Tuesday, 3 December 2013
Credit Reporting Bill 2012: Report and Final Stages
I move amendment No. 1:
In page 5, line 16, after "1942;" to insert "AND THE CENTRAL BANK (SUPERVISION AND ENFORCEMENT) ACT 2013;".Amendment No. 10 provides for the insertion of a new section into the Bill, which is section 35. The reasoning behind this provision is to correct a drafting error in the Central Bank (Supervision and Enforcement) Act 2013. Sections 5(2) and 5(3) of the Central Bank (Supervision and Enforcement) Act 2013 both erroneously referred to Parts 1 to 3 of Schedule 3 and Schedule 4, respectively. The insertion of this new provision will have the effect of rectifying the error by inserting the correct reference in each case to Parts 1 and 4. Should this amendment be accepted, it will result in a consequential technical amendment being required to make reference in the Long Title of the Bill to the Central Bank (Supervision and Enforcement) Act 2013.
I move amendment No. 2:
In page 12, between lines 20 and 21, to insert the following: "(2) The cost of amending any inaccurate or incomplete information detected in the Register shall be borne by the relevant financial institution and not the individual about whom the information concerns.".This amendment is to ensure that the cost of amending any or incomplete information detected in the register shall be borne by the relevant financial institution and not the individual whom the information concerns.
I note that in section 26 the Central Bank has the power, with the consent of the Minister, to make regulations prescribing fees for access to certain information. It does not make reference to the correction of the register where errors occur. We are aware, for example, that when Ulster Bank had technical difficulties last year it may have resulted in certain cases where the formal credit register, which will now be set up on a statutory basis, contained errors. What I am trying to get at here is, where an individual seeks access to his or her credit history - I note the Minister has a subsequent amendment proposing that he or she will be allowed to do so free of charge, essentially, once every year - and identifies any errors in the record which are not of his or her making, if any costs arise in connection with the correction of that record, the costs would not be borne by the individual.
Amendment No. 2 specifies that the cost of amending any inaccurate or incomplete information on the register will be borne by the credit information provider and not the credit information subject. I do not propose to take this amendment on board as the provision is not necessary. The Bill does not make provision for charges to be imposed on individuals who seek to amend inaccurate or incomplete information on the credit register.
Section 9 provides for an application process to correct personal information that is comparable to the process under the Data Protection Acts. I am advised by the Data Protection Commissioner, DPC, that data subjects do not have to pay a fee to request the correction of personal data held by the data controller.
An application in relation to the correction of information held on the credit register will, first, be made by the Central Bank. The Central Bank must rectify the credit register as appropriate where it is found that the information held on the credit register is inaccurate or incomplete. There is no resulting charge on the individual about whom the information concerns.
It is not necessary because of the existing provisions. For the information of Deputy Michael McGrath who spoke of section 26, my understanding is that section 26 does not allow fees to be imposed on individuals to apply in order to correct errors.
Essentially, the Minister of State is giving an assurance that he does not envisage any circumstances where individuals would be charged for corrections having to be made to their record. If that is his understanding of the Bill, I would be happy to withdraw the amendment.
It is important that Deputy Michael McGrath, in putting down this amendment, gets clarity on it. As I have always stated on Committee and Report Stages, the transcript of the debate helps to inform the decision-making that follows. Let it be clear, my understanding is exactly that of the Deputy. Let everyone outside this House who is implementing this understand that.
I move amendment No. 3:
In page 13, between lines 46 and 47, to insert the following: "(2) Financial institutions that contribute to the Register shall be required to satisfy the Regulator that the procedures of such financial institutions, for cross referencing and verification of data, are fit for purpose.".Amendment No. 3 requires that financial institutions contributing to the register shall be required - it places a legal onus on them - to satisfy the Regulator that the procedures of such financial institutions, for cross referencing and verification of data, are fit for purpose. This was an issue raised by the National Consumer Agency during the public consultation phase of the Bill. It requires the institutions to ensure that they have proper systems and procedures in place so that the information they provide to the register is up to date and accurate. It shifts the onus onto them to ensure that what is inputted onto the new register is bona fide and can form a reliable basis for those, both for borrowers and lenders, who are making important decisions.
We had a general discussion about how to correct the register on Committee Stage to which the Deputies opposite contributed. Deputy Michael McGrath stated at that point he would bring forward this amendment to reflect that discussion and he flagged that as part of his contribution.
I do not propose to take amendment No. 3 on board as it is my view that this is not necessary. Section 20 gives the bank the power to set the verification standards for personal data. Section 21 places an obligation on credit information providers in relation to the quality of the credit information provided. Furthermore, credit information providers have obligations as data controllers under the Data Protection Acts.
In addition, section 11 of the Bill allows the Central Bank to define the detail to be provided by way of regulations for both personal and credit information. That power exists for it in terms of the regulations that are to be provided thereafter. Failure to adhere to the regulations or standards can be addressed by the Central Bank through the extensive enforcement powers of regulated financial service providers.
