Dáil debates

Wednesday, 3 November 2021

Credit Union (Amendment) Bill 2021: Second Stage [Private Members]


9:57 am

Photo of Marian HarkinMarian Harkin (Sligo-Leitrim, Independent)
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I move: "That the Bill be now read a Second Time."

I am very pleased to have the opportunity to present the Credit Union (Amendment) Bill 2021. This Bill proposes to amend the objects of credit unions in order to allow them to extend the range of services they can provide to their members without a long list of permissions and processes, as is currently required by the Central Bank. As it stands, the list of services that any credit union can provide without that special permission is enumerated in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016. This list includes services like the provision of standing orders, direct debits, money transfers, etc. The list dates from 2004. It was amended in 2006 to allow for the introduction of personal retirement savings accounts, PRSAs, and in 2016 to allow for insurance services to be provided on an introduction basis. However, this list is out of date and it does not take into account the massive changes in the nature and provision of financial services since 2004. If an individual credit union wants to provide additional services outside of this narrow and outdated list, it must apply on an individual basis to the Central Bank. The level of red tape, bureaucracy and permissions required is stopping many credit unions from applying. This, in essence, means that many credit unions are not permitted to reach their full potential on behalf of their members and consumers.

I emphasise that I am not asking for special treatment in this context. I am asking for equal treatment with other financial institutions. Credit unions would have to operate fully and wholly in compliance with all the relevant legislation that is already in place governing the financial services they might wish to offer to their members. Whether an individual credit union can offer a regulated service to its members should not be at the sole discretion of the Central Bank. Sometimes the impression is given that credit unions, because of their voluntary and community nature, lack the necessary expertise to extend their range of services. I refer, for example, to the provision of debit cards to credit union customers. The reality is that systems for the provision of debit cards are already in place. This expertise is held centrally by the card companies and by the credit unions' payment providers. These payment providers are already in place. They are already regulated and authorised by the Central Bank. They look after compliance and individual credit unions have to do small amounts locally. In effect, credit unions would be piggybacking on the tried, trusted and regulated systems already in place in order to extend their range of services. That is a reasonable ask.

This Bill also seeks to provide for the establishment of a credit union policy committee. This is not a new idea as the template is already in place with the Credit Union Advisory Committee, CUAC, which is already set up to advise the Minister for Finance on credit union matters. I am proposing a policy committee that would review the impact of Central Bank policy on credit unions and provide feedback to the Central Bank on the impact of its policy decisions. This committee would have a formal consultative role with the Central Bank and the Central Bank would be expected to have regard to its deliberations. This would in no way compromise the independence of the Central Bank, just as CUAC does not compromise the Minister's decision-making process. Rather, it would provide an independent and informed perspective to the Central Bank on the broader impact of its policy and oversight process. Its role would be consultative but it would be very valuable. The committee I propose would be set up by the Minister and would include members with expertise and experience in the credit union sector.

This Bill would also provide for a number of miscellaneous matters relating to credit unions. First, the Central Bank would need to obtain the Minister's consent when prescribing the minimum regulatory reserve requirements for credit unions. Currently, the Central Bank prescribes the minimum regulatory reserve ratio and it has set it at 10% of the assets of the credit union. It is worth mentioning that the 10% reserve required for credit unions is much higher than what is required for high street banks in Ireland. Given our relatively recent banking crash and its hugely negative impact on citizens, small businesses and our economy, I am not convinced by the logic of requiring much higher reserves from credit unions than from banks. It is also important to note that we are out of kilter with the reserves required for credit unions in countries like the US, Canada and Australia, where the credit union movement is very strong. However, my personal view is one thing. The essential point here is not the level of regulatory reserve required for credit unions by the Central Bank but that the Minister of State must give his consent to the figure proposed by the Central Bank. There is precedent here. For example, when the Central Bank decides on the industry levels to be applied in order to fund its activities, the Minister has to give consent. I do not believe that compromises the independence of the Central Bank in any way.

This Bill also proposes that when amending a common bond, the Central Bank shall have regard to the common bond of other credit unions and ensure there is no overlap. The common bond in credit unions is a factor that unites the members of the credit union together. The principle of the common bond is that it enables members to know and trust each other. It also provides a certain level of solidarity and support and its unique nature should not be compromised.

The Bill also proposes that the Central Bank will administer the system of regulation and supervision of credit unions in an appropriate and proportionate way, with a view to the protection of the community and volunteer ethos of credit unions. This is crucial because this is what distinguishes credit unions from other financial institutions.

The context of my proposals today is important. The truth is it is no accident that credit unions are time and again ranked as Ireland's most trusted organisations. This is because they are not-for-profit, community-based, volunteer-led organisations that are owned by their members. I have said it many times before: if we were trying to design a financial institution to act as a counterpoint to the profit-driven, investor-led model of public banking, we would invent credit unions. Thankfully, we do not have to do that. However, we cannot sit back and watch as the sustainability of credit unions is left uncertain. We as legislators need to act and my amendment to the Credit Union Act is part of that process.

To say that the viability of the credit union movement is threatened is a strong statement, but after 20 years of listening to and visiting credit union members and staff in my former 15-county European constituency, I have serious concerns about the medium- to longer-term sustainability of many credit unions, as they struggle to serve and remain part of their communities.

I have received a number of emails from credit unions throughout the country in recent times and many of their heartfelt statements support my contention that, at best, the future sustainability of many credit unions is not guaranteed and, at worst, is under threat. One credit union has informed me of some of the regulatory risks facing the sector:

We are a small credit union and there is the feeling and impression that the Central Bank wants us to merge into a bigger credit union. This has been the impression given to us at various PRISM visits and while the Central Bank does not openly acknowledge this, they do not refute it. Some of these engagements have been less than civil and this has quite an impact on a credit union's motivation and enthusiasm to provide a financial service to the local community.

Another credit union has told me:

There is a teacher-student relationship between the Central Bank and credit unions. We are effectively micromanaged by the Central Bank as they set out what needs to be included in almost all of our specific policies and there is no room for negotiation. The Central Bank implements regulation and provides guidance without any first-hand experience of the time, labour and resources required to implement the bureaucratic burden and there is no impact assessment of the regulation undertaken.

This is one of the main reasons I propose the setting up of the credit union policy committee. Another credit union has suggested:

The quantity and cost of regulation leads credit unions to question if they are sustainable going forward. There has been a push for change in the regulation, but this has been met with stiff resistance. Board succession has become one of the main risks facing credit unions as the Central Bank continues to pile pressure on boards without considering how they are demoralising and altering the culture of credit unions.

The Minister and I know that once this is gone, it is impossible to replace. I have quoted strong words, but I have heard similar strong words in the offices of credit unions throughout the country for many years and they are not an exaggeration. They are the words of a hugely valuable and important part of the financial sector in this country. Credit unions are, in many cases, the glue that supports many individuals and communities and helps to keep them together.

When the financial crash started in 2008, our banks failed us and burdened the citizens of this State with huge levels of debt. A very small percentage of credit unions found themselves in trouble, but they did not cost the State anything. Today, credit unions remain as a bulwark against the exclusively profit-driven, investor-led model of financial institutions. While such institutions have an important role, we need that balance, counterpoint and opportunity for a community, volunteer-led, not-for-profit financial institution to serve local communities and individuals.

I represent a constituency that has 13 credit unions serving their local communities. They are an invaluable asset and it is time we, as legislators, stepped up to the mark and fully recognised their value and importance in the financial life of our communities. I expect many, if not all, Members to support the role of credit unions in the provision of financial services, but supporting institutions such as the credit unions requires more than fine words and praiseworthy phrases and a general feeling of overall support.

We, as legislators, have a responsibility to legislate to ensure the viability of small, medium and large credit unions. It is easy to say we support the credit unions, but we only support them if proportionate and appropriate legislation is in place. In that context, I commend this Bill to the House.

10:07 am

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I commend Deputy Harkin on bringing this Bill forward. I know she has put an enormous amount of work into it. Credit unions are the life and soul of many rural areas from which Bank of Ireland and some of the other banks have absconded, including rural areas and small towns such as Glenamaddy, where once there were two banks and where St. Jarlath's Credit Union, which was known as Glenamaddy credit union, is the only thing; or Ballyhaunis in County Mayo, which is a fairly big town. The credit unions have tried to step up to the mark, but their hands are being tied by the Central Bank.

In some cases, credit unions have been forced. One can dress it up whatever way one wants. Some will say they were not forced, but with the regulation that came in, it went from voluntary people trying to run the credit union in different parts of the country to being more professional and tougher to run. I agree with Deputy Harkin about putting a body together to watch over the rules of the Central Bank. Many credit unions, as the Minister will be aware, have a good few quid in them, but the problem is that it is costing them money to hold that money and they are struggling to get some of it out with all the different regulatory systems.

Many credit unions have gone into the debit card, as has been talked about earlier, but sadly they seem to be reluctant to put in pass machines around the credit unions. It would be good if with community involvement along with credit unions, one could put in a hub system where the likes of Bank of Ireland had fairly strategic buildings with a post office, credit union and other necessity-type operations in those small towns.

We also need to remember the farming community. With the banks, everything is nearly online. With due respect to all farmers, there are some who have never had a mobile phone and are finding it that bit difficult. When one goes into a bank, compared to many credit unions where at least someone will say hello, it is a machine one has to look at to lodge or take out money. In fairness to many of the credit unions, they have made an effort to have a person who, if he or she sees someone coming in who is rummaging and a bit flustered, will go up to that person and settle him or her down and give him or her the opportunity.

