Willie Penrose (Westmeath, Labour)
Link to this: Individually | In context

Question 86: To ask the Minister for Social and Family Affairs if, in regard to his recent interview on a television station and subsequent press statement, he will outline the steps he will take to secure a reduction in the interest rates charged to low income families; if, in particular, he has instructed his Department to prepare legislation to make it illegal to charge exorbitant interest rates to such people; and if he will make a statement on the matter. [37770/06]

David Stanton (Cork East, Fine Gael)
Link to this: Individually | In context

Question 88: To ask the Minister for Social and Family Affairs his views on the 50% increase in clients accessing the money advice and budgeting service over the past four years; if this increase is indicative of the failure of poverty strategies to address the social and financial exclusion suffered by low income groups in Irish society; and if he will make a statement on the matter. [37970/06]

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 86 and 88 together.

The money advice and budgeting service, MABS, provides assistance to people who are overly indebted and need help and advice to cope with debt problems. It is a countrywide service, delivered through 52 independent companies, and in 2006 had a total budget of more than €16 million. The number of clients seeking the assistance of the service has grown year on year. Last year, 27,000 people availed of the service compared to 18,000 in 2001. The growth in demand for the service can be attributed to the increase in the availability of credit generally in the economy and to the quality of the service provided by MABS advisers.

Since 1997, the Government has made significant inroads in tackling poverty and social exclusion. Overall expenditure on social welfare has increased from the equivalent of €5.7 billion in 1997 to a projected figure of €13.5 billion in 2006. The number of people on the live register has fallen by more than 100,000 and investment in social welfare and other social services has brought about real and lasting improvement in the living standards of the most vulnerable people in society. It is estimated that approximately 250,000 people have been lifted out of consistent poverty during the past decade. In 2004, the EU-SILC survey showed a significant reduction in the consistent poverty rate from 8.8% in 2003 to 6.8% in 2004, thus continuing a downward trend over the period since 1997. This shows that Government anti-poverty policies are working.

MABS was set up specifically to assist people who are on low incomes by providing debt and money management advice. The evidence from the new MABS information system, which has been rolled out to all MABS offices in the past year, is that the service has been particularly successful in reaching this group. To date in 2006, more than 10,000 new clients have approached the service. While approximately 52% of clients were on social welfare, a significant number of people, that is, 30%, were in employment. Most people approached MABS on their own initiative as they were aware of the service and the assistance it offered. MABS has proved successful in meeting the needs of such clients and is very well regarded by people who seek advice in managing their finances.

The issues that give rise to problems of over-indebtedness for people are highly complex. The cost and availability of credit for people on low incomes is a significant aspect of the problem. I am particularly concerned about the difficulties many people on low incomes face in accessing mainstream and cheap forms of credit.

I have announced my intention to bring proposals for legislation to provide a statutory basis for MABS before the Government shortly. The objective of this legislation will be to put in place a modern and streamlined structure that will be geared to meet the changing nature of the problems debt poses, particularly for people on low incomes. The research findings will be considered specifically in this context. Furthermore, my Department will continue its consultations with the Financial Regulator and other key interests in regard to the options available to strengthen the role of MABS in tackling the problems that arise for people on low incomes in getting access to the full range of mainstream financial services.

Last year, I met the Financial Regulator and the Combat Poverty Agency and initiated research to find out more about the nature and extent of this debt and the report will be available to the Financial Regulator shortly. I refer to the report being undertaken together by the Financial Regulator and the Combat Poverty Agency.

Additional information not given on the floor of the House.

The regulation of money lending comes under the Consumer Credit Act 1995. The Financial Regulator has significant powers to grant or refuse licences to money lenders and a strict regime is in place to ensure compliance with the regulatory code for moneylenders. I have had discussions with the Financial Regulator about our shared concern in respect of these issues.

Following our meeting, the Financial Regulator, together with the Combat Poverty Agency, initiated research to find out more about the nature and extent of financial exclusion in Ireland, as well as the barriers faced by people on low incomes in accessing a wide range of financial services. The report will be available to the Financial Regulator shortly.

The findings of the research, together with the comprehensive statistical data now emerging from the new MABS information system, will make a significant contribution to our knowledge about the problems of debt in Ireland and the situations that leave people on low incomes vulnerable to high cost credit services.

