Wednesday, 5 April 1995
Dáil Éireann Debate
“(2) This Act shall come into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes and different provisions.”.
The purpose of the amendment is to enable the Minister to provide that the Act or parts thereof shall come into effect on a day or days specified by order. My disposition is to allow the various providers of credit, credit and mortgage intermediaries and the officer of the Director of Consumer Affairs a period in which to make the necessary preparations to comply with the provisions of the legislation. I am fully aware that current moneylenders' licences expire at the end of July and my intention is that the legislation will have effect before then.
Miss Quill: I support the amendment. Will the Minister give an assurance that before the provisions of the Bill are implemented adequate resources will be made available to the office of the Director of Consumer Affairs? Will the promise made by the previous Minister that four regional offices would be set up in conjunction with the implementation of this Bill be met? Consumer credit law has been put forward as a  charter of consumers' rights and in that context it is most important that from the outset consumers are in a position where they can fully vindicate their rights at no cost, by availing of the office of the Director of Consumer Affairs rather than going through the courts, thereby engaging in expensive litigation. That is an option that will become available to consumers when this Bill is enacted, but there is no point making that option available on paper if resources are not made available and the services of the office of the Director of Consumer Affairs made accessible to consumers who have grievances and want to vindicate their rights under the provisions of this legislation. Will all these things happen at the same time and will we have a Bill that is fully enforceable?
Mrs. O'Rourke: I support the comments of my colleague, Deputy Quill. Extensive debate took place on Committee Stage, particularly on this matter. Everybody agreed that adequate resources should be made available for the Director of Consumer Affairs and particularly for the four regional offices as laid out in the previous Programme for Government. Will the Minister say what progress is being made on the setting up of these offices and the staffing of them? I understand he wishes to have the Bill speedily implemented and adequate resources should be made available to the Director of Consumer Affairs to ensure it is implemented in a transparent fashion.
When we debated this Bill on Committee Stage Deputy Rabbitte insisted that great resources would be made available to the Director of Consumer Affairs and that he should report speedily to the Dáil. Will the Minister give a detailed account of how the Director will implement the Bill, the resources that will be made available to him, the system of regional offices, the source of information to consumers and how the legislation will affect their daily lives?
Mr. Rabbitte: I thank Deputies for agreeing to amendment No 1 as this is the most prudent way to implement the terms of the Bill. I am conscious of the fact that the moneylenders licences expire on the last day of July and I hope there will be adequate time between finalising the Bill and allowing the various credit institutions and others to prepare for a date in and about that time. It has been represented to me that it would be important prior to the issuing of new licences that the Director of Consumer Affairs would have an opportunity to examine the situation and make the decisions about new licences. It is a very long and detailed Bill and its passage through the other House may take some considerable time but I accept the views expressed in representations from the Irish Bankers Federation that some time ought to be given to enable them to tee up their systems to prepare for the coming into effect of this fairly complex and extensive legislation.
Both Deputies opposite raised the question of resources. I accept that when I was on the other side of the House I made those points and it is true that the Office of the Director of Consumer Affairs must be resourced in a manner compatible with his new duties which are extensive and onerous in respect of some provisions of the Bill and arrangements for additional staffing and resources will have to be made. I appreciate that both parties in Opposition are very concerned about public spending and the fiscal implications of any overrun, notwithstanding that I have taken time out since I became Minister to ensure that when we enact this Bill the Director will not in any way be hampered by a shortage of resources. Accordingly, I am making arrangements over the next two years that the staff of the Office of the Director of Consumer Affairs will effectively double. In addition I am conscious of arguments made directly by the Director about the suitability of staff and the particular expertise required if he is to discharge his duties efficiently and without delay.
 It may be necessary to look at the particular needs of his office in terms of skills and expertise. Over the period the staff complement will be increased to 60, which is effectively an increase of 30.
Some later amendments have already been discussed on Committee Stage. For example, the fee levied on financial institutions seeking to increase their charges will make a contribution towards defraying the very extensive costs of the Director of Consumer Affairs in discharging his functions. It is right and proper that the financial institutions ought to be asked to make a contribution towards these costs. It is a very important dimension. There are several other areas of public policy where institutions or private individuals are required to make a contribution rather than the Exchequer bearing the entire cost. The modest charge of £25,000 for each application to bring in a new charge or increase an existing charge is eminently reasonable and will contribute to the costs I have spoken about.
Mr. Rabbitte: It is important that consumers in parts of the country outside Dublin have ready and immediate access to the Director of Consumer Affairs, his staff and office for guidance and advice. That is expensive but the Government is committed to putting it in place. It goes some way towards filling the gap that exists in terms of a network of advice bureaux that can advise people of their rights as citizens generally. We are dealing with consumer rights and I can confirm that an office of the Director of Consumer Affairs will be opened this year in Cork and over the two year period it is my intention to ensure that resources will be provided so that offices will be opened in Limeick, Galway and Athlone.
Mr. Rabbitte: Having regard to the contribution of my predecessor, Deputy O'Rourke, it is very important that the proposal to locate in Athlone should remain intact and I shall give the Deputy every assistance in delivering this service to her constituents.
The Director will undertake a nation-wide tour on enactment of the Bill advising consumers in all parts of the country of their rights under the Act. He will publish also a number of leaflets setting out in plain and intelligible language what the Act means for consumers. We agreed on Committee Stage that there is little point enacting very extensive legislation inspired by various European Union directives if it is not communicated to the people who are supposed to be the beneficiaries under the Act. It is important that consumers should be aware of the new rights conferred on them and of the remedies and redress open to them. We are all agreed that the present Director does an exceptionally good job and is very committed to the discharge of his functions. The tour I have referred to and the provision of intelligible leaflets will make a considerable contribution to making the public aware of their rights.
“‘APR’ means the annual percentage rate of charge, being the toal cost of credit during the currency of the credit agreement and comprises total repayments of interest and charges,  expressed as an annual percentage based on the number and frequency of repayment instalments and calculated in accordance with section (11);”.