Deputy Harkin touched on what happened when this country was hitting the rocks. I remember the former Minister, Michael Noonan, in the Minister of State's position saying we had to put a certain amount of money aside for the credit unions. They did not use it because they were being run pretty efficiently. They covered anything they needed to do, which was not what the banking system did, as the people of this country know well.

We have to move credit unions on. Some of them have come together and it is about the turnover in the books and, as Deputy Harkin spoke about, the amount of liquidity or money in, bar what one can let out. They should now have the same facilities as banks. If credit unions wanted to go into the different schemes the Government brought out under Covid, they should be brought into them or given the opportunity if they want to take them up.

Whether people like it or not, credit unions are going to be the bank of rural Ireland right around this country because the rest of them have upped sticks and gone. I ask the Minister of State to give credit unions the opportunity to provide the same types of loans, including for land or houses, as the banks. They are doing it on a smaller scale at the moment but the liquidity situation is crippling them.

10:17 am

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
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I move amendment No.1:

To delete all words after “That” and substitute the following: “Dáil Éireann resolves that the Credit Union (Amendment) Bill 2021 be deemed to be read a second time this day nine months, to allow for the progression of the Review of Policy Framework which is at an advanced stage and for such progression to be taken into account in further scrutiny of the Bill."

I welcome Deputy Harkin's Private Members' Bill because I firmly believe that we both share the objective of strengthening and expanding the credit union movement. Since I entered office 15 months ago I have been working closely with the many stakeholders in the credit union sector to deliver the review of the policy framework for credit unions as set out in the programme for Government. I am pleased to inform the House that this work is nearing completion. I hope to update the House in the not too distant future of the Government's plan to support the credit union sector to enable it to thrive.

The credit union movement is one of the most valuable assets we have in our society. Credit unions play such an important role in the economy, with over a third of the unsecured lending market in Ireland, over €20 billion in assets, a branch footprint of over 400 offices across the country, millions of members and an unrivalled reputation. Credit unions have been at the centre of local and workplace communities for over 60 years, tailoring their products and services to match their members' needs. The movement has earned the number one spot for the best customer experience in Ireland for five consecutive years, rated first by consumers for value and loyalty. The €5 billion in loans right across Ireland is community banking in its truest form.

It is important to acknowledge the Taoiseach's decision to create, for the first time ever, a Minister of State with responsibility for credit unions to head up an ambitious review of credit union policy. This demonstrates clearly that this Government wants to see the sector thrive and expand. Credit unions hold almost €17 billion worth of people's savings. As a Government, we always have to put the public first and protect their well-being and their savings. Since entering office I have made good progress to help to support and deliver meaningful reform and to deliver on Government commitments. I am currently developing policy proposals that encompass the views of a large sample of stakeholders from across the sector. We are considering submissions made by the representative bodies and recommendations from two detailed reports produced by the CUAC. The Department is also considering the feedback from extensive stakeholder engagement which has been carried out as part of the review. In June and July I met three representative bodies, the Registry of Credit Unions, RCU, the CUAC and four collaborative ventures. We also met a number of credit union service providers and received an analysis from the CEO forum of the credit unions in relation to other markets outside the State. In total I have held 23 stakeholder meetings with the credit union sector so far this year. Well over 100 proposals are being considered in the Government review. They have come from a wide range of stakeholders throughout the credit union movement. I also brought through legislation to give credit unions the discretion, for the first time ever, to convene wholly or partly virtual annual general meetings last year. The new measures were introduced in response to public health guidelines restricting gatherings. The credit institution resolution fund levy and the credit union stabilisation levy have been reduced in the last year. Collectively these levies have been reduced by 56%, representing a €6.7 million per annum saving for credit unions. Lastly, we completed legislation to enable the wind-down of the credit union restructuring board.

The Government's review is now at an advanced stage. My meetings with the sector since I came to office have allowed me to gain further insight into collaboration and business model development. I came away from these meetings with a renewed belief that enhanced co-operation is essential for the future of credit unions, particularly in relation to growth in lending. I recently attended the launches of an agri-lending product and a retrofit lending product, both developed by a collaborative venture among credit unions. Similar projects have enabled the launch of two funds to lend to approved housing bodies, AHBs, for social housing. Every credit union in Ireland can invest in those funds. All of this makes clear the need to extend the credit unions' reach across Ireland. We need credit unions to get more people using their facilities. To do this there needs to be further collaboration and harmonisation on the products that credit unions offer. It is good to see credit unions offering current accounts, debit cards and ATMs. I see great potential here if they continue to integrate these products with other financial services which their members use. This will allow them to grow their market share. I would also like to see credit unions expand more into the mortgage and insurance markets and to increase their student loans. Recent bank branch closures offer them a huge opportunity to reach new customers. As some Deputies have already said there are some towns, including in my own county, where the credit union is the only financial institution left standing. I encourage credit unions to engage more with local community groups and voluntary and sporting organisations to increase their lending which is in keeping with their ethos and social value to the community.

I intend to issue proposals emanating from the review for consultation with stakeholders shortly. This consultation will involve meeting with representative bodies and other stakeholders, a commitment I made in my recent engagements. Potential legislative amendment will be considered as part of the review. We have heard some very important and constructive suggestions here today. However, my engagements have highlighted that there is no firm consensus on the desired legislative change which would assist in solving the financial challenges facing the sector. As has been mentioned already, some credit unions in parts of the movement are in favour of this legislation but others are not supportive of some of what is being proposed here today. I do not want to raise unrealistic expectations about the potential impact of any such change, if it were approved. Legislative amendments to the policy framework will not solve the financial and business model challenges arising from the low interest rate environment, muted credit demand, strong savings growth and high operating costs. As Minister of State I have made a commitment to work to strengthen the credit union movement but policy change is not a panacea. Representative bodies, collaborative ventures and individual credit unions must work together to lessen fragmentation, provide strategic direction and leadership and drive business model change.

Regarding Deputy Harkin's Bill, it is important to remember that the Central Bank is independent for good reason. As a Government, we always have to put the public first and protect their well-being and their savings. In its role as regulator, the Central Bank must be allowed to discharge its duties in an independent manner free from potential political or sectoral interference. Today's Bill assigns the Minister a role in setting a strategic plan for the sector, with the Central Bank reporting annually to the Minister on this plan. The Minister for Finance, Deputy Donohoe, and I believe it is not appropriate for the Minister for Finance to set out a strategic plan for the development of the movement. This is a matter for the movement itself and it needs to step up and increase its lending, reduce fragmentation and develop more collaborative projects. It is not for the Minister to decide on an appropriate future. We can assist and support but it is a matter for the credit union movement, in the first instance, to decide on its future.

I wish to respond briefly to some of the points raised thus far. I have listened carefully to what Deputies have said about services that are approved and the fact that if credit unions want to provide a new service, notwithstanding the fact that the service providers may already be regulated to do their end of the work, the credit unions must get separate sanction from the Central Bank. I take that point on board and it will feed into the consultation that is happening at the moment. Reference was made to the removal of certain requirements relating to members' funds, with the reserve requirements relating to members' funds to be cleared by the Minister. The last thing the Irish people want is politicians deciding the reserve ratios for financial institutions in this State. In fact, political interference would be the worst thing to happen in this area.

We have a different point of view as to whether the Minister should have a role in this area. The common bond has been mentioned to ensure there is no overlap. In parts of Dublin city and in other towns, five credit unions can serve the same street, so there is massive overlap in relation to the common bond. While it is intended and introduced for good reason, in its own right, it creates a lot of operational difficulties, which we will address as part of the consultation process.

Regarding regulation and the cost of it, the banks have to pay 100% of the costs of their regulation but it is Government policy that credit unions would only pay 50%. I note Deputy Harkin's comment that the future sustainability of credit unions is at risk. We all want to work with the credit union movement to grow its business and lending in the future.

10:27 am

Photo of Kathleen FunchionKathleen Funchion (Carlow-Kilkenny, Sinn Fein)
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Deputies Connolly and McNamara are sharing time. They have five minutes each. Is that agreed? Agreed.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I thank Deputy Harkin for the work she has put into this Bill, which I support. As the Minister of State outlined, I accept there will be issues to be teased out regarding the role of the Minister. We would all be very sceptical of that and the common bond.

The essence of the Bill is to increase the services a credit union is allowed to provide. It refers to a policy committee, which is advisory, and other miscellaneous changes that are important. We are back at the stage again where we have what I call the nine-month pregnancy adjournment. Usually, a pregnancy is something wonderful and we look forward to the birth of a lovely baby at the end of it, but in my time, in this Dáil that has taken on a whole new meaning. It is a method of delay to ensure we do not get something, and I have a difficulty with that. I am sure people will have a difficulty with me using the pregnancy analogy; however I cannot but when I hear about a delay of nine months and then the Bill goes off into wonderland.

As Deputy Fitzmaurice stated, a lot of places simply have the post office and the credit union. Today, we are looking at credit unions, but we could easily be looking at post offices. Is it not extraordinary that the two financial institutions that have kept the country going, and kept us going, are struggling and reliant on politicians to bring motions and various amendments when all the resources are on the Government's side? We constantly say we have to change and there is no going back. The banks let us down. Not alone did they let us down, but they cost us billions of euro and we have lost trust.

