Éamon Ó Cuív (Galway West, Fianna Fail)
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I am pleased to have an opportunity to speak on the Credit Union Bill. Before we get into the minutiae of the Bill we should look at the background and purpose for which credit unions were founded. The basis of credit unions was that people’s savings, in the form of shares, would be used to lend money to the same group of people. In other words, they were mutual societies and mutuality was at the core of everything they did. One could not get one’s money in the form of a loan unless one bought shares and one had a stake in the society. Every member of the society had a vote at the AGM. Credit unions were also based on a common bond, be it a work bond or geographic bond. That was crucial to their operation.

The other characteristic was volunteerism. Credit union committees were manned by volunteers and in many cases in the early years those who ran credit unions were volunteers as well. The final characteristic of credit unions and why they were so important to people who would not otherwise get access to credit is that credit decisions were based on local knowledge not on a big, complicated form that gave one a credit rating in the conventional way utilised by banks. That meant people could borrow money from a credit union where the credit union believed the money would be repaid and in the vast majority of cases that trust was honoured. The same people had to have savings in the credit union because the basic principle on which they operated is that one could not borrow unless one saved.

Some credit unions have grown to a considerable extent over the years. Perhaps that is a good thing. There is room for an alternative banking system based on mutuality, but there is still room for the small credit union based in the community and working on local knowledge. No matter what could go wrong with such a credit union it could not in any way upset the national finances. Therefore, when one considers regulation, one cannot compare large credit unions with hundreds of millions of euro at their disposal with the small local credit union that still operates in a valid field on the basis of the original concept of the credit union, namely, the small mutual society that takes in small deposits and gives out small loans.

The regulation of the sector is focused on the bigger credit union operations. I will be told that there are criteria governing the regulation but it seems that it is very much focused on the higher end rather than the needs of a small society. There seems to be big pressure for amalgamations and the corporatisation of credit unions. It is interesting to note that of the 404 credit unions, 295 have less than €40 million. Everyone who has spoken in the debate has placed emphasis on that issue. It is interesting also to note that more than 100 credit unions have more than €40 million and some of them are very large. I have noticed this growth over the years.

I was involved for many years in a small co-operative. It was not like the big dairy co-operatives but a small community co-operative. I worked for it, was chairman of it and am still involved in it. I always worried that the credit unions were going the same way as the building societies. Building societies started as mutual societies. The idea was that people saved for their housing and that the only thing for which the building society loaned money was housing. The only people they loaned money to were the people who saved with them. Perhaps the Minister of State, Deputy Alex White, remembers the system. One could ask what went wrong. Building societies became big as they got more money. First, they got rid of the rule that one could not get a loan if one did not save. Then, they got into all sorts of activities that had nothing to do with building houses for ordinary people as their primary purpose. Following that, they lost a pile of money and had to go to the State to get bailed out. If they had not been bailed out the consequence for depositors would have been unthinkable.

Element of the credit union movement are going through the second phase, namely, the big mutual phase. I have no doubt that as organisations get bigger those that run them get even bigger aspirations. In time they aspire to become even bigger organisations and eventually the whole idea of any connection between the saver, that is, the member, feeling that it belongs to him or her, will be lost. If one does not believe that happens then one should look at the co-operatives that turned into plcs the building societies that turned into something that was very different to what building societies were originally about.

Therefore, before we start talking about the minutiae of the Bill, we must decide what is the role of the credit union. I accept that in the case of bigger credit unions their role is to act an alternative banking system. I hope they will remain as mutual societies but I would not have any particular objection if they developed a plastic card system. However, the bigger they get and the more one amalgamates them, the more one will depart from the original purpose of catering to the needs of the person needing a small loan for a first communion or confirmation or burst pipes in the house or other disasters people face. What will happen is that just as credit unions replaced building societies to a certain extent with their mutual philosophy, one will get a new growth of small credit societies. One can call them what one likes.

