Seán Crowe (Dublin South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Ireland is currently facing one of the worst economic crises in living memory. That crisis was caused by unbridled capitalism, the gross mismanagement of the economy by successive governments and a complete lack of any serious regulation in the banking sector. It is completely understandable that Irish citizens are extremely angry that their taxes have been used to bail out gamblers, speculators and private banks, whose managements are rewarded by obscenely generous salaries and pensions. However, one institution has stood head and shoulders above the rest during these difficult times, namely, the Irish credit union movement. To most people, the credit union is not just a financial institution but a grassroots movement that was built on volunteerism and is at the heart of many communities across Ireland. The 493 credit unions affiliated to the Irish League of Credit Unions across the 32 counties have a total membership of approximately three million. Credit unions affiliated to the league hold almost €11.7 billion in member shares and deposits and have approximately €5.5 billion on loan to members at the moment. Most of us would agree that with its success over the years in serving members' needs and its impressive penetration levels within Irish society, the Irish movement is an international success story in credit union terms.

On a daily basis we are bombarded with stories of former bankers, civil servants and Ministers living a lavish champagne lifestyle, with some collecting pensions of up to €500,000 per year despite their role in creating the social and economic crisis which has shaken Ireland to its core. Credit unions are not perfect and individuals could and did make mistakes. It would be naive to suggest that the movement was unaffected by the boom; we have all heard stories of unsustainable loans being advanced for properties. However, the main point is that the credit unions themselves would be the first to admit that the regulatory context in which they operate is in need of real reform. In fact, the credit union movement has campaigned for years for radical reform of the regulatory structure. The Irish League of Credit Unions was an advocate for the establishment of the Commission on Credit Unions.

Some of the issues addressed by the aforementioned commission are not reflected in the Credit Union Bill, and one such issue is that of shared services. The sharing of services, which was referred to by Members from all sides of the House, offers credit unions the opportunity to benefit from economies of scale and allows them to access expertise that they might not have the resources to engage individually. This may become increasingly important in the future given the increased complexities and running costs which could be expected from a modernised regulatory framework and enhanced service offering. While sharing services is to be encouraged as a mechanism for increasing economies of scale and promoting co-operation between credit unions, it should not expose credit unions to undue risk. The commission recommended that shared service arrangements be established by legislation, and that recommendation must be taken into consideration.

Credit unions should lead the way in assisting the Government in a financial inclusion agenda. The new Bill should clearly enable credit unions to offer electronic payment accounts. I do not know why the Government would be opposed to this development; perhaps the Minister will address that issue in his reply. Credit unions should also aim to provide for the economic and social goals of members and their wider local communities. Credit unions are in an ideal position to play a key role in the provision of social lending and the promotion of financial inclusion. Social lending involves the provision of loans to local enterprises and voluntary organisations to develop social infrastructure in order to provide affordable debt funding for community enterprises that can operate on a self-sustaining, commercial basis to create jobs, promote economic development and otherwise improve social conditions.

Ordinary hard-working people in Ireland are at economic breaking point. Families have lost another generation to emigration, which is at a level we have not seen in decades, and nearly every household is scared stiff of what is coming down the track in the next budget. The social and societal problems that drove the creation of the credit union movement, including high unemployment, poor housing, poor health, emigration and spiralling debt are again firmly embedded in many of our communities. However, credit unions are ready and willing to come to the aid of ordinary people. They can and should be supporting job creation, community-based enterprises and socially useful schemes. In my own constituency of Dublin South West there are areas of high unemployment and social exclusion, but social lending by credit unions could have a strong impact in reducing many of our serious social and economic problems. The Bill should enable credit unions to provide funding to Government-guaranteed schemes and job-generating projects with a social benefit. Why does this legislation not allow credit unions to take part in social lending schemes?

Another issue of concern is the second loan bar, which was referred to by other Members. Reference was made to loans for birthday and Christmas presents, school uniforms, confirmations, communions, graduations and so forth, but people also seek loans to deal with unforeseen difficulties such as ill health. Given the current delays in the processing of student grants, loans from local credit unions can fill a gap. Another common reason for loan applications is for funeral expenses when there is a death in the family. In that context, some flexibility is required regarding second loans.

Why is there is an unacceptable imposition of limited terms for directors of credit unions and a prohibition on their membership of the board? These measures are unnecessary, anti-democratic and an attack on the basis of volunteerism, and they will have a negative impact, particularly on smaller credit unions. Why are we discriminating against credit unions?

Seán Crowe (Dublin South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

The Bill should be about the future as well as about regulation. I have asked why the Government is opposed to shared services and electronic accounts. Credit unions should be allowed to invest in socially responsible job creation schemes with State-backed guarantees. Is it necessary to provide for term limits for board members and prohibitions on service by family members? I see these measures as undemocratic and an attack on the core of volunteerism. They will have a negative effect, particularly on credit unions in rural areas. Why does the Bill discriminate against credit unions in this way? Is it proposed to introduce similar restrictions for board members in the banking or education sector? Why pick on the credit union sector in particular? Credit unions already face difficulties in recruiting directors.

Sinn Féin wants the legislation to provide strong, effective and appropriate regulation of credit unions. It must reflect the fact that credit unions are not banks. They are ready and willing to tackle the huge socioeconomic problems which have come to the forefront since 2008, but the legislation must allow them to do so.

