Dáil Éireann - Volume 416 - 28 February, 1992

Friendly Societies Regulations, 1992: Motion.

Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke): I move:

That Dáil Éireann approves the following Regulations in draft:

Friendly Societies Regulations, 1992,

a copy of which Regulations in draft form was laid before Dáil Éireann on 10th February, 1992.

I propose to make regulations entitled the Friendly Societies Regulations, 1992. These are designed to allow an improvement in the operation of certain friendly societies. As required by Friendly Societies Acts of 1896 to 1977, a draft of the regulations has been laid before each House of the Oireachtas and each House must pass a resolution approving the draft before I in turn can make the regulations.

The effect of these proposed regulations would be to allow friendly societies registered under section 18 (1) (b) of the Friendly Societies Act, 1896, and which operate loan funds under section 46 of that Act to increase their limits for the taking of deposits and the making of loans, last set in 1896; to allow increases in certain other financial limits applying to the friendly societies registered under section 8 (1) of the 1896 Act, and to require all friendly societies due to benefit from the increased loan and deposit limits to appoint supervisory committees.

A little background information will [981] help us all to understand better what I hope to achieve by these regulations — I include myself in wanting to know all about it as well. The Friendly Societies regulations of 1988 raised loan and deposit limits for a category of friendly societies called Specially Authorised Loan Societies, usually known as SALS, fixing £5,000 as the maximum for a single fixing £2,500 as the maximum loan that could be made. This was done in order to update limits set in 1896 to more realistic levels in line with prevailing money values. There are 11 such societies registered with the Registrar of Friendly Societies with total assets of about £2.4 million. The increase in limits which was allowed in 1988 meant that those friendly societies covered by the regulations have the capacity to handle considerably larger sums of money, so closer supervision was required. The 1988 regulations, therefore, required the Specially Authorised Loan Societies to appoint supervisory committees and also required all of the friendly societies to have proper accounting and proper auditing procedures.

In the years leading up to the finalisation of the 1988 regulations, approved by the Oireachtas, there was no representation that friendly societies other than the Specially Authorised Loan Societies needed updated deposits and loan ceilings. However, since 1988 it has been represented to me that there is such a need. I would add that your colleague, the Leas-Cheann Comhairle, has been to the fore in seeking to resolve this matter.

I have considered the matter in consultation with the Registrar of Friendly Societies and officials of my Department and have accepted the case. Accordingly the regulations I am now proposing will extend the scope of the increases in deposit and loan limits, allowed in the 1988 regulations, to a limited further group of friendly societies comprising those societies registered under section 8 (1) (b) of the Friendly Societies Act, 1896, which operate loan funds in accordance with the legislation. There are 15 such societies registered with the Registrar of Friendly Societies within a total of 130 registered friendly societies. They are [982] engaged mainly in the provision of assistance to members at times of financi pressure arising from the birth of a child or from a death in the family, with the provision of a loan fund being seconda to their main activities.

As these societies will be handlir larger sums of money the regulations-as made in 1988 for the Specially Aut orised Loan Societies — will require them to have supervisory committee I am conscious that these societies are mutual help bodies serving social need in a limited area and I would not intend change their basic nature. I am proposir these increases as the limits under which this type of friendly society operate present are £200 maximum for a depos and £50 maximum by way of loan to an individual. Those limits were set in 189 and are clearly in need of updating.

This extension of higher limits for deposits and loans, already permitted the Oireachtas since 1988 in the limited group, is being limited — as I have already mentioned — to another sma further group where the end has bee established to our satisfaction and where the Registrar of Friendly Societies has indicated his satisfaction with this particular proposal. The proposed regulations also will increase certain benefit that may be paid by friendly societies to more realistic levels by today's standards updating the figure of £10,000 set by the 1988 regulations. Again, the Registrar of Friendly Society has no difficulty with this proposal.

By way of background social historical information the current legislation governing the friendly societies dates bac to 1896. That Act in itself was legislation that consolidated earlier Acts going back to 1875. One can imagine the social and economic milieu of the day at that time which would have led to its need in community-type way for people in particular difficulties of social or economi-stress prevailing at that time, as well a in the present day but in an altered environment and in an altered sense.

