As my party's spokesperson on social welfare, and a former Minister for Social Welfare, I have a particular interest in credit unions and their work. Credit unions form an enormous voluntary co-operative. They play an important part in the development of our country because they have helped people who started out with small savings become substantial savers. They taught them how to make use of the funds available in an organised way.
Many Deputies came forward to speak on the Bill because they know credit unions play a vital part in their local communities. They know they have contributed substantially to the development and modernisation of those communities.
Credit unions have played an important part in tackling issues of poverty and disadvantage. I know that from my work as a public representative and, before that, as a worker in the community. In those early days, the banks played a part in tackling those issues through their individual managers. It was possible at that time to negotiate with an individual bank manager to get a family out of difficulty. It is difficult to do that today unless the credit worthiness of the individual is well established. I brought many families to the banks 20 or 30 years ago, and the banks established the credit worthiness of those families merely by the honesty of the individuals concerned. They took a chance on them and it was rare for the banks to be caught out. When they were, it was only for a couple of hundred pounds.
People learned to save with banks in those days, as many learned to save with the credit unions. However, banking has changed. Local managers have less authority and autonomy in dealing with their own local communities. I realise banks are part of a world of competition, investment, return on investment and profit, but we meet the people on the ground and know the difficulties they face.
The credit unions helped in tackling the problems of people in need who could not get support. They developed that work and gave succour to the population to discourage them from going to moneylenders. There were more moneylenders in those days than people realised. We carried out a study which showed the extent of the moneylending problem. People did not understand the percentages being charged by moneylenders. They thought 25 per cent over six weeks seemed like a reasonable deal but, when taken on an annual basis, it was enormous. To the person who needed money urgently and who had nowhere else to go, the moneylender had a role to play.
The research indicated that the moneylending habit was passed on from mother to daughter. A culture of moneylending was clearly highlighted by the research. That problem had to be addressed but who was there to address it? The credit unions were there and they pioneered the work in tackling the problem of moneylending. The Lough Credit Union in Cork did great work in tackling moneylending problems and expended much of its facilities and resources in doing that. I am sure that, at times, they wondered what they were doing and whether they would be successful in helping people to break away from moneylenders — at times they had to face physical and other challenges and sometimes ended up in court. That is history now, but it was the voluntary non-profit-making credit unions who did that work. When we came to tackle that problem on a national basis, we turned to the credit unions. They are the salt of the earth. The Department of Social Welfare was able to work with them. A small scheme was devised which has now become the highly successful MABS — money, advice and budgeting system — as a result of credit unions, the local society of St. Vincent de Paul, community welfare officers and the Department of Social Welfare working as a team to tackle the issues. The credit unions played a central role in that.
I mention these issues because in speaking of the Central Bank, regulation and control, one is inclined to forget that this is about people. The Central Bank is far removed from the people but the credit unions are not, and those who work voluntarily to keep the credit unions going are on the ground working with people. The household budgeting system, under which deductions are made, originated in the Department of Social Welfare as did many such schemes. Necessity is the mother of invention and if one has initiative and is prepared to tackle problems, new systems will be developed. In Dublin, the household budgeting system has been effective in so far as the payment of rent, ESB and other regular household bills are concerned.
To operate properly in this area, credit unions need a number of facilities, including that of electronic fund transfers and the legislation that goes with it. The movement is developing and improving to meet modern needs. It is doing work which has a large voluntary element and has become much more professional. It is managing huge amounts of money. People are dealing with the credit unions and are happy with them. If people are concerned about elements in the Bill, it is only natural that Deputies in this House are also concerned. Some 80 amendments have already been suggested and there will be more as the Bill goes through Committee Stage.
There is concern about four key points — the limits on savings and loans, self-regulation, the ability to introduce new services, and offences and penalties. The Bill provides for 20,000 shares. Several Deputies have already mentioned that they would like to see this increased to 30,000. In this modern age it would be almost criminal to refuse such a request. Regarding deposits, the Bill provides for £20,000 and there is a demand that it should be £50,000 or 2 per cent of total shares, whichever is the greater. This seems reasonable. Under the Bill, loans are restricted to £20,000 but people want the limit to be 5 per cent of total assets or £30,000 in loans. Several Deputies have said that £30,000 does not constitute a very substantial loan nowadays. It is not exorbitant and there is still a reasonably controlled approach which is beneficial.