The Central Bank has the necessary power in the Bill to set the rules and standards and has the power to take enforcement action if necessary. The amendment is not required because of the existing power that the Central Bank has in terms of regulations in this matter.
I move amendment No. 4:
In page 15, between lines 24 and 25, to insert the following: "14. (1) Licensed moneylenders shall be required to consult the Register before providing a loan in excess of €500.".Amendment No. 4 requires licensed moneylenders in the State to consult the new credit register before providing a loan in excess of €500. This is an important amendment. The typical loan provided by licensed moneylenders in the State would be €500. The recent report by the Central Bank provided confirmation of the growth in activity by licensed moneylenders. By their nature, such loans are high risk. From the point of view of the borrower, a loan that starts off at €500, given the high interest rates that apply, can grow quite substantially over a period of months. If the liability remains outstanding for a year or more, the borrower can owe a considerable sum of money.
The present threshold is too high. Deputy Pearse Doherty tabled a separate amendment, amendment No. 5. Given the specific and unique characteristics that apply to the licensed moneylending sector, it should be required to consult with the register because it is quite possible that individuals will have multiple loans from different licensed moneylenders across the system without any of the other moneylenders knowing that such money is owed. It is something that should be looked at to ensure that proper credit decisions can be taken by the moneylenders.
The Minister of State will be well aware that I tabled a number of amendments on Committee Stage but I have decided to retable only a few of them on Report Stage, one of which is connected to this issue but is not being taken with this amendment. There is a deficiency in the legislation regarding the issue of moneylenders. I recall the Minister of State's remarks on Committee Stage in terms of getting the legislation up and running and then considering how it will affect moneylenders. While I note what Deputy Michael McGrath seeks to do in his amendment, and there is an argument that identifying moneylenders would involve a separate section in the legislation, which would be a good approach, I have an issue with the threshold of €500 because it would not capture lending by moneylenders. As I mentioned on Committee Stage, Provident, the largest moneylender in this State, advertises loans from €100 to €500 on its website. The wording in the amendment provides for a loan in excess of €500, but on Provident's website loans are offered up to €500 and it would not be possible to get one in excess of €500. Therefore, I would be cautious about that aspect.
The principle underpinning the amendment is the right one. Amendment No. 5 ties into this amendment. Even with the inclusion of my amendment or that of Deputy McGrath, the Bill would not deal effectively with the issue of moneylenders. The problem is that the providers have only to consult the register. There are moneylenders who want to lend and are willing to take the risk because the APR is very high. Also, they will call to the door of the borrower every week to collect the repayment of the loan. That is not intimidating in the sense of illegal moneylenders but when a provider calls to a borrower's door every week to collect the €5 repayment, the provider is likely to get back the money as against the borrower making a lodgement to a financial institution, be it the credit union or some of other institution. The issue is not only that the provider should check the register but that the other section should be amended in terms of the requirement to report loans. Even with the inclusion of these amendments, the provider would not have a loan that is less than €500. The problem is that moneylenders will want to lend money because they will believe they will get a good return and even if they check the register they do not have to do anything about it. They can note that the person is over-indebted but all they have to do is check the register, and that is where there is a weakness in the legislation. I support the principle of Deputy Michael McGrath's amendment. The threshold of €500 is too high and I will deal with that in my later amendment, but the principle is good in terms of identifying moneylenders as a unique area.
I know from Committee Stage that the Minister of State is unlikely to accept these amendments but I would encourage his officials to consider drafting a section that would deal with the issue of moneylenders. I had a conversation with a newly appointed Sinn Féin councillor to Donegal County Council, who was co-opted to the council last Monday, and one of the first issues about which he spoke in the council was that of moneylenders calling door to door in estates in Donegal and the burden that places on individuals. I would encourage the officials to draft a section dealing with the issue of moneylenders if the Minister of State is not willing to accept these amendments.
We had a discussion, not on this issue but on a similar one, on Committee Stage. The first point to make is one I made on Committee Stage that, principally, this Bill is not about moneylenders, rather it about trying to ensure there is a very clear decision-making process on prudential risk within the financial institutions and that we capture that by way of information, which previously was not in place in terms of the crisis that befell us all. That is an important point. I am also aware that the whole question of APR reflects the very significant risk - we discussed this on Committee Stage also - and that is the reason it attracts such a very high rate of interest. The point the Minister, Deputy Noonan, has repeatedly made is that the first priority is to have this in place for the banks and credit unions and we can then consider rolling it out for other aspects of the financial services industry, and as to whether this would make a difference, we would have to be clear on that.
The legislation that already regulates moneylenders, which is the Consumer Credit Act of 2010, sets the floor at €200 for its consumer protection rules. Those are consumer protection rules and whether they have the same impact the Deputy is suggesting in his later amendment is probably another matter. Licensed moneylenders fall within the current definitions of regulated financial service providers. The consent of the Minister will be sought when regulations are being made to phase in licensed moneylenders. The Minister will be cognisant of the need to ensure the threshold is set at an appropriate level. The Minister for Finance may review the threshold amount having regard to influences, including taking into account the effect of credit information subjects. It would not be the appropriate way to adopt the proposed amendment as it would be a case of treating credit information providers differently, which could be found to be discriminatory. We will also discuss that when dealing with the next amendment. To meet a claim of discrimination one must be in a position to objectively justify such differences in treatment. It would be more appropriate to determine if one could be justified after a period of practical operation of the credit register.