Let me declare a conflict of interest. I am sure all of us have a conflict of interest. I am a proud member of a credit union. I have both shares and a loan. The credit union has been with me throughout my life as a struggling student and, later on when I was lucky to have a series of jobs, it has kept me going. I use the credit union for general elections. I am a proud member and I hope I can give back to the credit union now. Credit unions have given to all of us. We are now in a situation where they are struggling. We have any number of reports. I thank the staff in my office for their work on this. We had the establishment of the Commission on Credit Unions in 2011, more than ten years ago. The commission reported in 2012. There is a report by the credit union advisory committee, CUAC, the review of the implementation of the recommendation of the Commission on Credit Unions 2006, the Oireachtas joint committee's report on the review of the credit union sector in 2007 and the CUAC implementation group final report in 2018. We are waiting on the report by the Minister of State, which was imminent in September. When will the report be completed and will it be published? That information would be helpful.

Credit unions operate on a community-based volunteer system. It is extraordinary because, in a sense, it is a contradiction, but not really, because that is how the country is run. Credit unions are run on a voluntary basis in a professional manner by committed people and they have served us well. Surely it is a model to learn from, look at and work with so we can improve it. At the very least we should allow them to increase the number of services they provide.

We had the withdrawal of Ulster Bank, of which I am a customer, and KBC from Ireland. There is less and less competition. All the language of neoliberalism calling for more competition has in fact led to much less competition. We are back relying on the basics – the struggling post offices and the credit unions - without any obvious help. I realise that the Minister of State made many positive comments about credit unions in his speech and that he backs them, but positive words only go so far. We must learn that we can never go back again in this country. I say this like a broken record. We need transformative change. Part of that transformative change is the credit union based on an ethos that is for the community. I accept credit unions are not perfect and regulation is needed, but if the regulation is a stranglehold on them then we need to look at the type of regulation. While not reducing the efficacy of the regulation, we need to look at how that fits in to the community model and the ethos behind credit unions.

I hope the report that is imminent will be the start. The Minister of State might tell us if he is going to publish it. It looks like the Government has the votes to get the nine-month delay and that it will be another nine months before we can begin to bring the transformative change to ensure credit unions are an essential part of the solution, as are post offices and local industries.

Photo of Michael McNamaraMichael McNamara (Clare, Independent)
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I thank Deputy Harkin for preparing the Bill and for the opportunity to discuss the historical role of credit unions and the role that they can play in the future, which is even more important. The timing is fortuitous from my perspective, as I attended an event last Friday night to celebrate 50 years of Derg Credit Union, which is the credit union that covers the area in which I live - Scariff, over to Broadford, and down to Killaloe and Ballina. I will not thank the individuals who were involved in setting up that, but everybody in the community knows who they are and they are indebted to them for the role that they have played in the community over 50 years. They provided money to people who could not get money anywhere else. The money had a useful social function in keeping people away from moneylenders, but also in starting small businesses and getting people off the ground when they could not access funding. The credit union still has a hugely important role to play in that regard.

I was flabbergasted to learn that Derg Credit Union now holds €33 million. When I look at the community that I live in, I see what the €33 million could do if the credit union was able to invest, but it is not. Credit unions have a significant difficulty. The main correspondence that I get from people in Clare, not just from the Derg Credit Union area, but across the county, is complaints that they have been contacted to take money out of the credit union because it is incurring a cost in storing the money. All the money is in the control of community-minded people who want to spend it on something that could give a financial return but also a societal return.

Helene McManus, the president of the ILCU, was at the event and she spoke about housing. A way must be found so that instead of having vulture funds coming in from abroad, picking the bones of a young generation, those savings of perhaps a slightly older generation, but from the same communities, can be put to good use and provide gainful accommodation. The investment will provide a financial return. The money is safe because the vulture funds would not spend all this money on housing in Ireland if they did not think it was secure and it would not provide a return. There must be a way. If the Minister of State is going to put this Bill back for nine months, I urge him to look at this in particular. I know he has acknowledged the role the credit unions play throughout the country, including in his own area, but we need to see how this money can be harnessed, in the way that it has been in the Sparkasse system in Germany, which is not dissimilar to our credit unions.

I wish to turn to another part of the Bill, which is bureaucracy. There is a need for oversight, but there is a big difference between oversight and strangulation. To get a €2,000 loan for a community defibrillator group, the following were required as underwriting requirements: a comprehensive business plan, and detailed financial projections appropriate for the scale and complexity of the loan. They must be provided to the credit union before it grants the relevant loan. The comprehensive business plan should include the following at a minimum: an executive summary; a description of the business; a market analysis of the current sectoral market positions; staffing and operations, financial projections, including key assumptions, profit and loss accounts; and balance sheets and cash flow projections for three years. That is for a loan for a defibrillator; it is not to build the national children's hospital or the national maternity hospital.

If we had that level of oversight for the national children's hospital, we might not have a huge hole in the ground at the cost of billions to the Exchequer. We do not have that oversight because Ireland has a great ability to have a huge level of bureaucracy and oversight for the little people, who are spending small amounts of money, but for the big people with large amounts of money, the attitude is "Ah sure, they know better". That is the way the Civil Service, and Ireland, operates. That has to change because people have to be allowed to provide something like a community defibrillator without going through massive amounts of rigmarole. There has to be appropriate oversight but, equally, people have to see that the oversight and the system is fair. There has to be oversight for the bigger projects too. Maybe some of this bureaucracy could be better directed elsewhere in the State rather than towards some of what is required of credit unions. I am not saying there should not be oversight. There should, but it should be appropriate. Above all, we need to harness the funds available to credit unions and put them to use for the benefit of our society. Nobel economics prizes have been won for microfinancing around the world. This is an example of microfinancing we desperately need in our communities in Ireland.

10:37 am

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I thank Deputy Harkin for bringing this Bill before the House. In a time of pandemic and economic downturn, the credit union movement has served the local needs of the communities within which it is embedded. We all agree that credit unions are trusted, visible and they understand what makes and strengthens communities. Just this month, credit unions maintained the top spot for best customer experience at the customer experience insight awards for the seventh year in a row. They hold this position among the Irish people because they treat their customers and members with respect. They respond to their needs and their circumstances and, with more than 300 credit unions throughout the island, one in two people in Ireland has a credit union account. It is a movement that places people above profits, benefits its members not its shareholders, and is embedded in the community.

During the pandemic, credit unions stepped up and served their members. The ethos of the credit union movement should be contrasted with that of the commercial banks, which used the public health restrictions as an opportunity to close down branches in our communities negatively impacting customers and communities that are remote, lack decent access to broadband or require assistance in adapting to digital services. Credit unions, in stark contrast, have remained accessible and responsive.

In May, the State's largest moneylender, Provident Financial, withdrew from the Irish market. The immediate reaction of the credit union movement was to remind people that credit unions provide affordable and ethical loans that meet the needs of those in need of credit, unlike high-cost credit providers, such as moneylenders, who are permitted by the Government and the Central Bank to charge annual percentage rates, APRs, at an eye-watering 288% when collection charges are included. My legislation to cap the interest moneylenders can charge, which is currently before the finance committee, was introduced in the knowledge that credit unions can serve our communities through the provision of affordable and ethical credit, but only if they are supported and not held back.

It is long past time we unlocked the potential of the credit union movement. Its viability and long-term existence are at stake. Communities need credit unions to thrive and not merely exist. Either their decline can be managed or they can be empowered to thrive and increase their footprint in the financial services market through increased products and services. That begins by addressing the issue of under-lending. With an asset base in excess of €19 billion, credit unions have the potential to increase support significantly for communities, customers and businesses. That includes the ability of the credit union movement to support and extend credit to increase social housing stock, since credit unions hold up to €900 million of finance, through social housing and the retrofitting of more than 500,000 homes by 2030. In September, the Central Bank approved the establishment of the credit union approved housing body fund that will see an initial deployment of €200 million over the next 12 months. While this is welcome, so much more can be done to unleash the potential of the credit union movement so that it thrives and not just survives.

The provisions in the legislation before us relate to specific issues in credit union policy and regulation. There is a need for the Government to adopt a comprehensive credit union policy and agenda for reform. At present, the Government does not have one, despite commitments in the programme for Government to enable the credit union movement to expand and grow. It is now more than two-and-a-half years since the final report of the Credit Union Advisory Committee, CUAC, report implementation group. That was published in January 2019 and there has been no movement on any of its recommendations. That is simply not acceptable. I am also aware that the credit union movement submitted a comprehensive and extensive set of proposals to the Department of Finance and to the Minister of State in February of this year. Has he even responded to that set of proposals? If not, when will he?

The Government's approach thus far has been slow and piecemeal. It is time that any reforms of the credit union sector are done in a comprehensive manner. Deputy Harkin has sought to advance the cause of the credit union movement with this legislation and give voice to the need for reform. I commend her on her work in this area. Sinn Féin will support the progression of this Bill to Second Stage. The Minister of State should not use the tactic, over and over again, of stalling legislation by placing a stay of nine months on it. He has done it a number of times with legislation I introduced that was focused on consumers. However, on this legislation, we have some reservations about elements of the Bill that require further scrutiny. That is why it should go to the next stage, which involves further scrutiny. There is a diversity of opinion within the credit union movement, which was made clear, for example, in the policy paper on the common bond published by CUAC in December 2017.