Members on all sides of the House have made reasonable proposals for improving the Bill. Many of the measures it introduces are positive, but it has failed to strike the right balance overall. I hope the amendments tabled by all sides will be considered by the Minister on Committee Stage. We want to support the Bill but it needs to be improved if is to get the balance right.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Bhí mé ag éisteacht leis an díospóireacht níos luaithe agus bhí sé spéisiúil an réimse tuairimí a bhí le clos, ní hamháin ón bhFreasúra ach ó chúlbhinsí an Rialtais chomh maith. Ba léir gur thuig Teachtaí cé chomh tábhachtach is atá an córas chómhar creidmheasa timpeall na tíre agus an dáinséar atá ann, má reachtaítear an Bille go loitfear bun ethos na gcomhar creidmheasa. Dúirt an Teachta Arthur Spring go ndéanfadh an Bille an córas níos láidre. Tá roinnt de ghnéithe an Bhille a dhéanfadh sin agus tá gá le roinnt reachtaíochta. Ach is í an fhadhb is mó, mar atá an Teachta Seán Crowe díreach tar éis a rá, nach bancanna atá i gceist anseo. Ghníomhairí pobail atá taobh thiar den chóras chomhar creidmheasa. Ar bhonn phobail a bhí na comhair creidmheasa ó thús báire agus ar son an phobail atá siad. Níl siad ann chun brabús a dhéanamh dóibh féin. Ní cóir go mbéadh siad ariamh ceangailte leis an gcaipitleachas a raibh na bancanna gafa leis.

Tá cleachtas difriúil ag teastáil chun na comhair creidmheasa a reachtáil. Ní cóir, dá réir, rialacha banc a chur anuas orthu mar bhéadh sé sin ag teacht salach ar an mbun ethos atá a baint leis na heagrais pobail seo. Ba chóir déanamh cinnte de go leanfaidh na heagrais seo, go gcuirfear leo agus go dtabharfar cosaint don pobal a bhfuil siad ag soláthar seirbhíse dó, fiú in am an ghátair mar atá ann faoi láthair.

Forcing on credit unions the commercial and banking regulations that apply to banks and other financial institutions reveals a lack of understanding of the credit union movement as it evolved in Ireland. If the Minister understood how it originated, the services it now provides and the ethos underlying it, he would not even think of imposing many of the restrictions he proposes. Nobody is arguing against stricter regulations for credit unions to ensure nothing untoward happens, but they should not be legislated for in the same way as banks. These are voluntary groups with limited membership numbers and liabilities. They are not multi-billion euro basket cases like Anglo Irish Bank, AIB or, to a lesser extent, the ESB, which speculated to beat the band. They are community-based, not-for-profit organisations and their shareholders are their members. Their purpose is to serve their communities and keep people out of the grip of moneylenders, both legal and illegal. Professionalising them to the extent that the voluntary aspect is removed would limit the ability of directors to serve their communities and is an affront to members. I do not deny that some credit unions face difficulties or need to amalgamate but they should not be tarred with the same brush as the Fingletons of this world. Credit unions need to be protected and encouraged rather than hampered because they play an important social role. We are trying to encourage people who are in difficulty to go to MABS rather than moneylenders.

The Irish League of Credit Unions states that thousands of valued and experienced credit union members will be debarred from serving as directors or board oversight committee members as a direct consequence of the term limits proposed in the Bill. It argues that the introduction of the fitness and probity regime for credit union directors and officers should obviate the need for the crude device of term limits and points out that such hard and fast rules do not apply to any other credit union movement across the world. This is unprecedented in the context of the financial services industry in Ireland.

Gerry Adams (Louth, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Bhí mé ag éisteacht leis an díospóireacht níos luaithe agus, mar a dúirt an Teachta Ó Snodaigh, bhí sé suimiúil éisteacht le Teachtaí ó achan páirtí ag tabhairt barúlacha faoin Bhille seo agus ag léiriú go bhfuil siad ar fad buartha faoi.

Sinn Féin supports strong, effective and appropriate regulation for the credit union sector. While there are many positive aspects to the Bill, there are a number of others which concern us. As Sinn Féin's spokesman on finance, an Teachta Pearse Doherty, has indicated, we will table a number of amendments to the Bill on Committee and Report Stages.

Credit unions have a distinctive, not-for-profit ethos that needs to be protected and encouraged. This should be the position of the Government. Credit unions are an integral part of every community. Across the entire island they are a truly national social movement. Their ethos is based on values of community, voluntarism, solidarity and social enhancement. They keep people away from moneylenders and make money available to those not in a position to deal with the banks. In many cases, this involves just small sums of money that can be paid back in small repayments.

In September I met the representatives of the Kilsaran-Castlebellingham branch and the Dunleer branch and the manager of the mid-Louth group of credit unions. I have also been in contact with Collon Credit Union and the parish of Darver credit union. Many of those I met have serious concerns about the Bill. They are not against change, but they have concerns which I share. There are concerns that some of the measures agreed to by the Commission on Credit Unions have not been included in the Bill. Why not? The sharing of services among credit unions should be supported in order that members could avail of a wider range of services. The Bill should also enable credit unions to offer electronic payment services and accounts.

A particular fear of some of those I met is that some proposals will make the closure of smaller credit unions inevitable, leading to the removal of another vital service in rural Ireland. There are concerns that some of the Government's proposals will undermine the ethics and principles of the credit union movement as a democratically based and community owned service. Credit unions are not banks and should not be treated as such. They did not help to cause the economic crisis and the directors do not draw huge pensions or receive huge bonuses or salaries.

The proposal to apply the Central Bank legislation from 1942 -2011 to credit unions was not considered, even by the Commission on Credit Unions. This will have far reaching implications for credit unions. There are similar concerns about applying the Central Bank (Supervision and Enforcement) Bill 2011 to them. The concern is that this will undermine the right of appeal to the Irish financial services appeals tribunal, as recommended in the commission's report and included in the Credit Union Bill. As some of my cairde have said, changes to the appointment and selection of directors will militate against real member and community ownership of credit unions. Term limits for directors will remove a wealth of knowledge and experience from the movement.

There are positive aspects of the Bill, but it needs to be amended. We want to see strong, effective and appropriate regulation. The credit union leaders I met want to see the same thing happen. This is necessary for their survival and the future well-being of the communities they serve. I hope the Government will take on board some of the suggestions others in Sinn Féin and I have made.

Michael Kitt (Galway East, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Deputy Aodhán Ó Ríordáin will share his time with Deputies Michael Conaghan, Kevin Humphreys and Dara Murphy.

