Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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62. To ask the Minister for Finance his views on the banks' charging of a €10 penalty when there is insufficient funds available in a current account to complete direct debit transaction; his further views that the imposition of such arbitrary and punitive penalties are especially unfair on the part of the bailed out banks in view of the cost of the bank bailout to Irish citizens and business alike, almost certainly contributed to the lack of funds in the first place; and if he will make a statement on the matter. [1937/15]

Michael Noonan (Limerick City, Fine Gael)
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While all credit institutions in Ireland are independent commercial entities and I have no statutory role in relation to the charges applied by credit institutions, section 149 of the Consumer Credit Act 1995 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 rather it applies to fees and commissions only. The Central Bank may direct the institution not to impose the new or increased charge or it may approve the charge, or approve it at a lower level than requested by the institution. Once approved, the bank is entitled to impose the charge. 

My Department published a report on the review of the regulation of bank fees and charges in December 2013. This contains a detailed description of the process by which the Central Bank makes decisions on whether or not to approve proposed charges. It is available on my Department's website at .  The following are the key findings of the review of the regulation of bank fees and charges undertaken by my Department:

- net fee and commission income divided by average assets in Irish banks was well below the average of their peers,

- net fees and commissions are lower in the Irish banks than in their European peers relative to net interest income,

- fee and commission income have become a more important source of income to the banks in recent years and banks have been able to increase fee and commission income since 2009 despite the restrictions imposed by section 149,

- Section 149 does appear to exert a restraining effect on the development of innovative products by the existing banks in Ireland but this may not be to the detriment of consumers,

- Section 149 may lead to inefficiency in pricing of financial products by the banks in Ireland, and

- Low customer mobility may mean that banks can increase prices without fearing a loss of customers.

The review also found that competition in the Irish banking sector has reduced significantly since the onset of the economic crisis and that this reduction is not related to Section 149.  The review considered a number of possible changes to the existing regime but concluded that it would not be appropriate to repeal Section 149 at this 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. The Central Bank Supervision and Enforcement Act 2013 did introduce changes to Section 149 to attract new entrants to the Irish banking sector. There is some evidence of improvement in the banking sector with a number of institutions introducing new products and adapting their business model.

I would advise consumers who wish to compare current account offerings to look at  the Competition and Consumer Protection Commission  website at .