Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time".

I am pleased to present the Credit Union (Amendment) Bill 2022 to the Dáil today. I want to begin by thanking my predecessor as Minister of State at the Department of Finance with responsibility for credit unions, Deputy Fleming, for his work on the Bill. Under his stewardship, the Bill completed its passage through the Seanad in December 2022.

Although I have been Minister of State with responsibility for credit unions for just a brief period, I have already engaged well with the sector. I have met with the Irish League of Credit Unions, ILCU; the Credit Union Development Association, CUDA; the Credit Union Managers Association, CUMA; and the national supervisors forum, NSF. I have also met many individual credit unions over the past two months. I am very encouraged by the discussions I have had with credit union managers, directors and representative groups. I have met staff and volunteers who are eager for change and for credit unions to reach their potential. I look forward to continuing these engagements throughout my time as Minister of State.

I would like to take this opportunity to issue a challenge. I ask that collectively, we set a vision for where the credit unions can be a decade from now. The reputation of credit unions could not be stronger, but I believe the sector needs to have a strategic vision of where it wants to be in ten or 15 years, and how that will sit vis-à-visother developments in financial services and fintech in particular. The vision for success can only be achieved through greater collaboration and co-operation between credit unions. I have every confidence that this challenge can be met and that Irish credit unions can continue to be vibrant and community-focused pillars of society that serve their members in a complete way in the financial services sector.

The pace of change in financial services is relentless, as can be seen in the rapid growth of fintech and digital banking. Change and technical development is exponential. A new and different set of players is continually connecting with customers and potential customers in a range of new and different ways. There is great opportunity for credit unions to harness new technology to broaden their membership and to grow lending.

Indeed, many have already begun to do so. However, I believe all credit union members should have access to the full services of community banking, regardless of size. This Bill will help the credit union movement to meet this objective and grow as the key provider of community banking as envisioned in the recently published retail banking review.

The Bill before us is the output of the policy framework review, which was a commitment in the programme for Government. The review involved the holding of over 50 engagements with stakeholders, involving more than 60 credit unions either individually or in groups. Additionally, representatives of many more credit unions were met at conferences throughout the country. I have had the opportunity to participate at such a conference already.

Officials at the Department have analysed over 100 proposals for legislative and regulatory change. They continued to do so following the publication of this Bill and its passage through the Seanad. We continued to receive suggestions and amendments from both the Central Bank and the sector until recent weeks. Therefore, there is ongoing collaboration on the Bill. This Bill is the product of that collaboration. I pay tribute to everyone in the sector for the work.

Credit unions, as we all know, are a key component of Irish life. They are social, community-based organisations providing vital financial services. I have seen at first hand the importance of the sector, as Deputies across the House will have done. Credit unions are the largest providers of personal unsecured loans, a lifeline for many families in moments of difficulty. They hold about €17 billion in savings and €5.5 billion in loans and serve 3.5 million members. There are approximately 200 credit unions, with over 400 branches, across the State.

Challenges arising from the negative interest rate environment have abated materially recently. This gives the credit unions a different opportunity, perhaps with a more positive tailwind going forward given the structure of their assets and loans.

The credit unions are co-operative, not-for-profit organisations. They are governed by over 2,500 volunteer directors and board oversight committee members, whose objective is to pursue the economic and social goals of members and wider local communities. This role is even more important given the withdrawal of Ulster Bank and KBC Bank and the closure of many bank branches around the State. Credit unions have a loan-to-asset ratio of just 28%, or €5.5 billion, of their €20 billion assets. This is far too low and is a strategic risk to the sector.

It is important that credit unions continue to develop plans for lending in the community, such as loans to small businesses, agri-lending, retrofit loans and mortgages, in a safe and cost-effective way through collaboration. However, it is crucial that credit unions extend their loan book to mortgages, including more substantial mortgages, and become a competitive force in the Irish mortgage market for their many members. This can be achieved through collaboration.

I am delighted to see the development of a sector-led credit union mortgage task force and look forward to the outcome of this group's work. It is clear that credit unions are engaged and ready for this opportunity. This is a promising start to an ambitious but really necessary programme of work and collaboration for the sector. Collaboration does work.

More than 75 credit unions now provide current accounts and debit cards and make up more than 10% of all new current account openings. Approximately 57,000 credit union current accounts were opened in the first ten months of 2022. All this is supported by two collaborative ventures. These are member owned and provide back-office support for the delivery of common products.

It is important that we acknowledge the challenges the sector faces while at the same time responding to them as a Government and explaining how the Government and, more importantly, the sector can address them and, hopefully, take advantage of the opportunities that arise through the changes being made by this Bill.