Aodhán Ó Ríordáin (Dublin North Central, Labour)
Link to this: Individually | In context | Oireachtas source

There is much agreement across the House on what credit unions give to communities in every section of Irish society. In the past couple of weeks I have taken the opportunity to speak to members of Donnycarney Credit Union and members of the credit unions in my constituency in Fairview and Clontarf who have told me that the basic role of credit unions is now keeping the wolf from the door of many households which in previous generations might easily have turned to moneylenders. We should take the opportunity to give credit to the credit union movement for what it has done. It is a not-for-profit organisation that is community-based and oriented. Some of the sums of money credit unions deal with are very small, but they are a means of keeping a family on the straight and narrow and can make a huge difference in meeting the day-to-day expenditure of a family. Everybody who enters a credit union knows its ethos.

That said, everybody must accept that credit unions need regulation. When I asked people working within the credit union sector about the Bill and their concerns, they said the one thing they would like to change was section 15(10) which deals with the directors of a credit union. They have genuine concerns that the way in which credit unions operate will be severely undermined if this section is allowed to continue unamended. It states an employee or voluntary assistant of the credit union or an employee or voluntary assistant of any other credit union are not eligible to become a director of a credit union. This is overly prohibitive. Most credit unions operate on the basis of good will, yet the people who work in credit unions and volunteer to help in them selected this section of the Bill as a concern. When I asked them to select one area of the Bill in which they would like to see a change, this was the section they chose.

Section 15(14) is also a concern. It states a member of a credit union may not be appointed or elected to the board of directors if he or she has served for more than nine years, in aggregate, of the previous 15 on either the board of directors or the board oversight committee of the credit union. I understand this provision may be being made owing to significant bad practice in the past. Perhaps some individual credit unions operated in the manner of fiefdoms. However, as previous speakers said, we should not over-regulate the credit union system because of the sins of a few. Most credit unions have a long history of dedicated service in order to allow the credit union movement to survive. The nature of voluntarism and community activism has changed in Ireland and many of those working in the sector are looking at the next generation and concerned because most of their members are not young. Most credit union volunteer members are of a particular generation which had a different understanding of community interdependence.

While understanding the need for regulation of the credit union sector, I suggest that if one element of the Bill can be reexamined, it should be section 15(10) dealing with the board of directors. The Minister should also reconsider the length of time for which they may serve. The overall thrust behind what the Department is doing is laudable and important, but we should also remember that it is the credit unions that are keeping moneylenders out of business. It is not in our interests, therefore, to put credit unions out of business.

Michael Conaghan (Dublin South Central, Labour)
Link to this: Individually | In context | Oireachtas source

Ireland is unique with regard to the scale and success of the credit union movement, one of the biggest developments in our social history and now an integral part of community infrastructure and life. This is something of which we should be very proud. There are 399 credit unions in Ireland, with 3 million members. More than any other country, Ireland has bought into the credit union movement and communities across the country have reaped the benefits of this development in the past 50 years.

Credit unions are run by volunteers and owned by their members. They sit at the heart of the community. This community ethos is the most striking characteristic of the credit union movement. For over 50 years, credit unions have encouraged saving and engaged in lending among their members.

They have supported communities and individuals in these communities on big and small projects. Credit unions have a particularly strong reputation for supporting the needs of disadvantaged communities and individuals. Small loans are regularly provided to people to assist them through difficult times, for example, to help a family pay for Christmas and to support young people to succeed in education. People who save their money in credit unions know that this money will be used in their communities to support those communities.

The Government recognises the vital role credit unions play in Irish society. In the programme for Government, it states clearly that it recognises "the important role of Credit Unions as a volunteer co-operative movement and the distinction between them and other types of financial institutions". The Government's desire to reform and support the credit union movement properly, while taking the views of the movement fully on board, was recognised in the creation of the Commission on Credit Unions, which completed its work earlier this year. It has also been recognised in the legislation we are discussing and the wide consultation that has taken place around the legislation.

Despite the unique nature of credit unions, the financial collapse has highlighted clearly the need for them to be governed by robust regulation. The Irish League of Credit Unions went from a surplus of €15 million in 2009 to a deficit of €45 million in 2010. The Minister, Deputy Noonan, has estimated that the cost of recapitalising credit unions will be between €500 million and €1 billion. Credit unions affiliated to the Irish League of Credit Unions hold assets of €13.5 billion. Measures must be taken to ensure this is secure. Like any other financial institution, an individual credit union cannot be allowed to play fast and loose with the money of its members, or to take the kind of unacceptable risks that brought our economy to its knees.

The credit union is the people's bank. As it takes responsibility for the deposits of individual members and lends to members when needed, it needs to be regulated. In recognising the need to reform the regulation of credit unions, the programme for Government clearly states that a balance must be struck between "their not-for-profit mandate, their volunteer ethos and community focus" and "the need to fully protect depositors savings". The structure, ethos and business model of a credit union is vastly different to that of a commercial bank. As a result, a credit union cannot be treated like a commercial bank. Nobody is arguing with the need for robust regulation that will allow the credit union movement to develop into the future. However, this legislation must ensure the credit unions' flexibility and ability to respond to the needs of the community is not lost.

I conclude by thanking my local credit unions in Ballyfermot and Inchicore, which contacted me to outline their particular concerns about the impact that certain aspects of this Bill will have on individual credit unions. They are concerned about the effect of some governance provisions, such as the term limits to be imposed on directors, the prohibitions on membership of boards of directors and the status of the treasurer, on smaller credit unions in particular. I ask the Minister to outline how he proposes to address these concerns to ensure credit unions retain the flexibility they need.

I would like the Minister to explain the absence from the legislation of two simple items raised by the Irish League of Credit Unions which strike me as sensible and desirable. First, the sharing of services would allow for the provision of a broader service and would ultimately reduce costs. Second, credit unions should be allowed to provide funding to Government-backed or Government-guaranteed schemes and projects with a social or local benefit. I suggest that such investment should be encouraged at a time when every available resource should be targeted to deliver a social dividend in struggling communities.

