Wednesday, 11 December 2013
Credit Reporting Bill 2012: Second Stage
I welcome the Minister to the House.
The Bill’s purpose is to promote more responsible borrowing and lending practices among borrowers and lending institutions. Much has been lamented about our Celtic tiger years and how too many people are now paying the cost of reckless lending by our financial institutions to industry and the consumer back then. Banks lent moneys to developers whose ability to pay was based on the continuing rise, or at least continued stability, of the property market. Banks also lent moneys to people across the board who wanted to get on the property ladder, as they were advised to do so at the time. Some on low incomes overestimated their earnings to secure loans. We know of older parents re-mortgaging their own homes to help their children get on the property ladder. There appeared to be no checks and balances to protect the institutions from being overexposed or to protect the consumer from borrowing beyond his or her ability to repay. Financial institutions and consumers were exposed, accordingly, to significant risks if things went wrong in one sector of our economy. The consumer who borrowed to purchase a home was overexposed to large debt if the property market crashed, which it did. Did we hear the alarm bells? Some did, but others did not want to acknowledge them.
This Bill will help prevent a return to the past. It creates a statutory centralised register of credit applications. The information on it will help the Central Bank form a picture of borrower indebtedness and how much financial institutions are lending. In essence, the checks and balances that should have been in place in the past to prevent the overexposure of lending institutions and the consumer will now be put in place. This has to be welcomed.
The Government has been active in supporting the small business sector and recognises its vital importance to the economy and its role in the economy’s recovery. This legislation will extend the role of the Data Protection Commissioner to deal with complaints from microenterprises and small and medium-sized enterprises, SMEs, with a turnover of less than €3 million with respect to their data held on the credit register. This initiative may provide some comfort to enterprises that have concerns about the potential storing of inaccurate data but may not have the resources to take legal action to have it corrected. Inaccurate data on the central credit register could result in the refusal of credit to a small company. Such a refusal could do irreparable harm to a small business, resulting in the loss of its good name and jobs.
The database of credit information will be owned by the Central Bank. How will this information be stored and managed? I note the Central Bank could outsource the operation and maintenance of this register to a third party. Given the sensitive nature of this information for both businesses and consumers, can the consumer be guaranteed that his or her information will be safeguarded in a central location, using the best available software to prevent data breaches? In the interests of all consumers, it is important that such information is not transported on laptops but stored centrally.
Credit providers will be required to make mandatory credit checks with the register for all credit applications above a threshold of €2,000. This should help prevent both businesses and consumers from borrowing too much money, ending up with debts they cannot afford to repay.
None of us wants to go back to the past system of reckless lending, therefore I welcome this Bill to the House.