealings for a company. The finance arm will be the arm that takes on all borrowings and lends the money internally to other branches of the firm. Trying to deal with these complex set-ups within the register would involve significant cost for the parent and subsidiary companies concerned for a minimal gain of information.
Subsection (1)(d) is intended to exclude any financial accommodation offered by an employer such as a wage advance from being captured for the register. Although this information could be useful, the cost and resources required to monitor every firm that offers any financial accommodation to its employees and mandate reporting from such firms would be highly significant. On balance, the information would not be sufficiently valuable to warrant this. Where credit providers cannot rely on this exclusion, they must report on all loans of more than €2,000 they provide for employees.
Subsection (1)(e) aims to exclude utilities from the register. The possibility of including utilities in the register was examined by the inter-agency working group and not considered necessary at this point. The group recommended that the inclusion of additional sources be considered by the Central Bank of Ireland after the initial implementation of the register in consultation with the stakeholders, including the Office of the Data Protection Commissioner.
Section 1(f) is intended to exclude trade credit where financial accommodation is being extended for a short period from one business to another. This is distinct from financing arrangements where credit is extended in exchange for repayment with interest over a period of time. Late payments are likely to be short-term and are most likely to take place with ongoing customers over a period of time. For example, manufacturers of goods will have trade credit accounts for retainers of those goods, which will be part of the business model in a way that one-off credit or financing is not. Section 1(g) aims to cover ad hocinterest-free arrangements. If credit is offered without interest or charges, it is likely to be less formal and for a shorter term. This section should also mean that informal loans between friends and families are excluded if no interest is applied.
With regard to amendment No. 1 and section 1(f), regarding goods and services, is it tight enough so that the provision does not apply to a service from a financial institution? The essence of the point is captured but one cannot define going into a financial institution or another institution that provides credit and deeming it a service. One enters into a contract and one receives money on the basis of paying it back. Is it tight enough to provide for that definition?
My understanding is that it is. We looked at it in the previous working group and we are happy the definition covers it.
Amendment No. 2 proposes the deletion of subsection (b), which relates to the providers of hire purchase agreements. The reason for the deletion is that the providers of hire purchase agreements are regulated financial services providers and are already captured in subsection (a). The inclusion of subsection (d) widens the scope of the Bill by extending the definition of credit information providers to any person - other than a regulated financial service provider, local authority or NAMA - who provides credit. The amendment also proposes the exemption of pawnbrokers, the Central Bank of Ireland, the central bank of any other country or territory from the definition of credit information provider.
Amendment No. 3 provides a definition for a credit institution, which is taken from the capital requirements directive as it is now being referred to in the Bill. It is, therefore, necessary to define amendment No. 4. Under section 186B of the Social Welfare Consolidation Act 2005, "international organisation" means an international intergovernmental organisation, including, in particular and without limiting the generality of the foregoing, the United Nations organization and its specialist agencies, the institutions and agencies of the European Communities, the Council of Europe and the Organisation for Economic Cooperation and Development.
In respect of amendment No. 5, as stated when discussing amendment No. 1 with regard to a related undertaking, the definition is required in order to provide an undertaking of what a related undertaking is and to ensure that, where a bank takes ownership of a company, it is not exempted from reporting to the register.
With changes taking place in Europe, bank accounts will be made available in any part of Europe. Obviously, credit will become an issue and it will be easier to have an account in Spain or France. If I apply for a loan from a bank in Birmingham, can this information be accessed?
This is an important point although it may not be widespread at the moment. It is likely that we will move in that direction, although it depends where people decide to go. It will become easier for people to access credit and to have deposit accounts in other EU member states. If this is about ensuring banks do not overlend, the problem is that if I have overstretched myself with the credit union or with AIB and then decide to go to a bank in Birmingham or London and apply for a credit facility when there is no requirement on the bank to access this register, I am putting all three institutions in jeopardy. Therefore, the credit union or AIB is less likely to get paid.
My understanding is that the mortgage credit directive, which is coming down the tracks, will make it a requirement that this information can be passed on. The current situation is that the individual must sanction the information and must give permission in respect of the credit institution.
On a point of clarification, many systems, such as utilities and phone providers, have a pay-as-you-go function. If people take up the option of a bill pay telephone provider or energy supplier, are such providers given access to this credit rating?
The issue was raised as part of the working group. The Central Bank can give effect to that in the future but it is not proposed at present. The issue was flagged and it is a matter for the Central Bank to decide on.
I move amendment No. 2:
In page 6, subsection (1), to delete lines 13 to 18 and substitute the following:
(c) a local authority, or
(d) any person not within paragraphs (a) to (c) who provides credit, other than--
(i) the Bank or the central bank of any country or territory other than the State, or
(ii) a pawnbroker, within the meaning of the Pawnbrokers Act 1964;”.
I move amendment No. 3:
In page 6, subsection (1), between lines 23 and 24, to insert the following:
“ “credit institution” means a credit institution within the meaning of Article 4.1(1) of Regulation (EU) No. 575/20131 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012;”.
I move amendment No. 4:
In page 6, subsection (1), between lines 34 and 35, to insert the following:“ “international organisation” has the meaning given by section 186B of the Social Welfare Consolidation Act 2005;”.
I move amendment No. 5:
In page 7, subsection (1), between lines 8 and 9, to insert the following:“ “related undertaking”, in relation to a company, means --(a) a subsidiary of the company,and for this purpose “holding company” and “subsidiary” have the meanings given by section 155 of the Companies Act 1963;”.
(b) the holding company of the company,
(c) a subsidiary of --(i) the holding company of the company, or
(ii) a subsidiary of that holding company,
We are on section 2 and, as per Standing Orders, we will deal with the amendments and then discuss the section. The Deputy can speak on the section when we put the question as to whether the section, as amended, should stand part of the Bill.
I move amendment No. 6:
These amendments are proposed because the phrase "proper law of" is ambiguous and is not a commonly used phrase. Following consultation with the Office of the Attorney General, it was decided that the wording "law governing" was preferable and more appropriate in the circumstances. These amendments simply clarify what law is being referred to.
In page 7, subsection (2)(b), line 16, to delete “proper law of” and substitute “law governing”.
I move amendment No. 8:
Section 2(3) addresses how the register will deal with possible transfers or disposals of credit agreements between credit information providers, for example, where a credit information provider originates a credit agreement and at some point prior to its conclusion disposes of some or all of its rights under that credit agreement. This can be quite a complex area, particularly on a partial disposal of rights where the credit information provider sells the right to the receipt of the payment but, perhaps, keeps rights associated with the security under an agreement. This amendment will cater for these complexities, placing the reporting obligations with the party that has the associated right under the credit agreement. The amendments propose to bring clarity to the situation and will propose the collection of all necessary information relating to agreements falling within the remit of the Bill.
In page 7, subsection (3), line 19, to delete “the”.
I seek clarity on the interpretation section and the definition of the credit score, which is mentioned on line 24 of page 6 and states that credit score, "in relation to a credit information subject, means a numerical or alphanumerical value assigned to the credit information subject, on the basis of information ...". In layman's terms, the credit score refers to the risk rating attached to an individual who has been loaned money. Who has access to this information and for how long can they retain it? One of the big issues currently is that people borrowed money during the credit bubble - the so-called Celtic tiger period - and they are adversely affected by that credit rating, in some cases through no fault of their own. What is the procedure for ranking the credit score, how is it arrived at, who will have access to it and for how long will it last?
My understanding is that this provides the legal basis for the score, but that we still have a lot to work out by way of regulation with regard to what information will be included and who will have access to it. Effectively, the bank will have access to it because it will be held there. However, the fuller implementation of this will be by way of regulation, which will follow the enactment of the Bill. The provision in the interpretation section concerns the legal argument. We do not have any previous legal basis for this and this Bill provides for it. However, it will require work on the regulation side to develop it.