We want to see the credit union movement strengthened and united through comprehensive reforms. That is where it is incumbent on the Minister to act. We also have concerns about section 6 of the Bill, where the wording is unclear on the aims and objectives in giving sites authorisation under financial services legislation without specifying the legislation in question. However, these issues and other provisions can be scrutinised on Committee Stage together with the broader health and direction of the credit union movement.

It is now time for the Minister of State and his Department to come forward with a plan for the credit union sector, one that will strengthen it and the communities it serves. He should not delay this legislation moving to the next stage. It is an important contribution to this debate and it will inject a little energy into it.

Photo of Martin KennyMartin Kenny (Sligo-Leitrim, Sinn Fein)
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I commend Deputy Harkin on bringing this legislation before the House. The credit union movement is at the base of many communities throughout the country. Credit unions do tremendous work. Not only are they trusted, many communities would not be able to survive without them. They have made major commitments and a massive contribution to large parts of rural Ireland, especially when the credit union was there when other facilities were unavailable.

We all acknowledge that during the boom there were a couple of issues with a small number of credit unions, including regulation, but that has been ironed out. As is often the case, overreach has happened. When work is to be done to bring regulation into place, especially when it comes to movements like the credit union, the real pressure is put on them rather than on other places it should be put. That is the problem we have got.

I will give the Minister of State an example. I spoke yesterday evening to a woman who works in a credit union. Her brother-in-law is a small builder with a site he wants to build houses on, but he cannot get the money from anywhere to start the site and get a bridging loan to build those houses. This woman has spoken to people in her credit union who want to lend him the money but the regulations will not allow them to do so. We have this problem throughout the country, with people who want to do stuff the Government is telling them they need to do. The housing crisis is at the centre of that. So much more could be done if we could unlock the potential of the credit union movement and put those finances in place to build houses and homes for people throughout the country. The Minister of State may nod but we have been looking at this issue for years now. We are not getting any action and action is what we require. To kick the can down the road on this for nine months is no good to people who are waiting to get a home, especially when they hear that the credit union has money to put finances in place to provide those homes yet Government legislation and regulation is preventing that from happening. We require action immediately.

We also know the credit union does an awful lot of work for people in providing small loans when they and their families are under pressure at Christmas and other times, which keeps them out of the clutches of moneylenders. We need to support what Deputy Harkin is trying to do in providing for the credit union movement to help people and communities throughout the country.

Photo of Chris AndrewsChris Andrews (Dublin Bay South, Sinn Fein)
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I commend Deputy Harkin on her work in introducing this Bill on credit unions. I also commend the members of credit unions on the work they have done in the community over the past 60 years. They have witnessed high levels of unemployment, emigration and a city in which poor housing is rampant but they have kept communities together. As the Minister of State with responsibility for credit unions, he has done a great job listening to credit union representatives, but the time for listening is over.

The time for kicking the can down the road is over and we need action. There are clear commitments in the programme for Government to support the credit unions. The Minister of State has been in government for 16 months now. We are still waiting for action. If he does not want Deputy Harkin’s Bill, then where is the Government’s Bill?

Credit unions are delivering an important service to the local community in Ringsend, Crumlin, and Pearse Street. However, by 2030, some of the smaller credit unions will be gone, unless they get support from Government. If they go, this will have a significant impact on many people. Our banking system is effectively down to two and a half banks, which is the same number we had 20 years ago. The banks’ working model is to close branches. Post offices are closing. Donnybrook, for instance, has no post office. There is a need for credit unions, now more than ever. Many people to whom I speak, many of whom are on decent incomes, cannot get bank loans because they are financially powerless. Credit unions support this profile of person. The Central Bank of Ireland is doing what it is required to do by legislation. The Central Bank is not the stumbling block; the legislation is. We have to change the legislation.

10:47 am

Photo of Patricia RyanPatricia Ryan (Kildare South, Sinn Fein)
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I too want to thank Deputy Harkin. As a long-time member of a credit union and an advocate for credit unions, I am pleased to have the opportunity to speak on this Bill. Credit unions are a model of community banking that we need to support in every way we can. The commercial banks are turning their backs on rural Ireland. We must equip credit unions to bridge that gap. The Credit Union Act 1997 limits the role of credit unions to accepting savings and providing loans. They may seek approval from the Central Bank of Ireland to provide limited additional services. The list is outdated. It needs to be expanded, so that credit unions can continue to grow for the good of local economies and its members.

This Bill will allow credit unions to provide a greater range of financial services to its members, including current accounts. This would be a great shot in the arm for towns such as Monasterevin and Kilcullen, both of which recently lost their Bank of Ireland branches. Although that is for another day, it is an absolute disgrace. This Bill will also provide for the establishment of credit union policy committee. The purpose of the committee would be to examine the impact of Central Bank of Ireland policy on credit unions and provide feedback to the Central Bank. This is a vital reform if we are to strengthen our credit unions. Credit unions exist for the benefit of their members and should be given a role in addressing our climate change crisis. They should be used as a vehicle for low-cost loans to help families to install renewable energy solutions, which will save them money in the long run as well as helping us to deliver on our climate commitments.

Photo of Pa DalyPa Daly (Kerry, Sinn Fein)
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I commend Deputy Harkin on bringing forward this important Bill. I support it going to Committee Stage and allowing for further debate because it gets to the heart of the difficulties facing our credit union movement. I also commend the movement for working so hard and so professionally in their submissions to suggest many of the policy solutions causing difficulties for them and their thousands of members across the island. I do not have to list the many benefits credit unions have brought to Irish life, from allowing people who are not accommodated by the mainstream banks to access loans and mortgages to its commitment to maintaining hundreds of jobs in our town and village centres. Towns such as Castleisland, Killorglin and Causeway were abandoned by court services and by mainstream banks, but continue to be serviced by credit unions. During lockdown, the only life in some town centres was in the queue outside the credit union.

I welcome the amendments to include the provision of mutual services and the provision whereby the Central Bank of Ireland would be obliged to seek and obtain consent of the Minister for Finance when prescribing minimum regulatory reserve requirements. The current ratio of 10% of the assets is much more than what is required for high street banks and credit unions in other countries. Capital requirements mean that the sector has had to compete with banks with one hand tied behind its back. The credit unions lost millions of euro to mainstream banks as a result of the capping of deposits.

Discrimination in favour of the main banks has to stop. Obliging the Central Bank of Ireland to have regard to the common bond of other credit unions must also be discussed on Committee Stage. I am happy to support our credit unions and support this Bill on Second Stage.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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I thank Deputy Harkin for this necessary work and for the opportunity to speak about the necessity of our credit unions. It is in the public domain how hamstrung the credit unions are at this stage. We need Government to step up to the mark. We have heard about the multiple reports that have been done. We all know what needs to be done. We all accept the situation we are in. We know that there needs to be an increase in the products and financial services that credit unions are able to provide. We need that so we can further facilitate the community; our major private and public housing issue; and so that necessary action can be taken on the environment and retrofitting.

I requested a meeting with Dundalk credit union in the past while. In fairness, it is probably due to how busy I am that we have not had the meeting at this stage. I had a worry at one stage, particularly when governance difficulty levels meant that many smaller credit unions were subsumed into the larger ones. My fear is that local knowledge will be lost. Local credit unions would say, “We need to help this person out, because this will be a difficult Christmas and if we do not do that they will go straight to the moneylenders." That is where Government inaction has been an abject failure. That needs to be addressed.

Deputy Pearse Doherty spoke earlier about the APR of up to 288%. This is wildly wrong. Since Provident Financial left the Irish market, the credit unions have said that more people have come to them. They generally try to facilitate them, using whatever flexibility they can. There are mad situations where the money moneylenders are getting is literally drug money. The drug money is put back on the street. People then find themselves in really difficult situations, possibly having to pay a drug debt of a family member. That money ends up adding to this pot. This is a completely ridiculous situation. In most cases I generally advise people not to pay this money, because that opens the tap. However, it is easy for me to say that to them because I am not in that situation. This is where our credit unions have stepped up to the mark. We need to ensure that they are given a model in which they can survive into the future. They are a necessity. This is not to say, however, that we do not need to deal with the wider issues in relation to the issues I brought up. The Minister of State and his Government have the power to change things. We need action as soon as possible.

Photo of Martin BrowneMartin Browne (Tipperary, Sinn Fein)
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I also commend Deputy Harkin on bringing this legislation to the House. In my constituency of Tipperary, there is great faith in our credit union system. That feeling is replicated in communities throughout the country. The regard with which our credit unions are held is quite distinct from that of banks. That is not just pure luck; it is because credit unions put people before profit. They are involved in communities in which the branches operate.

Credit unions do not answer to faceless shareholders. They answer to their members in the communities that have made them what they are. Credit unions also look to the needs of people when other financial institutions just consider the probability of having a customer. If somebody needs an emergency loan, the credit union is there for them. If somebody wants help with financing the refitting of their homes, most of the time, they go to the credit unions. It is not just households that do this. Small SMEs take up those kinds of loans as well and they have benefited from credit unions, as have our communities.

With an asset base of €19 billion, there is immense potential to enhance our communities and help them to prosper. This ranges from the potential of having a positive effect on the provision of social housing to arranging a way to empower localities.

