Wednesday, 28 January 2015
I, too, welcome the Minister of State and thank him for coming.
I have proposed this matter because of the concerns brought to my attention. At this time of year, after Christmas, people examine their finances and the charges and fees they pay. I conducted some research and there is a wide variance in the charges of the main banks. There is nothing wrong with this. The banks provide products and services and seek to attract customers based on their model of service provision. However, there is something wrong when people are not notified adequately of the charges being foisted on them and there is no justification for some of the charges. This has been a subject of discussion in the Lower House. Questions were asked about it recently and I do not know whether it was the Minister of State or the Minister for Finance, Deputy Michael Noonan, who answered them.
The Minister of State will be aware that the issue is governed by section 149 of the Consumer Credit Act 1995 which requires that “Each credit institution shall, within three months, notify the director of all charges imposed by it in relation to the provision of any service to a customer or to a group of customers”. When the process has occurred, under subsection (5)(a), the director may require a credit institution “to refrain from imposing or changing a charge in relation to the provision of a service to a customer or to a group of customers, without the prior approval of the director”.
Despite the responses given in the Lower House to Deputy Michael McGrath on a specific issue regarding AIB's 25% increase in the cost of iBusiness Banking in 2014, it is clear that there is a provision to prevent such charges, if the director in the Central Bank decides the charges are too high and too much of an imposition on businesses. We are not using the legislation. There was a review and new legislation, the Central Bank (Supervision and Enforcement) Act 2013, was passed. However, the Act did not introduce changes to the section I have detailed. In a reply to a parliamentary question in the past couple of days the Minister said, "low customer mobility may mean that banks can increase prices without fearing loss of customers." This seems to be the nub of the issue.
I have a list of the various charges of the main banks. They charge a variety of fees for the provision of a duplicate statement, from zero to €2.50, €3.80 and €3.81, while one bank charges €5 per page. In anyone’s language, this is an inordinate charge. Retail customers cannot view account statements more than three months old. Instead, they must contact the bank and incur charges. While we say we are keeping an eye on this issue and that there is provision to prevent such charges, the proof of the pudding is in the eating. Given that whenever one makes a transaction on one's account one pays for it, the reason for maintenance charges on accounts is beyond me.
It is beyond me as to why it is necessary to charge to maintain an account.
Two institutions offer free banking.
I will finish up now. There is free banking in two institutions - in AIB where the account holder must have a continuous balance of €2,500 or more; and in Permanent TSB where the account holder must lodge at least €1,500 every month.
I thank the Senator for raising this important issue. He is right in saying it is timely given that at this time of year people tend to review their finances and look at ways of reducing costs and saving money.
I will address the issue of advertising and provision of information first. The Central Bank's consumer protection code of 2012 provides that a regulated entity must provide the consumer, on paper or on another durable medium, with a breakdown of all charges, including third-party charges, which will be passed on to the consumer. In addition, the code states:
A regulated entity must display in its public offices, in a manner that is easily accessible to consumers, a schedule of fees and charges imposed by that regulated entity. If the regulated entity has a website, its schedule of fees and charges must also be made publicly available through placing this schedule on its website.The section of the code which deals with advertising provides that "A regulated entity must ensure that... key information, in relation to the advertised product or service, is prominent and is not obscured or disguised in any way by the content, design or format of the advertisement". Key information means any information that is likely to influence a consumer's actions with regard to a product or service.
I will now turn to the controls imposed by the Central Bank on bank charges. The Senator raised section 149 of the Consumer Credit Act 1995. That section requires that credit institutions, prescribed credit institutions and bureaux de change must make a submission to the Central Bank if they wish to introduce any new customer charges or increase any existing customer charges in respect of certain services. Section 149 does not cover interest rates; it applies to fees and commissions only.
As part of the conditions under which the Irish banks received state aid, Ireland made various sectoral commitments to the European Commission in order to promote competition in the Irish banking sector. Among these commitments, section 1.1(b) of the approved state aid for Bank of Ireland states: "Legislation will be enacted that will provide that Section 149 of the Consumer Credit Act, 1995 regarding price regulation and fees will not be applied to new entrants in their first 3 years of commencing business in Ireland". This three-year exemption from section 149 has been given effect in the Central Bank (Supervision and Enforcement) Act 2013 and applies to new market entrants from 1 August 2013.
Section 149 requires the Central Bank to take account of the following in assessing an application for an increase in fees or for new charges:
(a) the promotion of fair competition between—The Department of Finance undertook a review of the regulation of bank charges in Ireland which was published early last year and is available on the Department's website at www.finance.gov.ie. The review concluded that it would not be appropriate to repeal section 149 at that point in time. The lack of competition in the banking sector means that the removal of section 149 would give unfettered price-setting power to the incumbent banks.(b) the statement of commercial justification referred to insubsection (3)(b),(i) credit institutions, and
(ii) credit institutions carrying on a particular type of banking or financial business,
(c) a credit institution passing any costs on to its customers or a group of its customers in proposing to impose or change any charge, in relation to the provision of a service to a customer or a group of its customers, and
(d) the effect on customers or a group of customers of any proposal to impose or change any charge in relation to the provision of such service.
The Competition and Consumer Protection Commission has a website, consumerhelp.ie, which has a section that compares various financial products including current accounts. It lists the various charges imposed by the various financial institutions for different types of transactions including Internet transactions.
The institutions have varying models for charges and have different regimes and conditions under which they are willing to grant banking free of transaction charges. Individuals' use of their bank account will be specific to each individual and I would strongly encourage people to look at this comparison site with their specific circumstances in mind in order to decide which institution offers the best product for their pattern of account usage.
At EU level, the payment accounts directive introduces rules on the transparency and comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features. The payment accounts directive was agreed in August 2014 and will be transposed by the Department of Finance.
I hope my putting this information on the record of the House is of use to consumers in the area of bank charges, and in ensuring transparency and fairness.
I thank the Minister of State for his reply. I remember Senator Quinn once informing us that he had got notification for an annual subscription for a business magazine. He discovered that new customers got it for free, so he terminated his account and his wife became the new customer. It is similar here. A new customer gets it free for three years but an existing customer must pay. Would the Minister of State not agree that is a bit unfair?
With regard to the availability of information online, which I will bring to the attention of the people who told me, some of us still live in traditional ways. People have informed me that when they go into their bank they cannot get to talk to anybody at a counter - there is nobody there to talk to. They are sent to machines that do not answer questions. While younger people like the Minister of State might be very proficient at using Internet banking, older people rely on face-to-face communication, which is fading out very quickly. I thank the Minister of State for his response, which I will study further.
I thank the Senator for raising this important issue. It is also important to acknowledge that the Government is in the business of getting out of banking ownership. We are in the business of returning banks to the private sector over a sustained period of time and getting back as much money as we possibly can, much of which was pumped into the banks by the last Government and some by this one. We now have a plan to recoup every single cent that the Fine Gael-Labour Government has put into AIB, Bank of Ireland and Permanent TSB.
As we move out of bank ownership and having stakes in banks, it is important to have robust controls in place. That is why the Department carried out a review last year to ensure the charges were monitored and will continue to be. I take the Senator's point that not everybody uses the Internet. That is an ever-more important point as banking technology advances. However, under the 2012 consumer protection code the fee information must be displayed in the bank branch and the Senator should relay that to his constituents.
I take his point on the three years. However, to counter it, I make the point that it was a condition of state aid by the European institutions and also to try to encourage competition. We all appreciate that the more competition in the market, the better ultimately it is for all of us, as consumers. The Senator has raised a very important issue. It needs to be monitored closely and I can ensure him that I will do so as will the Department of Finance.