This is a definition of APR which featured in much discussion on Committee Stage. APR means the annual percentage rate of charge being the total cost of credit during the currency of the credit agreement and comprises total repayments of interest and charges expressed as an annual percentage based on the number and frequency of repayment instalments and calculated in accordance with section 11.
At the conclusion of Committee Stage, I indicated I would revert to this question. The present formulation of words is intended to give clearer expression to this concept. Although it is increasingly in common usage I doubt if the vast majority of consumers fully comprehend its meaning and effects. This definition is intended to give more precise expression to what the total cost of credit means as the present wording is somewhat loose and could leave the consumer confused.
Mr. E. O'Keeffe: I welcome the Minister's remarks. This is a confusing area for many borrowers. Bankers are in the business of making money, a banker usually talks about the wholesale rate and there are a number of options available to borrowers. The wholesale rate is the rate at which bankers borrow and they retail the money out at the margin. On top of that there are two other systems, the Dublin inter bank rate and the inter bank rate. I do not understand how they can add charges to the interest rate and roll up on APR because, in many cases, the charges are variable. The interest charge is most confusing for many borrowers. The fixed rate plus the charges on APR is fairly simple but where there is a variable rate, by and large in rolling that over, the banks charge different rates of money on the borrowing. That should be foolproof as  interest rates are calculated on a daily basis and the formula used for charging creates confusion. I am no expert in this field but I am aware of the differences that arise between different institutions in the rolling over which brings about the APR rate.
Advertisements usually contain the APR rate but I do not understand how the rate can include charges because the bank cannot add the charge until they know the transaction involved. Are all charges included in the APR rate and, if so, how does that happen?
An Ceann Comhairle: Before I call the Minister of State to reply, do other Members wish to intervene so that he can take their views into account when replying having regard to the fact that on Report Stage Members, apart from the mover of an amendment, may speak only once in closing the debate?
Mr. Rabbitte: Deputy O'Keeffe has quite properly identified this as a major issue. Since he raised it last Thursday I have looked at it further and I agree with him. It is fundamental to what we seek to do in the Bill. He says he is no expert but my observations are that he knows a great deal more about it than most of us. The previous Minister is on record as saying on Committee Stage that she did not understand it and most of us said we did not understand the mathematical calculation on page 82. I am committed to looking at this when the Bill goes to the Seanad and at the point raised by Deputy O'Keeffe regarding charges and whether they should be included.
I do not know what Deputy O'Keeffe would say if I asked him to ruminate on the following definition: “APR is that effective rate of interest quoted as an annual rate which, when expressed as a decimal and used to discount repayments made by the borrower over the term of the loan, gives a total present value of such repayments equal to the amount of the loan advanced”. That has the merit of being brief and concise. I do not want to go into the mathematical  equation on page 82 and whether it is accurate or intelligible. That is for another day. It is necessary at this stage to give verbal expression to that mathematical formula. That is what the Deputy seeks to achieve so that consumers who borrow from banks or building societies know that APR means the same thing and that there is a common and accurate definition of what it means. As the Deputy said, products are advertised in the public press apparently at different interest rates but the APR could be the same, alternatively, you could have different APRs but when you look at the rate of frequency, discounting and so on, the situation is not as it seems.
It ties into the area of misleading advertising. In indicating to Deputy O'Keeffe that I am having this fundamental area of the Bill examined, if we agree on a single, uniform, consistent definition of APR I do not see any good reason advertisements should not be required to express what they are offering in terms of the true APR rate. Consumers could make a real judgment between one offer and another. At present it is immensely confusing. If we carried out a vox pop in the street few people could say precisely what APR means. In trying to work out something accurate it was suggested to me that the true rate of interest is the rate of discount expressed in annual percentage terms, in other words, the annualised percentage rate of APR which when applied to the total sum of repayments made on the loan over its lifetime including the repayment of principal but excluding any sums payable as a penalty, compensation or damages or, as Deputy O'Keeffe said, other charges unless required by regulation. In the moneylending business collections are made at the door and, therefore, collection charges are an issue. This equates the total amount of repayments made to the original value of the loan extended taking account of the amounts, timing and frequency of the debiting of instalments of amounts due for repayment  and crediting of repayments made to the running account of the borrower.
I am determined to ensure only one definition of formulation of APR is used throughout the Bill. That may be expressed in long or short form as appropriate, but it is always the same definition. The expression of the mathematical formula must be consistent with this formulation. In other words, the formulation is no more than the mathematical formula expressed clearly in words. That would mean that charges which can vary from one lending institution to another would have to be expressed separately. The formula or formulation should concentrate on the financial APR. In other words, charges and so on should not be included as they can vary from one lending institution to another. In this regard and equally important, the APR should be the only rate a lending institution should be allowed to quote in publicity, advertisements, brochures and contract forms. No other rate should be allowed to be quoted or used thus enabling the consumer to compare like with like. I will table an amendment to give expression to this critical change. Furthermore, the APR used by lending agencies should be the only formulation contained in the Bill, no other formula or formulation should be allowed. That approach would allow total transparency and enable consumers to make real comparisons.
 If my memory serves me right this matter was raised on Committee Stage by Deputy McDowell. It is intended now to correct an inadvertent omission in the present and earlier text of the Bill. The definition “cash price” will now apply equally to the supply of a service as well as to the purchase of goods.
Mr. T. Kitt: Regarding the supply of services, I wish to raise an issue about which I am sure the Minister would share my concern and that of my colleagues on this side of the House. I refer to additional hidden costs imposed for concert and theatre tickets. I understand this subject has been dealt with in the media. As the Minister is no doubt aware, a handling fee of approximately £2 is added to the cost of concert and theatre tickets when customers book their tickets by credit card or through a selling agent. If a customer calls into HMV or another ticket outlet and it is necessary to telephone the theatre in question, an additional hidden cost of approximately £2 is added to the price of his or her ticket. This additional charge is grossly unfair to the consumer.