We are cognisant of the points both Deputies are raising, and specifically Deputy McGrath in this amendment No. 4, but we should wait and see where this goes. Importantly, the first priority, as we have given a clear obligation to implement, would be for banks and credit unions. We will then see whether this can be rolled out across the entire system. That appears to be the approach that would have the support of the entire system, given that the primary objective of this legislation is not about the question of moneylenders per se but about the quality and the collection of data surrounding borrowing decisions that are taken across financial institutions.
I do not think we will reach agreement on this issue. I agree with the Minister of State that the most important point is to get the register in place. It is a welcome development and an important step, both for borrowers and lenders, to have a register that has a statutory base and to which all creditors, essentially all financial institutions, are required to submit information. However, the substance of the threshold of €2,000, and we will get to the substance of it when dealing with the next amendment from Deputy Doherty, is excessive and has the potential to lead to bad lending decisions. In the example I have given, licensed moneylenders could give loans of approximately €1,900 - I am not suggesting they do; their loans are much smaller - without having even to access the register to see how indebted is the person to whom they are proposing to lend. That is a significant drawback in the legislation and I ask the Minister of State to revisit it at the earliest opportunity.
We had a good discussion on this on Committee Stage. We will keep a very close eye on this but I agree with Deputy Michael McGrath that the primary objective of the exercise is to get the register in place. That will be the new benchmark upon which decisions are taken, and there has been some verification on those decisions. Without the register we do not have a proper, robust system of making decisions and ensuring the risk is understood by all concerned but we will keep a very close eye on this issue.
Yes, it is the one that proposes the figures of €125. As I said, there may be justification to have a specific section in the legislation and not reduce the threshold to €125 for all credit institutions, and the Minister mentioned the question of a discriminatory approach in this respect.
Moneylenders are included in the Bill, as are credit unions and financial institutions, but the Bill will have no effect on moneylenders because they lend sums smaller than the €2,000 threshold that forces them to check the register. Also, they make loans smaller than €500, meaning there is no obligation to report the loan to the Central Bank. While the legislation puts an onus on moneylenders if they exceed the threshold, in all almost cases the legislation will have no effect. The Minister of State is correct in stating that we must deal with the larger financial institutions in respect of the quantum of money being lent to customers. We should not adopt the approach of getting the Bill up and running with the intention of dealing with moneylenders at a later stage. We do not take that approach to legislation. If there is a credit reporting system, we must capture all credit institutions coming under the confines of the legislation.
On Committee Stage I referred to the National Consumer Agency. Although the figures may be outdated, it referred to moneylenders lending an average of €100. In exceptional circumstances, this increases to €1,000. Provident Personal Credit Ireland lends up to €500. I suggested the sum of €125 to acknowledge that the threshold of €2,000 or the €500 reporting threshold does not capture moneylenders. The Minister of State mentioned that there is nothing to prevent a moneylender from calling to someone's house and lending €499 to several members of the household. A family with three adults in the house may owe €1,500 to a moneylender, yet it would not appear on the credit history. There is a likelihood that they will pay back the moneylender because someone is calling to their house every week. If a credit union has a similar loan it must report it and, although it does not have to check the register, it is also likely to do so.
It is much harder to regulate moneylenders because they are not sitting behind a desk in high street banks or credit union offices. They call to people's houses and we hear stories about them appearing with Argos catalogues and asking what people want for Christmas, suggesting that they can provide loans. Recently, someone told me they could not offer a second loan to a person who already has a loan, but they could tell the person about a loan and the person could then apply for it. How can we regulate that? In a main street bank there is greater control, but this involves going into people's living rooms. I am not saying all licensed moneylenders are involved in this practice, but it is a difficult area to regulate. It is unfortunate that the Government has decided to exempt moneylenders from the legislation. The reduction of the threshold to €125 would capture moneylenders, although I acknowledge that it would put onerous restrictions on other financial institutions. A signal must be sent to moneylenders that they will not be exempt and that we need tighter regulations on moneylenders. We allow them to charge massive APRs of up to 187%, and the least we should do is say they must come within the confines of the legislation. While the legislation applies to them in theory, in effect it does not because the thresholds are too high.
I do not want the impression to go abroad that we are putting the legislation in place and seeing how it goes while it has no impact on moneylenders. Notwithstanding the small sums of money, there is an issue here. The Minister is being given power under this Bill to change the threshold, and there is a logic in that. The views of stakeholders on the value of the limit encompassed the upper end and the lower end; it was not a unanimous view. The establishment of the €2,000 threshold is a policy decision. It is at the lower end of European examples of credit registers of this nature. We must be cognisant of that. In every aspect of the Bill, we are talking about the entire financial services industry and all institutions, big and small, risky and risk-averse. We must take a considered policy decision on the way to go.