The basic friendly society was set up to provide for the relief of members of the society, or of their close relatives, or fam [983] ilies at times of illness, birth of a child or death. Cash was provided by voluntary subscriptions of members of any donations that might be made. They also gave help to members who were seeking work and they had special regard to the difficulties that could face fishermen; a form of fire insurance was also provided. Other types of friendly societies provided insurance against loss or death of livestock. Also, societies were set up for charitable purposes to enable social contact to provide help in crisis and to make loans available. The time at which they were set up was of a different era. Yet the various crises which affect people and which lead them to go to their local community self-help friendly society remain as pressing as ever. With those few words I would ask the House to approve the draft regulations which are largely technical in nature.

Mr. Durkan: I thank the Minister for bringing this information before the House this morning. From what I can ascertain, the changes in the regulations are necessary and desirable in keeping with the borrowing and lending requirements of friendly societies at present. The Minister is right in stating that the situation has changed considerably since the original legislation was enacted. The need which was met then is still as great today. Because of the expanding of Europe, the free market of 1992 and so on — about which we hear more all the time — we are told of the need to expand the activities of financial institutions to broaden their lending base, their borrowing base, their capital base and so on. That is desirable but I hope we do not see a diminution in their attention to the people for whom they were first introduced. There is a grave danger of that happening in today's highly commercialised world. I know the Minister would do anything that would encourage that to happen.

There is a tendency to operate every item related to financial services on a strictly commercial basis, to such an extent that these services, although originally [984] introduced to cater for a certain sector in the market, may be forced into a strictly commercial competition with the commercial financial institutions. I recall years gone by when we had a very competitive banking system in Ireland when all the banks competed. They do not compete anymore, either nationally or internationally; they operate a kind of cartel. When one checks on the various charges applied to individual customers at present one finds that one institution applied them initially and the competitor actually competes to increase the charges on the unfortunate customer. I hope nothing like that will happen in this case. I recognise the need for allowing friendly societies to provide them with a wider economic base to enable them to deal with the demands of today's society, to respond positively and to meet the requirements of today's society by virtue of increased demands and at the same time to have the necessary investment that will ensure they can meet such demands. I would have preferred if the Minister had named the 11 societies.

Mrs. O'Rourke: I have them here.

Mr. Durkan: I am sure the Minister will do so at a later stage. If we had been given them we would have been able to assess their capability in the marketplace.

I do not want to delay the House as we have other business to deal with and I am quite sure everyone wants to be as brief as possible this morning but I should say there is an obvious need in society today to provide the facility the Minister spoke about which could be availed of in the event of an emergency, when there is either a birth, marriage or death in a family whereby the householder could obtain a limited amount of cash at a reasonable interest rate to that they can get over their predicament without having a substantial amount of interest extorted from them. It is at such a time, when they are most vulnerable, that individuals or groups are most in need of help and assistance and it is at such a time that avaricious moneylenders in the market place, the illegal and unofficial moneylenders, [985] move in to extract an amount far in excess of anything that is legal in a fashion which would not be tolerated in any ordered society. The sad thing about it is that even in this enlightened age, in an expanded Europe when many desirable regulations have been introduced to curtail such activities, their activities are more prevalent that ever.

Week in week out all of us in this House meet people who find themsleves under pressure because of some family difficulty and have had to go to some unauthorised or illegal money lending agency, some of which charge interest rates of up to 100 per cent over one and a half years. This is nothing short of scandalous. The people caught in this net find that they are unable to extricate themselves from it because they borrow from one to pay another and if they do not meet certain requirements, restrictions are imposed on them.

In this city not all that long ago two of the children of a family who were unable to meet a repayment did not come home from school and, by devious means, a message was delivered to the family that in future if payments were not made promptly the children would not come home at all. That amounts to serious intimidation. It is illegal and should be dealt with.

The only way to deal with this matter is to provide an alternative and the alternative is what we are talking about here today. I hope the regulations which the Minister is now amending will provide a way and a means for people who find themselves in difficulty, be they groups within firms, families or in districts, to obtain the short term finance that they need in the event of an emergency without putting their necks on the block.

Mr. Taylor: Let me, first, welcome one aspect of the exercise that the House is engaged in this morning and, that is, that the Minister is bringing in new regulations by way of positive resolution; in other words, she is giving Deputies an opportunity to discuss and debate them here in the House. It is unfortunate [986] however that this procedure is the exception rather than the rule.

Mr. Durkan: Correct.