Booking tickets by telephone is in the interests of the efficient running of major events and is surely in the promoters' interests and in the interest of security. At a time when there is concern about security surrounding concerts, theatre performances and so on, it is important that we should be conscious of security aspects. It is incredible that patrons are singled out for exploitation in such an opportunist way. I am sure the Minister will agree it is unacceptable that this practice is taking place at a time when the artistic life of the country, especially this city, is flourishing. I appreciate that I may have sprung this matter on the Minister, but it is one of which I am conscious not only because I am a theatre-goer. Young people are being exploited by this hidden cost and the cost of tickets for many performances are exorbitant. When considering the Bill at this Stage, will the Minister  take some account of this exploitation of patrons of artistic events?
Mr. Rabbitte: Out of courtesy to Deputy Kitt, I will reply to the matter he raised. This phenomenon was referred to in the media, but it has not intruded into the discussions on the Bill until now. The key question is whether it falls within the scope of the Bill in the sense of whether the transaction to which Deputy Kitt refers is a credit agreement. I am not sure that it is.
Mr. Rabbitte: It may indeed be and the Director of Consumer Affairs may have a role in that regard. I will be happy to ask him to consider it. I do not believe this matter is within the scope of the legislation. The handling fee to which the Deputy referred may well be an agreement between the promoter and, say, a credit card company. It requires some study to ascertain if that is where the agreement exists, in which case it would not be within the remit of this Bill or be a credit agreement in the terms defined in it. I am glad to reassure the House that when Deputy Kitt and I attended the “Dermot Morgan Show” in the Olympia last week we were not fleeced in this manner and no extra handling fee was imposed and we both enjoyed the night immensely.
Mr. T. Kitt: A friend who booked a ticket for the show which the Minister and I attended was one of a number of people who observed an increase in the cost of the tickets. If people purchase their tickets at the Olympia or any other theatre they pay the set price, but if they book their tickets by telephone and collect them on the night of the performance, which makes matters more convenient for the promoters, they must pay an additional charge. I thank the Minister for responding to this matter. I  understand he said he would bring the matter to the Director of Consumer Affairs and I ask him to report back to me on this.
Acting Chairman (Mr. Foxe): We come to amendment No. 4 in the name of the Minister. Amendments Nos. 75 to 79, inclusive, 81, 84 and 85 form a composite proposal. Amendments Nos. 4, 10, 40 and 46 are consequential proposals. It is proposed to take amendments Nos. 4, 10, 40, 46, 75 to 79, inclusive, 81, 84 and 85 together by agreement. Agreed.
It is fair to describe this as a technical amendment which has knock-on consequences to be seen in the series of amendments grouped together for discussion purposes. The purpose of the amendment is to delete the phrase “and includes a hire-purchase agreement”. The significance is that hire-purchase transactions, for the purposes of this Bill, are not deemed to be credit agreements. This has been confirmed by the Attorney General.
Amendment No. 10 proposes the deletion of the phrase “hire-purchase price”. A more detailed definition is proposed in amendment No. 77 which appears in Part VI dealing with hire-purchase agreements. This is being done on the advice of the parliamentary draftsman.
This amendment requires us, on page 10, to excise the words “bank or any other credit institution” and substitute “credit institution or other person”. These amendments tidy up the definitions in the Bill. “Credit institution” includes banks, building societies, the Trustee Savings Bank and so on.
The second amendment corrects an omission pointed out on Committee Stage and extends the definition of “credit card” to accounts maintained by persons in credit institutions. That could apply to department stores who have their own credit cards.
Mr. E. O'Keeffe: While credit cards, when first introduced, were great value for money, since the introduction of new technologies much of their value has been eroded. Practically all business credit cards are now in line which means that the 30 days credit allowed heretofore has been reduced to 15. People appear to be under the impression that they still represent value for money whereas modern technology has eroded their value.
Life assurance companies are not credit institutions. They were included in error in the definition of “credit institution” in the surviving text of the Bill. The amendment does no more than seek to correct that error.
Mr. E. O'Keeffe: Many life assurance companies make loans or mortgages available to house purchasers. While I do not want to name companies, I am aware of life assurance companies who provide house mortgaging arrangements.
Mr. Rabbitte: I agree with Deputy Ned O'Keeffe. If that kind of diversification is taking place in the marketplace, it is important that it be brought within the remit of the Bill. In so far as they are mortgage lenders, they do fall within the remit of the Bill.
In regard to amendment No. 8, I should have explained that the present definition of “credit institution” is not all-embracing. For example, it does not comprehend all members of the Irish Finance Houses Association or the subsidiaries of some of the finance houses  covered by the definition. The regulations I intend to make on the implementation of this Bill will avoid any unwitting omissions. Regulations also provide the flexibility of adding to or deleting from, as necessary, the list of institutions which should be regarded as “credit institutions” for the purposes of this Bill.
“credit intermediary' means a person, other than a credit institution or a mortgage lender, who in the course of his business arranges or offers to arrange for a consumer the provision of credit or the letting of goods in return for a commission, payment or consideration of any kind from the provider of the credit or the owner, as the case may be;”.
This amendment was the subject of discussions with my colleague, the Minister for the Enviornment. It provides the same exemption from the definition of “credit intermediary” for a mortgage lender as applies in the case of “credit institution”.
Mr. Rabbitte: As Deputy O'Rourke  knows, this amendment concerns the accurate definition of “credit intermediary”. If one does not insert the words “or a mortgage lender,” Irish Life Home Loans, for example, would not be encompassed by the definition. It does not take deposits but it advances loans. It is ingrained in my memory of the 1992-93 currency disturbance when it was in that unique position of not taking deposits but of advancing loans, that people who happened to have their mortgages with Irish Life Home Loans were especially penalised during that difficult period. The purpose of the amendment is to make it as watertight as possible from the point of view of the Minister for the Environment.