The Minister, whoever is in that position in the future, has the power to ensure the thresholds can be altered based on an impact assessment. We do not want to make it so onerous for every credit union to report the cost of each and every transaction that follows. There is a broad consensus about the threshold. After the legislation is enacted we will see how it works, and if there are significant issues arising, as outlined by the Deputy, they can be dealt with through substantive change by a future Minister for Finance.
There would be additional requirements for credit unions if we reduced the threshold to the amount argued by the Deputy. Stakeholders had mixed views during consultation with the Department of Finance and the Central Bank in the advance of the publication of the Bill. We believe it is broadly right, but any difficulty can be resolved.
The risky business of moneylending is tied up with the rates of interest charged. For some people, who want small, insignificant amounts of money that are significant from their perspective, the money is available for a short period of time, notwithstanding the fact that we must be conscious of the activities of moneylenders. There is a regulated sector and a demand for their services. We must wait and see how we can meet that within the confines of the Bill. The Dáil is giving the Minister for Finance and any future Minister for Finance the power to amend the threshold if the issues outlined by the Deputy become a difficulty.
Moneylending is a risky business. The APR set for each individual moneylender, as specified by the Central Bank, takes in the risk, but it is not the case that everyone is defaulting. The fact that someone is calling to the person's door on a weekly basis is the encouragement to repay. These high interest rates occur because of the administration end and the fact that someone must call to the house every week to collect the money. That is the big problem and the reason some of the rates are so high. It is a hugely profitable business.
There is no point in looking at how this will affect moneylenders, because we know it will not affect them. Is there a way of capturing moneylenders - through a hybrid of the suggestions made by Deputy Michael McGrath and me - which is unique to moneylenders so that we do not put a burden on credit unions? I am not suggesting doing it now.
The Minister of State has indicated that the Minister has the power under section 11(7). My reading of the subsection is that the power extends to raising or varying the amount, or reviewing the rate, having regard to the changes in the consumer price index, CPI. It is written in a way that is supposed to reflect price changes. I am not sure it is written for the purpose of decreasing the rate. Scope may be provided to do that but, as I noted a moment ago, a different section may be required for moneylenders so that we do not put pressure on the likes of credit unions.
I am sure the Minister of State at the Department of Finance is well aware that as we impose restrictions and requirements on lending for financial institutions - credit unions in particular have had different lending caps imposed on them - some of these are very blunt instruments that do not take into account the individual borrower's circumstances. These blunt instruments mean that credit unions cannot lend above a certain amount. It is right that we ask credit unions to go to the register, but if I ask my credit union for a €2,000 loan it may find me overly extended on the register and refuse to give a loan. As the pressure is put on credit unions, people go to moneylenders and get smaller loans. The moneylenders take the risk as they call to the door every week, but they are exempt from this legislation. Although it is right that we force credit unions and other financial institutions to do this, we must recognise there is a knock-on effect whereby people go to riskier lenders. If the moneylender does not give a loan, some people, out of desperation, will go to illegal moneylenders. That is the trickle-down effect.
If we apply the regulations to credit unions, we must ensure we realise what a desperate person will do when a credit union checks the register and finds that the person should not be given a loan because of his or her level of indebtedness. That person will turn to the moneylender, visiting the website of Provident or another legally registered and regulated entity in the State for the money. It may be provided by the moneylender without complying with this legislation.
We introduced an amendment relating to section 11(7), as Deputies recall, and originally the Minister's decision was based on the CPI. We broadened this provision to include the following: "The Minister may, from time to time, review the amount for the time being provided for by subsection (6) and may, following consultation with the Bank and having regard to changes in the consumer price index, the implications for the effective and efficient operation of the Register and the effect on credit information providers and credit information subjects, by order specify a different amount instead of that amount." This amendment broadened the definition of subsection (6) to have a more holistic review rather than something based on the CPI. Within that, there is an opportunity to capture the very issues referred to by the Deputy when it comes to moneylenders and the amounts involved.
Deputies raised as essential point. We are not saying that automatically there is to be a sunset clause and in two years there will be a review and some kind of impact assessment. There would have to be some review, which may come after two or two and a half years. We have to see, in a period of time, whether this will create new difficulties for people in appalling positions and who must go to these illegal entities - they are sharks - that raise extortionate amounts of interest on very small sums of money. It would be normal in this kind of environment for a review to occur, although I am not saying that provision is in the legislation. I am giving the commitment that a review will be complete within two years, and it would have to include an impact assessment across the industry, including the micro-issues raised by Deputies.
Section 11(7) captures the collective view of the committee in having a much broader definition of the Minister's assessment of whether to review thresholds. Previously, there was a provision related to the CPI, but we have now included, following the agreement of colleagues, subjects of financial services and their providers. It is a better approach and the Minister must have regard to the entire range of issues being brought to his attention. I presume that between now and the time of the review, probably in two years, there will be the opportunity to change the thresholds if difficulties arise in light of the Bill's operation.