Willie Penrose (Westmeath, Labour)
Link to this: Individually | In context

I thank the Minister for his reply. I hope he is not creating a false dawn for many people or that he is not creating a smoke and mirrors effect. He launched a fairly strong attack, which I supported, on licensed moneylenders during a recent interview. He referred to a significant increase in those seeking help from MABS. Is he preparing legislation that would make it illegal for such licensed moneylenders to charge such exorbitant rates of interest to low income families? I refer to families that are dependent upon social welfare and low incomes. He has indicated that in one case, a legal lender charged 39% interest to people who were borrowing to pay for family events, both anticipated and unanticipated, such as first communions, bereavements and Christmas, of which we are on the cusp.

Why did the Minister's predecessor launch an attack upon MABS by taking away its facility and ability to allow such people to be given €10 to €20 per week from MABS, almost as a subsidy? It was essential for such people who were trying to get out of the grip of moneylenders. MABS played a key role in this respect, apart from the excellent work it does nationwide and for which Members salute it. Members also support the legislation to be introduced to strengthen its role and to streamline the service.

Will legislation be brought forward to curtail or restrict the rates charged to such unfortunate people by simply making it illegal to so do? Why are the financial institutions charging exorbitant rates? Has the Financial Regulator a role in this regard? Has the Minister spoken to the credit union movement — the poor person's bank? This movement has always been willing to help and might open up avenues of access for such people. It might increase the access of people on low incomes to credit when they are obliged to borrow.

I will put this another way. People who are on low incomes or on social welfare must expend what they have on basic necessities to keep themselves alive. I refer to expenditure on clothes, food, fire and fuel, after which little remains. Is the position of such people not exacerbated by the enormous increases in fuel and electricity costs? Consequently, greater numbers of such people must resort to borrowing to meet their normal demands, as well as both planned and anticipated events. Would it not be far worse if the Society of St. Vincent de Paul had not spent approximately €50 million last year helping those people with inadequate incomes? What would the situation be like if the various organisations throughout the country did not help? Are those people who charge exorbitant rates not simply preying on the vulnerable? Matters would be even worse were it not for the intervention of MABS.

A total of 46 moneylenders are licensed by the Financial Regulator. These people are allowed to charge an annual percentage rate of up to 188% for loans, payments of which are collected each week by door-to-door salesmen. Was it not this scenario that drove Tralee Credit Union to publish a few weeks ago a leaflet entitled Keep the wolves from the door this Christmas? This leaflet encouraged members of the credit union to turn to it rather than to moneylenders. Such promotions also have been run by Waterford Credit Union, Newry Credit Union, St. Francis Credit Union in Ennis and Finglas Credit Union in a bid to wean people away from moneylenders. A problem exists when all these very responsible institutions, particularly credit unions, are taking an active and positive step in this regard.

Will the Minister take steps to bring forward a promotional campaign to ensure that people are diverted away from those moneylenders who are charging exorbitant rates, particularly as we head into the month of Christmas when there are so many demands, particularly in low-income households, and people are pressurised by the strength of advertising for various toys and gadgets? Parents in such households often feel under pressure and it is surely an opportune time to step forward. Above all, is the Government not contributing to the situation in which people find themselves by increasing various forms of indirect tax, thereby diminishing the level of income available to these people and forcing them to go elsewhere to borrow money, often for necessities?

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

The findings of a major report entitled Do the Poor Pay More?, which was produced some time ago, and other research make it clear that poor people pay more for loans. Apart from banks, the Consumer Credit Act 1995 envisaged moneylenders as a sector. Under the Act, a person must charge a minimum of 23% to be considered a moneylender, as opposed to a financial institution or bank. The legislation does not set out any maximum limit. I instructed my officials to hold meetings with the Financial Regulator and such meetings are ongoing. I also instructed my officials to seek legal advice — that is being done — as to whether it is possible to amend the Consumer Credit Act in the forthcoming MABS legislation.

The MABS legislation will streamline MABS, give it national leadership and focus and, without interfering with the voluntary nature of MABS, which I am very keen to retain, bring a new professional national structure and leadership to the service. As this Bill travels through the Houses of the Oireachtas, I will be very anxious, if at all possible, to insert a section into it which will deal with this matter. Every time I think out loud, the Deputy opposite accuses me of doing just that, but I will probably not change my ways now.