Credit unions will grow bigger and become more professional. They will require longer forms to be filled and they will become more strict on credit controls not based on local knowledge but on objective criteria - whatever that is. The term "objective criteria" has become such a catch-cry. However, objective criteria are not objective. As is the case with the Department of Health, it depends on the criteria one says are the objective criteria. That is not an objective exercise. The more one does all of that, the more one will leave a vacuum for the small person who needs a loan that was previously given based on trust and knowledge, not on a credit rating by filling a complicated form. The biggest tragedy is that with the corporatisation of credit unions making it difficult for a person of limited means to get a loan as they do not have the asset backing because, for example, they are living in a local authority house, there will be nowhere to go for a small amount of money and people will have to resort to moneylenders. Perhaps we should be discussing an urgent Bill to control interest rates for moneylenders. I fear that because of what we are doing the small co-operative idea with which I am familiar will be lost, in some cases by big credit unions. Can people not see the danger of over-regulation, in particular of the lending of small amounts of money by credit unions, through form-filling?

Can the Minister of State not see that this will push people back to the moneylending, both legal and illegal, that credit unions did so much to reduce?

When he replies he might answer the following question. His senior colleague stated he would have to put about €1 billion into the credit unions. In relative terms and compared to what was lost in all the other financial institutions, that is a modest sum. How much of that sum arises because of the investments made by credit unions, and how much because of their loans? I understand that only 40% of credit union funds were lent which, even with a bad debt rate of 20%, makes only 8% of the total number of shares. There will always be bad debts: that sum has always been factored in. I am very curious to know what would have happened if the credit unions had not lost money on their investments, in other words, if the big financial system had not collapsed and if credit unions had not bought the subordinated bonds for which the Labour Party were so keen to get a good discount.

As with everything else there are unintended consequences. I attended a meeting of credit unions recently and was told, "You burned the credit unions when you were in government." I asked how this was the case and was told that some credit unions had subordinated bonds and were paid some 10 cent in the euro. I pointed out that it had been amazing how many people had been shouting at us not to pay anything. Not many people thought there would be collateral damage to credit unions with such a policy. This is the problem arising from the complexity of the financial system. When one does not discriminate there are unforeseen problems but if one does discriminate it is not legal. The Minister of State might give us that figure. If I am right about the investments providing the big hit, the irony is that if they had lent more to the small people and invested less in the big banks they might not have needed the €1 billion after all.

There are all kinds of fancy rules being introduced here about membership of boards, connected people and so on. A person cannot be on the board longer than a certain period. That is fine with big credit unions that have a turnover of €20 million, €40 million, €60 million or €100 million. There is a credit union on the Aran Islands, however. With what will the Minister amalgamate it? Why should it be amalgamated? Can the Minister of State tell me how in God's name that credit union can follow all these rules and have a person who is related to nobody else on the board? How will the union have a turnover of board members when there is a small population of 1,500 to 1,800 between three islands? Did anybody think about that? Are we saying that small places cannot have small things? If that is the way we are going we are losing the plot. If one thinks of the real essence of the credit union movement the Aran Islands would surely be a perfect example of a community that would have an intimate knowledge of itself and be able to make very wise lending decisions. These would be very humane but would also be based on a fantastic knowledge of the local community.

I can think of other credit unions, such as Comhar Creidmheasa Cholmcille, which was founded in Indreabhán in south Connemara. When the bank pulled out of Carraroe it was able to put an office in its place. There is another small credit union in Cashel and another at Tullycross which has been fantastically successful and a huge driver of development in the area. If one wished to have the kind of structures the Minister has proposed one would have to take in all of Connemara. The Minister would probably tell us the area in question should be 60 miles long and 50 miles wide. How can people base local knowledge in such a way, whether in the Gaeltacht or the Galltacht? We will be told that is the way to go, the modern thing to do. It is the same in the city where there are locally based credit unions. It is very important that we look to have a system of credit unions that allows flexibility for small credit unions to function and for new ones to be founded within small local communities. That goes back to the heart and soul of what the credit union movement is about.

There is another issue of great concern, namely, the interaction between the Personal Insolvency Bill and credit unions. The banks, or the secured lenders, have the veto. When that Bill was being drawn up and the regulatory impact analysis being done, was there any calculation made as to possible financial damage to credit unions? The banks have effective control over the system of personal insolvency. It seems unfair and wrong that banks which could not look after their own affairs are now being given a veto over the affairs not only of individuals but over decisions in respect of unsecured creditors of organisations such as credit unions.