The big issue for me is people's credit ratings. Currently, some people's credit ratings are adversely affected by their debts and this is like a millstone around their necks. For what period will this credit score be on record and when can a person get a clean bill of health in regard to their finances?
I move amendment No. 10:
Amendments Nos. 10 to 12, 14, 53 and 57 do not give the bank any new powers to process data, but are designed to provide more flexibility in how the bank must process information on the register and safeguard against limiting the technical or IT solutions the bank can bring to bear in delivering the operation of the register. There is currently no explicit provision in the Bill permitting the bank to connect records of credit information subjects who have a shared liability or who are connected through their provision or receipt of a guarantee. It was concluded that the connected borrower scope should focus on shared liabilities and links through guarantees provided or received, which are clearly defined and subject to legal certainty. Amendment No. 13 allows for this.
In page 8, subsection (2), lines 10 and 11, to delete “in relation to a credit information subject”.
I move amendment No. 13:
In page 8, subsection (2)(b), line 16, to delete “and” and substitute the following:“(c) details linking any credit information subject who has made a credit agreement for the provision of credit with any other credit information subject who has given a guarantee or indemnity in connection with the credit agreement or also has liabilities under the credit agreement, and”.
I move amendment No. 15:
The proposed amendments, Nos. 15 to 25, inclusive, provide for the following additional personal information fields to assist with the successful identification and categorisation of credit information subjects on the register. These fields are entity type, the type of entity or business for which the credit application is being or has been made and other tax number, any other tax number used by the entity. At present, separate categories of credit information subjects are set out under the personal information section of the Bill. However, there is no provision for the bank to collect the entity type as a personal information data field.
In page 8, subsection (1)(f), line 33, after “2005)” to insert the following:“and any other reference numbers allocated to the individual for the purposes of tax (whether in the State or any other country or territory)”.
The collection of this field will in some instances help determine what other types of personal information are to be collected. For example, if the credit information subject is a sole trader, then all sections under section 6(1) must also be completed, while if the credit information subject is a limited company, then only those sections under 6(3) must be completed.
Amendment No. 15 deals with the collection of a tax number from a credit information subject. Currently, a provision is included to collect the value-added tax number of the credit information subject. However, no provision is made for a tax number from another jurisdiction. Removing the words "value added" leaves this provision broad enough to cover any type of tax number originating in Ireland or elsewhere. The amendment to substitute "a business" with "other activities" is to ensure non-individual entities such as clubs and charities are fully covered.
I move amendment No. 18:
In page 8, subsection (2)(a), line 40, to delete "the trading name of the business" and substitute the following:"any trading name, the nature of the entity by which the activities are carried on".
I move amendment No. 22:
In page 9, subsection (3)(a), lines 7 and 8, to delete all words from and including "and" in line 7 down to and including "subject" in line 8 and substitute the following:", the nature of the entity it is and any registration number issued to it".
I move amendment No. 24:
In page 9, subsection (3), lines 16 and 17, to delete paragraph (d) and substitute the following:"(d) all reference numbers allocated to the credit information subject for the purposes of tax (whether in the State or any other country or territory);".
I move amendment No. 26:
The Bill, at section 7(1)(b), provides for the collection of "the nature of any guarantee or indemnity, or any security, given or to be given", which, we understand, enables the bank to collect the type of guarantee, indemnity or security offered and details of whether it is, for example, a personal guarantee or another type of security. In terms of tangible items of security, collecting the value of the item without the source of the valuation or the date on which the valuation was carried out diminishes its usefulness. The date of the valuation will help determine whether the value is up to date and the source of the valuation will help determine whether the value attributable is reliable information. While this type of credit information may not be used by other lenders, who may not fully rely on any valuation not commissioned by them, the bank would greatly benefit from access to this type of security detail in reviewing the overall composition and value of the assets of regulated financial services and in reviewing the quality of lending being conducted by them.
In page 9, subsection (1)(b), line 41, after "nature" to insert "and extent".
Amendment No. 28 is required in order to help improve the effectiveness of the register as a source of information for the Central Bank. This amendment will permit the bank to collect important additional credit data.
I move amendment No. 28:
In page 9, subsection (1)(c), line 43, to delete "payable." and substitute the following:“payable;(d) any identifying number allocated to the credit application or credit agreement, or to the credit information subject, by the credit information provider;
(e) details of any risk rating undertaken in relation to the credit applied for or agreed;
(f) details of any securitisation of the credit agreed.”.
I move amendment No. 29:
Amendment No. 29 is the Government amendment to section 8(2) specifies that data retention for this information is linked to the closure or discharge of a debt arrangement rather than that arrangement entry on the register.
In page 10, subsection (2), lines 35 to 42, to delete paragraphs (a) and (b) and substitute the following:"(a) in the case of credit information to which section 7(2)(b) applies, until the end of the period of 5 years beginning with the day on which the proposal is withdrawn or the arrangement is terminated,
(b) in the case of credit information to which section 5(2)(c) or 7(2)(c) applies, until the end of the period of 5 years beginning with the day on which it is entered on the Register,
(c) in the case of any other credit information, until the end of the period of 5 years beginning with the first day on which all liabilities under the credit agreement to which it relates have been discharged, and
(d) in the case of personal information, for as long as any credit information relating to the credit information subject may be held on the Register.”.
The amendment to section 8(2)(b) adds credit information to which section 5(2)(c) applies to this provision and thus specifies that data retention for this information is linked to the date of its entry on the register, not to any specific credit agreement. The amendment to section 8(2)(c) clarifies that this kind of information should be retained for five years after the closure of an account, not immediately upon closure. The amendment to section 8(2)(d) provides that personal information be treated separately and not linked to a specific credit agreement, but rather to a credit information subject more generally. Overall, these amendments, taken together, clarify the periods for which data may be retained on the register.
I do not propose to accept amendment No. 31, which is Deputy Pearse Doherty's amendment. I thank the Deputy for his input. The reason we cannot accept the amendment is because it is important from the perspective of developing the credit risk or credit profile of the borrower that all information on the register is subject to the same retention period. If information related to the original terms for restructured mortgages on primary residences were to be deleted from the register, it would place any new credit information provider at a disadvantage relative to peers who were aware of the original terms to which the credit information subject was subject.
It is also important to highlight the situation whereby a customer may struggle with a mortgage, including, for example, missed payments, but may not seek to restructure the loan and keep to the original terms. All of this detail would be kept on the register for a period of five years, thus placing him or her in an unfair position vis-à-vis those who chose the restructuring option.
Finally, it is also important to recognise that the original terms of the loan up to the restructure represent a significant piece of credit intelligence and should be retained on the register for the same period of time as any other information. I note that it is important to make a distinction between the content of the register and the content of credit reports, which is not specified in the legislation. For example, the Irish Credit Bureau currently holds data for five years, but only two years' worth of data is included in its reports. The contents of reports will be set out in regulations following consultation with credit information providers and the Data Protection Commissioner and will be subject to the Minister's consent.
I am disappointed that the Minister is not open to accepting amendment No. 31. We all realise that the situation with individuals who have mortgages and simply cannot pay them back is not a small one. I am not talking about a number of individuals who borrowed recklessly. It is a large section of society who have found themselves with mortgages that are way beyond their means at this point in time. We all acknowledge, as the Minister of Justice and Equality, Deputy Shatter, did in the Personal Insolvency Act 2012, that the large number of applications that may go through that service, not to mention the banks themselves, and the targets that have been laid down by the Central Bank for arrangements reached at the end of each quarter, demonstrate that this is not a normal situation with regard to restructured mortgages.
This Bill should reflect the reality that there is a certain section of borrowers who are in this position and who should not be subject to the same rigors of this legislation. I am not trying to decrease the strength of the legislation, because it is important to protect future borrowers, the State and the institutions. I wish to provide that the register can be amended to reflect that borrowers have concluded successful restructuring arrangements, either with a bank or through the mechanisms in the Personal Insolvency Act 2012, where such arrangements have been in place and working for a 12-month period.