The Bill includes 56 sections, amending the Credit Union Act 1997. The explanatory memorandum sets out which of those amendments are policy, technical or consequential. It is heavily technical amending legislation, and it is the first substantive credit union legislation since the 2012 Act. The sector has changed a great deal in the past ten years. There are now fewer credit unions, but those remaining are much larger and provide a far greater range of products and services. The average asset size is now roughly €100 million, the largest being above €500 million.

Arising from the consultation with the sector, several important issues were identified. First, if a member's local credit union does not provide a current account, he or she cannot join a credit union that does, nor can the credit union introduce the member to another credit union. While the common bond may appear to protect from competition from other credit unions, it does nothing to prevent competition from banks or non-banks. The common bond should not be a barrier to members accessing the widest possible range of financial services. We need to reflect on this, and the Bill provides the opportunity to do so.

Second, while a local focus is a great strength of the credit union sector, it can lead to fragmentation. In many areas, there are multiple products, price points and varying terms and conditions. This makes it almost impossible for the sector to market itself as a nationwide option to consumers. This Bill contains measures to address these issues.

Collaboration is bolstered by allowing for corporate credit unions, a new type of regulated vehicle. Corporate credit unions are credit unions whose members consist of other credit unions.

The Bill will amend section 43 to clarify that credit unions can invest in ventures supporting credit unions. Enhanced governance is supported by including the option of making the manager a member of the board, in line with best practice in corporate governance; a reduction in the minimum number of board meetings to six per annum; a mandatory review of policies every three years, rather than annual, as at present, and the removal of the requirement for the board to review procedures; a reduction in five administrative issues to be mandatorily approved at board level; four amendments to streamline the work of the board oversight committee; and a provision to allow credit unions to seek deemed consent from members to receive the annual accounts by electronic means. The latter could save significantly on print and postage costs.

Member services are improved by providing flexibility to the common bond in four aspects: to allow for referral of members to other credit unions to provide a service not provided by the referring credit union; to allow for loan participation; to allow more businesses to be members; and to allow credit unions to lend to certain public sector entities designated by the Minister. Section 38 is amended to allow the Minister to set a maximum interest rate, currently fixed at 1% per month. To fully take advantage of this legislation, the sector must work together to lessen fragmentation, provide strategic vision and leadership and drive business-model change, as so many credit unions have already begun to do.

There are three non-legislative policy actions that I believe will make work easier for credit unions and enhance their engagement more broadly. First, the Central Bank, the Credit Union Advisory Committee, CUAC, and the Minister will have a memorandum of understanding to improve co-ordination on policy matters while respecting regulatory independence. Second, the Central Bank has agreed to introduce an enhanced engagement protocol with credit unions. Third, we have amended the terms of reference of a stakeholder group to widen attendance and enhance transparency with the sector. These are all pretty sensible changes that are in progress.

The core elements of the Bill come directly from detailed engagement with the credit union sector, supported by research from the CUAC. I have also sought feedback from or taken the opportunity to seek feedback from organisations such as Women's Aid, Men's Aid and Safe Ireland in regard to financial abuse training for credit union staff. By that, I mean policy around the third strategy on domestic, sexual and gender-based violence has to be reflected in every Department. Credit unions are in contact and have many members, and their staff are in contact. Financial abuse is a key part of coercive control, as we understand it, and it is incumbent on every Department to ask what it can do by way of a contribution to eradicating domestic, sexual and gender-based violence. I have simply used the Bill as an opportunity, a moment of reflection, to engage with the credit union managers' association and staff of credit unions to ask them for their views on where financial abuse is occurring or not within credit unions, on what more we can do to identify it, and on what training might be helpful or appropriate. Many credit unions have already done training, with Women's Aid in some cases. Is there a way in which we can enhance the protection of the community more broadly, even if it is simply through providing training to staff and directors of credit unions? That implies a significant number of people in every community. It is a contribution that the Department of Finance and the credit union sector can make to the broader Government strategy on domestic, sexual and gender-based violence.

To return to the technical part of the Bill, we have received significant feedback on the current draft of the Bill, both from the sector and the Central Bank. This is helpful and appropriate. I will be tabling amendments on Committee Stage in the Dáil based on that feedback. I am happy to discuss with Deputies the feedback from all the representative bodies and the Central Bank. That will strengthen the crucial proposals in the Bill to support credit unions to collaborate and grow their membership, and also to broaden their range of services for members.

There are some new provisions – this relates to the amendments – in regard to matters not previously raised during the policy review that we are now considering based on the second round of feedback. We will take time to ensure all of that feedback is properly considered from policy and legal perspectives. I look forward to debating this Bill with Deputies throughout its passage. I look forward to a constructive debate on it and I commend it to the Dáil.

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