There is a need to ensure that our financial systems operate properly. When something goes wrong the greatest tendency is to over-regulate the small entity which did not cause the problem simply because the big entity made a big mess. I am not convinced. Mistakes were made in credit unions but the biggest one they made was when they did not follow their own rules. I remember dealing with a particular case in which a lady had managed to borrow far too much money from far too many organisations. The thing that really puzzled and annoyed me was that she had managed to borrow money from four or five different credit unions, this being contrary to their own rules, and on two grounds. The first was that she did not have any savings in the credit unions and should not have been able to borrow in the first place. The second was that most of the credit unions were far beyond the common bond, geographically speaking. She lived in one house only, in one area. Of course, like everybody else, the credit unions had become slipshod, lazy and easy going. They broke their own rules. Rather than making a myriad of rules that in time people will not heed because it is all too complicated, would it not be better to have simpler rules and apply them? If we went back to the basic tenet of the credit union, whereby a person puts in a deposit or shares and gets loans proportionately, the credit unions would be very secure places to invest.

It is true that the bigger an institution is the more it must be regulated. There is much in the Bill I have no difficulty with, in respect of big professional financial organisations which need regulation just as banks do. However, there appears to be total overkill when it comes to small societies that either exist today or those which I suspect will spring up all over to try to help people when bigger financial institutions no longer will. I believe that in the next five to ten years, if there is a suitable vehicle for so doing, we will once again see a springing up of small mutual societies. I hope that this time they will stay mutual and be self-supporting community organisations. People will put their money in and get money out within a small circle. They will work on the basis that made the credit unions what they were - a place where a person with no credit rating could go because he or she was part of a common bond.

When one considers the difference between those on high incomes and those on low incomes in the context of accessing credit, one of the biggest determining factors relates to the capacity of the former to borrow money much more easily when something unforeseen arises. The creditworthiness of those on high incomes is generally much better than people on basic incomes. During the boom times it became far too easy for such individuals to obtain loans of €5,000 or €10,000. To whom will a person on a low income who needs €600 to pay for a family occasion go in the future? Such an individual will discover that all of the normal institutions will be so regulated that, on his or her income, he or she will not be able to borrow the money. What the Government is doing is pushing those to whom I refer into the arms of the moneylenders.

Michael Kitt (Galway East, Fianna Fail)
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I call Deputy Heather Humphreys who, I understand, is sharing time with Deputies McLoughlin and Breen. The Deputies have six minutes each.

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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I thank the Minister for bringing forward the Credit Union Bill 2012. I commend the members of the credit union review commission on all their hard work and commitment and I acknowledge the huge effort and time they invested in producing their interim and final reports. It is on these reports the legislation is based. I also wish to recognise and pay tribute to the huge work done by and commitment of credit union volunteers who continue to play a crucial role in the credit union movement. Without those volunteers, credit unions would not exist. Their voluntary contribution to the movement throughout the country can never be overestimated.

Credit unions are not immune to the current economic difficulties. The volunteers and staff continue to work their way through what is a very difficult period. I commend them on their massive commitment and effort in the context of serving their communities. I worked as a credit union manager for 12 years and I previously worked with Ulster Bank. Having experienced these two very different types of financial institutions, I wish to state in very clear terms that I remain a strong advocate for credit unions and the ethical banking values they uphold. Those values ensure the member or customer comes before profit or gain. I have seen at first hand the benefits a credit union can bring to a community. I am committed to the credit union movement and I am of the view that this legislation will support and allow credit unions not only to continue to provide the services they currently offer to their members but also to strengthen and enhance such services.

The membership of credit unions is vital to their survival in an ever-changing world. A previous speaker noted that virtually everyone in the country has used his or her credit union at some point. This can be often the problem. People use their credit unions when they cannot obtain credit elsewhere. When their financial position has improved and their credit rating re-established and as their needs become more complex and demanding, they move their business to a bank. To survive, credit unions need to retain their members and increase their market share. The Bill will allow them to use synergies within the sector - through co-operation and amalgamation - to provide a broader range of services that will assist them in retaining their members and serving their needs.

The credit unions are at a crucial juncture in their development. While it could be stated that they are victims of their success, they are also the victims of their reluctance to move to another stage in their development. They have been unable to progress and there have been fragmented attempts at offering a wider range of services which have resulted in some credit unions facing serious financial difficulties. In recent years there has been no clear vision for credit unions. I am of the view that the Bill will give them the impetus and encouragement they require and will, with the assistance of ReBo, assist them in progressing to another level. The Bill also takes cognisance of their special place within our society, their mutual nature and their strong voluntary ethos. The latter has allowed them to expand and grow during the past 50 years and has facilitated them in providing a vital service to the less well off.

