John Browne (Wexford, Fianna Fail) | Oireachtas source

I compliment Deputy Michael McGrath on tabling this motion, which highlights the manner in which credit unions are being stifled by lending restrictions and unfair competition from the banks. I was a member of the board of Enniscorthy Credit Union for a number of years prior to being elected to this House. I was asked to leave it then, which was fair enough from a political point of view. The credit union sector has a proud tradition of supporting communities across County Wexford. With expert local knowledge and strong personal relationships, credit unions were able to make sound judgments about lending to individual customers, small businesses, the self-employed and small farmers. We have credit unions in the four towns in the county and we also have credit union offices in rural areas of the county.

At a time when banks and post offices are closing, it is important they are allowed to continue on a smaller scale in rural communities.

The credit union was always known as the ordinary people's bank. It specialised in communions, confirmations, weddings, Christmas top ups and car loans, without the bureaucracy and red tape people would encounter if they had to go to a bank. The cap now being imposed by the Minister and the regulator is certainly not going to help credit unions.

I am involved with a GAA club which has a savings club. Approximately €800,000 a year is placed into the local credit union in Enniscorthy. Will the cap of €100,000 affect that? We probably have about 500 individual members. Will they be treated as individual members, or will we no longer be able to put that money into the credit union? Will we have to move to the banking institutions? The Minister might clarify this in his reply.

Unfortunately, the reality is that the credit union sector is effectively stagnant due to the current Government policy. Credit unions can only make money if they are able to issue new loans. However, in far too many instances, the ability of credit unions to do just that is being unnecessarily constrained by the cap and the restrictions about which the regulator and the Central Bank are now talking. As Deputy McGrath has pointed out, the credit union sector itself has undergone massive change in recent years. Its regulatory framework has been overhauled, and professionally qualified people can now be counted amongst its employed and voluntary staff. The financial position of the credit union sector has also been improved and, without this, credit unions would have to resort to the type of tactics employed by commercial banks that raise interest rates and charges at the expense of the existing customers.

We have a concern that various legislative and regulatory provisions collectively threaten the viability of credit unions as they very much allude to maintaining an "as is" format, which undermines the ability of the sector to innovate and expand. These include restrictions on the length of time for which a loan can be issued, the maximum amount credit union members can have on deposit, and the approved process for new products such as debit cards.

The role of the Central Bank has to be questioned. In my opinion, the way in which it treats credit unions is nothing short of a disgrace. Credit unions are unable to get information or clarification from the Central Bank. There is no dialogue or discussion, just the heavy hand of regulation on a continuous basis. While 100% of Irish banks have failed and have no restrictions, 1% of credit unions failed and that sector has 50% restrictions. I wonder how the Central Bank can justify that.

In other jurisdictions, the functions and role of the credit unions are clearly set out. Here, that is certainly not the case. We have no national policy on the future role of credit unions. It is important that we look at a new policy and a new way forward for them. We need a review of section 35 legislation relating to restrictions on rescheduled loans and term limits on lending; a streamlining of the process for the approval of additional services; a financial impact analysis to be conducted on the extent of losses incurred by credit unions arising form the personal insolvency legislation; and, as Deputy McGrath has said, a White Paper on the future role of the credit union sector within the broader financial services in Ireland. It is important that we recognise the great contribution the credit unions have made for ordinary people, who go to a bank and have the door slammed in their faces, are on small incomes and are seeking small loans. If they go to the credit union, 90% of the time they will be looked after.

The Minister should face up to his responsibilities regarding the future of the credit unions. The cap he is now talking about imposing on them should be lifted and he should clarify the position of the many penny bank clubs and saving clubs around the country which save with credit unions. If the €100,000 cap is applied, the credit unions will have no place for them.

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