Mr. E. O'Keeffe: I take it that a “credit intermediary” is a person who provides a facility for credit on the purchase of goods and that a service or credit charge is imposed after a certain date. For example, if I buy goods from a merchant and do not pay within 30 days a charge of, perhaps, 2.5 per cent may be added per month. I do not see anything about mortgages or other forms of lending in the Bill. A business person who imposes a charge when payment is not made within a prescribed period is entitled to protection. All businesses today, due to tight margins and lower profits, avail of a credit charge. The consumer is more open to exploitation by banking institutions because everyone seeks more time to pay their bills. These charges in many cases can amount to 18 per cent to 24 per cent per annum. This is another type of moneylending which has existed for some years and is becoming more prevalent. That would be my definition of a credit intermediary. Will the Minister say why he proposes to delete the two lines from the definition? What is the official definition of “credit intermediary”?
Mr. Rabbitte: The definition is set out in the amendment. If Deputy O'Keeffe can suggest improvements on it I am willing to hear them. Deputy O'Keeffe may be under a misapprehension. A  credit intermediary is a person who arranges credit. It does not have anything to do with default, penalty fees and so on. It is a person who sets himself or herself up as one who can arrange credit. The latest version of this, as a result of the discussion on Committee Stage, is that a credit intermediary means a person other than a credit institution or a mortgage lender — not the bank or the building society — who in the course of his business arranges or offers to arrange for a consumer the provision of credit or the letting of goods in return for a commission payment or consideration of any kind from the provider of the credit or the owner as the case may be. I would be reasonably satisfied that that definition will stand the test of time. It ensures there are no loopholes such as those I have instanced in the case of Irish Life Home Loans. I am not implying in any way that Irish Life Home Loans would want to escape the terms of the Bill. It is the best formulation we have.
This amendment was also proposed to me by the Minister for the Environment. It stipulates that refinancing loans, secured on the principal residence of the borrower or his dependants, will be regarded as housing loans in the context of the Bill. The definition of “housing loan”, which I am proposing should be substituted for the present one in the Bill, differs in two respects from the existing version. First, there is a new paragraph (b) which reads: “the loan is made for the purpose of refinancing a loan within the meaning of paragraph (a) ...” This amendment is designed to ensure that where a borrower refinances his existing housing loan either with his or her existing lender or with another lender, the new loan is still regarded as a housing loan. It would not make sense that a housing loan cease to be classified as a housing loan simply because the borrower had renegotiated his or her loan with their existing mortgage lender or had switched lenders.
Amendment No. 12 which seeks to insert the words “or to continue to be used” after the word “used” in paragraph (b) of the existing definition in the Bill and which would now become paragraph (c) of the definition to be substituted, clarifies the intent of the existing text by making it clear that it is not necessary to commence the use of the house as a principal residence for the first time after the loan has been advanced for the loan to be classified as a housing loan. For example, it will often happen that a person will raise a new mortgage on his or her principal residence to pay for education expenses. This has been brought to our attention by the Minister for the Environment but it is eminently sensible because we all  know that this type of refinancing package is frequently resorted to by consumers. As I understand it, it applies only to the principal residence.
Mrs. O'Rourke: This was essentially my Bill and I am trying to be helpful. This amendment gives rise to many issues which I wish to explore in some detail. Will the refinancing loan apply to the main residence or can it apply to another residence?
Mr. Rabbitte: Once a housing loan, always a housing loan. The loan will not be confined to the principal residence. It refers to any loan used to refinance an existing housing loan which was used by the consumer to provide, improve or purchase any house.
Mrs. O'Rourke: Will the Minister explain the exact purpose of his amendment? In his original explanation he said it was put down at the instigation of the Minister for the Environment and it referred to the principal residence. The explanation he has now given that it may apply to another residence may alter his original explanation.
Mr. Rabbitte: The amendment is designed to ensure that where a borrower refinances his existing loan, either with his existing lender or another lender, the new loan is still regarded as a housing loan. This will have implications outside the scope of this Bill in terms of the tax laws, etc. It would not make sense for a housing loan to cease to be classified as a housing loan simply because the borrower had renegotiated his loan with his existing — or another — mortgage lender. The person may have good reason to renegotiate his loan having regard to the packages on offer etc. It is prudent that people who reach that stage should look at the packages on offer as another building society or credit institution may offer a better refinancing package from the point of view of the consumer. It would be manifestly unfair not to allow people to do this.
Mrs. O'Rourke: I have grave reservations about refinancing. Some people who have repaid a substantial amount of their mortgages refinance their loans to avail of the tax reliefs available for educational purposes, etc. Many financial institutions offer seemingly attractive refinancing packages which claim to clear all the person's debts and pay off their original loan and outstanding bills, that with one payment they will pay less. However, I know two gullible families who took out a refinancing loan in the belief that all their bills would be paid and that they would have less to pay but who now find they have to pay more. When I examined the terms of the credit agreement I found that they had been done, had not been given the loan at a decent rate and were now much deeper in debt. I wish to issue a warning about the refinancing of mortgages. While many financial institutions offer genuine packages, some rogue operators trap gullible people who do not know much about finance, thus putting them in debt for many years.
Mr. E. O'Keeffe: I support the points made by Deputy O'Rourke. We cannot legislate to stop people from taking out refinancing loans, as under the Constitution, they are entitled to take out loans with the financial institution of their choice. It has been said that people  remortgage their houses for educational purposes, which does not meet the criteria under the Act. People usually remortgage their houses because the value has increased and the extra money can be used for other purposes.
It must be pointed out that there are substantial costs involved in moving from one mortgage house to another for the purposes of refinancing. For example, the title, insurance and many other details must be dealt with again. Similar problems arise in respect of APR as in respect of clearing bank institutions. In many cases, the loan originally agreed in respect of refinancing is not the final package because of the large number of deductions.
Mr. Rabbitte: Whatever one may say about the phenomenon of refinancing, it takes place extensively and for a variety of reasons. The proposal in my amendment merely tightens the Bill to ensure the definition of “housing loan” still obtains. What Deputy O'Rourke said merely points to the urgency of the Bill. The discussion on the APR terms, the different presentation of these products and the discussion which will follow the fact that the consumer may not readily understand the concept “APR” and misleading advertising in respect of these products, underlines the necessity to regulate credit and mortgage intermediaries. Deputy O'Keeffe may be correct in regard to educational expenses. It was not intended as a glib remark but, if I may now make one, it will not be necessary under the new Government because we have provided for that.