It is a sensible amendment and I am open to changing it. If a person fell back into arrears the situation could revert to the original. If we are talking about having a clean break, however - drawing a line in the sand for families and trying to get the banks to arrange restructuring for them so they can move on with their lives - we should reflect that in this legislation. A 12-month period would suffice in this instance, where a restructured arrangement is in place and is working. As stated in the amendment, it would then be subject to an application to be amended by the individual, rather than something that would happen automatically. I would be open to the idea that this information could be retained in some way for intelligence, as it was termed, but we need to move to give people a clean break. The five-year period for this cadre of people, who number 140,000, is onerous. It does not recognise the current situation or what the State and the Government are trying to do with both the targets and the personal insolvency legislation.
In principle, I support Deputy Doherty's points. Whatever mechanism the Minister arrives at to determine the scoring, I would have thought it possible to have the score amended on a more frequent basis rather than having to deal with the subject in the way Deputy Doherty outlined. Perhaps the Minister of State might reflect on that and provide us with some assurances on Report Stage, offering an amendment that would capture how the scoring might recognise the re-engineered or amendment agreement. There would then be a relevant benchmark towards which to work.
If it does, it might not need to be reflected. The methodology by which the score is determined will probably be established through secondary legislation, which we will not see. It will be like many statutory instruments, into which we do not really have any input. Will it be possible to introduce an amendment on Report Stage that might capture the essence of what we are trying to achieve, namely, to set out some guidelines that would insist the score changed?
Having the credit score reviewed on an annual basis is something to consider. I refer to section 8 of the initial draft legislation, which features in amendment No. 29. The proposal in the initial legislation was that a person would be on the system for a five-year period, from the date the credit agreement was put in place. It would apply in respect of guarantors for five years from the date liability was discharged. The Minister of State might give us the logic behind the amendment. There could be a situation where a family member stands guarantor for a son or daughter who sets up a business. The loan could be discharged but it would remain on the system for five years thereafter, with the guarantor liable to be impinged upon. Perhaps the credit scoring could do away with that.
The Minister of State might also explain something else. In the normal course of a normal loan, assuming there is no guarantor, does the five-year rule from the date of discharge apply, or does it extend from the date the loan is taken out?
Suppose I am the guarantor. According to the amendment, if a person acts as guarantor for a loan, it stays on the record "... until the end of the period of 5 years, beginning with the day on which the proposal is withdrawn or the arrangement terminated". My point is that typically one could have a loan for five years with somebody acting as guarantor, but even if the loan were paid back in five years' time, given the way the amendment is drafted, it would stay on the record for a further five years after the loan was discharged. Is my interpretation correct? Does the Minister of State understand my point?
Yes. Under that section, the data would stay on the system for a five-year period, either from the date the loan was taken out or, if the loan is over a longer time, for that period. If it was a four-year loan it would remain for five years; if it were for six, it would last for six. As drafted, however, amendment No. 29 will insert section 8(2)(a), which states that: "In the case of credit information to which section 7(2)(b) applies" - namely, in respect of a guarantor - "until the end of the period of 5 years beginning with the day on which the proposal is withdrawn or the arrangement is terminated".
My point is that it is not infrequent for a parent to give a son or a daughter a hand-out by acting as a guarantor, perhaps for a credit union or a normal loan. Even if we assume the loan is for a four-year period, it will stay on the system for a further five years, meaning the guarantor might feature for nine years.
The information is for the bank. We all want the quality of information throughout the system to be consistent. One of the reasons we are in the hole we are in is a lack of information. This arrangement would give us consistency across the entire scheme but in no way would it have any negative implication either for the person who has discharged liability for the original loan or for the guarantor.
I may be able to help the Deputy understand the bigger thing we are trying to achieve if I return to the point raised by Deputy Dooley. The credit score is the key issue here. As I stated, this is giving us the legal basis to produce the credit score. The Deputy made a valid point when he stated that the scheme of the credit score was not contained in the legislation. Obviously, it will have to be signed off by the Minister for Finance, because he is the person who makes the regulations, following the considerations of the bank.
The bank would have a view on that issue also. I suspect there will be scope for much greater clarity once the regulations on the credit score are fleshed out in greater detail. We will probably take into account Deputy Pearse Doherty's point on the credit score. It could be well highlighted in it.
My only worry and the only reason I am putting this forward is that when consumers go to an institution to look for credit and if a loan has been discharged in the normal way, there should be something built into the credit score, given that information will be left on the system for five years. That is reasonable.
The Minister of State should correct me if I am wrong on this. On Deputy Kieran O'Donnell's point, amendment No. 29 includes a change to the relevant period whereby information will stay in the system for five years, that applies to section 7(2)(b) which refers to debts on a loan, which means that it has not been paid back. The other paragraph, whereby it will terminate five years after the date the information was entered in the register, relates to performing loans. Am I correct in saying the scenario about which Deputy Kieran O'Donnell spoke, where a loan is discharged normally and where one will have the stain on the system for five years afterwards, does not apply? It only applies where there is a debt in relation to the arrangement involved.
On section 8(2), for the purposes of clarity, let us take the issues individually. Section 8(2)(a) includes a reference to section 7(2)(b), which reads, "any proposal or arrangement with respect to debts under the credit agreement or any guarantee or indemnity given in connection with the credit agreement". Specifically, we are talking about credit where there are debts outstanding.
In that arrangement, when the proposal is withdrawn or the arrangement is terminated, the information stays in the system for five years afterwards. If I have a mortgage or loan and I still owe €10,000, for five years after the period by which I was supposed to pay back the loan, this information will stay on the register.
It will remain on the register until the credit arrangement is terminated. If I go into a bank, for example, AIB, to ask for a car loan of €20,000 over a period of three years and in that period of three years I only pay back €10,000, I will still owe the bank €10,000, but the credit arrangement will have terminated-----
In the original section 8, one could have had an eight year loan and the information would only have stayed on the register for five years. By amending the legislation, the Minister of State is making certain that it will be in place for five years afterwards.
The original section only provided for the capacity to extend, if one did not discharge a loan, but the Minister of State's amendment provides, regardless of when one discharges a loan, for a period of five years.
Amendment No. 31, my amendment, is also trying to capture this in the case of family homes. This could be written with different distinctions. As I said, I am open to this.
I raised this issue on Second Stage and I am raising it again on Committee Stage. I will pursue some amendment of this sort on Report Stage because it is really important that there be a distinction made for successful arrangements. It would be an encouragement also. If somebody has entered into a successful long-term arrangement with a financial institution, it is important that the system does not work against him or her in accessing a new line of credit three or four years later. There must be a clean break. I am merely interested in hearing that there is a willingness to explore this issue.
My understanding is that if a mortgage is restructured, that information will be given to the register and the performance will be reflected in it. There is no suggestion the information will not be captured.
-----but our understanding is that there is information capture. In a sense, it is not real-time information. It applies to a two-year period. If what Deputy Pearse Doherty is trying to achieve, with which we agree, requires a further definition, we will look at the issue. We will get the view of the bank in advance of Report Stage.
I move amendment No. 30:
This is a much welcomed Bill. There is very little in it that we dispute. We pointed to such areas on Second Stage. Amendment No. 30 seeks to re-establish something that was in the heads of the Bill. It reads, "The Bank [the Central Bank] may provide for an independent adjudication of disputes between a credit information subject and a credit information provider as to the content of the register. The Bank may rely on such adjudication and amend the Register as recommended by the adjudicator". It would allow for an independent mechanism if the bank so decided, as provided for in the original wording of the heads of the Bill. However, it was removed, which makes the legislation weaker. I do not understand why the Minister of State will not allow for this. For individuals, this could be very serious where there was a dispute between the bank and the individual about the information held.