Is there an anti-avoidance provision with regard to the application of the €2,000 threshold? If a licensed moneylender provides multiple loans of perhaps €500 in a short period with a cumulative value of more than €2,000, is there a measure to deal with it?
My understanding is that when the register is operational, the bank will obtain statistics from each of the financial institutions and this will give a full picture. Currently we do not have that information but we will have it when the register is in place.
I move amendment No. 6:
In page 16, between lines 9 and 10, to insert the following:“15. Information contained on the register in relation to a credit information subject who is an individual shall be accessible by such individual’s spouse, guarantors and executors in circumstances where such spouse, guarantors and executors have a reasonable entitlement to such information.”.This amendment relates to certain circumstances in which information on the register concerning individuals would be provided to others. I accept that this is a very difficult and sensitive area, but the matter was raised by the National Consumer Agency during the public consultation phase, and it has a certain point. It considers that consumers should have limited access to the records of another individual held on the register if said individual is liable for a debt. For example, guarantors and spouses may be liable for the debts of another person. Although I fully respect the right of each individual to absolute confidentiality, if there is somebody else with a financial interest in a level of indebtedness, there should be a way of working that into the legislation. It would be in a person's interest to have access to information on the register about the amount of debt being carried by certain people if there is a direct financial interest in the case.
I do not propose to accept amendment No. 6, but I thank the Deputy for raising the issue on Committee and Report Stages in order to allow me the opportunity of putting on the record the specific advice we have. On Committee Stage I committed to take advice on the question of executors gaining access to the register. I am advised that the duties of an executor are specifically set out in the Succession Act 1965. An executor is obliged to distribute the assets of a deceased person within a reasonable time period in accordance with the will of a deceased person. From the date of death of the deceased, the whole estate devolves and passes to the executor. The executor has numerous duties under the 1965 Act, including ascertaining all liabilities of the deceased, establishing the identity of beneficiaries, gathering and protecting the assets of the deceased and ascertaining their value, and paying debts or taxes owed. I am advised that there is no need to make specific provision in the Bill to allow an executor to have access to the register as they will be entitled to such access until the estate of the deceased has been duly administered.
With regard to spouses and guarantors, this is a separate matter. Individuals themselves have clear legal entitlements to reports and may share them with whomsoever they chose. The Deputy has proposed access for these individuals where they have reasonable entitlement to such information. It is unclear as to what constitutes a "reasonable" entitlement. A guarantor does not currently have access to any other individual’s record. It is for guarantors themselves to decide if they wish to give a guarantee and they are not forced to give a guarantee. It is for the borrower to decide if they wish to give their record to any party that is willing to undertake a guarantee on their behalf. We imagine any attempt to give "reasonable" access would be very difficult in practice. For example, who decides what is reasonable, and on what basis? Furthermore, it is difficult to see how such access could not be considered as encroaching on the individual data protection or privacy rights of the borrower concerned. For these reasons, I am unable to accept Deputy McGrath's proposal.
I thank the Minister of State for his response. I accept the substance of what he said on executors. In essence, he said there is an absolute veil of confidentiality for every individual concerning the private record that is held on the register for guarantors and spouses. That could throw up potential issues down the line - for example, where a person incurs debts where there is joint liability and the other person concerned does not have access to the information. The matter must be examined should many such issues arise when the register is up and running, but it is important to flag it at this stage. The NCA made a valuable submission and the issue was well worth raising. I will not press the amendment but I will flag the matter as one to be watched closely once the register is operational.
I move amendment No. 7:
In page 17, line 6, after “subject” to insert the following:“in circumstances in which a credit information subject has made a request for such an evaluation to be made”.We had a lengthy discussion on this amendment on Committee Stage, when the Minister of State committed to reviewing the position, but he has not tabled an amendment. He said that when the section was taken in conjunction with other sections there was no need for a change. I believe there is a need for it, but I am eager to hear the reason provided. My concern is that information from the credit register could be used by a credit provider to offer credit to individuals who have not asked for it. I accept that it is difficult to utter such an idea at the end of 2013 because most people who are looking for credit from banks cannot get it, and issues arise in terms of freeing up credit. However, we will not always be in this space and we were not always in it. Many of us had the experience of credit being pushed on us by financial institutions. It was the decision of the individual to ultimately accept it, but one was encouraged to take it. We cannot return to such a situation and the register should not be used to allow it. I am concerned about section 16(b), which allows a credit institution to evaluate any risk arising from affording or extending credit to a person subject to credit information. I am worried that the information could be used for the purpose I have explained. I await the response of the Minister of State.
I thank Deputy Doherty for raising this matter, on which I gave him a commitment on Committee Stage. When I discovered I would be taking Report Stage the first question I asked of the officials was whether we had examined the issue and received advice on it. I am sincere about that.