One possibility is thrown up by the fact that the Financial Regulator grants an annual licence to every moneylender. We do not control interest rates but the Financial Regulator is allowed to take the level of interest rates into account in deciding whether to issue an annual licence. In theory at least, it is open to the Financial Regulator to decide that he does not like the rate of interest but whether this would be sufficient or would need to be combined with other matters affecting the application is the area on which I have sought advice.

I have been very transparent in this regard. I hope I do not raise people's hopes unnecessarily. At the same time, it is important that I am transparent in carrying out this kind of work. As soon as I receive very solid legal advice and we conclude our talks with the Financial Regulator, I will be able to decide whether a section can be inserted into the MABS Bill, which the Government is committed to bringing forward in the next few months, as the Deputy is aware.

David Stanton (Cork East, Fine Gael)
Link to this: Individually | In context

If things are so good in Ireland, why are more and more people being forced to go to MABS for advice on financial and budgeting matters? Is the Minister concerned about the rising levels of personal debt? Does he agree with the consumer debt surveys carried out by the IIB Bank and ESRI in 2005 and 2006 which show that personal debt among Irish consumers increased by 11% between 2005 and 2006 to an average personal debt level, excluding mortgages, of €6,000? Is the Minister concerned about this finding?

Has the Minister any comments to make about people in employment who are forced to MABS, in other words, the working poor? Has he any figures relating to these people? Is the Government concerned about the total number of new clients who have gone to MABS — more than 10,000 this year — and that out of a total debt of €64 million, the average personal debt is over €6,000 per person? Does the Minister agree that his policies are not working? If they were working, fewer, rather than greater, numbers of people would be forced to go to MABS and fewer numbers of people would be in poverty. Yet the trend has gone the other way. Does the Minister agree that the increase in interest rates and house, gas and electricity prices, many of them Government-driven, are also having an impact? What plans does the Minister have for addressing these issues and helping these people, many of whom are young people with families who are struggling to survive?

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

Deputy Stanton is aware that we increased the number of units that pensioners could avail of for electricity and gas, beginning in October in the case of gas and January in the case of electricity. This move will protect pensioners against the recent increases in electricity and gas prices and is a positive step.

I agree with Deputy Penrose's comments about encouraging people to make greater use of credit unions. They are fine institutions with a very good history and wonderful integrity and I encourage people to look to them rather than to moneylenders, even those which are legal.

Deputy Stanton asked me my views about the 10,075 new people who approached MABS this year. The majority of these clients were aged between 26 and 40. They were mainly single people or single parents with children. Just over 50% of them were in receipt of a social welfare payment and 30%, or just under 3,000, were working. A high percentage of people — 70% — had no second income coming into the household. Most people had approached MABS of their own accord. As the Deputy rightly pointed out, the average personal debt is €6,000.

The Deputy's question regarding why so many people still need support or are borrowing money if we are doing so well is a good one. One could also ask why debt everywhere is increasing if the country in general is doing so well. Everyone acknowledges that the country is powering ahead. There should be no debt in the country, we should all be able to pay off our debts, if we are doing so well, but the reality is that whatever level of society or income one is at, one has commitments to meet and bills to pay. One's expectations also increase. The credit that was dealt with 20 years ago was secured to pay routine bills like electricity, gas, coal and food. By and large, the situation today is nothing like that. Some of the figures I have seen and the figures I have just quoted relate to credit card bills and loans for cars, motorcycles, bicycles and short holidays, all of which are legitimate, but people's expectations have risen.

Séamus Pattison (Carlow-Kilkenny, Labour)
Link to this: Individually | In context

We must proceed to the next question.

David Stanton (Cork East, Fine Gael)
Link to this: Individually | In context

Is the Minister talking about relative income poverty?

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

The Deputy knows my views on this. I suppose it is relative——

Séamus Pattison (Carlow-Kilkenny, Labour)
Link to this: Individually | In context

We must proceed to Question No. 87.

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

It could be argued that fewer people should seek assistance from the MABS as the country gets richer but, as expectations increase, that is the reason more people seek assistance from it.

David Stanton (Cork East, Fine Gael)
Link to this: Individually | In context

That is not right. It does not ring true.

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

It relates to credit card bills.

David Stanton (Cork East, Fine Gael)
Link to this: Individually | In context

That is a cop out. The Minister is in denial. He has not shown any concern in his responses.