In page 11, between lines 7 and 8, to insert the following subsection:"(2) The Bank may provide for an independent adjudication of disputes between a credit information subject and a credit information provider as to the content of the Register. The Bank may rely on such adjudication and amend the Register as recommended by the adjudicator.".
It is important that there be an independent mechanism to adjudicate in these circumstances and on which the Central Bank can rely in making a determination or recommendation.
I do not propose to accept Deputy Pearse Doherty's amendment. It is not necessary to have an adjudicator as the relevant provisions of the data protection legislation of 1988 and 2003 will apply to the Bill. When a credit information subject seeks an amendment to correct information held on the register as it relates to him or her, he or she must inform the Central Bank. The Central Bank is the data controller for the information held on the register. If the bank is satisfied that the information held on the register on the credit information subject is accurate but the credit information subject still wishes to seek an amendment to the register, the credit information subject has recourse to the Data Protection Commissioner. Therefore, a procedure has been provided for in the Bill that provides the credit information subject with an avenue to follow in the event of a dispute about the content of the register. The amendment, as proposed, is, therefore, not necessary, largely because the overriding issue is with the Data Protection Commissioner, not the Central Bank. It would be an extra layer. It is the Data Protection Commissioner's job to deal with the matter, not that of the Central Bank. Applications can be made to the commissioner for that reason.
With regard to amendment No. 56, the Office of the Attorney General consdiered it was appropriate to move the material that formerly featured in section 11 to this new section as it relates not only to the amendment dealt with in sections 9 and 10 but also to the issue of access, dealt with in section 16. The proposed amendments apply the appropriate provisions of the Data Protection Acts 1988 and 2003 to this Act and provide clarity regarding the role of the Data Protection Commissioner and the Central Bank in respect of the systemic problems identified by the bank. The Data Protection Commissioner has been consulted on the proposed amendments to this section. No protection for credit information subjects will be lost through these proposed changes. The amendments will simply apply only the provisions that are applicable. Small and medium enterprises with a turnover of €3 million also have recourse to the Data Protection Commissioner in this regard.
Am I correct in saying that under section 14 of the Bill, the Central Bank is obliged to put a statement of not more than 200 words on the register? If a borrower had a difference of opinion with a lender in a certain case, would he or she be entitled to put forward in 200 words the equivalent of a tweet for beginners? It is like a Twitter page for borrowers.
My understanding from colleagues is that a short explanation of not more than 100 words would apply considering the subject’s credit information held on the register. The bank is obliged to include this information on the register.
If if there is a dispute between an individual such as a hairdresser and the bank, that individual, depending on the size of his or her business, may be able to go to the Data Protection Commissioner. However, a large supermarket, owing to its size, would not have the independent adjudication process available to it. If we have established that the Bill should be able to allow for an independent adjudication process, we should redefine-----
Where there is a turnover of more than €3 million, one is talking about legal action before the courts. Individuals would attempt to have the information clarified in the courts. Such recourse would not be available to the person with a small turnover. The objective is that the information commissioner would be the sole person with the information in that regard. That is why the threshold of €3 million applies.
The Data Protection Commissioner and the relevant Acts deal with a different set of scenarios. They deal with data, of which financial data are obviously a part. These data were dealt with in the legislation at a time when this register was not being conceived. I agree with the Minister of State that the Data Protection Commissioner is the best independent person to adjudicate on these issues. However, the Minister of State should consider that it should be possible to examine issues beyond the figure of €3 million in the original legislation or allow the bank to have an independent adjudication process for those who not captured by the data protection legislation.
There would be cost implications associated with the extension of the data protection legislation for the types to which the Deputy refers. On section 9, applications from credit information subjects or credit information providers to amend information held on the register must be made on the basis that the information is inaccurate. My understanding is that under section 9, this can happen anyway. They can seek to have the information clarified.
Any individual can do so, but the problem arises when there is a dispute. Depending on one's turnover, in a dispute one can engage in an independent adjudication process. However, the legislation stipulates that this route is not available to a successful business person with a turnover in excess of €3 million. The Minister of State is not on solid ground in this regard.
What has been established under existing law is such that we do not extend the Ombudsman's jurisdiction to the types to which the Deputy refers. Corporates are corporates and the ultimate independent arbitrators in disputes are the courts. The objective is to protect the small trader. If one were to extend the power as far as desired, there would be a financial cost that could prove very difficult to meet. We are going down the route of independent arbitration and adjudication in respect of a range of disputes but mostly for small traders. We have not built in the corpus of law an arbitration arrangement to cover every eventuality. That would have implications for business.
I will not labour the point, but I dispute some of the Minister of State's contentions and ask him to reflect on them.
This is about information that will be held on this register. It will concern an application that would have been made to amend the information by an individual or a small and medium-sized enterprise, SME, but the bank has disagreed with the information. The information that can be contained in this register should not be significant. It should not take much to adjudicate on the accuracy or non-accuracy of a statement on the register.
We have had banks in the State that have not operated in the best fashion - that is probably the biggest understatement of the year. An SME in the right with a turnover of over €3 million will have to go to the courts to have the register amended and its rights vindicated. A mistaken entry on the register could put an SME’s future and its employees in jeopardy because it could deny it access to credit.
In any scheme of legislation, one has to be realistic about what can be achieved. We appreciate the support we have received on this Bill from all sides of the House. The Deputy knows the confines under which we are working because this is a troika commitment that we have to put in place. It could be reviewed in time if an SME with a turnover of €3 million felt the legislation was not fair to it. To get to the €3 million threshold, there was some amount of negotiating behind the scenes. If it becomes a difficulty for businesses, as the Deputy described, we can review it. It might be more difficult to have no limitations on it as it would put everyone in the same basket
My amendment states the bank may provide for an independent adjudication of disputes between a credit information subject and a credit information provider as to the content of the register. I am not sure whether we have a right to provide one company with a route to independent adjudication and not another. I will return to this on Report Stage.
I move amendment No. 32:
These amendments allow the register to impose some minimum standards around the data to be reported and the verification procedures that credit information providers must undergo to confirm certain information that may be subjective, which includes collateral valuations or information that may be falsifiable by a credit information subject including personal identity data.
In page 13, subsection (2)(a), line 8, to delete “and”.
I move amendment No. 33:
In page 13, subsection (2)(b), line 10, to delete “provided.” and substitute thefollowing:“provided, and(c) requirements as to verification which are to be met or complied with in connection with that information.”.
I move amendment No. 34:
Amendments Nos. 34, 35 and 38 ensure that the ability to amend reporting thresholds can be based on a more complete range of criteria to make sure reporting thresholds are always set at an appropriate level for the achievement of the register's overall goals. The principles and policies permitting the thresholds to be amended include changes in the consumer price index, effective and efficient operation of the register, and the impact on credit information providers and credit information subjects. The outcome of this is that it allows greater flexibility for the register to change as it develops.
In page 13, subsection (7), line 30, to delete “and to the impact on credit information providers” and substitute the following:“, the implications for the effective and efficient operation of the Register and the effect on credit information providers and credit information subjects”.
I am not accepting Deputy Pearse Doherty's amendment No. 37. I am aware of his comments on this matter on Second Stage. During the consultation process on the Bill, stakeholders advocated higher and lower thresholds on the reporting requirements under the Bill. The threshold level chosen is based largely on the detail of the interagency group report and the consultative process. The imposition of such a low threshold as set out in his amendment may place a significant burden in terms of cost and resources on smaller credit information providers in particular. If one lowers the threshold, it could have an impact on credit unions and small sums of money which may not be in the interest of the consumer. In addition, amendments Nos. 34, 35 and 38 will allow greater flexibility for changing the thresholds if required. This does not preclude the Minister from amending the thresholds in the future.
The capacity of the Minister to amend the level of thresholds after a period of practical operation of the register may be some comfort to the Deputy. This has also occurred in other jurisdictions as after a period of operation. It will be clearer what thresholds will best meet the purposes of the register. While some other national registers have lower thresholds, the Central Bank has informed me the current thresholds contained in the Bill are in the lower range of European public registers with which it has consulted.