One fundamental difference between our credit unions and the banks is the banks used the Covid-19 crisis as an excuse to close branches across the country. In Tipperary itself, Cashel, Cahir, and Templemore were the latest to see their branches of Bank of Ireland close to the detriment of their customers. We did not see the credit unions taking that cynical approach. Instead, they lived up to their community-centred spirit and remained accessible to the public.

Among the measures included in this Bill are provisions to allow the credit unions to provide a greater range of financial services in a more streamlined way. I look forward to seeing this being analysed further, as the Bill goes through the Houses. I will support this Bill and look forward to further examining its elements as it progresses.

Photo of Sorca ClarkeSorca Clarke (Longford-Westmeath, Sinn Fein)
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I too commend Deputy Harkin for her time and effort and bringing this before the House. Credit unions have for generations been a valuable asset to the constituency that I represent of Longford-Westmeath. That relationship has been built up over time, over trust, between businesses, families and community groups. That is reflected in the high regard in which credit unions are held. A core part of that relationship and the high value is simply the way the credit unions go about doing their work. In my constituency, where we are seeing consistent branch closures, that is going to become increasingly important.

To ensure that continues, regulation of credit unions by the Central Bank must be carried out in a way that is appropriate and protects that community-based ethos.

While I acknowledge the ongoing policy review being carried out by the Department, we need action and not words at this point. Many potential credit union customers live in a very different financial reality from even this time last year. We see that in the growth of unlicensed, unscrupulous and illegal moneylenders who prey on the financially vulnerable and suck them into an arrangement whereby a small debt also equals threats, intimidation and an element of control that causes profound suffering and anxiety.

If someone happens to have less access to credit or cash, he or she is essentially penalised for being poor, whether that means needing to pay car tax in quarterly payments or for a 20 litre drum of oil instead of a full tank. That results in significant additional costs for those who are in a position whereby they less able to bear them. It is grossly unfair. Credit unions have a very valuable and important role to play in situations like this, and that needs to be reflected in fit-for-purpose legislation to ensure growth can continue to meet the increasing demand.

10:57 am

Photo of Seán SherlockSeán Sherlock (Cork East, Labour)
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At this stage of the proceedings, where further down the speaking slots, it allows time to read a Minister of State's speech and parse the words. In supporting this Bill, in the same spirit as we have always done, we would continue to support any initiatives that come before the House in respect of highlighting the continuing important presence of credit unions in our towns and villages throughout the country.

In proposing an amendment to the Bill, the Minister of State states that it is deemed to be read a Second Time this day nine months to allow for the progression of the review of policy framework, which is at an advanced stage and for such progression to be taken into account in further scrutiny of this Bill. At face value, it would appear that he is seeking to engage with the proposer of the Bill and, pending the review, see where stands the Bill.

However, when I quote from his speech, I am a little bit disturbed by some of the words, which suggest that the contrary is the case. He started by stating, "The potential legislative amendments will be considered as part of the review". The key point is his statement is:

However, my engagements have highlighted that there is no firm consensus as to the desired legislative change which would assist in solving the financial challenges to the sector. I do not want to raise unrealistic expectations about the potential impact of any such change, if it were approved.

I am long enough around the House, including having served as a Minister of State, to recognise the coded language in that. That suggests that the Government has no intention whatsoever of promulgating this Bill. It may be that the only exercise if the Bill is to succeed is that the review has to be fast-tracked in a way that involves engagement with all of the stakeholders. Even if the pregnant pause, to use Deputy Connolly's expression, that has now replaced the guillotine is to be implemented as a tool, it is a coarse tool to use not to allow legislation to proceed to Committee Stage.

However, if the one thing that comes out of this is a fast-tracking of the review such that the stakeholders feel that they have been meaningfully engaged with, then that might not be such a bad thing. It is hard not to be cynical, however, because the Minister of State said, "I hope to update the House in the not too distant future of the Government's plan to support the credit union sector". There are too many ifs and buts. The language is nebulous.

We want concrete actions in respect of a sector that is vital to the functioning of this society. There are 3.6 million credit union members on the island of Ireland. There is €16.38 billion in savings and €19.28 billion in assets. I could go on. Credit unions have been consistently voted the best organisations for customer experience for the past seven years.

Credit union stakeholders are in and out of this House, through the committee structure, on a regular basis. What the Minister of State is hearing from all of us is a genuine plea to Government to engage with stakeholders in the credit union sector so that credit unions can lend productively within their communities. It is most patronising for him to come into the House and say:

I would encourage them to engage more with local community groups, voluntary and sporting organisations to increase their lending. Its in keeping with their ethos and social value to the community.

I am speechless at that remark.

The volunteers in credit unions know exactly what their ethos, mandate and mission are. They are doing this day in and day out. They are seeking to lend. However, now the very ethos that underpins the credit union movement is being hampered by regulatory overreach where, in certain circumstances, the Central Bank now controls whether the credit union can pay a dividend. This sticks in the craw of every reasonable and rational credit union member that ever was, myself included.

Dividend restrictions on credit unions by the Central Bank have, by stealth, undermined the ethical basis through which credit unions were created. There was a time when Fianna Fáil would have stood up to the Central Bank on issues like this. There was a time when Fianna Fáil would have pushed back against the Central Bank on this. The way to push back against the Central Bank on this now is to put in place a proper policy framework so that credit unions can realise their full potential throughout Ireland and within the very communities that we represent. I do not know what the modus operandi of the Central Bank is, but is high time that we reach a point where it and the Department of Finance pull back a little and consider the potential of the sector.

Given the stark reduction in the number of credit unions throughout the State, there is the danger of an existential threat to their very existence in some of the communities mentioned here today where banks have gone to ground. There is no oversight of the Central Bank by other central banks in respect of the regulation of credit unions.

I reiterate the point about dividend restrictions. There is no other country in western Europe where there has been transformational changes in governance in credit unions. Those involved are volunteers who have gone through a process and have done everything that has been asked of them in terms of governance and meeting requirements. It is time to give them a fair chance, take the foot off their necks and let them thrive.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank Deputy Harkin for bringing forward this Bill, which we are very happy to support. When the for-profit banking system drove this economy over a cliff, along with its developer friends, the Government moved heaven and earth to prop it up.

Emergency legislation was flowing like confetti. It involved late-night sittings, huge urgency and €60 billion to keep them going. As for how they thank us, Ulster Bank, although not a beneficiary of the bailout, it got bailed out elsewhere, is upping and leaving, and the other banks, the pillar banks, are shutting down branches left, right and centre. We have the highest interest rates in Europe. There is a general disregard for the public, for any social objectives and for any objective other than the bottom line as far as they are concerned, and yet we did everything to sustain them, as previously we had done everything essentially to facilitate their racing greed with the dire consequences that had.

In contrast, there is a lack of urgency in terms of supporting credit unions and their members. Credit unions have completely different, absolutely benign objectives to serve their members. They are not about profit and instead are about trying to achieve social and community goals. They are the model of what banking should look like, not for-profit banking. Of course, in my world, we would scale up the model of the credit union to a full-scale publicly and democratically run banking system and remove the for-profit banking system, which in my opinion has failed us. While I doubt the Minister of State would necessarily endorse that socialist aspiration for a fundamentally different type of banking model, the least the Government could do is show the sort of urgency it has shown for the for-profit banking system in terms of supporting the credit union movement.

It seems we have had this debate repeatedly for years. Year after year, they have their briefings and ask us to put forward these asks Deputy Harkin has put forward in the Bill to Government. It is always tea and sympathy and lip service but not much in terms of advancing the requests of the credit union movement, namely, understanding that credit unions are fundamentally different, that they have to be treated differently from the for-profit banking system, and that the failure to do so threatens their very viability; that they be allowed increase the level of services they make available to their members; and that we would have, as the Bill proposes, a credit union policy committee that would look after the interests of the credit union movement and ensure Central Bank regulations were not such that they would threaten the viability of credit unions but would fully understand the need to protect the ethos of the credit union movement.

As other Deputies have suggested, while I note the Irish League of Credit Unions welcomes the Minister of State's review and is glad that review is happening, moving from the review to advancing the requests the credit union movement is making needs to happen as a matter of urgency. It has been asking for a long time and the Minister should show the same urgency as was shown to the for-profit banking sector.

I heard the Minister of State, Deputy Fleming, say in terms of one of the asks in this Bill that it would be inappropriate for Ministers to set the reserve ratios for credit unions. As I understand it, the Bill is not saying the Minister should set them but rather the Central Bank would have to check in with the Minister in terms of the setting of those ratios, that there would be an opportunity for the credit union movement via the political system to question the imposition of certain regulations, in this case the regulations around ratios, on the credit union sector where the regulatory excess of the Central Bank in imposing on occasion more excessive regulations than it imposes on the rest of the banking sector is threatening and inappropriate for the credit union movement. That is what the movement is saying and the Minister of State's response is inadequate. It is not about saying politicians should set the minimum reserve requirements but that the Central Bank should check in with the political system and there should be an opportunity via the political system for the credit union movement to have its voice heard in these matters. Its voice has not been adequately heard and that is what it is asking for.