We need to maintain a strong and vibrant credit union movement that continues to support communities and individuals. It should be responsible and well regulated and should remain responsive to the needs of the community.

Kevin Humphreys (Dublin South East, Labour)
Link to this: Individually | In context | Oireachtas source

I welcome the Bill. The Minister has done a substantial amount of work to strengthen the credit union movement, rather than damage it. I should declare at the outset that I am a member of a credit union. I would probably not be here if I had not been able to borrow money in 1998 to run my first campaign. I suppose I should declare my self-interest at this stage. That is an example of the strength of credit unions at the heart of the community.

My children were introduced to the credit union movement when their grandmother opened their first account for them. I am sure many people, including some of the young people in the Gallery, have had a similar experience of the intergenerational nature of credit unions. In that context, it is worth mentioning the support that credit unions give to local communities and the assistance the credit union movement gives to the Money Advice and Budgeting Service.

As Deputy Crowe said earlier in this debate, we need to examine the possibility of expanding the role of credit unions to allow them to fund schemes with a social benefit. I could not help thinking of John Hume when Deputy Adams was speaking. As part of his great work, John Hume travelled the length and breadth of the country to build and expand the credit union movement. Indeed, Deputy Adams would probably not be here today without the work done by John Hume as part of the Good Friday peace programme.

A number of major issues have been raised during this debate. Deputy Ó Ríordáin mentioned some specific areas. Rather than repeating those points, I will express my support for them. We need to examine the different types of credit union in this country. Some of the smaller credit unions are associated with certain professions or workplaces. The community credit unions tend to be slightly larger. Some credit unions are verging on the size of banks. Therefore, the new legislation has to cover a range of regulations.

I hope the Minister will consider some amendments to this Bill. A great deal of work has already been done. Government and Opposition Deputies continue to have an opportunity to work together to try to get the best solution for credit unions across the wide range of the spectrum, from the very small branches to the very large branches. That will be difficult. When the Joint Committee on Finance, Public Expenditure and Reform held hearings on this issue, it was clear that there was a difference of opinion across the movement in several areas.

I believe the issue of governance needs to be addressed. Current legislation imposes a number of administration measures on credit unions. For example, each credit union must have a membership committee, credit committee and a credit officer. All of the functions of small specialised credit unions that have an excellent credit record over a number of years could probably be carried out by a single board. I ask the Minister to consider giving the registrar of credit unions the leeway to permit small credit unions to have less formal committee structures, as long as the registrar is satisfied that the credit union in question is run in accordance with the regulations and requirements and is likely to be run in that way in the future.

The specific requirement for all directors have to expertise, qualifications or backgrounds in financial services is worrying and needs to be considered in greater detail. The extent of that requirement is not spelled out clearly. We must ensure we are talking about a qualified financial adviser. I ask the Minister to consider amending section 15(3) of the Bill to provide that the registrar must be satisfied that the board has availed of relevant financial services expertise and has not acted against the advice given. Such a small amendment could assist smaller and more specialised credit unions.

We have to bear in mind that the credit union movement in this country has been a force for good. Recent surveys have shown that people try to make repayments to credit unions first because they appreciate that credit unions are continuing to lend money. As Deputy Ó Ríordáin said, they keep the moneylenders from the door. They play a very important role in society. As we continue our consideration of this Bill, we have to ensure we do no damage and we strengthen the credit unions.

Dara Murphy (Cork North Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome the opportunity to speak on this Bill. Everybody accepts that credit unions play a very important role in this country and appreciates the voluntary status and nature of those involved with credit unions. Their importance can be seen in two large suburban areas in Cork. There are four financial institutions - two banks and two credit unions - in the north east of the city, but both of the banks are closing, unfortunately. In the north west of the city, there are two credit unions and no banks at all.

It is important to note that the ambition of this Bill is to protect the savings of credit union members, to safeguard the stability and viability of credit unions and the sector at large and to preserve the ethos of credit unions, which we are all talking about today.

It was interesting to listen to Deputy Humphreys who, like myself, spent a couple of days a month ago with various representatives of credit unions, including individual credit unions. It must be acknowledged that there is quite a varied stance on the Bill as it now appears. It must also be acknowledged, however, that this is a new position, because this Bill gives effect to 60 recommendations that came from the final report of the Commission on Credit Unions, which sat for some nine months. In the largest part, this comprised the Irish League of Credit Unions, the Credit Union Development Authority and the Credit Union Managers' Association. While one of the groups clearly has some difficulty with some of the elements, what I took from the meetings with individuals, particularly the managers, was how much they embrace the need for regulation. In fact, the need to move on and enact the Bill was the greatest message I took from that series of meetings and from the witnesses.

There was a fairly strong message that perhaps some differentiation might be considered between smaller and larger credit unions when it comes to some of the regulation. While this regulation certainly does not preclude movements on social finance, Government-backed schemes and electronic payments, that voice was clear and unanimous from the credit union movement. Given that all of those who have spoken so far seem to have given a voice to the Irish League of Credit Unions, it must be acknowledged that at our committee meeting, the managers' association, including one individual manager whom I know quite well, was very supportive of the concept of term limits. In particular, its representatives felt that to have employees as directors would be unsatisfactory within any financial institution.

When we are considering the amendments, it is important that there is some review of the fact that over nine months, all of the stakeholders were involved in a lengthy and thorough process. It is acknowledged that while this Bill is not a carbon copy of the report of the Commission on Credit Unions, it holds very true to it. There is not much point in engaging in such a widespread process with stakeholders for nine months and then allowing some individuals to come back afterwards and make arguments that would go against a unanimous report, although I am sure some of those opinions will once again be voiced when we reach Committee Stage.

I commend the Minister on supporting such a valuable resource to our country, which is, of course, our credit unions.

Sandra McLellan (Cork East, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I wish to share time with Deputies Dessie Ellis, Tom Fleming and Patrick Nulty.

Michael Kitt (Galway East, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Is that agreed? Agreed.