Mr. Molloy: The Minister stated that the amendment would have taxation implications. I accept this is not taxation legislation, but the fact that a mortgage resulting from refinancing is included under the definition of a housing loan  does not necessarily mean it would qualify for the reliefs available under the taxation code, other rules would apply. Why did the Minister refer to taxation? Is there something in the Bill about which I am not aware?
Mr. Rabbitte: There is not, I was responding to Deputy O'Rourke's point about whether it applied to the principal residence only. If that were the case obviously it could have financial implications because if one can demonstrate to the Revenue that the purpose of the refinancing loan is specifically to improve one's principal residence, that can be compounded in terms of mortgage interest relief, but in this case, as the Deputy correctly pointed out, that would not necessarily follow.
Mr. Rabbitte: Amendment No. 12, which proposes to insert the words “or to continue to be used” after the word “used” in paragraph (b) of the existing section which will become paragraph (c) if this definition is substituted, clarifies the intent of the existing text by making it clear that it is not necessary to commence the use of the house as a principal residence for the first time after the loan has been advanced in order for the loan to be classified as a housing loan.
Mr. Molloy: The Minister appears to be adding verbiage which does not have much meaning. His explanation does not clarify the necessity for the addition of the proposed words. If a house is to be used as the principal residence why is it necessary to add the words “or to continue to be used”? This point was not raised on Committee Stage, it is something the Minister has introduced out of the blue on Report Stage.
Line 34 refers to one of the categories of exclusion under the definition of a moneylender. A moneylender is defined as a person who carries on the business of moneylending or who advertises, announces, or holds himself out in any way as carrying on that business, with the exception of a number of categories  which are listed in that section, for example, a pawnbroker, a society registered under the Industrial and Provident Societies Acts, etc., and a credit institution. The effect of this amendment will be to delete “mortgage intermediary” from the list of excluded persons who would not be regarded as moneylenders for the purpose of the legislation. The potential for abuse associated with the inclusion of mortgage intermediaries in the list of excluded persons was brought into sharp focus on Committee Stage. We were all agreed that it was relatively easy to circumvent the definition of a moneylender as it stood by, for example, making a mortgage loan to one's aunt. This amendment is necessary to close that loophole.
This amendment replaces the original definition of a mortgage lender with a better and wider definition. The new definition of mortgage lender is also intended to close off any loophole which the present definition could provide. A mortgage lender is among the category of person or persons excluded from the definition of moneylender. In addition, the power to make regulations now being inserted in the Bill provides the opportunity of amending the list of persons who may be defined as mortgage lenders as circumstances warrant, and that could change from time to time especially following trends in the marketplace.
Mrs. O'Rourke: I note that the Minister has had extensive discussions with his colleague, the Minister for the Environment. Perhaps I should say that the officials on both sides have been very busy and the heavier hand of the Department of the Environment is obvious in the Bill. When I was dealing with this Bill the Department of the Environment was very anxious about particular sections of the housing loans. It now clearly has a much stronger input, but I have no objection to that.
Mr. Rabbitte: I do not see it that way. The involvement of the Department of the Environment in regard to its business is entirely justified, and the definition is the better as a result. On Deputy O'Rourke's general allegation that the Department of the Environment is stronger in its presence now than when she was in my position, the opposite is the case and we will come to an amendment which, for the first time in the history of the Bill's progress, brings local authority loans within its remit.
Mr. Rabbitte: As Minister, Deputy O'Rourke failed miserably to do that,  even though she was a close confidante of the Minister for the Environment at the time. Contrary to what she says, this shows a greater willingness on the part of the Department of the Environment during the term of this Government to acknowledge that if it is logical to include something in a consumer Bill that it will not be arrogated to the Department of the Environment purely for jurisdictional purposes.
Mr. Molloy: It seems superfluous to introduce the Minister for the Environment into this Bill, especially when one considers that all that is being proposed is that this Minister shall consult with the Minister for the Environment but does not have to take heed of what the Minister for the Environment says. The Minister's explanation so far does not make clear why this is necessary. If we are to have tidy legislation it is difficult to justify the introduction of this requirement. On the making of a housing loan, surely the Minister's advisers are capable of making a determination. This seems to be tipping the hat in the direction of the Minister for the Environment. Perhaps the Minister can give strong justification for this proposal, but so far he has not stated any specific reason for including this consultation process. If it is not necessary it should not be in the Bill.
An Leas-Cheann Comhairle: We will observe it now. I would remind the House that this is Report Stage. Are there any other Deputies offering before the Minister replies to the debate on amendment No. 15?
Mr. Costello: This section deals with interpretation. If by redefining “mortgage lender” one improves clarity, that is desirable. If there is anything in the clarification which Deputies find undesirable, that is a different matter, and they can oppose it. The original wording of the definition was too narrow. The Minister of State is now extending it to cover institutions as well as “any other person”. Reference is also made to the local authorities, in the form of the Department of the Environment. It is desirable that we give recognition to local authorities which are now becoming more involved in housing loans. I am satisfied that this amendment is required to extend the definition to the credit institutions and the persons involved in them.
Mr. E. Byrne: It is clear to members of local authorities that the Department of the Environment has an important role to play in providing finance to various classes of applicant. Loans are available from the Housing Finance Agency — SDA loans were available in the past — while a range of mortgage packages available through the local authorities are financed directly by the Department of the Environment.
Mr. E. Byrne: The Department of the Environment acts as a finance house. It is right that the Minister of State should include paragraph (b) which reads “Any other person of a class prescribed after consultation with the Minister for the Environment, for the purposes of the Act” because of the Department's involvement in this area. The amendment is worthy of support.
Mr. Rabbitte: I am surprised that Deputy Molloy, who is a former Minister for Local Government, finds it difficult to understand why there is a need for co-operation between my Department and the Department of the Environment which is responsible for housing  policy, on a matter relating to definitions. This is only prudent. It would be a sorry state of affairs if we legislated and provided definitions under the heading of “consumer affairs” which posed difficulties and obstacles subsequently for the Department responsible for housing policy. The Bill includes several references to the Minister for the Environment.