Mr. Taylor: It highlights the position that many Deputies have commented on in this House during the years. The usual procedure is to insert a negative proviso in legislation which states that the regulations will automatically come into force unless a resolution negativing them is introduced in the House. In this case a positive resolution is required. I submit to the Minister — and I am sure Deputies would agree with me — that this is, far and away, the most desirable way of dealing with the matter because Deputies are given an opportunity to examine new legislation. In effect, these regulations amount to new legislation. Members are given the opportunity to discuss them with the Minister, to comment on them and perhaps raise some queries in connection with them.

Having said that, this procedure is not entirely satisfactory in that Members are not given the opportunity under the procedures — the Ceann Comhairle may confirm this for me — to amend the regulations. Normally, when legislation is brought before the House a Member can put down an amendment and have it discussed and a vote taken on it. In this case the House either accepts the regulations as a whole, as an entity, or rejects them. It appears that the opportunity to put down an amendment to the regulations does not arise. That is regrettable.

In her introductory remarks the Minister described what is being introduced here as merely technical in nature. I do not think that I could agree with that description. That is not to say that they may not be appropriate or necessary. They provide for a change in the status of these societies to enable them expand their activities in a substantial way. Perhaps this is appropriate but they are not technical.

We are talking here about a proposal to give societies the opportunity to take deposits of quite substantial sums and to make loans of substantial sums. It is [987] assumed that the powers being given under the new regulations will lead to a substantial increase in the financial turnover of the societies who will be required to exercise a great degree of responsibility. One must look at the question of whether the societies have exercised the necessary degree of responsibility required in the past. I do not know whether they have or have not but I note that the Registrar of Friendly Societies went out of his way to include a paragraph at page 14 of his most recent report, for the period up to 31 December 1989, under the heading “prosecutions”, which reads:

Due to a deterioration in the rate of submission by friendly societies of their annual returns, the Registrar has decided to introduce a policy of prosecuting the more serious offenders. Consideration is also being given to the possibility of including officers of friendly societies in such prosecutions. Such a prosecution policy already exists in the case of Industrial and Provident Societies.

It may be that the position has substantially improved since December 1989 — I hope so — but nonetheless it is a source of some slight concern that these societies, and the officers thereof, were not concerned about updating their returns to the Registrar of Friendly Societies. This is a crucial and important matter. This gives rise to some slight fears as to their capacity to manage increased finances in a proper and reliable manner. It is very serious matter when societies are allowed to take substantial deposits of money. I assume that they are only allowed to take deposits from their own members and not the general public but I also assume it would be little more than a formality to become a member if one was interested in making a substantial deposit.

As the Minister said, there are 11 such societies and these are listed on page 14 of the 1989 report of the Registrar. If Deputy Durkan is interested, I will name a few of them: Friendly Brothers of St. [988] Peter, Literary Teachers' Friendly Society, Phibsboro Garage CIE Sickness and Retirement Society, Irish Creamery Milk Suppliers Association and Willwood Friendly Society, to name but a few. They are an anachronism going back to the turn of the century. As I understand it, their origins are interesting and it was very necessary at the time to establish them. They were initiated when there were no social welfare codes and before mutual insurance was available to ordinary working people. Groups got together to form these mutual societies, people paid in and there was a fund on which they could draw in times of need. Time moved on and there are now only 11 of these societies in the country. They are an anachronistic institution but that does not necessarily mean they do not have a role to play. However, they should not be allowed to overreach themselves and act as a major player in the financial field because there could be dangers in that course.

Many societies who do well in a small way and who fulfilled a very valuable functions over the years might overreach themselves. It has happened before, many institutions get out of their depth and are carried away by big loans, big deposits and grandiose schemes. Some of them have failed and depositors have lost their money. There was a case in which the Minister was sued by a number of people who lost money, McMahon v. Ireland, in which there was a claim against two Ministers and the Registrar alleging negligence in the supervision of one such society during the seventies. The plaintiffs lost the money they had deposited with the society but their claims were rejected on the basis that a public officer should not be personally liable for decisions taken honestly and in good faith.