The reason I tabled this amendment is because moneylenders are exempt from this Bill because on average they tend to provide loans of less than €500.
Therefore, there will be no requirement on moneylenders to access the credit register. That is what the amendment is about. It is about trying to compel moneylenders to use the register and remove any excuse they have. We all know stories about the door-to-door canvassing by moneylenders in an area where a particular credit union has fallen into difficulties - Newbridge. There is an issue around illegal moneylenders, but we refer to licensed moneylenders. I would like to hear from the Minister of State on how the €2,000 limit will affect moneylenders, knowing how they operate in the State.
This legislation will force people to check the register. This is about compliance and making them do so. It is wrong to tar everybody with the same brush, as there is a role in society for moneylenders. However, I have major issues with the APR they charge and the behaviour of some moneylenders which I have reported to the Central Bank. If one does not have to check the register in giving a loan of less than €2,000, we are telling moneylenders this section does not apply to them, that they do not have to check whether a borrower has a good credit record. They can give the loan. That is the problem.
Above €500 all moneylenders are obliged to send information to the registrar and the register will have the names of individual moneylenders. If a profile is developed of a moneylender giving large numbers of small loans, does the Central Bank have the wherewithal to follow up on him or her?
If this pattern which would be identifiable by the Central Bank emerges, there is no difficulty about changing the regulations. The first priority in ensuring the register works is in terms of the larger institutions such as banks and credit unions. I take the Deputy's point about moneylenders, about whom he has spoken in the past. If this problem were to emerge by way of information from the register, it could be easily solved by way of the Central Bank reporting to the Minister who would ultimately have the power to deal with it.
The Minister of State says that in good faith, but I do not accept it. None of my comments is meant to tar the entire industry with the same brush, but there are reports on legal moneylenders who go around collecting their money with the Argos catalogue in hand, particularly around this time coming up to Christmas when they offer other loans or their loans are being exhausted. They are not allowed to offer a loan to someone who has an existing loan from a moneylender.
The Minister of State asked why a moneylender would offer a loan without checking the client's credit history. It is because moneylenders are different from financial institutions. They call to clients' houses every week or every day. That is one of the reasons their APRs are so high and why they are allowed to have collection charges built in. If I have a €200 loan with a moneylender, I will probably pay him or her before I pay the bank or the credit card company because the moneylender will call to me at a certain time every week. Deputy Kieran O'Donnell said this trend could be identified by the Central Bank.
Let us move from the figure of €2,000 to the €500 limit. I do not know the number of money lenders - that figure is available from the Central Bank - but their number of customers has grown massively in recent years. Because the average loan a moneylender issues is well under €500, the vast majority of loans they provide will not be captured by the proposed reporting mechanisms. The National Consumer Agency talks about the average moneylender's loan being €100 and, in exceptional circumstances, over €1,000. Moneylenders are providing small amounts of money such as €200 or €250. Many moneylenders have their own websites which show that the maximum loan is €500.
Deputy Pearse Doherty's proposal involving a figure of €125 is an attempt to capture more moneylenders. I accept what the Deputy is saying. Moneylenders know their customers and the reason they lend is they know they will usually get their money back. Even with a limit of €125, there would be nothing to stop a moneylender giving ten loans of €124.
There is a way around it. We have had situations where because of regulations and restrictions in credit unions people have moved towards moneylenders. We must ensure this legislation applies to moneylenders, as it does to any other regulated financial institution. It is very hard to dispute that the €2,000 limit above which lenders must check the credit worthiness of borrowers means that moneylenders are exempt from that portion of the Bill. Moneylenders' loans are, on average, below the €500 reporting limit. We could put up our hands and say we have drafted legislation which, although very welcome and supported by me, does not cover moneylenders in these two main sections.
The purpose of the Bill is to ensure people who provide credit for individuals have a database on the risk they take. We are also providing for a duty of care, albeit at a symbiotic level, and a firewall to ensure people do not over-borrow.
Whether it is a car loan or a moneylender, ultimately, the company will make the decision on loaning the money, regardless of the risk. It makes that decision. More important, Deputy Doherty's position addresses the nature of moneylending, which is short-term loans repaid on a short-term basis but the reality of this is these companies are engaged in a long-term lending practice because no sooner is the loan cleared than a new loan is made out. The concern if businesses can see I have a mortgage, credit union loan and a credit card arrangement, they will make a decision on their exposure and provide a hire purchase agreement or whatever on that basis. However, for example, they may be blind to the fact that I am servicing a loan of €400 out of every pay packet because they are not getting sight of that. If I am servicing such a loan out of my salary every month, that amounts to a significant sum out of my income on an annualised basis. The concern is we may leave a gap.
In my initial reply, I said if that concern is realised in a broad way, there can be a legislative response, ultimately, by way of the regulations the Ministers can introduce. Deputy Doherty accepted that not all moneylenders are the same but a second important issue is if we apply such onerous conditions to relatively small sums, will we drive more people into the hands of the unscrupulous lenders? I am playing devil's advocate in this regard. However, in trying to be helpful about this, we propose that as the threshold becomes operational, we will be able to ascertain after a period whether we need to review this provision. If so, it can be reviewed.
The review should not only be conducted on individual sums of €2,000. If a finance company, Doherty Lynch, lends money every week and Mr. Brian Hayes is borrowing from us and if the total capacity of Mr. Hayes's borrowings from us over a year in repayments exceeds €2,000, that should be registered. That means the review examines not only the sum but the totality of the loans.
Over six or 12 months. With regard to moneylenders, the sum borrowed is not the issue. The issue is the annualised payments because there are so many loans one after the other that somebody could pay back between €2,000 and €3,000 a year, which is a greater sum that the €2,000 provided for in the legislation. One is taking into account the total sum repaid, not the sum borrowed.
I feel strongly about this and I do not want to delay the committee but we have drafted legislation which provides that a regulated sector of the financial services industry is not subject to its main provision. This needs to be amended to capture the essence of this issue rather than providing for a review. The Minister of State made a valid point that this would be onerous on all other financial institutions. I recognise, as others do I am sure, that certain regulated services provide smaller loans than others. For example, the Central Bank and the Financial Regulator regulate the industry by sector and, therefore, there are separate rules for moneylenders, credit unions and banks. There is no reason we cannot apply a lower threshold under this legislation. It does not have to be the case that the lower threshold applies to every individual.
I have just Googled the largest moneylender in the State, Provident Personal Credit, on my iPad. Its homepage states:
Welcome to Provident Personal CreditAside from the fact that a loan of €500 from this company would cost €780, I made an application and I will get an answer in a few minutes. When the legislation is enacted, the company will not have to check my credit history. We know that is what these companies do. Every moneylender offers payday loans. It is a massive issue in Britain.
Cash loans from €100 to €500
We're Ireland's number one money lender.
Apply in minutes, its simple, upfront and easy.
They can but they do not. They have no history. Provident Personal Credit is not contacting the ICB to check me out. The company can do that if it wants but its interest is to provide me with a loan because its interest is profit and next week the company's agent will call to my house looking for the first instalment of the repayment. The legislation is about forcing them to check.
I am trying to work out the average amount of loans given in this sector and how significant an issue is this. The view we have is that if this is made so onerous on this regulated sector of the financial services industry, albeit one that provides a niche service, the unintended consequence could be to drive people towards a more unscrupulous group of people.
Even if a company was required to undergo a full credit examination of the potential borrower, it is the company's prerogative to proceed with the loan. The reason these companies charge exorbitant interest rates is the market they are in. They are supplying money to people who most likely should not be getting loans from them in the first place. If one could afford a loan at a cheaper rate, one would not go to these companies. People go to them because they are in trouble. I agree with the sentiment of Deputy Doherty's contribution. The Minister of State could provide 100 firewalls but if these companies think they will get their money back at any interest rate, they will charge it.
