Paul Murphy (Dublin South West, Solidarity) | Oireachtas source

It is worth looking back at the origins of the credit union movement in Ireland which was founded by a teacher, a baker and a civil servant during the 1950s in response to the grinding poverty that existed in Dublin, with conditions of high unemployment, low pay, poverty and low levels of welfare. These were ingredients for moneylenders to prey on working class communities and to exploit the situation for their own profit. While we are not quite back at that situation, unfortunately in some communities there are significant elements of it after the crisis. One sees that same preying on communities by licensed moneylenders and illegal moneylenders who charge extortionate interest rates. Credit unions were established to assist ordinary people with cheap affordable credit to make ends meet and encourage saving. It was a collective response by ordinary people, what the credit union movement describes as part of a tradition of co-operative self-help, with similar movements having taken place across Europe.

It is a very impressive movement. There are 2.9 million members, €11.9 billion in savings, 9,200 volunteers, some of whom are in the Gallery this evening, and 3,500 employees. There are still 260 individual credit unions in the State in communities providing that support for people. Chatting to some people earlier, they gave examples of some of the things they have done in recent years. They were small things at one level but for the individuals concerned they were crucial, and things that make a huge difference to people's lives, such as a €200 loan at Christmas so that people can have a Christmas dinner and eat decent food then. One credit union gave out three different loans for €50. Where else can a person get a loan of €50? A bank will not give a loan for €50, and the alternative is to go to one of those moneylenders who will charge interest rates at percentages in the hundreds or thousands. It is extortion.

It is worth contrasting the record of credit unions in our society and economy with the role of private banking. Others have noted how warning was given that credit unions would collapse and cost the public a huge amount of money. That did not happen but the private banking system collapsed and was bailed out by the public. The private banking system cost the public about €64 billion while during this massive crisis the credit union movement cost about €2.5 million. Lying behind every major banking scandal we have experienced, from the vulture funds to the tracker scandal to the banking collapse, has been the drive to maximise profit. Some months ago at the finance committee, Professor Phillip Lane, governor of the Central Bank, said that the problem which lay behind the tracker mortgage scandal was a culture of pursuing profitability to the detriment of the banks' customers. That is because they are the banks' customers, not their members. The banks exist to extract maximum profit from their customers rather than serving their members, as is the tradition and philosophy of the credit union movement.

Only today, Mr. Padraic Kissane was before the finance committee where he spoke of how €700 million was ripped off people by the private banking system through the tracker mortgage scandal, fuelled by that drive for profit. That is why the credit union movement is unique. It is not a bank and should not be treated like a bank because it is not driven by profit. It exists to serve its members, not to profit from their needs. Speaking to the credit union volunteers is inspiring because it gives a chance to hear of the work that is done and the difference it makes to real people in real communities. It also gives a vision of how banking and finance in our society could be run on a fundamentally different basis. It gives a glimpse of how it could be possible to have something based on public ownership, with democratic, community control of banking and finance and access to credit in our society. Instead of running our economy and our society to serve the interests of banks, financial institutions could be run to serve the interest of society, providing access to credit for those who need it, encouraging saving and so on, precisely as the credit union movement has been doing.

The dominant issue among the various issues which credit union volunteers will raise, is that fundamentally the Central Bank wants the credit union movement to be a bank. It treats it as a bank and tries to push it to become one. The Minister of State's response is fundamentally disappointing. He began his speech by saying that he welcomes the report but then went on to say that most of its recommendations are not implementable. He said "The separation of powers must be respected and it would, therefore, not be appropriate for a dispute mechanism to rest with the Minister on matters which require regulatory expertise." He defended the idea of the Central Bank continuing to have control of regulation which is fundamentally the problem. I echo Deputy Sherlock's point that the part in the Minister of State's speech about tiered regulation is extremely confusing. It said:

Tiered regulation was the subject of consultation in 2013 ... which proposed a two-tier regulatory model. However, the sector was not amenable to this approach at the time and it was unclear what form of tiered regulation it wanted.

The credit union movement disputes that. It says it always favoured tiered regulation. The only question related to how it would be implemented. Tiered regulation is an essential part of how the issues that exist can be resolved.

Clearly, credit unions do not exist in a vacuum, they exist in a profit-driven finance sector. It is important that they do not succumb to the pressure to become more and more like banks and that the non-profit, democratic and co-operative ethos is maintained and guarded. To do that, it is key that the credit unions are allowed to evolve to take account of the changes in how people use and manage their finances, and how they save, borrow and access their money. There is an idea that credit unions can continue to operate with one or two hands tied behind their backs, for instance, where the vast majority of credit unions are unable to offer current accounts and so cannot offer debit cards and other linked electronic payments. It puts them in a disadvantageous position when trying to attract young people, for instance, into the credit union movement. Only the larger credit unions, with assets in excess of €75 million, can apply for it. The Central Bank must understand that this is a different type of organisation that is based on volunteerism and democracy, and that the appointment of various positions should be done by the members rather than the Central Bank having a veto through the use of pre-approved controlled functions.

The effect is to reduce the level of democracy and communities' ownership of credit unions. A core aspect is that regulation has to be taken away from the Central Bank as this is a key part of the problem. The office of the registrar of co-operatives would be a much more appropriate place from where to provide for regulation, but it would have to be resourced sufficiently. It is clear that the Central Bank is not into the things that result from the benefits of credit unions and what is different about them. For example, there is a drive to encourage and push to say the Central Bank has been minded to recommend that credit unions merge together to reduce their number, which in recent years has gone from 420 to 260. When credit unions want to merge, that is no problem and is fine, but they should not be put under outside pressure to do so. There are benefits in having multiple credit unions in the diversification of risk, being really connected and knowing people on the ground. This provides the soft information that does not appear on balance sheets in knowing about people's ability to pay.

The State stabilisation fund continues to be built up. The credit union movement warned that it would never be used and it has still not been, yet the Central Bank continues to push for more and more money to be added to the fund. The Government needs to take this issue seriously. We need legislation to address it and to adopt a completely different model of regulation of credit unions that would recognise their special existence. There are ways in which they are better and different from banks. We need fundamental change to achieve this.

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