Sandra McLellan (Cork East, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

At a time when so many families are experiencing hardship of one form or another and others are struggling to keep a roof over their heads and put food on the table, the credit union is very often what keeps them afloat. One of the great civil society institutions this State has produced, credit unions offer people access to credit they may not be able to get elsewhere. Set up in the 1950s by the great Cork woman Ms Nora Herlihy, their aim was to provide ordinary people with bank-like facilities with which they could save and receive loans. The founders of the movement, Ms Nora Herlihy, Mr. Sean Forde and Mr. Seamus MacEoin, were very much products of their time. Shaped by the ideals of 1916 and driven by a desire to create a better society, they worked tirelessly to establish a national movement that would give ordinary people a degree, no matter how small, of financial security and access to credit.

What makes the credit union movement unique and special is that at its core it was essentially about empowering, for the very first time, ordinary Irish men and women. The founders had a vision of the type of institution they wanted to create and of its purpose. It would be based on the notion of volunteerism, and it would be people-centred and built around communities. It is worth remembering just how radical these ideas were in the Ireland of the 1950s and 1960s. This was a time of high unemployment and massive emigration, with limited opportunities for ordinary working people. Poverty was rampant and most people simply made do with what they had. Household goods were bought only when absolutely necessary, and things such as travel and new clothing were deemed luxuries to be purchased for special occasions such as weddings or communions or in the event of a death. As ordinary working people did not use banks, hire purchase was the order of the day; alternatively, people put deposits on clothes and other items.

Set within the societal context of the 1950s and 1960s, the birth of the credit union movement was truly revolutionary. The credit union - or the poor people's bank, as it was often referred to at the time - changed the lives of working-class men and women forever. For the first time, people in towns and cities across Ireland had access to a cheap and secure form of credit that would allow them to move beyond an existence that was based on subsistence.

The three aspects of the core ethos on which the credit union movement was founded - namely volunteerism, service and community - are also the key factors that helped it to flourish and grow. Today, credit unions are to be found in every community in Ireland. They are staffed and managed by committed workers who devote much of their own time to the service of their communities. We should be proud that such a movement originated in Ireland, that it was founded by people who were committed to notions of social justice, equality and fairness, and that it has since been exported to developed and developing countries across the globe.

Given its history and evolution and the key role it has played in Irish society and in bettering the lives of so many people, it is right that we approach any proposed changes to credit unions with caution and care. Moreover, when one considers the current crisis of confidence in our financial institutions and the justified public anger at institutions and executives that have abused the people's trust, it is important to remind ourselves of the successes that endured even through the most reckless days of the boom.

Credit unions are far from perfect and the Ireland in which they currently operate is dramatically different from that of the 1950s and, more importantly, from the Ireland of the Celtic tiger. The credit union movement openly acknowledges that the regulatory context in which it operates is in need of reform. In fact, the movement has been the leading advocate of this reform, which is the context in which this Bill must be set.

In the main, Sinn Féin supports the Bill. Our position is clear: we are in favour of effective and appropriate regulation for the credit union sector. We want credit unions, their members and the communities of which they are a part to have the highest levels of protection, probity and governance. However, we are also of the view that what is best and distinctive about the credit union movement - namely, its volunteer ethos and the fact it is rooted physically and ideologically in the community - should be safeguarded, valued and preserved.

Some of the issues that are a cause of concern for credit unions are to do with the proposed governance changes, particularly the proposed term limits for directors and the prohibitions on board membership. Sinn Féin agrees with the credit union movement that certain aspects of these sections of the Bill are unnecessary and that they could in effect undermine the volunteer spirit on which credit unions are based. Indeed, small urban and rural credit unions could well end up in a situation in which they are unable to operate if they cannot meet the very strict exclusions that are set down in the Bill. I know from first-hand experience that this is a real and genuine concern for people. For example, in my own constituency of Cork East, volunteers are afraid that people who either are involved or who would like to be involved in their local credit unions might be excluded from doing so on the basis that they are deemed unfit. In small towns and tight-knit urban communities, this would have a negative impact on community life and act as a deterrent against volunteering.

The Irish credit union movement has made sensible arguments in support of the amendment of the relevant sections of the Bill, to which I hope the Government will respond positively. There is a duty on us as legislators to ensure we do everything within our power to preserve what is a unique and valuable institution for future generations of ordinary working people.

Dessie Ellis (Dublin North West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Tá athas orm labhairt ar an mBille seo. Tá sé an-tábhachtach ar fad. I am delighted to speak on the Bill. Credit unions have served the people of Ireland well since they were first set up here in the 1950s to give ordinary families a hope of raising credit from their communities in order to build a home or a small business, and to help in their own way to make those communities thrive. As other Deputies have mentioned, many of those people would never have set foot in a bank, as is so commonplace today. The credit union was the financial institution of the common people, the ordinary working class people of Ireland.

The other option for the people it served were the moneylenders who charged high rates, kept people under their thumb and made threats to those who could not pay. We do not need a history lesson on such lenders, although as many people are suffering from their practices now either from debts they racked up in the good times or small emergency debts they were forced to take on as their pay was cut, their tax was hiked and the austerity measures struck home.

While not an Irish invention the credit union has been taken to heart by Irish people. With 2.9 million members in this State and in many areas, every man, woman and child has a few euro in the credit union. People clearly understand through their credit union the solidarity at work in their communities and the way they have all contributed through this crucial institution to building a strong and vibrant locality. In my area we have a number of credit unions which have served us well. I am pleased that I contributed in my way to them personally and as an elected representative and community activist. While many lending institutions have become pariahs, the credit union is still recognised as a valuable and respectable organisation which people trust and know that they are better off for having.

The ideals that founded the credit union movement are profoundly socialist, ones of co-operation between working people for the improvement of their conditions and life, a lesson we can all take something from as we approach a new budget and more expected hardship for those who can least afford it. We in Sinn Féin broadly support the Bill, with a few exceptions. It is essential to update the regulation of lending bodies in light of the problems created in the boom with the easy credit culture but it must be done correctly and tailored to specific institution types such as credit unions. The Central Bank legislation which is to be applied now to credit unions is wholly inappropriate for such institutions. It could be damaging to credit unions across the country which operate in a different manner to banks and should not be governed by the same regulation making them, in effect, one and the same. That would be a great pity.