If the Minister is taking it upon herself to allow these very substantial increases and to give a role to the Registrar, in fairness to people who deposit money, the Minister should have a responsibility to depositors who might be at risk of losing their money. After all, the Minister [989] allowed these increases and set up advisory committees. I am not sure of the structure of the supervising committees or how effective they will be but the general public who may be induced by advertisements or blandishments to put their money on deposit in these societies think that there is some kind of governmental or ministerial guarantee that their money will be safe. Their money should be safe and if a supervisory and interventionist role is undertaken by the Minister and Registrar of Friendly Societies, if things go wrong the Minister should carry the can and compensate people who lose their savings. It has happened and it could happen again if great care is not exercised.

I am concerned that there are only 11 such societies and that each of them operates on an individual basis, there is no inter-connection between them. That is where the major distinction must be drawn between these societies and the credit unions who, of course, are also friendly societies and play a very important role in the question of deposits and loans for family needs. The future in the kind of activity about which we are talking rests with the credit unions instead of with the friendly societies which have existed since the turn of the century. All encouragement should be given to the credit union movement which is much stronger than these societies. Their great advantage is that they have a mutual support system and they meet and mutually support one another all over the country. There must be hundreds of branches of the credit unions doing a remarkable job and filling a gap in relation to ordinary people making deposits in their local areas.

I would not like to think that the 11 societies, operating in a limited, closed way, would intrude on the workings of the credit union movement. It could be argued that they operate on a different plain, I do not know. However, when talking about deposits and loans we know they are the main activity of the credit union movement which is a stronger and more secure place in which to lodge money.

[990] The increase in the authorised limits proposed in the regulations is quite substantial. As I understand it it is £15,000. Is that correct?

Mrs. O'Rourke: I am just getting that information.

Mr. Taylor: As I understand it, there seems to be two categories. One seems to provide for an increase from £10,000 to £15,000 and in others I see figures of £2,500 and £5,000 mentioned. An increase from £10,000 to £15,000 is a substantial increase. Regulation IV, section 8, of the Schedule states that there is provision for £15,000, increased from £10,000, and the matter is again mentioned in section 41. When we talk about a loan of £15,000 we are not talking about a birth or death in the family, that money goes far beyond——

An Ceann Comhairle: Deputy Taylor has one minute left of the time available to him.

Mr. Taylor: Great care will be required when the 11 societies are allowed to get into the realm of this kind of substantial money. There could be a danger that societies — or some of them — intend to expand their activities beyond the realm of their long standing old membership looking for more business. I am not saying that they should not but, within those parameters, great care must be taken.

The democratisation of these societies has always concerned me, they have tended to be closely knit with a little inner circle of committee members controlling them on a perpetual basis, perhaps for generations. However, that will have to be changed if their funds are opened and members will have to be given a greater chance to play a more involved role at general meetings.

Mr. Tunney: I thank the Minister for having brought these regulations before us. I also avail of the opportunity to congratulate her on her appointment. I am sure I speak for the House when I say we [991] are confident she will bring to the office the same skill, commitment and success which she brought to other ministries.

Mr. Taylor: Hear, hear.

Mr. Tunney: I also wish to thank the Minister, Deputy O'Malley, who received many delegations and deputations in respect of this matter. Deputy Taylor made a good point and I would not be associated with anything where I was not assured that the interests of the depositors were safeguarded. He also said this was a bit anachronistic. In so far as the origins of friendly societies go back to 1896, one could say that the limits imposed then are certainly anachronistic.

I would differ slightly with the Deputy in one point in that I believe small is beautiful. When one looks at the systems of finance in Ireland and throughout the world one can see that there have been greater scams in the bigger anonymous bodies than in bodies such as this where there is a type of self-regulatory process. I am familiar with one of these societies which has been in Finglas for longer than I have. Everyone knows the committee, and they exercise an interest and restraint which goes as far as it can to guarantee that things do not go astray. I do not have the particulars before me but I recall that the depositors of one of these societies lost out. I am sure the Department and the Registrar of Friendly Societies have regulations and requirements which will guarantee as far as possible that deposits will be safe in the hands of these societies.

As the Minister said, situations arise in families for which these societies cater, for example, births, First Communions, Confirmations, marriages, deaths and, occasionally, holidays. Many families do not have resources immediately to hand to pay for such events but given some time they have the capacity to make repayments. It is desirable that they should have the services of a local friendly society available to them. I have no vested interest in credit unions as against friendly societies. However, in respect of the suggestion that these [992] societies intrude on the domain of credit unions one could say that these societies preceded credit unions and, perhaps, credit unions have intruded on their domain rather than vice versa.