The importance of the credit union being a fundamentally different animal cannot be overstated. We need a particular type of regulation for the for-profit banking sector because it is out to make profits and, therefore, to put it bluntly, it cannot be trusted. The State needs to keep a close eye on it because its drive for profit leads it to do things which can drive, and have driven, us over a cliff and can have very damaging impacts on society, communities and economies. The difference with the credit unions is they do not have those objectives. That does not mean they do not need any regulation at all, but fundamentally they are about trying to contribute to the well-being of society. It is a fundamentally different thing they are trying to do and it is inappropriate to impose on them the same kind of regulatory regime as is imposed on the for-profit banking system, particularly where it is excessive and threatens credit unions' very viability and gives them less entitlements than the for-profit banking sector to provide services for their members.

I strongly appeal to the Minister of State to support and progress this Bill. If there are particular technical or specific issues in the Bill he wants to amend on the next Stage, nobody would object to having a serious debate about that. The credit union movement is a responsible movement. It is a socially and economically responsible movement. I am sure it is happy to engage with the Government but let us move the Bill on and ensure we protect and develop the sector and give it the support it deserves.

11:07 am

Photo of Holly CairnsHolly Cairns (Cork South West, Social Democrats)
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I thank Deputy Harkin for producing this Bill, and the Independent Group for facilitating its discussion.

This Bill recognises the value of credit unions as volunteer-led community financial co-operatives and enables them to provide a greater range of services to members. Credit unions offer an incredibly important service in communities. We have one of the highest percentages of population who are members of credit unions globally. Irish people deeply value and use their credit unions.

Unfortunately, the legal and regulatory framework has not reflected this. There is a pressing need for the type of reform outlined in this Bill. Not only should all Deputies support it but the Government should facilitate its passing as soon as possible.

Credit unions provide local services and help whole cohorts who would otherwise be financially excluded. I was only able to do a masters due to the support of the Skibbereen credit union. There are many more individuals and families who are dependent on the financial facilities offered. Credit unions also help migrants and vulnerable groups enter financial systems.

Credit unions are also more accessible, with branches in towns and villages. At a time when commercial banks are leaving the Irish market and the remaining banks are closing rural branches, credit unions have never been so important. Of significance for many people is that they will be guaranteed to meet a staff member and not be directed to a machine. All of this is possible because credit unions are part of a volunteer-led movement with principles of inclusion, shared benefits, and service to members and the community.

Unfortunately, current financial regulations fail to appreciate credit unions' function as co-operatives and the importance of the common bond. Instead, they have excessive limits on their services and potential.

Credit unions are actively increasing their provision of finance in the areas of SME business lending and mortgages. Many are ready to provide much-needed services to local enterprises and family businesses to help address our housing crisis. In doing so, they would increase their viability and benefit their members. It is a win-win situation.

However, they are restricted by the concentration limits in the 2019 regulatory requirements which put artificial and anti-business controls in place on how much credit unions can lend for these purposes.

These artificial limits need to be removed. Then the credit unions can be overseen by supervisory and reporting tools rather than legislative barriers.

Moreover, Irish credit unions are subject to harsh capital requirements considering the profile of their balance sheets, international credit union frameworks, and the rules for competing financial institutions. This regime was brought in during the financial crash and has never been properly justified. The Credit Union CEO Forum and ILCU both have extensive reports highlighting this problem and suggesting more appropriate systems that reflect international best practice.

I recognise the Minister of State, Deputy Fleming’s work and commitment to reform of the framework surrounding this sector. I encourage him to help resolve the specific topics I have raised in the meantime. The Credit Union (Amendment) Bill provides structures to deal with issues like these by not only resolving them but also creating an architecture to respond to matters as they arise rather than having to wait years for them to be addressed. It is exactly the type of process this sector should have, reflecting credit unions' role in Irish society and helping them to thrive. The establishment of a credit union policy committee would provide a vital connector between credit unions and the Central Bank by reviewing and advising on the impact of policy.

Complementing this are the provisions which allow for the return of that link between the Minister for Finance and credit unions. Currently, there is a disconnect between the Department of Finance, which has responsibility for credit union policy, and the Central Bank which is responsible for regulation but which has no remit to appreciate the credit unions' volunteer-led, democratic organisation. In his response earlier, the Minister of State attempted to represent Deputy Harkin’s Bill as facilitating political interference in financial regulation. I think he knows that is not what the Bill is about and he heard Deputy Harkin make that exact distinction. She is asking for an official ministerial role in the process to create checks and balances, not interference.

11:17 am

Photo of Marian HarkinMarian Harkin (Sligo-Leitrim, Independent)
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Yes. I thank the Deputy.

Photo of Holly CairnsHolly Cairns (Cork South West, Social Democrats)
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The Bill helps address this with the requirement the Central Bank obtains the consent of the Minister for Finance when prescribing the minimum regulatory reserve requirement for credit unions.

Also, the importance of the section that values the common bond is essential. The common bond is the priceless solidarity that drives credit unions' philosophy, ensures it is focused on the needs of members and helps protect its community. Crucially, the Bill proposes the Central Bank would regulate credit unions in an appropriate way that recognises them as volunteer-led organisations and community banking providers. They must be subjected to very clear and robust regulation. Nobody disputes that. It is something the sector seeks. However, credit unions cannot be treated the same way as commercial banks. This point cannot be overemphasised.

One of the most significant threats to the viability of credit unions is the regulatory regime. There seems to be an inequity between the treatment of the big players, namely, banks, vulture funds, and insurance companies, and the measures credit unions as local organisations are subject to. At a time when commercial banks are closing branches and withdrawing from the market altogether for profit reasons, credit unions are being restricted by limits on business and mortgage lending, a harsh capital regime, and liquidity requirements on longer term lending. While these particular matters must be resolved, there is a pressing need for larger reforms that enable and direct the Central Bank to regulate credit unions as financial co-operatives, not commercial banks. This Bill provides excellent structures developed with the sector that will provide long-term solutions and help ensure the viability of credit unions. If Deputies value credit unions, they must support this Bill.

I must express my frustration at the Government’s response with another motion to delay a Bill from a member of the Opposition. We had the same two weeks ago with the Autism Spectrum Disorder Bill being pushed back by a year. Previously the Government had countermotions to the Opposition, but when that became too unpalatable, it just let motions pass and did not act on them. The latest tactic seems to be to delay Opposition legislation. It will take months for this Bill to progress through the different Stages without Government interference. Why can it not happen concurrently with the development of a new framework? This Bill provides many of the solutions credit unions need today. Any delay is wilfully putting more credit unions at risk. I simply cannot understand why the Minister of State, who claims to want to support credit unions, would want to delay legislation designed specifically to assist them. This Bill will enable a better, more appropriate architecture to oversee credit unions which acknowledges their vital and unique role while also facilitating them to provide SME and mortgage lending. I urge the Minister of State to withdraw his motion and for all Deputies to support credit unions.

Photo of Seán CanneySeán Canney (Galway East, Independent)
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I compliment Deputy Harkin on bringing forward this very timely Bill. I am very disappointed at the Minister of State's reply. To defer this for nine months is not the way to do this business. During the week - I think it was last Monday - we were at the launch of the Greenify home improvement loan product by some credit unions. The Minister of State was there and spoke. It was very positive. That is a case in point of credit unions coming together to provide packages of schemes for their members across the communities.

This Bill is setting out how credit unions can be of more benefit to their members and communities. It is something very simple. The credit union movement is there. It has the potential to create economic activity and drive our domestic economy forward, but for some reason we are holding back, looking at reports, doing committee reviews and it is going on and on. There is frustration among communities. There is frustration, first, because the main pillar banks, as we call them, are withdrawing services from our towns and villages throughout the country. At the same time we have talk about the rejuvenation of these towns and villages.

If I take my own constituency alone, the credit union movement serves many communities including Athenry, Menlough, Kinvara and Portumna. St. Jarlath's Credit Union in Tuam has branches in Headford, Dunmore, Abbeyknockmoy, Mountbellew, Turloughmore and Corrandulla. There is Naomh Breandan Credit Union in Loughrea and we have a credit union in Gort. That shows how embedded credit unions are within our communities. We need to tap the full potential of credit unions to provide the funding required by people who want to do retrofitting of their homes, for example, which we are all talking about as going to save the world in terms of climate action. They are providing this type of facility through the Greenify project which St. Jarlath's Credit Union is involved with.

These are the credit unions' efforts to try to become more relevant in their communities. They are local, they are embedded and they have, as I said, the potential to develop our communities. What is lacking is due to there being too many constraints on them to do anything beyond lending small money to local people. We have not looked at what they could do with mortgages and all the other loans for retrofitting houses.

One can look at the credit union movement and all it has done to support students. Deputy Cairns said she would not have been able to go to college without credit union support. I tell the Minister of State this is an opportunity that is staring us in the face. We have been talking about community banking and how we can get it going to replace the pillar banks. The fact is we have community banking but the credit unions do not have all the tools necessary to deliver all the services their members require. It is important we always bear in mind this is not profit making. We are not trying to make the credit union another bank which is profit making. They are still owned by the members, for the members. It is important we encourage every credit union in the country to work to its full potential. I plead with the Minister of State to withdraw his amendment.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Aontú)
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Gabhaim buíochas freisin leis an Teachta Harkin mar gheall ar an mBille seo. Tá sé go hiontach go bhfuilimid in ann an t-ábhar seo a phlé anseo inniu.