The Bill is lacking many of the positive recommendations made by the commission. These include service sharing, social finance, microfinance 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, namely the services to which I referred. The final Bill should include such measures for the improvement of credit union services to its members and its contribution to communities.

I cannot but heap praise on the credit unions in my area - Finglas, Ballymun, Santry and Whitehall. The service they have given to the community is second to none, as is the respect they have given to customers. As my colleague, Deputy Ó Caoláin, stated yesterday, the ludicrous cap of €25,000 on borrowing for families from credit unions should come to an end. However, we broadly support the Bill. I look forward to the continuing debate on it as it passes through the House.

Tom Fleming (Kerry South, Independent)
Link to this: Individually | In context | Oireachtas source

The credit union movement in this country has made a huge contribution to society. It has provided a culture of savings and prudent management of finance to thousands of individuals and families since it was set up by Nora Herlihy and her fellow pioneers and promoters of the Irish League of Credit Unions from its infancy. The movement has developed to its current number of approximately 400 registered credit unions and a membership of approximately 3 million, which is by far the largest pro rata membership of any country in Europe.

Following its inauguration in 1958 the credit unions mainly served the financial needs of disadvantaged communities and individuals who in many cases were denied access at the time to bank finance. Due to extensive community involvement in the administration of credit unions they have progressed to being a distinct alternative to banks, especially in the context of the current financial climate.

In drafting the credit union legislation we must be careful not to undermine credit unions or to kill them off. No bailout was required for credit unions, unlike other institutions which cost the taxpayer up to €60 billion. Credit unions do not provide large-scale commercial lending. They provide vital support to small businesses and the community enterprises to which they cater, usually with modest loans. The vast majority of such lending is for small businesses that cannot obtain funding from the pillar banks.

The many people who are involved in the operation of credit unions across the country have serious concerns about the proposed legislation. Despite statements to the contrary, little consultation has taken place with ordinary credit union activists who are genuinely fearful of the consequences of the proposed changes on credit unions and individual members. The proposal in section 15 to introduce term limits and overly restrictive conditions on board membership will have significant implications for the recruitment of new directors. There is also a major difficulty with section 20 which deals with the implementation of the proposed policy requiring the prior approval of the Central Bank for nominees going forward for election to officer positions. Further restrictions outlined in section 18 on the tenure of the chair, as well as additional responsibilities of monitoring his or her fellow directors, will cause serious difficulties for credit unions.

In section 24 the requirement to have a remuneration committee appears to indicate that in future directors will have to be paid for their services. That will impose further costs on credit unions and sound the death knell for volunteerism in the movement.

Despite the fact that the directors remain responsible for the control and direction of credit unions, the significant post of treasurer is being abolished. One would have thought that at this time when the clamour of corporate accountability and openness is deafening the post of treasurer, which provides the board with the required degree of oversight and inquiry, would be retained in some shape or form. Furthermore, it is the treasurer who reports on the credit union’s performance on behalf of the board to the general membership at the AGM, and as a result holds a special relationship with members.

Other anomalies must be addressed such as the position of tellers who are board members and who undertake part-time duty on the counter. In the event of a board meeting taking place on a particular night he or she would be unable to attend and would be prohibited, as such, from being a member of the board. It would have a negative effect, in particular on smaller credit unions if qualified and well-trained staff are banned from holding a dual function.

Last March the Commission on Credit Unions, which comprised the Department of Finance in conjunction with the Credit Union Development Association and the Irish League of Credit Unions, agreed a recommendation that would allow credit unions to invest in Government-sponsored projects and schemes. The provision has been omitted in the final draft of the Bill. The preservation and continuation of credit unions and their not-for-profit ethos and role in attaining the economic and social goals of members is paramount. The recommendation should be included in any proposed legislation we put to the House.

Patrick Nulty (Dublin West, Labour)
Link to this: Individually | In context | Oireachtas source

I am pleased to participate in the debate. I congratulate the Minister on bringing forward the Bill, which I support. I also commend the work of my colleagues in the Labour Party, Deputy Kevin Humphreys and Deputy Arthur Spring, on their work on the Bill in the Joint Committee on Finance, Public Expenditure and Reform.

A level of consensus is evident in the contributions of Members from all political parties and those of Independent Deputies on the need to regulate and reform the credit union movement. It has also been acknowledged that the Bill is a work in progress and there is opportunity for reform. We must take advantage of that.

A number of issues have been raised in the discussion to date, in particular the concept of allowing credit unions to share services.

Under such a system, if a member of a Dublin credit union, for example, were to visit Galway, Limerick or even another part of Dublin city, he or she could enter a credit union there and lodge money or pay off a due loan payment. Such a concept is logical and would be user-friendly for the consumer. One must ask why such a measure is not included in the Bill and also about the degree to which the Irish Banking Federation lobbied against it. I hope the Minister will elaborate on that point and will examine possible changes in this regard at further Stages of the Bill.

A second issue is financial inclusion. Prior to entering the Oireachtas I participated in consultation between the Department of Finance, non-governmental organisations and community and voluntary groups on the topic of financial inclusion, which has the aim of ensuring that every citizen in the country has access to a basic bank account. The credit union movement has the potential to unlock and develop such a mechanism. A strong argument has been made that credit unions should be able to issue debit cards, for example, as distinct from credit cards. They should be able to do so, allowing people to bank with them, because people on low incomes may not have a history of dealing with financial institutions, which, as we know, can be intimidating. They have even proved intimidating for Ministers. Credit unions are rooted in communities and can be a good starting point for people who wish to develop their financial management skills.