We examined the issue. My officials sought legal advice and I am assured that the current wording in the Bill is sufficiently robust. Sections 14 and 15 specify the occasions on which a credit information provider must or may access the register, and these do not allow general trawls, for example, to look for “good” potential customers. Section 14 provides that a credit information provider must access information held on the register which relates to a person who has made a relevant credit application to the credit information provider. Section 15 provides that a credit information provider may make an application to access information held on the register on those occasions, as outlined at subsections (1) to (3). Even where information has been accessed under either of those sections, subsection (4) of each of those sections restricts the uses to which the information may be put by the credit information provider for the purposes provided for in section 16. That is the all-important section mentioned by Deputy Doherty.
The purpose of section 16(b) is the evaluation of any risk arising from the affording or extending of credit to, or the taking of a guarantee or indemnity from, a credit information subject. Under paragraph (b) the information can be used for evaluating the risk of lending to someone. It appears that concerns have been raised about section 16(b) because it is claimed the wording is open-ended and too flexible. We do not see section 16(b) as allowing a credit information provider to pony up business. The provision under section 16(b) relates to an application already made by a credit information subject for credit or for the taking of a guarantee or indemnity from a credit information subject which is already under consideration by a credit information provider. The credit information provider would only get information on a particular credit information subject because of the scenarios outlined in sections 14 and 15. If, having been given access to the register for the purpose of section 16(b), a credit information provider were to use the information obtained to unilaterally seek entirely new business from the credit information subject separate to the business already under consideration between the credit information provider and the credit information subject, that would not be in accordance with section 16(b) and would be an offence under section 29(2). Nothing in section 16 permits the use of information for generating additional business.
Having examined the issue and obtained advice, we think the section is sufficiently robust. The objective of section 16(b) is to provide a framework for sections 14 and 15, and were institutions to use that as a means of generating additional business, as the Deputy has correctly highlighted, that would be a significant offence for which penalties are already provided in the legislation. I am grateful to the Deputy for raising the issue and clarifying it in the way he has, but our belief is that sections 14, 15 and 16(b) do as we expect rather than provide some kind of lacuna whereby institutions can generate additional business.
I thank the Minister of State for his reply, but I am not convinced. I appreciate his sincerity in seeking to ensure the issue was addressed between Committee Stage and Report Stage. My concern is based on the situation that arose previously when people sought loans and some but not all of them were advised to take out an extra €10,000 when they wanted a top-up on their mortgage to buy a new car or to go on a holiday. We are all aware of those stories from times gone by. If a person sought a credit card limit of €2,000, it was suggested that he or she increase the limit to €3,000.
Sections 14 and 15 have tight restrictions and specify that a person must be a credit information subject. The person must themselves have applied for credit or must be a guarantor. The register can only be accessed if one such individual has made a request to an institution for credit. Once an institution has accessed the register, section 16 sets out the cases in which it can use the information. There are some provisions, for example, under which the credit information subject has asked for an evaluation, but section 16(b), which is the key one, allows financial institutions to evaluate any risk arising from the affording or extending of credit to or the taking of a guarantee or indemnity from a credit information subject. Therefore, the provision is limited. The use of the register must be based on the application of a credit information subject - namely, the individual who applied to the bank for credit or a person who is willing to be a guarantor, who is also a credit information subject - but this does not prevent the institution from using the register and offering a credit information subject who seeks a loan of €1,000, for example, an increased loan of €2,000.
My amendment proposes to insert the words “in which a credit information subject has made a request for such an evaluation to be made” to ensure that the only purpose for which the credit information can be used is for the loan of the amount the person has sought.
The strong advice from the Attorney General is that the use of information generated under section 16(b) for an alternative purpose will be deemed an offence by the Central Bank. It is a matter for the Central Bank to regulate this and to ensure the system is working. As I said in my initial response to the Deputy, section 29(2) states, "A credit information provider who knowingly uses information to which access has been given under this Act for a purpose other than one permitted by this Act commits an offence." In this regard, consider the Deputy's point on general trawls and banks sending out letters encouraging people to take out hocus-pocus loans all over the place, which phenomenon was a reality in this country some years ago. If such activity became known in the brave new world we are all supposed to be trying to construct, it would be brought to the public's attention pretty smartly. An application could be made to the bank to investigate this issue. As far as we are concerned on the basis of the advice given to us by the Attorney General, the issue highlighted by Deputy Doherty involves the commission of an offence under section 29(2). We are now in a different place because we have the register in place. If the activity in question becomes part of a pattern of behaviour, the Central Bank will be on top of those concerned like a tonne of bricks. I very much hope so. More important, the legislation is framed in such a way as to provide the bank with all the authority to address this issue if it arises. More important still, the ultimate sanction will be penalties in the courts. I appreciate that the Deputy has given us the opportunity to raise this issue because it sets down a strong marker for the institutions that the kind of malpractice that obtained in the past will not be accepted in the future.