I ask the Minister to reconsider the position regarding the time limit of nine years relating to voluntary directors and the three-year term relating to voluntary officers. If implemented, these restrictions will mean some credit unions will have difficulty in attracting volunteers. They could also lead to valuable expertise and skills being lost. Credit unions are being asked to upskill their directors and develop their knowledge base. It is important, therefore, that the experience which has been gained should not be lost as a result of people being forced to retire. We do not want some volunteers to feel like conscripts. It is important, therefore, that every effort be made to attract new volunteers.

I wish to address a number of issues in respect of the Central Bank. There is nothing in the legislation which supports the Central Bank putting in place a set of rules and standards for credit unions. The Bill refers to the Central Bank deciding what is a viable credit union. However, the criteria that will be used to assess what constitutes such a credit union are not included in the Bill. A set of prudential rules have not yet been issued. I urge the Minister to ensure that as much clarity as possible is provided by the Central Bank in this regard. Credit unions are being asked to take on board these new standards and I am of the view that it is only proper that the Central Bank should clearly outline what is expected of them. In the recent past, the bank has issued directives and instructions without first carrying out any impact analyses. Neither did it provide justification for its diktats. In consultation with the credit unions, the Central Bank should establish a clear plan in respect of how its directives and decisions will impact on their business.

Having listened to credit union representatives and as a result of my experience of credit union regulation, it is my opinion that the Central Bank does not communicate well. It appears guidelines can be introduced or altered without prior consultation with the credit unions. The Central Bank regularly changes the goalposts. On some occasions, the attitude of its staff towards credit unions has left much to be desired. Volunteers have been made to feel incompetent, incapable and very vulnerable. There is a need to introduce a code of conduct for staff of the Central Bank in the context of how they deal with credit unions. At times, the bank has been erecting artificial and unnecessary barriers.

If the credit unions embrace the legislation and if the Central Bank improves its delivery of service, we can look forward to a sustainable credit union movement that will continue to be led on a voluntary basis and to meet the needs of those it serves. I want credit unions to be supported in order that they can continue to serve communities in cities, towns and villages throughout the country. I also want to ensure no community will be left without a credit union to serve the needs of its people.

Tony McLoughlin (Sligo-North Leitrim, Fine Gael)
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To fully understand the importance of the credit union movement, it is necessary to remind the House of its history. The Irish credit union movement was founded as a result of the efforts of three dynamic, pioneering and entrepreneurial people, namely, a teacher, a civil servant and a bakery worker. In Dublin in the 1950s, these individuals witnessed the effects of high unemployment, such as sickness, malnutrition, moneylending, hunger, poor clothing, poor housing and, inevitably, the emigration of a parent or of entire families. In addition, State unemployment benefits were low and did not last indefinitely. This meant many families lived in abject poverty.

The founders of the credit union movement recognised that the root of the problem lay in the scarce availability and poor management of money and resolved to identify a system which would allow people to gain more control over their finances. Tomas O'Hogain, another pioneer of the movement, suggested that credit unions would give individuals economic independence and responsibility by taking part in common activities and aims. In November 1954 the National Co-Operative Council was established to promote non-farming co-ops and a Mr Denis Byrne, a member of the council, wrote a letter to the newspapers to point out "the scandal of the moneylender whereby those who can least afford it are charged the highest rate of interest – is seldom referred to in learned documents on banking and finance". The letter told how credit unions in the US protected American wage earners from loan sharks and suggested that if the idea were taken up in Ireland, it would surely "be an attractive pastime for those who not only believe in the principles of social and economic justice, but are prepared to work a little to foster them". Mr. Byrne's comments sum up in essence why credit unions have been so important to Irish society during the past 50 years. Many people from the poorer sections in our society were saved from the claws of moneylenders. However, we must recognise that there are those who still engage with these unprincipled individuals.

in 1957, Mr. Seán Lemass, the then Minister for Industry and Commerce and a future Taoiseach, set up a special committee to advise on legislative changes which would help to foster co­operative enterprise in the non-farming sectors. The deliberations of this committee were an important part in the process which led to the introduction of what became the Credit Union Act 1966. The latter provides the legal framework under which the credit union movement operates in the Republic of Ireland. When we, as legislators, reflect on the history of the movement and the involvement with it of many decent and honourable people, we must be mindful of those people's ideals and goals.