I cannot understand why a provision for credit unions to invest in Government projects has not been included. There is a commitment in the programme for Government, agreed by the Labour Party and Fine Gael, to examine certain social investment bonds. Such a concept would permit credit unions and other institutions that have a social as well as an economic function to invest in projects in this country, both in the interests of their members and with the aim of freeing up capital. It would be a logical proposal and merits consideration in a time of scarce resources.

I see this Bill as part of a broader pattern of financial sector reform in this country. The Minister is present in the Chamber, and the budget is only some weeks away. I hope he will look closely at reform of the financial services sector and that he will change his position on the financial transaction tax. Support for such a tax is a mainstream position in Europe. My Labour Party colleague Nessa Childers, MEP, has done tremendous work in highlighting this issue. As a Deputy from Dublin's north side, I am acutely aware that a possible risk to jobs is not something that should prohibit us from taxing those financial institutions that make massive profits and have done so much to decimate and destroy this and other economies across Europe. I make this point because the Bill is part of a broader package of financial sector reforms. I commend the Minister on the legislation and am happy to inspect it further.

Michael Kitt (Galway East, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I call Deputy Michael Creed, who is sharing time with Deputy Tom Hayes.

Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am also sharing time with Deputy John Paul Phelan. I welcome the opportunity to say some brief words on the Bill. Coming from the constituency of Cork North-West, the home place of Nora Herlihy of Ballydesmond, I am acutely conscious of the ethos of the credit union movement and the reach it has into local communities. The financial rot that engulfed the State in recent years did not happen only to high street financial institutions. The fact that we are responding with legislation on credit unions reflects the involvement, to one degree or another, of all financial institutions in the State and our need to take another look at the regulatory framework within which they exist. For that reason, I welcome the legislation. Broadly speaking, it is the result of the work of the Commission on Credit Unions, which engaged extensively with stakeholders over a protracted period of almost a year. It is giving effect, in legislative format, to some 60 recommendations made in the commission's report. The Irish League of Credit Unions was party to the commission, but I understand that although it may have taken a view at a certain level, there are concerns within the movement. I have been contacted about those concerns by communities who are at the coalface of delivery of services through the credit union movement.

Primarily, however, the legislation is about prudential requirements for credit unions, which reflects the fact that we are dealing with local citizens' money and that we must be prudent in this regard. It deals with governance and restructuring requirements. Obviously, that will be unpalatable in local communities where the credit unions tend to be part and parcel of community identity. Telling one local parish credit union it may have to merge or join with another is a difficult task. There is also a commitment with regard to the State putting its money where its mouth is, and rightly so. The State is saying, in effect, that it acknowledges the difficulty the credit union movement is in and is prepared to bail out individual credit unions. That would be only fair given what taxpayers have been asked to carry already. The Minister is to be congratulated on that.

I acknowledge that there are difficult days ahead for individual credit unions. The requirement to put terms on the length of service of directors is a difficult one. We tend to celebrate the volunteer ethic, but if one looks at any community one will see that those involved are a handful of people, the same ones who volunteer in every organisation. They are in the GAA, political parties, the credit union movement and the community council. We are not oversubscribed with volunteers, and that will be a challenge. None the less, the lifeblood of any credit union is in new voices. If one becomes a prisoner to the same faces all the time, there is scope for complacency. Although the directorial time limits represent a challenge, it is not a bad idea, and one we might tease out further on Committee Stage. I refer to the issue of treasurers. It is important to separate the governance role from the manager's role. We can examine this on Committee Stage, but I do not think it is a bad idea. It is important that the Central Bank recognises and differentiates its engagement with the credit union movement. It must develop a protocol in that regard which recognises that credit unions operate based on a volunteer ethic whereby most of those involved do not work full-time.

I welcome the legislation. It is important that we empower credit unions to respond to a changing 21st-century environment and that we put them on a firm basis. Finding new blood and new directors will be a challenge but every credit union should aspire to having new faces and new ideas. I disagree with Deputy Fleming on the issue of staff members being directors; in my view, that is not a good idea. It could lead to capture in terms of the proper decisions that need to be made. The proposed measures for clear differentiation and good governance show that the Bill is taking us in the right direction.

Tom Hayes (Tipperary South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I pay tribute to the great work done by people working in credit unions. I recognise the special role credit unions play in the financial sector in Ireland and am keen to ensure the viability of credit unions nationwide. It is clear, however, that systemic failings in the regulation of the financial sector in recent times have led to the requirement for the State to bail out our banks at enormous cost to the taxpayer. Although I certainly do not wish to tar credit unions with the same brush, I accept that the outdated legislation from 1942 needs to be updated.

The credit union sector has performed well in comparison to the banks, but some 30 credit unions have received emergency funds from a rescue scheme set up by the league that represents the sector. It has been reported recently that worried regulators have 100 credit unions under close supervision because of fears about rising loan arrears.

These comprise one quarter of the credit unions in the State. Thousands of loans at the affected credit unions are not being repaid and this is putting huge financial pressure on their balance sheets. The State has set aside millions of euro to allow it to deal with weaker credit unions. I hope the merger of weaker credit unions and their stronger counterparts will allow the credit union movement to emerge from this process in a healthy financial position.

The Credit Union Bill 2012 largely reflects the recommendations set out in the final report of the Commission on Credit Unions which was published in March. The commission included representatives of all stakeholder groups in the credit union sector. The Irish League of Credit Unions was centrally involved in the Bill's development, drafting and finalisation. The league is not only a signatory to the agreed report, it also co-authored it. It is important that all those who drafted and agreed to the commission's report continue to stand foursquare behind it, particularly as the difficulties being faced by credit unions and the scale of the challenge ahead require steadfastness and leadership at all levels of the movement. The viability of the sector can only be secured through a fundamental reform of how credit unions are run and regulated. The Bill legislates for this reform and is designed to ensure the credit union sector will never again be brought to the brink.