Deputies followed what was essentially a mischievous point by Deputy O'Rourke. If her original definition was included the banks would not be classed as mortgage lenders. I respectfully suggest that that would be ludicrous. Having quickly passed over some important sections I am disappointed Deputies started to hare after what was essentially a mischievous point. It would be preposterous to leave open the possibility that the banks would not be classed as mortgage lenders.
The points made by Deputies Costello and Byrne are correct. The role of the Department of the Environment in this area is changing. It is reasonable that the amendment should require me in making regulations to consult the Minister for the Environment. Deputy O'Rourke referred to the shared ownership scheme but there are several other areas where it is important that close contact be maintained between the officials of my Department and those of the Department of the Environment to ensure that policy on this matter is aligned.
The original definition of “mortgage lender” would have left open the possibility of abuse in that anyone could have set himself up as a mortgage lender. Trends in the market place may change. As a result of the inclusion in the definition of paragraph (b) which reads “Any other person of a class prescribed after consultation with the Minister for the Environment, for the purposes of the Act” I fail to see how anyone could escape. We will now have the capacity to follow people up by way of regulations in full consultation with the Department of the Environment. This proposal makes good sense.
Mr. Costello: The word “purports” is rather loose and has been bandied about by Deputies O'Rourke and Molloy. In common parlance it seems to suggest that a person is not acting with absolute integrity, trust or confidence. The word “offers” is more accurate and seems to imply that a mortgage intermediary is actually trading. As the word “purports” is open to interpretation it is unsatisfactory.
Mr. E. Byrne: It is important when legislation is being prepared that simple, unconvoluted and unpretentious language is used. The word “purports” sounds Victorian and is more likely to be used by a school teacher.
Kathleen Lynch: I welcome this amendment because virtually everyone will seek a loan for one reason or another. We need to be clear about the wording of the Bill because people no longer speak this type of language. If one goes to the manager of a financial institution seeking a mortgage he will not use the words “I purport”.
Kathleen Lynch: Perhaps Deputy O'Rourke is delimited. I am not sure because I do not know her personally. This amendment is worthwhile although I understand Deputy O'Rourke's frustration. When I was a child I actually liked going to school and I could never understand why some people did not  like it until I saw Deputy O'Rourke. Now I know why children have nightmares about going to school. We are dealing with legislation that will affect—
Kathleen Lynch: We are dealing with serious legislation which will affect everyone in some form or another. We must make this legislation clear so that everyone, not just the people in power, understand it. The amendment is an excellent one and it is time that we began using this type of language.
Mr. Rabbitte: The more Deputy O'Rourke is allowed to run loose, the better I like it. We are really talking about supplanting one word with another because it makes more sense. The only serious point that can be made is that arranging a mortgage without proper authorisation is an offence and if the insertion of the word “offers” gives greater clarity to the section, it should stand. I believe it is a better term.
Mr. Rabbitte: This amendment refers to two lines in the middle of page 13 of the Bill which states that “prescribe” means prescribe by regulations made by the Minister and prescribed shall be construed accordingly. The new definition in this amendment states that “prescribed” means prescribed by regulations made by the Minister and “prescribe” shall be construed accordingly. This is a suggestion from the  Office of the Attorney General and I am sure the House recognises its merits.
An Leas-Cheann Comhairle: We now come to amendment No. 18 in the name of the Minister. This amendment arises out of Committee proceedings and it has already been discussed with amendment No. 2. I call on the Minister to formally move the amendment.
An Leas-Cheann Comhairle: Amendment No. 19 is in the name of the Minister. Amendments Nos. 21, 23a, 24, 25, 26, 50, 57, 62, 63, 65, 67, 68 and 71 are consequential on No. 19 and it is proposed that they be taken together. Is that agreed? Agreed.
This amendment derives from the earlier debate on the fact that “hire purchase agreement” was removed from the definition of “credit agreement”. Subsection (2) states: “In this Act a reference to a consumer, creditor, hirer, owner or borrower includes a person to whom the consumer's, creditor's, hirer's, owner's or borrowers rights or liabilities, as the case may be, under the credit agreement have passed by assignment or operation of law”. This amendment would excise the term “credit” and was suggested by the Office of the Attorney General. The need for the amendment arises because of the earlier deletion of “hire purchase agreement” from the definition of “credit agreement”. It is simply of a textual nature and flows from the earlier amendment No. 4. By removing the word “credit”, any agreement in this area is covered.
An Leas-Cheann Comhairle: The list of groupings of amendments has been circulated to Deputies. We now move to amendment No. 20. Amendments Nos. 20, 35a and 100 form a composite proposal and it is proposed that all three amendments be taken by agreement.
Deputy O'Rourke will recall that this amendment was put forward by my colleague, Deputy Bruton, on Committee Stage. On the advice of the Attorney General, I am deleting this section from this Part of the Bill and reinserting it in its present form in Part X which contains the miscellaneous provisions. The section deals with discrimination on a number of grounds in the granting of credit — for example, on the grounds of belief, sexual orientation, area of residence and so on.
Deputy McDowell put forward a different amendment on Committee Stage to deal with this issue, but other Deputies were of the view that it would be very dangerous to legislate for no go areas, which is what we would be doing if we accepted his amendment. This amendment will stand, but the draftsman believes it would be more appropriate in Part X of the Bill. It is not a substantive issue.
Mrs. O'Rourke: I was glad to accept the amendment put forward by Deputy Richard Bruton on Committee Stage. Section 3 states: “It shall be an offence to discriminate on grounds of sex, sexual orientation, belief, social status or  area of residence in the offering, negotiating or granting of a credit agreement”. We had a lively debate on this issue on Committee Stage. We are all aware of people who seek loans from credit institutions but on the basis of the address at which they reside they are discriminated against. To prove discrimination on the grounds of sex or religious belief is straightforward, but how would one prove that a person is refused a loan because they come from terrace A in a particular town? The person will be told the loan is refused because they do not have the necessary financial clout to repay it, but in reality they are discriminated against because they come from a particular address. The same applies particularly to young people looking for jobs — if they come from a particular area they are discriminated against. I accept the amendment but I would like the Minister to say how it will be monitored so that people are not discriminated against in the granting of a loan because of their address.