The credit unions have their own approach and vision. They operate in a co-operative way as a not-for-profit organisation offering the fullest possible financial services to everyone in the community who wishes to join. Their demands seem reasonable for people who have contributed so much to the country and its development — that hidden development which one does not read about in the newspapers or in Central Bank reports but which occurs. It is only when it has happened that we suddenly realise the difficulties and disadvantages people had to overcome and the credit unions had a major part to play in that.
The movement feels badly about the Bill. It believes its position is being undermined. However, the work of the 12,000 volunteers is worthy of support. There are some 427 credit unions with assets varying in amount between £500,000 and £55 million. There is huge diversity and great strength among credit unions. They have problems and there are issues to be faced. I am quite certain the Minister and his officials will identify these and put it to the credit unions that it is necessary to regulate them.
In practical terms, the limits which are proposed will have a detrimental effect on credit unions. It will result in some of their members turning away from them. It is fundamental to them that the limits set on deposits should reflect a percentage of the credit union's shares and should not be an absolute monetary limit. The current credit union legislation has no individual limit on deposits which a member can hold. This has not caused major problems over the years. The Minister should not jump to say that there was a little problem here or another problem there. The banks have huge problems; if this House and country did not support the banks they would have even greater problems. However, we all work within society and, at the end of the day, politics has a huge influence on all those activities. The credit unions wonder why the rules are being changed adversely.
I am sure the Minister has heard enough about this issue from both sides of the House to know that he must look at it very seriously. I will not repeat what has been said, but the question of self-regulation and proper recognition of the league and what it is doing is important to the credit unions. It must be recognised that all credit unions operate under rules which are approved by the Registrar of Friendly Societies.
In addition, for 38 years credit unions affiliated to the Irish League of Credit Unions have been subject to self-supervision through a comprehensive self-regulatory system which is operated centrally by the league through the management of the movement's own savings protection scheme which has strict rules and procedures. That was set up by the movement on a voluntary basis in 1989, which is evidence of the responsibility of the league. The SPS currently holds funds of £28.7 million, representing 1.2 per cent of savings, exceeding the actuarially recognised norm for credit unions worldwide of 1 per cent and far in excess of the 0.2 per cent represented by the deposit guarantee scheme of commercial financial institutions. Credit unions are careful and prudent; they are not spendthrift.
The rules of the SPS set out prudential management procedures, standards and ratios which must be adhered to and require credit unions to carry fidelity bonding for all its employees and volunteers. Under the SPS a credit union will receive an inspection visit from the league's monitoring division at least once every 15 months, and in 1996, 317 credit unions received such an inspection. The SPS copperfastens the other levels of support to protect members' savings — these are numerous and are well known to the Minister.
Credit unions want to provide new services and regard as important the system whereby the registrar approves additional services, recognises that such services may be of many different types and introduces approval mechanisms which are appropriate to these differences. They would like to provide services such as ATM machines, with a body such as the league to develop the service, set up conditions and procedures and make a single application for approval.
In regard to self-regulation, the movement has two fundamental problems with the regulation proposed in the Bill. First, the Irish League of Credit Unions is not recognised as a supervisory body with the appropriate powers to set standards, carry out inspections and enforce the rules of the savings protection scheme, even though the league, on behalf of the movement, administers this scheme. Without such recognition, the movement will not be able to continue in the way in which it has operated for almost 40 years. That is a fundamental issue for credit unions. Second, while for the first time the Bill makes it obligatory for credit unions to be members of a savings protection scheme, it also removes control of the movement's scheme from itself and subjects it to the control of the registrar. That is a basic attack on the self-help, independent ethos of the credit union movement, about which it is very concerned.
The work being done in this area is valuable and important to the development of the credit union movement on an organised and regulated basis. The Minister should, however, listen to the credit union movement. As the practitioner in this area, it makes a huge contribution to the local community and the Minister should work with the movement rather than against it.