I would agree with everything the Minister of State said if my point were in regard to the financial institutions doing a general trawl. That is not what I am talking about. Section 29(2) contains the phrase “uses information to which access has been given under this Act for a purpose other than one permitted by this Act”. There is nothing under section 16(b) that does not allow the financial institution to evaluate any risk arising from affording credit to the person who makes an application for €1,000. It is permitted to use the register to afford credit to me, which is fine because I will have applied for €1,000, but there is nothing to stop the institution using information to examine whether more credit should be afforded to me, although I might not have asked for it.
The protection is not against unsolicited calls to individuals stating they were pre-approved for loans, including credit card loans, as referred to by the Minister of State. I am arguing that when somebody made an application to his or her financial institution, not only was he or she granted the credit applied for but also encouraged to take more. While the Minister of State's advice is 100% correct, I am not sure about the consequences of not addressing the small grey area I describe. Please God, we will not return to the days described. However, if we allow it in the legislation, there is nothing the Central Bank can do by way of regulation. By including the words proposed, the Bill would not be weakened. It would just clarify that the purpose of the information is not to push more credit on people who have applied for it but to actually determine whether the applicant should be afforded it.
The Deputy's question as to whether there is an issue we have not captured is valid. My initial point was that section 16(b) is consequential on sections 14 and 15. One must read the latter two together to get a sense of the information that the applicant must actually give to the institution. I will not state it on the record again. I am convinced by the arguments I have heard that, within sections 14 and 15, the eventualities in question are properly addressed. Section 16(b) is really about the evaluation of risk arising from the information provided for under sections 14 and 15. Therefore, section 16(b) is really the all-important one in terms of making the evaluation on the risk that exists. It is our view that the eventualities outlined by the Deputy are addressed in sections 14 and 15, which precede section 16(b). This will allow us the robust approach that I believe I mentioned at the start.
Section 16(e) contains the provision I want in section 16(b). Although one must read section 16(e) with sections 14 and 15, it is clearly stated that only circumstances in which an application of the kind in question has been made are covered. I have made my point and I hope I have provided food for thought. I ask for clarification. We are not fighting over the matter. It is just a question of whether what I describe is allowed for.
I move amendment No. 8:
In page 21, between lines 28 and 29, to insert the following:"(3) Regulations under subsection (1) may not prescribe a fee for access to information by an individual under section 15(5) if the access is pursuant to the first application made by the individual in any year.".I believe I have better news for the Deputy in this case. Amendment 8 arises out of a discussion on Committee Stage when Deputy Doherty proposed a similar amendment. He is aware that the Minister for Finance, Deputy Noonan, already publicly outlined his support for the intention set out in that amendment. On Committee Stage, I committed to proposing an amendment to take on board the broad thrust of providing individuals with a free copy of the individual’s credit report. I recognise that it is necessary to ensure individuals recognise they are entitled to one free copy in a 12-month period. The Central Bank will carry out a public awareness campaign and will highlight this fact during it. The National Consumer Agency has indicted that it is keen to engage on this important consumer protection issue.
An obligation where the credit register authorities would be required to issue reports en masse, as proposed by Deputy Doherty, would be a serious concern for the Central Bank. This would place a significant operational burden on the register to issue records actively to all individuals. I would have concerns that if the Central Bank were obliged to issue records actively as suggested, there would be a greater risk that records containing personal and sensitive credit data might inadvertently be lost, intercepted or stolen. It is likely that many borrowers will have multiple addresses for legitimate reasons and it may not be clear to the Central Bank which is the most appropriate address to which such records should be sent. Interception of data of this nature is likely to increase greatly the risk of identity theft. The nature of transmission of any reports is uncertain, and both the Department and the Central Bank would be very concerned at such a requirement being put in place in advance of determining the most appropriate means of transmission from a security and data-protection perspective. A more appropriate mechanism to enable individuals to receive a copy free and securely is to require them to apply after they have confirmed the most appropriate and secure mechanism for transmission of their confidential report. This is the substance of amendment No. 8, which I encourage the Deputies to support.
As I have just brought forward an amendment to provide for free access on a 12-month basis, I do not propose to take on board amendment No. 9, in the name of Deputy Doherty. I recognise that it is necessary to ensure individuals recognise they are entitled to one free copy in a 12-month period. The Central Bank will carry out a public awareness campaign and will highlight this fact during that campaign.
I accept the fact that the information will be provided free of charge, arising from discussions on Committee Stage, and I very much welcome that. I also accept the Minister of State's argument regarding data protection, although I believe there are ways around it. It is not as if we are going to be plucking addresses from the sky, unlike the situation with the local property tax. These are addresses that will be given by the financial institutions which issue statements, which are also sensitive. That being said, the Government has gone further in terms of committing to a public awareness campaign. This credit register will simply not work and will have no effect on the public and how the public interacts with it unless there is an awareness that it exists.
I ask the Government to agree to two things before I withdraw my amendment. First, the Minister of State referred to an awareness campaign, but that can mean many things. We must accept the principle that we want to encourage as many people as possible to access this register. Second, the question of how people access the information is critical. There are ways to make access easier for people. I ask that the Government encourage the Central Bank to ensure that, for example, electronic access is made available. We should try to make getting this information as easy as possible for people. The more people who are aware of their credit status, the better we will be as a society in terms of accessing credit and knowing when access to credit will be available. This is a very good Bill and one that my party supports. However, unless consumers are made aware of this register, it will have very little effect on behaviour.