Mr. E. Byrne: We recently debated an amendment put forward in the name of the Progressive Democrats Member who is in the House at present and moved by his senior counsel colleague, Deputy McDowell. The collective view was that the amendment was unacceptable in that it would have facilitated discrimination against certain sections of society. If passed the amendment would have been found to be unconstitutonal, and civil liberty organisations would have had a field day with it.
Section 3 which is being transferred to Part X is of vital importance. In urban Ireland — I am sure the same applies in rural Ireland — there is a segregated and tiered society. In my early days in political life I was horrified to learn that very well known electrical companies in a large shopping centre about 500 yards from an inner city local authority flats complex refused credit terms and hire purchase agreements to the tenants of the flats complex. At the time I pursued a company on behalf of a constituent who was discriminated  against solely and exclusively because of his address. The man had permanent and secure employment in CIE and was earning an extremely good salary, but because he lived in an inner city flats complex he was discriminated against.
Mr. E. Byrne: I support these amendments and this is an opportune time to reflect on what exactly we are doing. Section 3 states: “It shall be an offence to discriminate on grounds of sex, sexual orientation, belief, social status or area of residence in the offering, negotiating or granting of a credit agreement”. It is important to reflect on the Bill arising from debates that took place on Committee Stage. This is a consumer protection Bill, introduced with the specific aim of protecting the rights of consumers regardless of whether they live in upmarket or poor housing estates. Consumers should not be discriminated against in seeking credit, as is the practice in many companies. I agree with the amendments and remind the House of the Progressive Democrats position as put forward on Committee Stage.
Mr. Costello: I concur with the remarks of Deputies O'Rourke and Byrne. This is an important issue that must be addressed in legislation such as this. I would like clarification of the term “social status”. Does it mean one's  standing in society? There is no doubt there is discrimination against people from disadvantaged areas and people of a particular background such as travellers who are regarded as having a low credit rating. Does the term apply to marital status as distinct from social status? Perhaps there is need to insert a section to cover the marital relationship. That is an area in which there has been great discrimination in the granting of credit. To my mind the financial institutions discriminate on the basis of marital status and the broader social status when deciding to grant a loan. To ensure that a person's marital status is not a discriminatory factor we might consider making provision for it as a separate category.
The word “credit agreement” is in this. I have not yet seen the amendment that is intended for Part X but I presume the word “agreement” will be deleted because we have already deleted it in various amendments.
There is a broad discrimination based on one's address. As somebody who lives in the inner city I know how difficult things are for somebody with an inner city address, whether on the north or the south side. Depending on the particular street a mythology about it has been built up that remains in public consciousness. A person applying for a job from a certain address or residence is automatically at a disadvantage. If there is a surplus in the labour market, the last person to be employed will be someone who comes from a certain area. It is one thing to make provision to counteract this in legislation but it is difficult to address. The only way that a person in such an area can address it is by giving a false address. However, if he is found out he is automatically disqualfied. Will the Minister elaborate a little further on how we can implement the legislation with the rigour that would be required?
On a broader aspect, businesses operate in areas that may not have top rating. I am well aware that insurance companies will not give a quote to an  applicant from a certain area. Insurance companies have in all instances to provide a motor insurance quotation but in the commercial world, for example, it is impossible for the proprietor of a small business such as a shop, a pub, a restaurant or other small operation in certain urban areas to get a quotation and on the odd occasion they get one the figure is astronomical. There is no policing of how insurance companies deal with the insurance needs of businesses at certain addresses. We have a major problem of discrimination on an ad hoc basis.
I have no doubt that everybody in this House is committed to eliminating discrimination but it is extremely difficult to find the exact mechanism that will provide the protection and ensure that companies do not discriminate against the person on the basis of their address, social status, sex, sexual orientation or beliefs or others as mentioned.
Mr. B. O'Keeffe: How does one monitor the provisions of the Bill? For example, if Deputy O'Rourke and I go to the same financial institution to seek a loan and I am granted a loan and she is not, have I been given the loan because I am a man? How can one claim that she was discriminated against? If we compare notes what explanation can I give and if she brings the matter to the attention of the Director of Consumer Affairs how will he find out why one of us was refused the loan and the other was not?
When a financial institution refuses credit one is not supplied with the information why the loan was refused. The financial correspondents who write the business sections in newspapers believe that people should be informed of the grounds for refusal. It can have quite an effect on a person in business or even the private borrower to be refused a loan.
We have referred to the status of residential areas. Let us take the example of an area that is rumoured to be associated with drugs, it may be a fairly  reasonable residential area but because it is identified with drugs — which are rampant in our society — the financial institutions will shy away.
Family history will be taken into account. I disagree totally with the credit bureau which records all transactions and knows a person's repayment capacity. I understand the clearing banks are not registered under this area but it is quite likely it will happen. With modern technology one can press a button and have his or her credit rating quickly. One's rating may change from time to time. While we welcome this section we wonder how it will be monitored. If a constituent who feels he has been treated unfairly comes to me how do I find out if he was discriminated against on the basis of where he lives, his beliefs or something else? The Minister would want to clarify the monitoring procedures that will be in place.
We have appointed a bank Ombudsman but the procedure has not been satisfactory. I wonder if the Office of the Director of Consumer Affairs and the banks Ombudsman's office will co-operate because they could help people. People are always disillusioned when they are refused a loan or a credit facility and they feel it is unfair. They may develop an inferiority complex because they do not know why they have been refused. Perhaps the Minister will clarify the matter.
Kathleen Lynch: This is an excellent section to insert in any Bill. It has been the practice for a number of years for a percentage of the mortgate repayments on local authority mortgages to go towards a mortgage protection policy. I have one and it is an excellent policy. Unfortunately it is negotiated centrally though, for administrative purposes and from the point of view of getting the best deal, perhaps that is the way it should be done. Since 1987 this practice has been compulsory for those taking out a local authority mortgage, which is as it should be as all mortgages should be protected.
