Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome the opportunity to speak on Second Stage of the Credit Reporting Bill 2012. I acknowledge that the Department has engaged in significant consultation with the key stakeholders in the finance industry, the Central Bank and the Data Protection Commissioner. I also acknowledge and thank the Oireachtas Library and Research Service for its excellent information on the Bill and the information supplied on all other Bills. The comprehensive documentary information provided is particularly helpful for Opposition spokespersons, as it puts the Bill in context and is particularly useful for the purposes of debate.

Last night the House debated a Fianna Fáil motion on mortgage arrears and debt restructuring. While the motion was defeated, we had a very useful exploration of the topic. The Bill is directly relevant to the issues of consumer indebtedness which were discussed in that debate. It is a welcome update on the current arrangements for the recording of consumer credit information. Fianna Fáil will support it on Second Stage. However, I have some concerns which I will outline and I hope the Minister will address. Fianna Fáil will bring forward amendments on Committee Stage to deal with them.

Ireland is about to embark on a major loan restructuring programme, involving tens of thousands of families. If this is to be done in a fair and transparent way, we need accurate information on the credit position of borrowers. The key issue is to have a central repository to hold information on the total indebtedness of individuals. This is essential when making proper lending decisions. It is in the interests of the consumer and also the lender that the complete picture is available in order that decisions can be made. A comprehensive and accessible credit register is necessary in order to facilitate the making of decisions. When does the Minister hopes this central repository, the credit register, will be in place? It is a positive development, which is to be welcomed. However, I hope its establishment will be regarded as a high priority. Having spoken to some industry sources in recent days, I have concerns that there is a lack of urgency. I have heard suggestions that it may not be in place before 2016, which I hope is not the case. I, therefore, ask the Minister to address this point.

I will deal with a number of aspects of the Bill. Section 15 sets the amount for a relevant credit application where the lender will be obliged to check the register for any amount above €2,000. By setting the exclusion amount so high at €2,000 per application, moneylenders, in particular, will be excluded in many cases, in that most of their lending amounts are normally under the €2,000 threshold. The provision also excludes the likes of UK pay day lenders who charge an APR of up to 4,000%. These lenders are not in the Irish market as yet, but they are rumoured to be testing the market here. Many would see the constraints the personal insolvency regime might impose on people's capacity to access credit as relevant in this regard. Either way, if this provision is intended as a protection, the small borrower should be protected against over-indebtedness. Moneylending at an APR of 188% is the scourge of housing estates, particularly in deprived urban areas. We all encounter this problem in our constituency work, but these borrowers are effectively excluded from this provision. A simple amendment to bring the limit to €500 would be reasonable. I intend to bring forward an amendment in this regard on Committee Stage.

I realise that section 16 gives a lender considering a loan application for less than €2,000 the right but not an obligation to seek information from the register. This provision does not go far enough. In essence, it is asking lenders to act on what might be described as best practice.

The head of consumer protection in the Central Bank, Mr. Bernard Sheridan, recently expressed his concern that multiple loans were being issued to consumers by moneylenders and indicated that action was needed in this regard. The more comprehensive the credit register is, the easier it will be to prevent this. Moneylenders should be required to ensure they have trained staff to properly assess information in order, for example, to identify signs of possible over-indebtedness such as multiple short-term loans with different lenders, which is often the case.

I refer to the use of information held on the register. A credit register is a very valuable tool in the hands of those who are allowed access to it. There needs to be clear control of who can use the data and in what circumstances. For example, we all agree that it is acceptable for a financial institution to check the register when it receives a new loan application. However, it is less certain whether it should be permitted to check on existing customers who are meeting their repayment obligations. I ask the Minister to clarify if this will be the case. We all agree that the register should not be available for general marketing purposes. Some of us may have seen the marketing carried out in the United Kingdom or the United States where individuals are invited to apply for a pre-approved loan of £10,000 or $10,000. That practice was prevalent in Ireland up to relatively recently. All the customer has to do is lodge a cheque or complete the credit card application in order to draw down the loan. We do not want that form of promotion taking hold in the Irish market. It is essential, therefore, that the guidelines covering the use of the code are robust to prevent this practice.

On a separate point, the National Consumer Agency makes an interesting suggestion that spouses, guarantors and executors also be allowed to access information held on the register as they have an obvious financial interest in the credit position of the person concerned. It is a suggestion worthy of consideration, assuming that such requests can be handled in an appropriate way. While the collection of information provided for under the legislation is very welcome, it must be ensured that it is verifiable and accurate. In so far as possible, there should be an obligation on lenders to validate and cross­check information, where practicable, for example, in comparing recent bank statements and pay slips to verify income and employment data. In addition, I have a concern about procedures being put in place to identify and prevent possible fraud, particularly where repayments are to be made using a third party debit card.

The Data Protection Commissioner is not in favour of an individual's PPS number being used on loan applications. I understand his concern, as this is not the purpose for which the PPS number system is in place.