The Ireland of the late 1950s was impoverished and, like today, was experiencing an economic downturn. It is incalculable to judge how much the credit union movement assisted its members with finance to provide, transport, education, heat, light, business, a bed to lie in or perhaps the table on which to put the food. It is against this background that we must ensure this Bill will mean that the spirit of the original founders lives on and that the 3 million members with their almost €13.5 billion savings are protected.

Regulation and prudence are two words that were missing within the Irish banking sector from 2002 to 2008. The blame for the collapse has been well documented by political commentators and economists and now is not the time to debate it again. It is imperative that any Government engaged in the clean-up of a mess should identify the cause and legislate so that nothing like this can happen again. The Irish League of Credit Unions has played a significant role over many years in regulating its members and bringing forward best practice procedures for member branches.

Some issues have arisen which are of concern, such as the bad debts that some of the 500 branches have incurred. The Government has already shown its commitment to the credit union sector by putting aside a figure of €500 million to address problems in the sector at a time when the Government faces difficult budgetary choices and competing needs for scarce resources. It has been reported that up to 40 credit unions are in difficulty with some in need of help from the league. It is further reported that up to €1 billion of loans are either behind or not performing. This is an issue which needs prompt Government action.

The Bill sets out the framework for the prudential requirements that are to apply to credit unions in areas such as reserves, liquidity, and lending and risk management. The policies and principles in respect of each area are set out in the Bill, with scope for Central Bank regulations in relation to standards, procedures and other more detailed matters. Regulatory requirements will be calibrated according to the nature, scale and complexity of credit unions. This will allow for the tiered regulatory approach recommended by the Commission on Credit Unions.

Communities have expressed their concern to me about proposals which were agreed by the commission but which are of concern to many individual credit union members. These include the imposition of term limits, prohibitions on membership of boards and a board oversight committee. I ask the Minister to re-examine these proposals on Committee Stage against the implications for smaller credit unions which have been managed in an exemplary fashion and which will face significant difficulties looking for the necessary volunteers to serve on their local credit union. The rule for eligibility of persons to become directors seems to be a little too strict. Anyone related to a volunteer or employee of a credit union is debarred. Term limits for directors are provided for, allowing a director to serve nine years on a credit union board in any 15-year period.

Restructuring is recommended for credit unions who are experiencing difficulties. Approved mergers will be provided with funding where required and subject to conditions to ensure that they have adequate capital and to upgrade systems. This will not apply to all credit unions. I am aware of the many credit unions in my own constituency which have a strong and healthy balance sheet due to prudent and competent management over the past 20 years. I have written to the Minister on behalf of some local credit unions based in rural and low population areas Small credit unions from low populated areas will be threatened by some of these proposals. I suggest that some thought be given by the Minister on Committee Stage. Overall, this is positive legislation and I welcome the Bill.

Pat Breen (Clare, Fine Gael)
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I welcome the opportunity to contribute to this debate. I wish to acknowledge the work of the Minister for Finance, Deputy Michael Noonan. I compliment him on the priority he has given to securing the future of the credit union sector. I note that John Hume served as Ireland's youngest ever president of the Irish League of Credit Unions, from 1964 to 1968. He stated that "[of] all the things I've been doing, it's the thing I'm proudest of, because no movement has done more good for the people of Ireland, north and south, than the credit union." I concur with his comments.

The credit union movement is the bedrock upon which our communities have been built and have survived in every corner of Ireland. With 399 registered credit unions in Ireland serving 3million members, the credit union movement is substantial. Credit unions could be best described as our grass-roots banks because they are the champions of ordinary people in our communities throughout the length and breadth of the country. They have retained their popularity because they are owned and run by their members who know and understand the needs of their members and customers. There is also a strong culture of credit unionism throughout Europe and in the United States. Given the difficult financial situation which has arisen in the banks since 2008, the regulation of credit unions will allow the credit union movement to expand and grow its membership. International experience supports this view. When regulation was introduced during President Reagan's presidency in the US in 1992, the membership of credit unions swelled and today, there are in the region of 89 million credit union members in the US. In my view, the reason credit unions have retained their popularity is because they have a strong customer-friendly ethos and a strong culture of volunteerism. Unlike the banks, credit unions treat their customers as persons rather than as numbers. The retention of these attributes presents real opportunities for credit unions to grow particularly during this financial crisis.