I am a great believer in the whole idea behind the credit union movement. Credit unions can play a leadership role in local communities. Above all, their strength lies in the fact that they have knowledge of the local people with whom they deal. The banks did not possess such knowledge, which is why difficulties arose. Credit unions possess an abundance of the knowledge to which I refer. I hope the enactment of the legislation before the House will lead to the emergence of strengthened and better credit unions that will serve their members and the communities in which they are located.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Deputies Tom Hayes and Michael Creed for sharing time. I welcome the legislation. There are a couple of issues which I have been discussing with Deputy Michael Creed and which I wish to raise with the Minister.

My first point relates to smaller credit unions. Like most other parts of the country, that from which I come, namely, south County Kilkenny, has a large number of very small credit unions which do fine and important work. People who are involved with these organisations in a voluntary capacity have raised their concerns with me. Such concerns relate to the limit being placed on the period for which directors can remain in position. I agree with the principle of what the Minister is trying to do, which was agreed to by the representatives of the credit unions on the commission. Many very small credit unions may only open for a number of hours in the evening a few days each week and will encounter grave difficulties in attracting a large turnover of new directors. In such circumstances, there should be a mechanism whereby the directors of such credit unions could be allowed to remain in position for longer than that proposed in the legislation.

The other issue raised with me involves those volunteers who work in credit unions in the evenings when they have finished working in their normal place of employment. These individuals deal with members of the public who go to their credit unions in order to lodge money or avail of the other services on offer. Many of the very small credit unions to which I refer rely to a large extent on voluntarism in order to operate. A balance can be struck in the legislation in order to ensure this voluntarism will be protected and that the people who give of their free time in order to ensure these institutions remain in operation will be accommodated.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank all the Deputies who contributed to this very constructive Second Stage debate in which the importance of the credit union movement in Ireland was highlighted. As stated in my initial contribution, the Credit Union Bill 2012 is an important step towards placing the Irish credit union movement on a sustainable path for the longer term. The Government recognises the importance of the credit union sector as a volunteer co-operative movement and the distinction between it and other types of financial institutions.

The Government's commitment to implementing the report of the Commission on Credit Unions is backed by the solid, early delivery of major elements contained therein. These include the publication of the Credit Union Bill 2012 which implements over 60 of the commission's recommendations, the commencement of fitness and probity measures and the requirement for contributions from credit unions under the deposit guarantee scheme and the establishment of the credit union restructuring board, ReBo, on an administrative basis - pending enactment of the legislation - in order to ensure the early commencement of its work. The Bill sets out a package of measures which were agreed to by all stakeholders on the commission and which will underpin the stability of the sector into the future. The Irish League of Credit Unions had the largest representation on the commission and agreed to all of its recommendations.

The Government has already shown its commitment to credit unions by setting aside €500 million to ensure the viability and long-term sustainability of the sector at a time when the country's resources are stretched. The provision of such funding, with necessary changes to prudential and governance requirements, is aimed at bringing about a strong and stable credit union sector in the future. This would be an outcome that would be in the interests of stakeholders.

I will reflect on the matters to which Deputies referred, including those raised on behalf of the Irish League of Credit Unions, and look forward to a constructive debate on Committee Stage. However, there are one or two matters with which I would like to deal now. The first of these is that there appears to be a major misunderstanding with regard to the application of banking legislation to the credit union movement. A theory seems to have developed to the effect that the Central Bank never had a role in regulating credit unions, that the Bill is conferring such a role on it for the first time and that rules which previously only applied to banks will now apply to credit unions also. That is not true. The Central Bank Acts already apply to credit unions. For example, the Central Bank Act 1942 sets out the role and responsibilities of the Registrar of Credit Unions, the Central Bank Act 1971 specifically exempts credit unions from the requirement to hold banking licences and the Central Bank Reform Act 2010 applies fitness and probity provisions to credit unions.

The Commission on Credit Unions recommended that section 184 of the Credit Union Act 1997 regarding the Central Bank Acts be reviewed. Among other reasons, it is necessary to unify the application of the Central Bank Acts in order to allow the commission's recommendations to be implemented. I refer, for example, to the application of administrative sanctions to credit unions, the ability of credit unions to appeal directions to the Irish Financial Services Appeal Tribunal and the need to clarify the level of recourse to the Financial Services Ombudsman available to credit unions and their members. Most of the changes outlined in the Bill give to credit unions provisions they have sought. The theory that the Bill involves applying the Central Bank Acts that are applicable to banks to credit unions is simply incorrect. I do not know from where that theory came.

In the context of the term limits being imposed on certain officers of credit unions, I want to use the Bill to introduce the principle of renewal. We are all aware of organisations which became moribund because there was no change in personnel at the top. One of the biggest reforms in my party was introduced by the late Dr. Garrett FitzGerald in respect of officers of branches. These individuals had previously served indefinitely, but a change was introduced to our constitution to the effect that an individual could only serve as an officer for three consecutive years. This resulted in the required renewal. Many members will be familiar with GAA clubs throughout the country which retain groups of gentlemen who discuss the make-up of teams outside the chapel gate each Sunday. These are usually not the clubs that win club matches or county championships.

Those which can renew themselves are more vital. It is also reasonable to introduce a renewal provision to the credit union movement. The issue is not the number of years, one we can discuss on Committee Stage, but the principle of renewal of the officer boards of credit unions.

One Deputy mentioned the financial transaction tax. What is being discussed in Europe is the payment of stamp duty on share transactions and perhaps other financial instruments. We already do this in our tax laws. Share transactions in Ireland are taxed by way of stamp duty at a rate of 1%. What is being proposed is that something similar be introduced for share and other transactions, with a starting point of 0.1%, perhaps increasing subsequently. We are not out of line with what is happening elsewhere in Europe. However, we are not participating in the enhanced co-operation mechanism in which other countries are participating because we do not want to create a situation where the 33,000 jobs in the financial services sector in Ireland would be put at risk of transfer to a more benign tax regime in London. That is the only issue involved. We do not have a problem in principle with a financial transaction tax.

I look forward to a very constructive Committee Stage debate. I invite Deputies to table any amendment they consider appropriate and it can be discussed on its merits.