The principle that each person is entitled to one free copy of his or her credit history per annum is agreed. The only point of difference between the Minister of State and Deputy Doherty is whether that statement is issued automatically or on request, and I believe that on request is fine. I do not see a need for automatic issuing of a statement every year.
I wish to ask the Minister of State whether the methodology for distributing and issuing information has been determined. I assume this will be quite an efficient process, whereby such information is issued electronically and people can receive a copy of their credit history by way of a PDF file sent by e-mail, or they will be able to access their statement online with a PIN. I ask the Minister of State to confirm the methodology that will be used.
On the latter issue first, it is the intention that if people seek this information electronically, they will obtain it electronically. The service providers will have to put a system in place to deal with that. Since the Committee Stage proceedings, when it was the unanimous view that the statement should be free and the information should be readily accessible, I understand the National Consumer Agency has said it is eager to work with the Central Bank in devising a national campaign. The NCA will bring a sharp focus on consumer-related issues to the bank. We must have a public awareness campaign that is in people's faces, informing them of this protection and their right, as citizens, to obtain this information, as a result of the Oireachtas's decision to make sure this right was included in the legislation. As far as we are concerned, the fact that the NCA will work with the Central Bank on this is all to the good. On the question of e-mail, it is crucial that where individuals want to obtain the information in this way, they can do so.
Finally, on the issue of awareness, there must be a national campaign. Broadly speaking, it will encourage individuals to use this in a way that provides them with the maximum amount of information about themselves. It is entirely right and appropriate that people know exactly the state of their own creditworthiness and where they stand in that regard. We believe our amendment reflects the broad consensus that exists on all sides of the House and improves the legislation in a way that allows people to get this information once a year in the most user-friendly way possible.
I accept what the Minister of State has said. The key issue is the fact that it is free. I am sure that the precise details of the user-friendly methods for issuing the information have not been figured out yet.
Banks issue statements all the time, and perhaps information could be printed on such statements. We must look at as many avenues as possible for advertising this register to the public. A one-off campaign will not be sufficient. It must be-----
Exactly. Errors can be made. The credit bureau is already operating and we know that banks have given information to the bureau in error in the past. In that context, it is important that people are not refused credit as a result of misinformation on the credit register. We have allowed for corrections to be made in this legislation.
Finally, when does the Government envisage that the first applications for credit statements will be issued? When is it expected that this will come into effect?
On a related point, when the Government is embarking on the public information campaign, it is important that it make clear to people how long the information will be held for. A period of five is specified in the legislation but if a black mark is registered against people on the credit register, they must understand that it is not there indefinitely. This is related to the point about an automatic credit history statement being issued every year. Perhaps something could be built into the system or else included in the public awareness campaign, so that people know that after a certain period of time, irrespective of credit history, information is removed from the register and the people concerned have a clean slate again. That is very important for people who are trying to plan their financial future and who wish to make a loan application. It should be built into the awareness campaign.
I accept the point the Deputy has raised. An application to get the information could lead on to ensuring that the person concerned had a much broader understanding of the provisions of the Bill. That is entirely correct, and we need to build that into the campaign. On Deputy Doherty's question, it is expected that this Bill, with the agreement of the other House, will be passed by the end of this calendar year. This has gone on for a very long time and Deputy Doherty, more than most, is aware of the priority that our friends in the troika attached to this legislation. It is really important that we get this through by the end of the year. My understanding is that once the legislation is in place the Central Bank will have to tender and outsource the work, and that will take some time. I do not have definitive timeframes but I will ask the Minister for Finance to revert to the Deputy on that. I suspect it will be at least a year, if not longer, before we see this in operation. The Central Bank will have to get its operations together. It will be the subject of a competitive tender process, as the work is to be outsourced to some external delivery agent. That all takes time. I will ask the Minister to give Deputy Doherty a more definitive timeframe if possible.
I move amendment No. 10:
10. In page 25, after line 14, to insert the following:“Amendment of section 5 of Central Bank (Supervision and Enforcement) Act 2013
35. Subsections (2) and (3) of section 5 of the Central Bank (Supervision and Enforcement) Act 2013 shall be treated as having, and always having had, effect with the substitution of “to 4” for “to 3” in each place.”.
I thank Deputies Michael McGrath and Pearse Doherty, who have gone through all Stages of this Bill. I know from the Minister for Finance’s engagement with them on Committee Stage that their comments, observations and proposals have greatly enhanced the legislation. There is a broad acceptance of what it attempts to achieve. This is an important milestone in improving the governance around borrowing requirements and prudential lending in this country. I hope it will be part of the new architecture that will lead to better decisions in the future. There was a unanimous view in the House that the legislation should be progressed. I thank the Deputies for their constructive engagement.