Kathleen Lynch: It is compulsory for those who have a mortgage from a local authority to have a mortgage protection policy. Everyone should have such a policy. The policy excludes people infected with HIV and explains that they contributed to their own disease. However, it does not exclude people, for example, with a heart condition or those suffering from cancer on the basis that they contributed to their own condition.
I regard it as a direct reference to someone's sexual orientation. For the majority of those infected, their sexual orientation had nothing to do with it as it was caused by circumstances beyond their control. I hope this section of the Bill will cover the matter and that people do not find their mortgage protection policy is null and void on the basis of what is presumed to be their sexual orientation. As it applies to all local authorities it shows our attitude towards sexuality as opposed to health, mortgage protection or lending institutions. Will the section make it illegal for this element to be included in a mortgage protection policy?
Mr. Molloy: Section 3 states that it shall not be an offence to discriminate on certain grounds. Deputy Costello referred to marital status. I am aware of a practice in a certain large retail store  which has branches nationwide, including my own town, which refuses participation in its credit arrangements to the lady of the house or housewife and only extends credit where the husband is the person to whom the credit facility is extended. In the case I am aware of, it caused much anger and resentment to the women who were refused. Will the Minister assure me that the terms of the section as outlined will exclude that type of discrimination on marital grounds? Credit facilities were refused on the grounds that they could not be extended to the wife. In the case of which I am aware the husband and wife had a joint bank account and there was an equal risk irrespective of which of them signed the agreement. Will the Minister assure me that there is no need to write in the words “marital status” and that it is covered by the section as outlined?
Mr. Rabbitte: I do not think I can give that assurance as the section stands. Deputy Costello raised a valid point. The section is a necessary and good one. It was as easy to insert “it shall be an offence to discriminate on grounds of sex, sexual orientation, belief, marital or social status” as “on grounds of sex, sexual orientation, belief or social status etc.” If it is permissible for Deputy Costello to move such an amendment I am amenable to accepting it. Alternatively, I assure the House that I will bring it forward in the Seanad.
Deputy Molloy has given a practical example of the type of circumstances in which the point raised by Deputy Costello could matter. As we have sought to insert a section in the Bill that seeks to prevent discrimination — I would not put it further than that, although Deputy O'Keeffe asked some hard questions which I will deal with later — the section should be comprehensive. A Leas-Cheann Comhairle, you may wish to guide me on this.
An Leas-Cheann Comhairle: Perhaps the second route indicated by the Minister could be followed and it could be dealt with in the Seanad. It is certainly  too late to deal with it in this House at this stage.
Mr. Costello: I suggested that another category should be added. I referred to one of the largest retail outlets in the city which discriminated on the basis of marital status, and that category should be specified. The category of social status does not adequately cover the matter since it refers more to people from specific social backgrounds, whether they be members of the travelling community or people from disadvantaged areas. Marital status is the status of a relationship.
Mr. Costello: Women in particular have been discriminated against because their marital relationship is seen not to give them the same credit rating in financial terms as it give to men. I suggest that an additional category should be included and that the  section read...“belief, marital status, social status or area...”.
Mr. Molloy: I seek clarification from the Chair as to what procedure he is following on this matter. The Minister indicated he is prepared to accept an amendment and it appears all parties are in agreement on that. That amendment is being made to section 3, not a subsequent section. The Chair has not indicated to my satisfaction what procedures are to be followed or how the amendment is to be made. As I understand the rules of the House, it would be appropriate for the Minister to submit in writing his proposed amendment and if the House agrees to accept it, the amendment shall be thereby accepted and inserted in the section. We are dealing with section 3.
Mr. Molloy: I am not finished. I am not aware there is any limitation on making a point of information unless I am repeating myself and I have not done so yet. If we move from section 3 we cannot amend it later on Report Stage. That is why I intervened before we moved on from that section.
An Leas-Cheann Comhairle: I will state what I have already indicated. I offered the Minister the opportunity to have the matter dealt with under amendment No. 100. The Minister, as well as the House, appeared to be satisfied with that.
Mr. Rabbitte: I will explain to Deputy Molloy why we are proceeding on this basis. We have all lost sight of the fact that what we are doing is deleting the section and it will form part of the later miscellaneous section. I will proceed with what Deputy Molloy seeks to have done at that stage. Since we are deleting this section, it would not make much sense to deal with the matter here. Therefore we will include the words in amendment No. 100.
On the substantive debate, Deputy O'Keeffe put hard questions about how the matter would be monitored and how it could be established whether somebody was being discriminated against and on what grounds. The Deputy instanced the grounds of sex and the male being successful in securing a loan and the female being unsuccessful. It is directly analogous to the employment area in terms of the corpus of labour law where a woman is passed over for promotion.
Mr. Rabbitte: She must establish under equality and discrimination legislation that the facts of the case support the charge. The position in this case is the same. It is important that a section is included which expressly seeks to outlaw this type of discrimination. We were all agreed on Committee Stage, even though it was not included in the original Bill, that it was wise it should be expressly stated in the Bill. I do not want to be misinterpreted on this, but if our consideration of the Bill is restricted to the moneylending section, there can be justifiable fears that somebody is being discriminated against because of social status or on other grounds. That would be the final irony having regard to the fact that the people who keep the legal moneylending industry in business are those caught in a social category who by definition cannot gain access to credit from conventional financial institutions.
Mr. Rabbitte: Very frequently they are women trying to maintain households, sometimes with little support from their male partners. In that sense they are the people who have the greatest resort under the Bill. If they seek credit from a conventional financial institution for a special occasion, such as a first Holy Communion, or Confirmation, they are likely to be refused, hence there is an alternative moneylending industry in existence. Therefore, this section is necessary and the fact that it is an offence to discriminate on the grounds specified means that a case will either lie in the courts or the Director of Consumer Affairs will act to deal with it.
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