I recently read an article in a financial magazine which cited the experience in the United States over the past month. Credit unions experienced a surge in membership when one of the bigger banks indicated that it intended to introduce a $5 increase in its fees for debit cards. I believe that the same opportunities exist here for credit unions. This is why they must be supported and given every opportunity to develop their business.

Like many Members of this House, I have been contacted by credit union members. The credit union movement is very strong in my constituency of Clare. It plays an integral part in the lives of people in west Clare, Kilrush, in my own parish of Lissycasey, Ennis, Clarecastle, Shannon and Sixmilebridge. I welcome the Minister's commitment to engage in this debate and consider any good ideas which may be put forward. I understand from the Minister's comments that the exclusions from board membership and the situation regarding treasurers were recommended in the report on the Commission on Credit Unions and agreed with the credit union stakeholders. The credit union movement depends on its volunteers but there is concern that the restrictions and limitations on board membership, coupled with the additional responsibilities and the extra committees which are being introduced, will undermine the movement by overstretching the demands of their volunteers, upon which it depends. We must ensure that volunteers continue to play a very active role in credit unions, that involvement is encouraged and that no obstacles are placed in the way of volunteers continuing to support their local credit union.

Many credit unions wish to expand the provision of facilities to customers. They would like to be in a position to offer electronic payment accounts. This has not been addressed in the Bill. However, I understand it is not necessary to include a clause in this Bill to facilitate electronic fund transfer, EFT, as only 10% of credit unions affiliated to the Irish League of Credit Unions currently have the ability to provide this service. I am aware that the Irish League of Credit Unions is working with its members to develop this service. It is anticipated that EFT services will be available by the end of December. It is certainly timely given that the issuing of cheques looks likely to be a thing of the past as early as 2016.

I am a strong advocate of the credit union movement. I welcome the commitment and ability to secure the viability of credit unions, which is what the Bill is all about. However, I am anxious that volunteerism, which underpins the success of the entire movement, be supported. This has been reflected in the speeches of all speakers on both sides of the House. I look forward to hearing the Minister's summation at the end of the debate.

Brian Stanley (Laois-Offaly, Sinn Fein)
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I welcome the opportunity to speak on this Bill. The State is in a difficult position financially, as are many households. I am thankful that there are institutions such as the credit union movement that are unique to Ireland and of which we can be proud. An interesting aspect of the movement - along with the GAA, another great organisation rooted in the community - is that it covers the whole island. It has a branch and cumann in every corner of every county. The GAA and credit union movement have shown themselves to be very resilient. All such progressive movements draw their strength from the fact that they are community-owned and people-centred. They are based in the community. They are solution-based organisations addressing social need. It is interesting to note that the credit union movement, with its co-operative ethos, is based on socialist principles. The Minister of State, Deputy Alex White, will share with me his appreciation of that fact.

The credit union movement was founded because of the efforts of three people, Ms Norah Herlihy, Mr. Sean Forde and Mr. Séamus P. MacEoin, all of whom were based in Dublin during the very difficult recession of the 1950s, whose effects they witnessed. I have but a vague memory of the pawnshops that were widespread in Dublin city at the time. There was considerable unemployment and other problems associated with poverty in that decade. In the 1950s, unemployment benefit was very low and did not last indefinitely. Many families were left in poverty.

Some 60 years later, more than 2.9 million people throughout the island have recognised the value of the credit unions and have savings approaching €11.9 billion. Over 9,200 active volunteers are involved in the movement. We know them in our communities. There are more than 3,500 people in very good employment in the credit unions. I have been a credit union member for a long time. I have been a member of two branches, one of which is near where I live now and another near a former residence. I acknowledge the benefits of having been a member. I used the credit union at times of greatest need and was always offered a sympathetic ear when trying to borrow money for essentials. The credit union was there for me. I have seen it play an essential role in the lives of people with low incomes.

Credit unions play an important role in their communities. Credit is difficult to obtain from banks at present. This is rehearsed in the House week in, week out. Where possible, credit unions try to facilitate their members. I salute the staff and volunteers of the credit unions across the State, including those in my constituency, Laois-Offaly, where there is a strong movement. It provides a great and very professional service and has been very important for people. Having spoken to representatives of the credit union movement, I can confirm that they are the first to admit more regulation is needed. They require a better regulatory context in which to operate and there is a need for reform. The credit union movement has been the primary advocate of this. We support the reform of the credit union movement. In doing so, we believe it must be achieved in a manner that reflects its unique ethos and community-based, not-for-profit and volunteer-based approach.