This is all about information. If the Central Bank is aware of the volume and amounts of the loans provided by moneylenders, it should be possible to come up with a proper critique of the profile of the loans. Are moneylenders legally required to conduct a review of an applicant via the ICB?
That is a step forward. I take the Minister of State's point that people might be driven towards unscrupulous moneylenders if the regulation is too onerous. Will he provide information before Report Stage in order that we can properly analyse what is happening?
I move amendment No. 35:
In page 14, subsection (5), line 14, to delete "and to the impact on credit information subjects" and substitute the following:", the implications for the effective and efficient operation of the Register and the effect on credit information providers and credit information subjects".
I move amendment No. 36:
This proposed amendment deletes the word "any" in the section in question as the inclusion of this word may narrow the application of subsection (1) too tightly, since credit information providers could read it as allowing them to avoid the duty under section 15(1) to make a mandatory check on credit information subjects before granting credit to them, by applying to access the register for any amount of information, however limited, directly before the application is made. This is a potential gap which was not intended. The amendment proposed will rectify this possibility of credit information providers being able to avoid making the mandatory check on the register.
In page 14, subsection (2), lines 30 and 31, to delete all words from and including "any" in line 30 down to and including "person" in line 31 and substitute "the information".
I move amendment No. 38:
In page 15, subsection (7), line 4, to delete "and to the impact on credit information providers" and substitute the following:", the implications for the effective and efficient operation of the Register and the effect on credit information providers and credit information subjects".
I move amendment No. 39:
The proposed amendment to subsection (1)(b) ensures that credit information providers have access to a guarantor's record on the register at the application stage of a loan backed by that guarantor, so they can assess the credit risk involved as accurately as possible. This would provide greater efficiency and assist the credit information providers in ensuring their engagement in responsible lending.
In page 15, subsection (1)(b), line 16, to delete "agreement made with" and substitute "application made to".
I move amendment No. 40:
Amendments Nos. 42 and 43 are with regard to subsection (2), and are required to provide access to the register where the credit information subject requests a change to the nature or term or fails to comply with an obligation under a credit agreement with another credit information provider. The effect of this will be to broaden the scope of access for a lender, beyond the performance of credit agreements it has entered into with a particular credit information subject, to the performance of credit agreements entered into by that credit information subject with other credit information providers. This will allow a credit information provider a fuller picture of a person's indebtedness resulting in more responsible lending.
In page 15, subsection (2)(a), lines 26 and 27, to delete "agreement, or" and substitute the following:"agreement or has requested any other credit information provider to change the nature or term of any other credit agreement or a guarantee or indemnity given in connection with any other credit agreement, or".
Amendments Nos. 40 to 42, inclusive, will, among other things, enable the effective monitoring of pre-arrears credits, a practice encouraged by the Central Bank of Ireland and reflected, for example, in its code of conduct on mortgage arrears, which includes a protocol for credit institutions to follow once a borrower indicates he or she is likely to face financial difficulties. In broader terms, the importance of engaging with borrowers where early warning signs have been detected was referenced by the Governor of the Central Bank at its conference in February of this year on how to fix distressed property markets, as a means of helping to prevent a spiral of indebtedness.
It is to the benefit of both the credit information provider and the credit information subject to have transparency with regard to the debt position of the credit information subject at all times during the life cycle of the credit so as to enable the credit information provider to assist the credit information subject in addressing any debt problems. This transparency would also enable the credit information provider to maintain or adjust its expectations regarding the performance of the credit and associated risk weighting and credit loan grade, where necessary, during the credit cycle.
A new subsection (3) to be introduced through amendment No. 43 will include portfolio analysis of a credit information provider's own records as a legitimate purpose for accessing information. This aim had been outlined in the original interagency working group report. This is of particular importance to smaller lenders, who may not have the capacity to perform this level of portfolio analysis within their own systems, but has also been highlighted by the IBF as a key benefit for its members.
Amendment No. 52 enables the bank to decide when access to the information on the register is to be given and allows it to produce regulations dealing with the timing of monthly reports.
I move amendment No. 43:
In page 15, between lines 31 and 32, to insert the following subsection:"(3) A credit information provider may make an application to access any information held on the Register which relates to the credit agreements made by the credit information provider.".
I move amendment No. 47:
The proposed deletion of subsection (7) is necessary as the provision is superfluous. The Central Bank of Ireland falls within the definition of a public authority under the Statistics Act 1993 and is subject to the provisions of the Act relating to the collection of statistical information from public authorities for the purposes of the Act. Thus, this particular section is not necessary. On this basis, we recommend its deletion.
In page 15, lines 43 to 46, to delete subsection (7).
I move amendment No. 48:
Amendment No. 48 and the substituted version of paragraph (c) are designed to remove the risk of paragraphs (b) and (c) being given a construction that confines their application to the credit information providers providing the credit. These amendments are in many ways consequential and directly linked with the amendments proposed for section 16. Section 16 gives credit information providers the option or the obligation of accessing a number of scenarios, including considering a new applicant, considering a request by the credit information subject to change the terms and conditions, or restructuring, or considering the impact of a breach of terms and conditions by a credit information subject. The amendments proposed in section 16 afford credit information providers access where changes to terms and conditions or a breach of terms and conditions occur with credit information providers.
In page 16, paragraph (b), lines 4 and 5, to delete all words from and including “the” in line 4 down to and including “taking” in line 5 and substitute the following:"any risk arising from the affording or extending of credit to, or the taking of".
Section 17 sets the boundary for proper use of central credit register information obtained by a credit information provider under section 16. This section needs to be amended to reflect the changes made to section 16. In summary, if one provides for the gateway in section 16, one must also provide the associated appropriate legislative boundary and permitted use in section 17.
The proposed amendment No. 50 to section 17(d) is in order to standardise the language in section 17 to more directly reflect the provisions of section 16 and make it clear that what is being referred to is the common meaning of default, specifically a breach of obligations under a credit agreement rather than any other meaning of default, such as any regulatory concept of default. The inclusion of amendment No. 51, relating to section 17(f), again allows for portfolio analysis of a credit information provider's own submissions to the register to be included as a legitimate purpose for accessing information.
I am not accepting Deputy Doherty's proposed amendment No. 49. This amendment would impact on the effectiveness of the register by limiting the access of credit information providers to the register by not allowing them to evaluate the risk of affording or extending credit to, or taking a guarantee or indemnity from, a credit information subject unless the credit information subject has consented to the evaluation. In effect, this amendment goes against the stated aim of the legislation in promoting responsible lending by possibly resulting in pertinent information being withheld from the credit information provider. On this basis, unfortunately I am unable to accept the amendment.
I take the Minister's point about the amendment. This arises under section 17, detailing the purposes for which the information may be used by credit information providers. It was not so long ago that many people, including me, got phone calls from financial institutions telling me that an overdraft had been extended again and again. At one stage we figured out that between overdrafts and credit cards we had €21,000 of extended credit by financial institutions, which was crazy. The intention of this amendment is to ensure that financial institutions cannot use the information available to them on the credit register to partake in that kind of activity.
The amendment endeavours to ensure that a credit information provider could access the register to evaluate risks but only on the basis of somebody applying for a loan. We could examine the wording. We do not want to see certain financial institutions deciding to start offering loans to people with a good credit history or cherrypicking the register in trying to encourage people to-----
I understand. Section 17 deals with the matter in that it sets out the purposes for which the information can be used by the credit information provider. The purposes are set out in subsections (a) to (e). These include: verifying information provided in or in connection with a credit application; evaluating the risk of affording or extending credit to, or taking a guarantee or indemnity from, a credit information subject; evaluating the risk of any changes to the nature or term of a credit agreement; monitoring any default by a credit information subject; and evaluating whether to make any proposal or arrangement changes to the position. Section 29(2) indicates: "A credit information provider who knowingly uses information to which access has been given under this Act for a purpose other than one permitted by this Act commits an offence.", which would be applicable in the Deputy's scenario.