We must consider building a unique identifier system such that the data on the credit register can be considered entirely robust. The ESB has built its own complex coding system, while Bord Gáis Energy and the mobile phone companies have done similar work.

It is imperative that we get the balance right between protecting the privacy of the citizen and preventing unnecessary data retention, while ensuring the opportunity for identify fraud is minimised and, if possible, eliminated. It is welcome that consultation has taken place with the Data Protection Commissioner. All Deputies are aware that they are subject to rules about retaining the personal data of constituents on the constituents' database which has been provided for us. We need the consent of constituents to retain their data which, in any case, cannot be retained for an indefinite period and beyond the purpose for which it was originally provided.

Once the credit register is in place, it will be essential to introduce a widespread programme of consumer education to ensure members of the public understand their rights in this area. In the United States people are very conscious of their credit standing and will regularly check their current status. I doubt that many people go to the trouble of checking their status on the Irish Credit Bureau register. This is a pity, as people need to understand how banks go about making loan decisions and the type of information that can go in their favour or against it. In schools there is a very useful CPSE programme to educate students in all matters relating to civic society. I would like to see some time devoted in the curriculum to basic financial planning and the provision of skills students will need throughout their adult lives. Financial skills would be a great tool to have in later life as they undertake making financial decisions, whether it is buying a house, taking out a pension or making an investment decision. It should be possible in a simplified manner to work into the curriculum a knowledge base for students that would stand them in good stead in later years.

Where customers check the register and find that the information held on them is inaccurate, the procedure for correcting the record must be as straightforward as possible. Similarly, if a customer misses a payment through no fault of his or her own, it must be correctly recorded on his or her file. Customers should be reassured that they will not suffer any adverse impact. I am thinking of the recent example of customers of the former Irish Nationwide Building Society who found that their mortgage payments had not gone through owing to a change of sort code following the liquidation of the IBRC. An individual could find that there is a black mark against his or her credit history in circumstances where he or she was not at fault. As a result, a person's credit standing would be diminished. It should be possible to put a note on a customer's file to explain missed payments where there are clear, extenuating circumstances. I have seen cases in my constituency in which people had been made redundant and had to fight to receive the redundancy payment to which they were entitled. This led to many getting into short-term difficulty. It would be very unfair if a missed payment on a loan or credit card which occurred through no fault of the customer were held against him or her on the credit register.

I note the statement of the National Consumer Agency:

The Bill highlights the necessity to acknowledge debtors who actively co-operate with their lender if they find themselves in financial difficulty. The draft Bill proposes that co-operation should be 'rewarded' with a reduced retention period. However, without a definition of 'co-operation' issuers of credit may have no obligation to pass on the benefits of this provision to all relevant consumers.

It is an important point which should be taken on board. Speaking of the National Consumer Agency, I congratulate its new head, Ms Karen O'Leary, on her recent appointment. I wish her the very best in her important role. The importance of consumer rights and advocacy on behalf of consumers is not something to which we tend to give enough acknowledgement. Given the range of challenges and difficulties consumers face, from indebtedness to rising bills, there is a case for having a full Cabinet Minister to look after this area. It is something to which consideration should be given.

It is arguable that ten years ago, at the height of the boom, there were too many lenders in the Irish market. Banks were falling over each other to offer new products on ever more attractive terms. We saw the introduction of the 100% home loan. In some cases, people received loans of over 100% of the price of a property, as they accessed additional funds by borrowing against their credit card limit and from credit unions. Cut-throat competition among the financial institutions proved to be disastrous for the economy and society and we are still picking up the pieces. However, we now seem to have moved in the opposite direction. Competition is limited in respect of mortgages and non-existent in some categories of the market. In years gone by, if a person wished to transfer a mortgage from one institution to another, normal competitive conditions allowed them to do so, but that is no longer the case. This week, for example, small retailers have complained about an impending massive hike in transaction charges, including in depositing cash.

I have seen Ulster Bank referred to as the sleeping giant of the sector. It has the potential to play a much more significant role on the banking landscape in the years ahead. We need an injection of new blood in the banking sector which could come in various forms. We must look at a new State-supported bank to replicate the work done in the past by the ICC or attract an overseas bank, with a clean balance sheet and the capacity to lend to small and medium enterprises and personal customers. While Ireland may not be seen as an attractive market for new entrants, that will change in time. The economy will improve and there will be opportunities for new lenders to provide much needed competition. In either scenario, we need a usable dataset that would provide a clear picture of the financial position of potential borrowers. The credit register can do this and, if it is subject to the appropriate controls, benefit consumers by making available credit options that would not otherwise be available.

Overall, the legislation is welcome. We want to put the financial services sector on a sound footing. Accurate information, accessible in appropriate circumstances, is integral to achieving this. I have some concerns about the use of data and security and hope the Minister will be able to address them and that we can work together to make improvements to a welcome Bill.

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