While I broadly welcome the Bill, I must highlight a number of concerns I share with the credit union movement. The first is the proposal to apply to credit unions the historic Central Bank legislation dating from 1942 to 2011. The legislation is inappropriate and fails to recognise the difference between the banking sector and credit unions. This was not considered by the Commission on Credit Unions and may have far-reaching and negative consequences for credit unions. We are also concerned about the application of the Central Bank (Supervision and Enforcement) Bill 2011 to credit unions. This view is shared by the credit union movement.

The commission's report recommended certain enhancements for the credit union movement but none of these is contained in the Bill. These include service sharing, social finance, micro-finance for small business, co-operative ventures and the introduction of electronic payments. I urge the Minister to consider my sincerely held views and ensure that the final Bill will be capable of enjoying the support of every Member such that it will be passed successfully.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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I welcome the opportunity to speak on this important Bill. I echo the comments of a number of previous speakers, from my own party and others, in commending the credit union movement on its contribution to Irish life and communities right across the island. As outlined by my party colleague and spokesperson on finance, Deputy Pearse Doherty, in his contribution to this debate last week, Sinn Féin broadly supports the Bill but will be tabling amendments intended to improve and strengthen it.

We recognise the vital role local credit unions play in the communities they serve, founded as they are on an ethos of community service, volunteerism and not-for-profit activity. As ordinary people struggle on a daily basis to pay bills and manage their household budgets in the face of further and seemingly endless cuts by the Government, as with its predecessor, the importance of the local credit union becomes further pronounced. Credit unions, for as long as I can remember, have helped people by way of neighbours helping neighbours, through short-term loans to help send children back to school or to provide for Christmas. They stepped in when banks did not want to know. In doing so, they ensured low- and middle-income families could avoid the clutches of loan sharks and unscrupulous lenders who charge exorbitant interest rates. Credit unions have provided and continue to provide a vital social service.

The Bill deals with four broad areas: prudential regulation, governance, restructuring and stabilisation. We support the demand for good practice, transparency and probity, the implementation of agreed standards and necessary accountability. It is agreed by all that the regulatory context in which credit unions operate is in need of substantial reform. The movement itself has been among the leading voices in calling for this reform.

We support strong, effective and appropriate regulation for the credit union sector. We want credit unions, their members and the communities in which they are rooted to have the highest levels of protection, probity, and governance. This is in the best interest of all who provide these services and all who avail of them. However, we firmly believe this can be achieved in a manner that is consistent with the distinctive ethos and values of the sector. It should not be the case that that which is applied to the banking sector is automatically extended to credit unions. It must be recognised that appropriate regulation for one type of financial institution may not be appropriate for another.

If credit unions are to be able to grow and service the increasingly varied needs of the members and communities they serve, they will need to be able to offer a wider range of services. I include the ability to undertake transactions and access services above and beyond those that are currently available. The sharing of services should be facilitated and promoted. We have the opportunity and responsibility, with this Bill, to address specific restrictions on credit unions that go completely against the spirit and purpose of the organisation. The decision by the Financial Regulator to cap a family's borrowing at €25,000 is one such example.

This outrageous restriction has resulted in dire consequences for many families. It is wholly too limiting and fails to appreciate and understand the demands that present in a household, particularly where there are a number of children, and especially if they are third level college attendees or aspirants. This diktat by Mr. Elderfield must be revisited and, at the very least, significantly relaxed.

I ask the Minister to note the situation that applies. No cognisance is taken in regard to the collective income in a household or the number of income earners. It is literally a blanket restriction applying to the members of a particular household, and that is outrageous. I repeat that where the banking institutions are failing in their lending responsibilities, despite the fact that we continue to bail them out on an ongoing basis, credit unions are incapable of responding to members' needs because of the diktat of Mr. Elderfield who does not belong to any community on this island and who does not, I suggest, have the same experience and appreciation of what the credit union movement stands for and what it has meant in the lives of its members throughout the length and breadth of this island.

Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I sometimes like to simplify issues. During the late 1980s and early 1990s when I was younger, a number of other people and I used to think about how north Leitrim might be a better place, the problems it faced and the opportunities available. I recall listening to people in the community and although we had three banks in the town in which I lived, many people felt the commercial banks were for the guys with plenty of collateral and that any financial support they required would have to be met by moneylenders. I believe they were legal as well as illegal moneylenders at the time. I recall thinking that a credit union would make a great difference to the area in which I lived if it could be established, but the group I was working with knew that would not be easy because a number of unsuccessful attempts had been made to establish a credit union. They were unsuccessful mainly because of the difficulties in recruiting and retaining voluntary people from a rural, sparsely populated area. That was the main problem. However, we took on the challenge. I recall it was difficult to get a sufficient number of people from a low population to meet the credit union board of management and the regulatory requirements set down, but we got them. We went through six months of intensive study, training and preparation. It was great that voluntary people would do that. I often refer to them as ordinary people doing extraordinary things. I recall the great support we got from the Irish League of Credit Unions and from credit union officers from adjoining chapters.

It took a while but eventually we founded the credit union in 1996. Unfortunately, I do not have the opportunity or the time to play an active role in the management of the credit union although I remain an enthusiastic member and I am privileged to have been one of the founding members but from those humble beginnings in 1996 we now have a credit union in our own premises on Main Street, Manorhamilton with approximately 2,500 members which, if I calculate correctly, is about one in every three men, women and children in the catchment area. We have approximately €7 million in shares and €2.5 million out on loans. We hope, subject to approval, to pay a 1% dividend this year and a 10% interest rebate. Of the loans this year a total of €8,900 was written off. That covered eight loans, just over €1,100 per loan, and there was a surplus of €339,514 at the end of September, which is the end of the accounting year.

The big banks and the investors who are used to talking in billions and trillions of euro would probably chuckle patronisingly at the figures I have mentioned and might call them peanuts, but Manorhamilton and District Credit Union, mainly through the voluntary work of many people, has done more for those 2,500 members than the commercial banks ever did. The bigger institutions perhaps should stop the chuckling long enough to ponder how an institution such as a credit union, with mainly voluntary workers and a voluntary board of management and its ethos of neighbourliness and community solidarity, has managed to continue in successful operation when they crashed their own businesses, their country and their people. Big is not necessarily beautiful, nor is it necessarily safe, efficient or effective.

I disagree slightly with what Deputy O Cuív said earlier. I would want a much wider societal role for institutions such as the credit unions. There is nothing wrong with widening the role provided it is a societal role, not just for the credit unions but for the post office network also. We should be reducing our over-reliance on for-profit financial institutions.

On the Credit Union Bill, Sinn Féin understands that citizens need trust and certainty in their dealings with all financial institutions. They must be satisfied that their investments are safe and cannot be plundered, pilfered or recklessly managed in an attempt to increase profits for shareholders or for senior officers of the various institutions. Government had and still has a responsibility to ensure there are adequate systems and checks in place to ensure no more financially disastrous surprises are visited upon the people. Consequently, we support the broad intent of this Bill and commend the Commission on Credit Unions, the Minister and the Department, and the wider credit union movement on their work because they were involved in bringing this legislation before the Dáil, but I repeat that bigger is not necessarily better or safer. We must remember that credit unions are generally smaller, community and volunteer-based institutions with a not-for-profit ethos and what is clearly necessary to regulate the banks, given their recent history and their continuing dysfunctionality, could cause irreparable damage to smaller credit unions.

Most of our specific concerns were laid our earlier. The proposal to apply 70 years of historic Central Bank legislation to credit unions without consultation is inappropriate and fails to recognise the fundamental difference between credit unions and commercial, for-profit banks. The new Bill affords sufficiently enhanced powers for credit union regulation. Likewise, the Central Bank (Supervision and Enforcement) Bill 2011 should be modified to reflect the different ethos, operations and management of credit unions. There should be right of appeal to the Irish Financial Services Appeals Tribunal in respect of any regulatory directive.

There is an urgent need for a simple, plain English memorandum of understanding between credit unions and their members and the Central Bank and regulators to ensure that regulation and regulatory practices are proportionate and transparent.

The width of bands for regulatory tiering of credit unions is too wide. We would argue that it must be based on a model of risk and business complexity rather than on size alone. The office of treasurer should be retained for the purpose of ensuring timely preparation and presentation of annual accounts.