I thank the Minister of State for pointing out that provision. We can consider for what purposes the information is allowed to be used by a financial institution, and the Minister of State correctly listed the five purposes. All the subsections stand alone but we can consider subsection (b), "evaluating the risk of affording or extending credit to". That is a stand-alone measure. A financial institution could legally use this register to evaluate the risk of affording or extending credit to a person, and that could lead to a problem in the scenario I explained earlier. People could access the register to pony up new business. They could look at Timmy's credit register before giving him a call and offering him something. It would be permitted under the Bill. With that specific case, affording or extending credit to a person should be based on the person making an application or some type of request, and there should be a caveat to protect against the type of scenario I painted earlier.
The Deputy makes a valid point. The subsection states, "evaluating the risk of affording or extending credit to,", which is neutral. The Deputy is correct in that it stands alone. The term is open-ended and continues, "taking a guarantee or indemnity from, a credit information subject;". We should examine the language as it must be more explicit.
I move amendment No. 50:
In page 16, lines 7 to 14, to delete paragraphs (c) and (d) and substitute the following:"(c) evaluating any risk arising from any changes to the nature or term of a credit agreement, or to a guarantee or indemnity given in connection with a credit agreement;
(d) monitoring any failure to comply with any obligation under a credit agreement or a guarantee or indemnity given in connection with a credit agreement that has not been corrected;".
I move amendment No. 51:
In page 16, paragraph (e), line 18, to delete “made.” and substitute the following:"made;
(f) analysing the nature of the credit information provider's portfolio of credit agreements.".
The Minister of State may be aware that the National Consumer Agency suggested that spouses, guarantors and executors should be allowed access to information held on the register. People in that category would have a financial interest in the individual concerned and the suggestion is certainly worthy of consideration. I assume that since this is about use of information generally, it would require another section.
That is under section 29(2) which refers to a credit provider who knowingly uses the information. Subsection (6)(c) provides that a person guilty of an offence under this section is liable, on summary conviction, to a class A fine or imprisonment for a term not exceeding six months, or both.
I move amendment No. 53:
In page 16, between lines 26 and 27, to insert the following subsection:
“(2) Regulations under subsection (1) may make different provision in relation to --(a) different classes of persons who are applicants to access information held on the Register, or
(b) different descriptions of information so held.”.
I move amendment No. 54:
This is a correction of an error to the original drafting of the Bill and it ensures that the section is clear in its application. The reference is to "credit information provider", not "credit provider".
In page 16, subsection (3), line 33, after “credit” to insert “information”.
I move amendment No. 55:
Section 19 as contained in the Bill refers to "identity theft", as when a credit information subject indicates a reasonable suspicion that his or her identity had been compromised. Such reasonable suspicion could result from a lost document or stolen details. It could also be from a demonstration that an action resulting from that compromised identity has already taken place, for example, when someone has impersonated them to access credit. Amendment No. 55 broadens the provision to allow credit information subjects to place pre-emptive flags on their register accounts notifying any prospective lenders that their identity is being compromised or may be compromised and that they are or may become the victims of impersonation. This has the effect of increasing the protections offered to credit information subjects in cases of identity theft.
In page 17, subsection (1), line 6, to delete “has been, or may have been,” and substitute “may have been, may be being or may be about to be”.
I move amendment No. 56:
In page 17, before section 20, but in Part 2, to insert the following new section:
20.--(1) Nothing in this Act limits the operation of the Data Protection Acts 1988 and 2003.
(2) Sections 2, 4 and 6 of the Data Protection Act 1988 shall have effect as if--(a) references to personal data included relevant credit data, and
(b) a person to whom this section applies were a living individual, and sections 9, 10, 12 and 24 to 31 of that Act apply accordingly. (3) In subsection (2) “relevant credit data” means information held on the Register which relates to a person to whom this section applies and which, if it were information relating to a living individual, would be personal data for the purposes of the Data Protection Acts 1988 and 2003.
(4) This section applies to any person with an annual turnover of not more than €3,000,000 (and to whom sections 2, 4 and 6 of the Data Protection Act 1988 would not apply apart from this section).
(5) The Bank may, with the consent of the Minister, make regulations specifying for the purposes of subsection (4) how, and by reference to what year, annual turnover is to be calculated.
(6) The Bank shall notify the Data Protection Commissioner of any systemic problems identified by the Bank in relation to the obtaining, keeping, processing or use of information held on the Register.
(7) The Bank shall take such action (which may include action in cooperation with the Data Protection Commissioner) as appears to the Bank to be appropriate to eliminate or minimise any such systemic problems.”.
I move amendment No. 57:
In page 18, between lines 8 and 9, to insert the following subsection:
“(3) Regulations under subsection (2) may make different provision in relation to--(a) different classes of credit information providers, or
(b) different classes of credit information subjects.”.
I move amendment No. 58:
Amendments Nos. 58 to 62 provide that any party engaged by the bank to operate any aspect of the register is able to recover levies owing to it by way of court proceedings, instead of requiring the Central Bank to bring such proceedings. Amendment No. 63 allows the bank to publish and sell items produced under subsection (1). The bank may produce, for example, analyses, reports and statistics to potential market entrants.
In page 18, subsection (1), line 39, to delete “to the Bank”.
I move amendment No. 60:
In page 19, lines 16 to 18, to delete subsection (4) and substitute the following:
“(4) The Bank may enter into arrangements with any person in relation to the collection of the levy; and the amount of any levy payable is recoverable as a simple contract debt by proceedings in a court of competent jurisdiction by the Bank or any person with whom the Bank has entered into such arrangements.”.
I move amendment No. 62:
In page 19, lines 34 to 36, to delete subsection (4) and substitute the following:
“(4) The Bank may enter into arrangements with any person in relation to the collection of fees payable under regulations under subsection (1); and the amount of any fee so payable is recoverable as a simple contract debt by proceedings in a court of competent jurisdiction by the Bank or any person with whom the Bank has entered into such arrangements.”.
I move amendment No. 63:
This amendment allows credit information subjects to have access to their own information on the register each year on a free basis. The Minister said it is his intention that this would be the case and the amendment provides for it in the legislation. It is important that people understand that the register exists. Many people are not aware that they can access information from the Irish Credit Bureau at a cost. Sending these out free of charge will make them aware of it. This point has been made by the National Consumer Agency. It is the stated intention of the Government, so I hope it will live up to that intention. There are provisions in the different sections relating to levying fees on the financial institutions for the cost of running this scheme. Those who profit from this should cover the costs of this annual report to consumers.
In page 19, between lines 36 and 37, to insert the following subsection:
“(5) A credit information subject shall be issued with a record of his or her credit information once a year at no cost to him or her.”.
The Minister, Deputy Noonan, already publicly outlined his support for the intention set out in the amendment. The question is whether this is necessary in the context of the legislation, because we think this can be done by way of regulation. The objective outlined by the Deputy in his amendment is also the objective of the Minister for Finance. If the Deputy is agreeable, we will table an amendment on Report Stage. It is important to put it in that way as it is important for people to know they are entitled to this on an annual basis.
It is good consumer practice and it also reflects the majority view in the House on the Government side and the Opposition side that this should happen. If the Deputy is agreeable I ask him to withdraw the amendment and we will table our own amendment on Report Stage.
I support the principle of the amendment. I look forward to seeing the Minister of State’s proposal on Report Stage. As he rightly identified, it is not just a benefit to the consumer, it might be helpful when the letter comes in the post if the recipient is willing to open the letter. It might be a help on an ongoing basis to steer the ship to avert a crisis.
Sometimes the official advice is that all these matters can be addressed in regulation, and that is so, but it is important at other times to put it into the legislation to ensure clarity for the purposes of the Oireachtas.