The Irish banking system is in crisis. It is a crisis different from the one that existed more than ten years ago but it is a crisis nonetheless. We have a banking market which has been radically shrunk. The crash itself shrank the number of groups operating in the banking market and then Fine Gael came along and created this two-pillar banking system which was in effect an oligopoly and had another consolidating element within it in the banking system. As a result, we have see another two banks leave the banking system in the past couple of years. That has left a small number of players with an enormous amount of supplier power.

The banks that are left in the Irish market can do what they want. There is no limit to their power. The manner in which they use that power is seen in interest rates, the types of loan and so on that people can have, and the types of charges they apply to various accounts. They even determine where they operate. They are forcing people online en masseand are closing their banks in regional towns. They can do this because they have massive supplier power. If there was more competition within the sector, it would put manners on them and they would have to behave in a way that was more supportive of their customers.

I have spoken about the banking crisis but I have heard very little back, if anything. For example, I know of no Government solution to what is happening in the banking system. We in Aontú tabled a motion at the Committee on Finance, Public Expenditure and Reform, and Taoiseach seeking for a banking forum to be put in place shortly. That forum would discuss all of these issues, including credit unions and stakeholder public banking. Thankfully, the committee passed Aontú's motion, as did five or six other committees. I made a request of the finance spokespersons of all the political parties. Thankfully, the spokespersons for the Green Party and the Labour Party joined in the effort to get a banking forum set up to discuss the future of banking in Ireland. The credit union must be an integral part of that future.

It is incredible that credit unions have €13.4 billion in savings and their loans amount to €4.5 billion. They have significant wealth that can be tapped into for developing much-needed aspects of our society, for example, housing. Every time credit unions are discussed in this Chamber, everyone treats them like motherhood and apple pie. Everyone supports them and no one has a bad thing to say about them. However, there is never any action taken to develop their role in our society. I met the credit union regulator a couple of years ago where it was admitted to me that the establishment did not trust the credit unions' ability to manage a further banking role. Were I in government, instead of sidelining credit unions, I would look at ways of supporting and strengthening their management ability. This is a strong, well-organised and community-oriented organisation with billions of euro of assets at its disposal at a time when there is a major housing crisis and many other needs, so it is heartbreaking to see there is significant resistance, especially from Fine Gael, to giving a stronger role to credit unions and also to public banking. Unfortunately, I do not believe Fianna Fáil and the Green Party will have an effect on that Fine Gael policy.

11:27 am

Photo of Kathleen FunchionKathleen Funchion (Carlow-Kilkenny, Sinn Fein)
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Deputy Michael Healy-Rae is sharing time with three other speakers.

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry, Independent)
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I thank Deputy Harkin and her group for laying this important business before the Houses of the Oireachtas. This Bill would allow a credit union to provide a greater range of financial services to its members. I thank the members of the Irish League of Credit Unions, ILCU, operating in County Kerry, be they in Killarney, Cahersiveen, Killorglin or north Kerry. The other day, I had the pleasure of spending an hour in a credit union in Ballyduff that was having an open day. If implemented, the Bill would allow a credit union to offer a regulated financial service to its members without the Central Bank having to be the sole approver of this enhanced service.

I will give an example of how credible and good an institution our credit unions are. During the financial crisis when the banks and many other lending institutions let us down, two organisations stuck out for me as being good, sound and solid financial institutions, namely, An Post and our credit unions. They were sound people delivering a sound and solid service.

I thank the credit unions on behalf of many of the people I direct to them when I am sending them to the North to have procedures undertaken. Credit unions very kindly lend them money, charging them only a small amount of interest on loans that might give them their sight back or allow them to have an ear or hip operation carried out. That is an important service to those families and individuals and I humbly thank the credit unions for providing it.

The Bill seeks to provide for the establishment of a credit union policy committee. The purpose of that committee would be to review the impact of Central Bank policy on credit unions. I thank the Bill's movers. It should be supported by the Government.

Photo of Danny Healy-RaeDanny Healy-Rae (Kerry, Independent)
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I too am glad for the opportunity provided by Deputy Harkin and the Independent Group. Their Bill is important and has to be given recognition and attention. The current set-up is outdated. The Bill would allow credit unions to provide a greater range of financial services to their members. Credit unions are vital for people who live on the margins and on a shoestring, where every penny counts. When something happens along the lines of people having to go to the North to get cataracts, hips or knees dealt with, we are glad of the help credit unions give them. Otherwise, they could lose their sight or continue being in pain for years while waiting to have a hip or knee done.

Under the regulations, credit unions have to set aside €100 out of every €1,000 to maintain their capital reserves. On average, their reserves are actually at 17%. That is unfair. Credit unions cannot accept new accounts of more than €10,000. Given that the value of money has depreciated, this needs to be rectified.

Banks are pulling out of local communities, for example, Ulster Bank. We need there to be competition. The Government has to do something to bring credit unions up to date. The Central Bank is wielding too much power and is too close to the mainstream banks. We need the credit unions to survive and grow.

Photo of Richard O'DonoghueRichard O'Donoghue (Limerick County, Independent)
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I thank Deputy Harkin and the Independent Group for introducing this Bill. The credit unions are professionally managed by qualified staff. I am a credit union member and was a director of a credit union, which was a voluntary position. I could see at first hand the work being done within credit unions for the communities surrounding them. In the past, we were very much dwarfed by the giants in the sector - AIB, Bank of Ireland, KBC and Ulster Bank - but the credit unions are the only ones standing by the people now. Our banks have pulled out. As of last week, AIB in Rathkeale will no longer conduct cash transactions or accept cheque lodgements. It will not even install a machine for people in the community to use. AIB will only stay in Rathkeale for mortgages.

It is time the banks were held to account and we gave credit unions a chance. Credit unions were the only institutions during the pandemic that extended people's loans. The banking sector would not do so. They only gave six months' grace, and people would still have to pay off their loans within the original terms. Credit unions stand by their communities. They stand by me and all my family. It is time the Government stood up for them and did not delay this Bill by nine months, kicking the issue down the road again. Government Members make speeches about how great the credit unions are, but now is the time for them to man up, do their job and stand by the communities that elected them to this House to represent them and not just the banks.

Photo of Michael CollinsMichael Collins (Cork South West, Independent)
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I thank Deputy Harkin for introducing this Bill, but it looks like the Government will kick the can down the road again. The Minister of State spoke in the Dáil several times about his support for credit unions, but what the Government is doing shows no support for them. I met representatives of the credit unions in Skibbereen, Bantry, Clonakilty and Bandon in west Cork. They are fighting for their survival, but they will not survive. The Government will squeeze them out of existence. It is almost as if the Government wishes they were dead. It is time to wake up.

They want to compete and to give mortgages to people. Two weeks ago, a young man from Clonakilty came to my office. This young man is trying to get off the ground, but he cannot get a loan from the local banks or mortgage lenders, other than for €150,000. You could not buy a henhouse in Clonakilty for €150,000. This young man wants to get a decent mortgage. He has a decent job. The local credit union would sit down with him, I can guarantee that, because his family is known to that credit union and they know his background and that he will pay back what he borrows. Credit unions cannot compete. They cannot give the money to this gentleman. Successive Governments have stifled the credit unions and tried to put them out of business. It will not allow them to compete. Who is it allowing to compete? It is the Bank of Ireland, which closed its branches in Dunmanway and Bantry last week. The credit unions are still operating in those areas, as they are in Schull, Innishannon, Castletownbere and Dunmanway. They are the only institutions we can rely on. Deputies Michael Healy-Rae and Danny Healy-Rae spoke about providing bridging loans for people to get cataract, knee and hip operations. The only place I can point people to is the credit unions because they are the only places where people can meet in person and speak with somebody and, because they are known, they are likely to get their loans and they will repay them.

I ask the Government to give a genuine reason for stifling the credit unions out of business. Like previous Governments, that is what this Government is doing. Who is wagging the Government's tail? The Government needs to be honest about that. It needs to stand up and admit that it is not going to co-operate with the credit unions. That is the road it is taking in terms of the credit unions. It is trying to put them out of business and that is the road they are going. It is up to the Minister of State, Deputy Ossian Smyth, to change that.

11:37 am

Photo of Ossian SmythOssian Smyth (Dún Laoghaire, Green Party)
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On behalf of the Government, I thank all Deputies for an engaging discussion on the issue of strengthening the credit union sector.

It is clear that there is agreement on the importance of the credit union sector and the vital role it plays in providing much-needed funding to local communities. The role is even more important given the impending withdrawal of Ulster Bank and KBC Ireland and the closure of many bank branches. The goal of the Government is to help and support the credit union sector in continuing to become a strong and resilient movement in Ireland. For that reason, we will soon be issuing proposals on foot of the completion of the programme for Government review.

The Government has proven that it will act to support the sector. Priority legislation was introduced in late 2020 to allow credit unions to hold virtual general meetings. Legislation is also being progressed to bring the providers of personal contract plans, PCPs, hire-purchase and consumer hire agreements within the regulatory remit of the Central Bank. This legislation is supported by the credit union movement. Nineteen credit unions have been approved to provide loans to SMEs under State-sponsored schemes managed by the Strategic Banking Corporation of Ireland, up from zero at the start of the year. Many credit unions have developed retrofit lending products to dovetail with State supports for retrofit managed by the Sustainable Energy Authority of Ireland. I am delighted that credit unions are playing a key role in what is one of the most important capital investments in the history of the State and much needed and wanted by the public as well.

