Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I congratulate my colleague, Deputy Michael McGrath, on his very fine exposition of the challenges faced by the credit union movement and the need to treat it differently. If financial difficulties in the credit union movement had been the only financial difficulties facing the financial sector, we would not have had a problem. Taken together, the credit unions in difficulty could have been more than supported by those that had acted prudently. As a sector, credit unions acted in a prudent manner during the boom years and represented a good example for the likes of the major banks as to how to conduct their affairs.

I have noticed that when a problem arises in this society we have a great propensity for imposing more and more regulation and not making a differentiation between big and small and between those who failed and those who did not fail. That is very evident in this case where more and more regulation is being imposed on this sector.

Coming from a co-operative background, I believe the idea of co-operation and that of community ownership creates a totally different situation from the idea of large corporate commercial ownership. To have the same type of rule for a credit union as for a commercial bank negates the reason that credit unions were set up in the United States in the first place. As the Minister knows, credit unions were set up on a mutual basis. In other words, people saved and the collective savings of all the savers were made available within the community for those who needed to borrow. They were not set up as major financial institutions operating under the normal rules followed by such institutions. They were devised as a mechanism for those at the lower end of society to access cash on the basis of mutual solidarity and trust. In other words, they were the ultimate community organisation. It seems the Minister, the Department and the regulators are trying to change them into something else, namely, major financial institutions with the same type of regulation that is imposed on such institutions, forgetting that the great strength of the credit union was mutual solidarity.

It is interesting to consider the basis on which credit unions throughout the country lend money. I note this Government wants to do everything on paper, whether it be a matter related to community welfare officers or any other sector, requiring an increasing number of forms, and more complicated forms, to be completed. It has taken personal knowledge and discretion out of the equation. That change falls hardest on those who are least well off. I have often pointed out that one of the biggest challenges that those with very limited means face when they hit financial difficulties is their inability to borrow money, even very modest sums. Those on a higher income with more assets find it much easier to borrow because banks are much more attracted to them.

Under the credit union tradition, credit unions operated on a common bond basis and personal knowledge of the community and money was lent to people who may not have had major tangible assets on the basis of their record and the lending committee's knowledge of them. If we take that ability away from the credit unions, if we move into having a much more regulated and straitjacketed system and destroy the common bond basis of the credit union, we will be in serious danger of pushing people back towards commercial moneylenders, some legal and some illegal, because people at crisis points in their lives have to access money and if they cannot get it legally, there is always a temptation they will go to people who would not act with the responsibility, solidarity and support shown by a credit union.

I have always been struck by the success of credit unions in the more disadvantaged communities in our society and their success in encouraging the habit of saving and in lending money to people and getting that money back. One of their incredible achievements has been to create a sense of loyalty among their customers regarding their duty to repay. I am stuck every day of the week when dealing with people in financial trouble by the priority they give to meeting their credit union liabilities and perhaps, at times, they list them above more pressing needs because they feel they have that obligation and they also believe that if they are honourable with their credit union that it will be there for them again in their hour of need.

Therefore, we must look at the big picture of why credit unions are different and the reason they were set up to be different and we must reflect on their history and their purpose. I have not been a great fan of the idea of amalgamating credit unions and making them into big commercial organisations because that moves us away from the common bond basis of the credit union and the personal knowledge aspect as those in the credit unions knew the people to whom they were lending.

If the credit unions are changed into big commercial entities, as the Minister seems hell bent on doing with all the regulation that has been introduced, that will force somebody to set up a new type of mutual savings and lending club that will fulfil the role that the credit union always fulfilled. Therefore, it is time to stand back and say that we need special rules. It is also time for all of us in this House to reflect that if the building societies had not been changed into public limited companies and had remained operating as mutual societies facilitating people who had saved to buy a house - with one person being given a loan to buy a house and the next person saving and then getting a loan and so on - we would not have run into some of the major problems we have had as a result of people viewing those societies not as a means of helping people to buy a home but as a means of making a great deal of money for the investors. If they had remained operating for the purpose for which they were set up, we would have avoided many of the problems people now face in regard to their home loans.

Coming from a co-operative background, the idea of mutual assistance and of living in a community and the members of it helping each other with a phase of saving followed by at phase of borrowing and then a phase of saving again, makes a lot of sense to me. It is time we moved back to the basic principles and ensure that the structures we put in place are conducive to this. That is in no way to say that credit unions should not be allowed to have new services, including debit cards and so on, which are part of modern living, with such cards being a device for withdrawing money. With the demise of the building societies operating on a mutual basis, the nearest thing we will now get to building societies will be if we allow the credit unions give mortgage type loans secured on assets.

There are many more things I could say about credit unions. We need to treat them differently because they are different. If we do not do so, the social fallout of that will cause great hardship for the most vulnerable people at the lowest end of our society.

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