I welcome that and agree entirely with the Minister of State because it is important that people know exactly what is involved. It will help with prudent lending and prudent borrowing as well. When will the regulations appear setting the fees for subsequent reports? I believe the fees could vary.
As the Deputy is well aware, in any primary legislation there is an amount of time before the regulations come in. This is priority legislation and understandable pressure has been imposed on the Government by the troika to ensure it would be introduced. There is very little point in the Oireachtas passing the Bill but then not bringing forward the regulations. While I do not have an exact date, it is a priority issue.
I attended a conference recently where a Supreme Court judge spoke about the operation of all the legislation that has come from these Houses in recent years in terms of how the financial crisis has been dealt with. He made a valid point that it is the heart of prudential lending, that we have a totally different view of risk and, more importantly, of the assessment of information and the quality of it. There is collective support for that on all sides of Dáil Éireann. It is important that we get this right and much of the fleshing out of the regulations will bring clarity.
The other point that was made by the Supreme Court judge is that sometimes one just has to get on and do it, and even if mistakes are made, so be it. The important thing is that the great majority of what we are attempting to do is right and proper for the future prudential risk within the banking sector. The legislation is a priority and we want to get on with it. On Report Stage I might have a more exact timeframe for the regulations.
The thrust of the legislation is that people would have access to their credit rating on an annual basis. The Minister of State referred to regulations. When is it his intention that the legislation would come into operation?
I move amendment No. 64:
This amendment allows the bank to publish and sell items produced under subsection (1). The bank may produce, for example, analysis reports and statistics to potential market entrants.
In page 21, between lines 34 and 35, to insert the following subsection:
“(2) Where anything produced under subsection (1) is not held on the Register the Bank may sell it or publish it and sell copies of it.”.
This comes down to the issue on credit scores. It would be important that within any report that is published in terms of the reduced weighting of credit scores over that time that as loans diminish the information would be incorporated in the report.
I move amendment No. 65:
Amendment No. 65 allows the gateways to sections 33 AK (3) to (5) to operate via section 32. The deletion of section 33 is necessary so as to allow the gateways in sections 33 AK (3) to (5) operate via section 32.
In page 22, subsection (3)(a), line 23, after “required” to insert “or permitted”.
Amendment No. 66 inserts the word “agents” in section 33 AK of the Central Bank Act 1942. The Attorney General's office has advised that in the circumstance where the Central Bank engages third parties to carry out specific tasks, section 33 AK should include a reference to an agent of the bank in line with the proposed section 32 of the Credit Reporting Bill 2012. The proposed amendment to section 32 is effectively an extension of the reasons the Central Bank may disclose information from the register lawfully.
Amendment No. 67 is a technical amendment in order the change the Title of the Bill if amendment No. 66 is approved.
I move amendment No. 66:
In page 23, after line 11, to insert the following new section:
35. -Section 33AK of the Central Bank Act is amended in subsection (1)(h) by inserting “or is or was an agent engaged by the Bank” after “Bank”.”.
I move amendment No. 1 to amendment No. 66:
In page 23, after line 11, to insert the following new section:
“Amendment of section 33AK of Central Bank Act 1942.
35.--Section 33AK of the Central Bank Act 1942 is amended in subsection (1)(h) by inserting “or is or was an agent engaged by the Bank” after “Bank”.”.
On a point of information for colleagues, I wish to bring to the committee’s attention that the Government intends to introduce an amendment to the Credit Reporting Bill 2012 on Report Stage.
This amendment is to provide a legislative base for Ireland to make transfers from the Central Fund to an intermediate account operated by the ESM on behalf of the euro area member states. There will be two other amendments to the Bill, consequential to this amendment, one to the Long Title of the Bill and another to exclude this amendment from the requirements in respect of commencement orders. These transfers are an amount equivalent to the income on the SMP portfolio accruing to the national Central Bank as and from budget year 2013. The member states under a full financial assistance programme are not required to participate in this scheme for the period in which they receive financial assistance. As this provision currently falls outside the scope of the Credit Reporting Bill an instruction to a committee motion will be required under Standing Order 131(2). Standing Order 131(2) provides that the Dáil may, following debate of not less than 60 minutes, give an instruction to a committee empowering it to make amendments.
The net issue is that under the second bailout for Greece, a new fund was provided which all member states of the eurozone commit to. We must have this up and running in legislation because, as we come out of the bailout programme ourselves, we are liable. The next payment is due on 1 July 2014. With the agreement of the House, we propose to use the provisions of this Bill to provide a mechanism through which this can be paid. Essentially, it is our portion of the funds made available to Greece. An agreement was put in place whereby the amount of interest owed that a member state would obtain through the fund would be given back to the Greek authorities. We did not have to pay this because we were in a bailout programme ourselves but when we come out of the programme, we will have to pay it. The sum for next year is approximately €31 million, which Ireland will pay to the Greek authorities, as will our eurozone partners. This is totally accounted for in terms of the budgetary position, notwithstanding the commitment we must make. Effectively, we are adding this into this legislation because this is probably the last chance we will have to do so between now and July. If we do not do it this way, there will be no legal basis for us paying it. That is the intention of the exercise.
I do not have an issue with the substantive issue of the agreement brokered by Greece, whereby the interest on loans extended to Greece by member states would be reimbursed to the Greek authorities. I do not think that other member states should be profiting from loans advanced to Greece. However, I do have a difficulty with inserting an amendment into this legislation on Report Stage, which is inappropriate, in my view. This is not the appropriate place to underpin a payment to the ESM and via the ESM to the Greek authorities. It should also not be put forward on Report Stage. This is a Credit Reporting Bill which has received broad party support across the House. We will deal with the amendment when it comes before us. We can draft amendments very simply or draw up a short, stand-alone Bill to deal with the issue to which the Deputy referred. I do not think this legislation is the place for such an amendment. It does not sit within the Bill. The Credit Reporting Bill is very clear and comprehensive. It is good legislation but providing for a payment to the Greek authorities through the ESM does not fit within the scope of the Bill. I suggest to Deputy Hayes that we should do that in a different way.
It is not perfect. I fully concede that point. I accept that this Bill deals with an entirely different matter but the difficulty is time. Given the different financial year we now have, the Finance Bill will be going through the House between now and December. That has changed the parliamentary cycle in terms of the Finance Bill, although that Bill is not the ideal vehicle for this provision either. I concede that it is not a perfect solution but we must have a legislative basis for making these payments when they fall due in July. That is part of our obligation as a country coming out of a bailout programme. It is important that we meet those obligations and I know Deputy Doherty fully supports what we are doing by way of the SMP portfolio. If it could be done differently, we would have done so. I referred to this issue by way of providing information to the committee but ultimately it will be coming before the House. It will be for the House to determine whether permission will be given to change the Long Title of the Bill and to change the legislation to include this provision for the purposes of the payment. That will be a matter for the House to decide.
The Minister of State is in danger of having the Report Stage debate on this Bill, which is very important legislation, dominated by an issue which is just being torpedoed in. That is very regrettable. It has always been the intention of this State to exit the bailout at the end of this year. That was the aim of the original bailout. The agreement reached with Greece was finalised over a year ago, so we knew this was coming. I acknowledge that the Minister of State has said that this is not ideal but it is actually unacceptable. I will not object to it but ---
There are two issues here. First, even though the substantive political agreement was reached in November 2012, the actual agreement in terms of our portion of the payment was only determined this summer. It was not concluded before then. Second, other countries have been paying into this since its establishment. We are now coming out of our bailout programme and this is the first available way of doing it. Deputy Doherty makes a very fair point, however. We do not want this to be subsumed into the bigger debate on the Bill itself. I might suggest that what is required is a sectioning off of Report Stage to deal exclusively with this issue. We must also ensure that we have adequate time set aside on Report Stage to discuss the substantive issues within the Bill itself. If that can be arranged, we can get over the problem.