Levies which fall to be decided by the Minister for Finance have dropped from €12 million in 2019 to €5.3 million in 2021, a fall of 56%. While the Government recognises the positive intent of Deputy Harkin's Bill, it is also aware that the Bill does not provide solutions to key challenges facing the sector, such as growing lending, reducing fragmentation or developing collaborative projects. The Deputy's Bill seeks to change fundamentally the role of the Central Bank as regulator in a variety of ways, including by assigning the Minister for Finance a role in setting minimum capital requirements for the credit union sector. This strays far from international best practice. The reasons for Central Bank independence are tried and tested. It must be allowed to carry out its duties as regulator in a free and independent manner, without political or sectoral interference.

The Bill also seeks to assign to the Minister for Finance a role in setting a strategic plan for the sector, with the Central Bank reporting annually to the Minister on this plan. The Government is of the view that it is not appropriate for the Minister for Finance to set out a strategic plan for the development of the sector. This is a matter for the sector, its directors and, ultimately, for its members who own the credit unions.

The Government amendment to have the Bill read a Second Time in nine months is the appropriate course of action. We should not lose sight of the commitment made in the programme for Government to carry out a review of the policy framework of credit unions. The Government's review considers and encompasses well over 100 proposals from a large sample of stakeholders, including representative bodies, recommendations from two detailed reports produced by the CUAC and feedback from extensive stakeholder engagement which has been carried out as part of the review. It is important that time be given to review and consider the proposals emanating from the programme for Government review. I can confirm today that the review will be completed within the coming weeks. The consultation has involved meeting representative bodies and other stakeholders and potential legislative amendments are being considered as part of the review. However, the Government does not wish to raise unrealistic expectations regarding the impact of potential legislative amendments. Neither legislative amendments to the policy framework nor Deputy Harkin's Bill, debated here today, will solve the financial and business model challenges facing credit unions today. The Government, therefore, is not supporting the moving of this Bill. Instead, we seek that the matter be considered by the House in nine months after important work has been done on the programme for Government review of the policy framework.

Photo of Thomas PringleThomas Pringle (Donegal, Independent)
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I have long been highlighting the importance of community banking and I have previously called for the Government to expand the remit and the authority of our credit unions. I take this opportunity to welcome the Credit Union (Amendment) Bill introduced by my colleague, Deputy Harkin. I thank Deputy Harkin for bringing forward this very important Bill. I would like to comment on something the Minister of State stated. I do not think there is any danger of the Government raising expectations within the credit union sector. There is no worry in that regard.

It is vital that credit unions have the support needed to provide proper community banking services and to offer a sufficient alternative to mainstream banks. Following on from what happened in 2007, people in this country, understandably, have no faith and no trust in the banks who are so far removed from our local communities and from the communities' wants and needs. We need to ensure there is an alternative banking service that people can trust. People trust our credit unions. Fine Gael, and in particular the former Minister for Finance, Michael Noonan, did all they could to limit credit unions and to drive people to the banks, but the value of community banking cannot be overstated and Irish people know this.

Credit unions need to be pulled into the modern era. The unnecessary bureaucracy and restrictions they face need to be addressed. I met recently with The Rosses Credit Union in Dungloe, where the limitations these restrictions have on them were explained to me. We need to allow credit unions the ability to provide more modern financial services to suit modern-day needs. I believe the Bill takes the necessary steps to ensure this. I support this legislation to amend certain provisions of the Credit Union Act 1997 and its intention to allow credit unions greater flexibility to offer a wider range of services without needing specific Central Bank approval on each occasion. I also support the establishment of a credit union committee, which would be set up to review the impact of Central Bank policy on credit unions and to provide feedback to the Central Bank on its policy development process. One would imagine this would be already part of the system but it is not. It is important that credit unions have the ability to provide feedback and have some say in how they operate.

I support the requirement of the Central Bank that consent be sought from the Minister when prescribing the minimum regulatory reserve requirement for credit unions and the requirement that the Central Bank administers the system of regulation and supervision of credit unions in an appropriate manner. In short, we need to take away the absolute power of the Central Bank to dictate how credit unions are run. Independently run credit unions, which make their own decisions at local level, tailored specifically to suit the best interests of their members, are far more equipped in knowing and dealing with the needs of their communities than the bankers in the Central Bank in Dublin. These bankers are completely out of touch with local people and they have no real care, want or interest in ensuring that the community grows and succeeds.

Credit unions in my constituency of Donegal are invaluable. Constituents rely on community banking to access loans that mainstream banks would not even dream of considering for them. Many of the businesses in my community exist due to the funding provided by our local credit union, the sole interest of which is not to make profits for the stock markets or shareholders, but to see the community thrive. As a member of the credit union and as a member of the community, I have seen the incredible impact that a not-for-profit, member-owned financial institution with a community-based and volunteer ethos has had in my town of Killybegs and indeed in many towns across Donegal. These institutions are more important than ever now with the recent closure of so many banks across the county. It has been announced in the last few months that five Bank of Ireland branches in Bunbeg, Bundoran, Dungloe, Glenties and Moville are to close. This is a huge blow to my constituents, especially in south-west Donegal, who have been let down time and again. The withdrawal of Ulster Bank and the wind-down of its services over the next year will see the removal of all of its services as well.

We need our credit unions here now more than ever. We need to ensure they have the ability to provide the same financial services to constituents as banks without the restrictions they currently face.

If the Government is serious about actually wanting to revitalise our communities then I strongly believe that credit unions are an effective way to do this. Credit unions want to evolve and they want to change to suit modern-day banking, but for them to do that we need to address the regulatory roadblocks we put in their path. I believe that this Bill is a step in the right direction in doing that. It is about time that we recognised our credit unions as the invaluable institutions they are, and as institutions that serve the people and not the markets. That should be at the forefront of the Government's thinking at all times, because serving the people and not the markets is certainly not what is happening.

11:47 am

Photo of Marian HarkinMarian Harkin (Sligo-Leitrim, Independent)
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I have listened to my colleagues. There is huge support for credit unions but what matters is that we translate that soft support into legislation and a framework that gives essential support for credit unions. We have heard many fine words here today and that is fine, but credit unions have been existing on fine words for far too long. That is why I proposed this Bill. It is not a final word on what is needed; rather, it is an opportunity for this House to put in place proportionate legislation to support the credit union movement. Like my colleague, Deputy Connolly, I must declare an interest. I too relied on the credit unions for a loan to support a number of my elections. That is an important point to make. Lots of people think that only certain people rely on credit unions but across society, we do.

I also want to recognise the contribution of my colleague Deputy Fitzmaurice who outlined the disappearance or downgrading of the banks in so many local towns. In more recent times, towns in my own constituency such as Ballymote and Tubbercurry in County Sligo and Manorhamilton and Drumshanbo in County Leitrim have been affected by this problem. That strengthens the need for appropriate and proportionate legislation for credit unions in order that they can continue to serve their communities, which is important. My colleague Deputy McNamara spoke of the high level of bureaucracy on little people as distinct from large institutions. If there is one thing I have learned from my reasonably long time in politics, it is that the individual always pays the price while institutions, especially large profit-driven financial institutions, are supported and protected by our legislation.

My colleague Deputy Pringle spoke of the need to take away the absolute power of the Central Bank. Many colleagues articulated their support for the specifics of my proposal or for its intent. That satisfies me because I do not have all the answers to hand. I am sure of one thing, however. The current high level of bureaucracy, without a proper and proportionate response to the financial needs of communities, is no longer acceptable.

Many other colleagues made really important contributions. I do not have time to go through them all. My constituency colleague Deputy Martin Kenny spoke of the overreach of the Central Bank regarding credit unions. Deputy Sherlock spoke of the need for the Central Bank to take its foot off the necks of credit unions and let them thrive. Deputy Boyd Barrett reminded us of the absence of social objectives in our reaction to the banking crisis and reminded us that the objective of the credit unions is to serve the community. They are the model of how financial institutions should operate. Colleagues from the Social Democrats wanted checks and balances, rather than interference in legislation concerning regulations. Deputy Canney spoke of the huge concern about the withdrawal of banking services in local communities. That was echoed by Deputy Tóibín, who noted that everyone speaks of credit unions in terms of motherhood and apple pie but no proper legislative support for the movement is put in place. I also thank the Rural Independent Group. Its Deputies spoke the truth when they said that credit unions were the only ones to extend loans to the community when we needed their support during the global financial crisis.

I listened closely to what the two Ministers of State said. I listened with real expectation and hope. I was prepared to wait the nine months to let this Bill move to Second Stage and that will happen because the Government has a majority. I have no problem with that. That is the system in which we work. I would have been happy to support the Government amendment had there not been so many caveats and get-out clauses to ensure the status quo remains. If I had heard a neutral ministerial response, I would not object to the Government amendment but the Minister of State said that my Bill does not supply all the solutions to key challenges. That is absolutely true but I have not heard his solutions. I am shocked by his statement that I support political interference. I do not. I never have. I am sickened by that suggestion. It is not worthy of the Minister of State and it is not worthy of the Government. My record of supporting credit unions in the European Parliament and in this Chamber will bear that out. I commend the Bill to the House.

Amendment put.

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Ceann Comhairle; Kildare South, Ceann Comhairle)
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In accordance with Standing Order 80(2), the division is postponed until the weekly division time this evening.

Sitting suspended at 11.57 a.m. and resumed at 12 noon.