I welcome the regulations and I congratulate the Minister on her appointment.

Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke): I thank the Deputies who have contributed to the debate. Deputy Durkan welcomed the regulations and asked for the names of the societies involved. They are the Mill Sawyers Friendly Society; the Shamrock Friendly Tontine Society; Ballsbridge Christian Burial Society; St. Canice's Mortality and Tontine Society; St. Agnes' Friendly and Tontine Society; Friendly Brothers of the Nativity; Milltown Tontine and Benefit Society; St. Laurence Female Tontine Society; St. Anne's Tontine and Benefit Society; St. Cronan's Tontine and Benefit Society; Clanbrassil Street Christian Burial Association; St. Mary's Tontine Society; Tom Moore Friendly Tontine Society; St. Patrick's and St. Bridget's Tontine Society and St. Lawrence Tontine Society. I entirely agree with the Deputy that in the context of a wider Europe we should not get caught up in big lending institutions with their various regulations which often inhibit and work against, albeit unwillingly, some people. He also referred to moneylenders who move in and offer people money when their resistance is low and desperately need help. The Deputy referred to a particular case. This is a particularly sad practice.

Deputy Taylor made several valid points. The regulations have been deliberately confined to a limited number of societies so that the Registrar of Friendly Societies can keep a close eye on them. The supervisory committees set up in 1988 also provide an extra degree of supervision. The Deputy referred to the 1989 report of the Registrar of Friendly Societies. The supervisory committees were set up when the regulations were changed in 1988 and therefore, their [993] impact would not have been reflected in the report to which the Deputy referred. I understand the supervisory committees are working well and that the Registrar of Friendly Societies is keeping a close eye on proceedings.

I note the Deputy's welcome for open debate on the regulations. We all benefit from debate on changes to regulations which affect legislation. The Deputy said it is not possible to amend the regulations. In the nature of things, the regulations will be constantly updated and regard will be had to the need for change.

As the Deputy said, friendly societies may take deposits from members of their committees. He also said there was a need to ensure that societies did not get out of their depth and asked if the Department or I would have a say in the structures of friendly societies and the advisory committees. The regulations have been deliberately confined to a limited number of societies so that the Registrar of Friendly Societies can keep a close eye on them.

Deputies Taylor and Tunney referred to credit unions. Deputy Taylor referred to the need for democratisation in the running of friendly societies. I am sure societies have provided for this. I understand the Deputy's fears in this respect but in view of the restricted milieu in which friendly societies operate, the people they help and the need for their services I believe regard is had to the need for democratisation.

The Deputy asked about the increase from £10,000 to £15,000. This relates to benefits which members may receive under any assurances they take out. It is entirely different from just going in and raising that sum of money. This increase merely reflects the need to update the benefits to note the passage of time.

I thank Deputy Tunney for his very kind wishes.

Mr. Taylor: We would all like to be associated with them.

Mr. Durkan: Indeed.

Mrs. O'Rourke: I thank the Deputies. [994] I hope to work very closely with the Deputies. This is a new area for me and one to which I hope I can bring some background knowledge from my upbringing. I will refer to credit unions in a moment.

Deputies should not lose sight of the background of friendly societies. Friendly societies were set up to serve communities and people who find themselves in difficulties. They were called “friendly” societies so that people would know they had someone to turn to when they were in financial difficulties. As Deputies Durkan and Tunney said, it would be a pity if we were to get caught up in the concept of huge societies and organisations which have structures and layers of bureaucracy which often inhibit the giving of knowledge, help and access to people in difficulties. We are all nostalgic about the corner store where you could get groceries at any hour of the day or night and did not have to queue up with a basket to be checked out. The friendly store, the local newsagent and the local friendly society were, in a communal way, the activities of the time, but there is no need for us to lose that intimacy. There is now a more compelling need for that type of intimacy in relationships so that bureaucracy does not previal.

In answer to the Deputies, there is a working group composed of representatives of the Department, the Registry of Friendly Societies, the Irish League of Credit Unions and the Credit Union Advisory Committees. This group are examining the up-dating of credit union legislation, and the Registrar of Friendly Societies in examining the question of up-dating the Friendly Societies Acts. Regard will be had to the points put forward in relation to amendment to regulations. I assure the Deputies that the points made in today's debate will be noted for consideration in the up-dating of legislation.

Question put and agreed to.