Ms Annmarie O'Connor:

On behalf of MABS, I welcome the opportunity to participate in the joint committee's consideration of the substance of the report on financial inclusion and related matters. The report and the submissions point to a variety of concerns to be addressed in the development of banking and financial services in Ireland. The report touches on many issues that are pertinent in our case work, including the role of banks in the lives of our clients, the potential role of post offices and credit unions in meeting the needs of our clients, access to affordable credit, the potential of financial technology, unresolved issues in the mortgage market and developmental opportunities for people and communities that are under-served in their consumption of vital financial services. While we view the primary goals of the proposed local public banking model positively, we have a focus on the needs of a wider segment of the population. We have a sense of the factors which lead to financial exclusion in day-to-day access to banking, such as the availability of accessible, expedient and low-cost payment mechanisms and affordable forms of credit. We understand the need to have the ability to extract best value from increasingly complex financial products. Many people have come to distrust banks and are increasingly wary of any potential toxicity in the financial products they consume. While we welcome innovative initiatives that seek to include specific groups in the productive economy, we do not want to see the emergence of a merely partial solution to widespread and systemic issues.

Since the beginning of the recession, MABS has assisted approximately 250,000 households through its face-to-face service. Virtually all of them have experienced a breakdown in relations with financial service providers. Our strong links with credit unions help our clients to build a bridge back to affordable and sustainable credit. We have worked with all of the main banks with the aim of re-establishing productive relationships. We are now dealing with a changing client group. A higher percentage of our clients is now waged or self-employed. There is an older age profile. Their debts are more substantial. The changing landscape is making our work for our clients more difficult. Our concern for their future access to affordable, simple and reliable banking and financial services is now more acute. Although a great deal of positive progress has been made towards the goal of improving the banking and financial services environment, our view is that the banking, payments and credit needs of atypical consumers have not been given sufficient attention. Many of our clients have impaired credit ratings, but they are not necessarily high-risk consumers. Viewed from the perspective of a remote and centralised lending unit within a commercial credit institution, they may face barriers in accessing affordable credit. High-cost credit is a poverty trap. We have seen the damage caused by sub-prime lending. Other solutions are needed. The proposal in the report is to be welcomed as part of a proactive search for such solutions.

Deep and widespread social scarring exists as a lasting legacy of the recession and the banking collapse. Some people have achieved solutions, but those whose loans have been classified as non-performing and sold on to funds are a significant ongoing concern for MABS and other stakeholders. The sale of non-performing loans represents a severing of relationships between banks and their customers. For many people, the distress of a loan sale is compounded by not knowing what might come after some resolution to their mortgage arrears is achieved. They have real concerns about how they will bank and what access, if any, they will have to affordable credit in the future.

In its submission on the report, CUDA rejects the idea that credit unions be "relegated to acting only as the 'poor man’s bank'". We likewise would disagree with such a proposal. If, however, for the purposes of today’s discussion, the poor man may represent someone who lives on a low income, who has experienced a reduction in their income, or who has some fragility or unpredictability in their income as a consequence of the nature and type of their employment, but who nonetheless plays a productive economic role and needs to have access to affordable banking, credit and payments systems, then we need a bank or a financial services provider that will meet all of those needs. Perhaps local public banking could be a partial solution.

We know from debt advice agencies in other jurisdictions that local public banks and debt advice agencies can work effectively together. We would like the opportunity to contribute to a more in-depth appraisal of how debt advice could be married in a practical and sustainable way within a proposal on local public banking in Ireland.

The report refers to the potential of FinTech and we feel strongly that this needs further exploration. We therefore welcome the Department of Finance’s statement in the report that "emerging trends, such as FinTech will be kept under review for their potential to develop initiatives that could deliver credit in a more effective and less costly manner". We see scope for a sandbox type regulatory regime that could exploit both FinTech and RegTech to the benefit of our client group, reducing cost and facilitating access for the types of consumer we have described previously in this paper as atypical and potentially underserved by main banks and financial institutions.