Seanad Éireann - Volume 131 - 18 March, 1992
Friendly Societies Regulations, 1992: Motion.
Mr. Wright Mr. Wright
 Mr. Wright: I move:
That Seanad Éireann approves the following Regulations in draft:
Friendly Societies Regulations, 1992, a copy of which regulations in draft form was laid before Seanad Éireann on 10 February, 1992.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: I welcome the Minister of State to the House.
Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke) Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke)
Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke): I was in the House about two weeks ago but did not get the opportunity to congratulate the Cathaoirleach and the new Leader of the House. I should like to do so now.
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 the Friendly Societies Acts, 1896 to 1977, a draft of the regulations has been laid before each House of the Oireachtas. Each House must pass a resolution approving the draft before I can make the regulations. The Dáil passed the necessary resolution on 28 February.
The effect of the proposed regulations would be to allow friendly societies registered under section 8 (1) (b) of the Friendly Societies Act, 1896, which operate loan funds under section 46 of that Act, to increase the 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 friendly societies registered under section 8 (1) of the 1896 Act, and to require all the friendly societies due to benefit from the increased loan and deposit limits to appoint supervisory committees.
A little social historical background information on the current legislation governing friendly societies will help us all to understand better the purpose of these regulations. The current legislation governing friendly societies goes back to 1896. However, the 1896 Act is actually  legislation that consolidates earlier Acts going back as far as 1875.
The basic friendly society was set up, as its name implies, to provide for the relief of members of the society or their families or close relatives at times of illness, birth of a child or death of a relative. Cash was provided by voluntary subscription of members plus any donations that might be made. It was a different time and a different milieu in which people lived, yet the family and social crises remain the same today. The societies 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 kinds of friendly society provided insurance against loss or death of livestock. There were also societies set up for charitable purposes, to assist or bring about social contact, to provide help in crises and to make loans. Against that background, the friendly societies regulations of 1988, raised loan and deposit limits for a category of friendly society called specially authorised loan societies, usually known as SALS, fixing £5,000 as the maximum for a single deposit and £2,500 as the maximum loan that could be made. That was done in order to update limits set in 1896 to more realistic levels in line with prevailing money values. There are 11 specially authorised loan societies registered with the Registrar of Friendly Societies, with total assets of about £2.4 million and a total of 13,000 members. The increases in limits allowed in 1988 meant, of course, that those friendly societies covered by the regulations then had the capacity to handle considerably larger sums of money, so closer supervison of operations was obviously required. The 1988 regulations, therefore, required the specially authorised loan societies to appoint supervisory committees and also required all friendly societies to have proper accounting and 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 specially authorised loan societies needed updated deposit and loan ceilings. However, since 1988 it has been represented that there is such a need. The matter has been considered in consultation with the Registrar of Friendly Societies and officials of my Department. It is accepted that there is a case for the increases proposed.
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. There are 22 societies registered under section 8 (1) (b) within an overall total of 130 registered friendly societies. Those 22 societies are engaged mainly in the provision of assistance to members at times of financial pressure arising from the birth of a child or from a death in the family, with the provision of a loan fund being secondary to their main activities. In fact, only 15 of those 22 friendly societies operate a loan fund at present.
When I spoke in the Dáil on this matter the debate developed into a discussion about the role of moneylenders. Concern has often been expressed about the activities of illegal moneylenders and I share that concern. Indeed, as I now have particular responsibility for the area of consumer protection, I should like to inform Senators that I have had consultations with interested parties on this very issue. While these regulations are limited in scope, and are not intended to provide an answer to that problem, the Minister for Industry and Commerce will in the next few weeks seek Government approval for a comprehensive set of measures in relation to various forms of consumer credit. Those measures will implement the EC directive on consumer credit, will deal specifically with illegal moneylending and will generally curb abuses in the whole area of consumer credit. I know that the Cathaoirleach, and all Members of the House, realise that this is an important area. The matter has come up constantly for debate and is  an issue of very great concern. All of us, when dealing with people in our constituencies, have come across the activities of illegal moneylenders. The matter is now my responsibility and I look forward to coming to the House and debating the whole issue when the legislation is ready. The legislation will be comprehensive and this issue will be a component within it.
As the societies will be handling larger sums of money, the regulations, as in 1988 for specially authorised loan societies, will require them to have supervisory committees. I am conscious that these societies are mutual help bodies serving social needs in a limited area and I do not intend to change their basic nature. I am proposing these increases as the limits under which this kind of friendly society operates at present are £200 maximum for a deposit and £50 maximum by way of loan to any individual. Those limits were set in 1896 and are quite clearly in need of updating.
The extension of higher limits for deposits and loans, already permitted by the Oireachtas for specially authorised loan societies since 1988, is being limited, as I mentioned, to a small further group of friendly societies where the need has been established to my satisfaction and where the Registrar of Friendly Societies has indicated his satisfaction with the proposal.
The proposed regulations, will also increase certain benefits 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. Members should not confuse the benefits with what can be granted, which is a separate issue. The benefits will, obviously, be benefits to members. Again, the Registrar of Friendly Societies had no difficulty with the proposal.
I ask the House to approve the draft regulations, which are largely technical in nature.
Mrs. Doyle Mrs. Doyle
Mrs. Doyle: I welcome the Minister to the House and wish here well in her new  position.
I find the concept of friendly societies, and even the expression, “friendly society”, endearingly quaint in this day and age. I cannot profess to have a great knowledge about them or about the way they operate, but I am fascinated about how they knit into overall credit facilities. We have the banking system, credit unions, trustee savings banks and other credit facilities and the friendly societies. They are a quaint concept but I imagine many thousands of people still get a tremendous service from them. I have no difficulty in dealing with the regulation before us. Will the Minister expand on the EC Directive on consumer credit and say how close it is to ratification here? The Minister said in the course of her introductory remarks that the Minister for Industry and Commerce will seek Government approval of a comprehensive set of measures within the next few weeks. Are we likely to discuss the directive in this House or will it be discussed in the Dáil in the immediate future? How will its provisions impact particularly on the vexed area of moneylending? Anyone who is driven to a moneylender does so as a last resort despite the exorbitant interest rates they charge, particularly the illegal moneylenders. Most people caught within the grasp of illegal moneylenders are not conscious of their exorbitant interest rates; they really do not understand how the interest rates are calculated. Therefore, it is usually as a last resort that they approach a moneylender, perhaps for money for a major family occasion, or to pay off another debt and so the circle continues.
There is no number on the statutory instrument before us. What is meant by paragraph 5 which simply states that regulation 3 of the 1988 regulations is hereby revoked? I have to admit ignorance and say I do not know what is in the 1988 Regulations. Lest there is anything ominous or interesting being revoked about which we do not know perhaps we could have on the record what is regulation 3 of the 1988 regulations now about  to be revoked.
I have no difficulty with this motion and will not delay the House. I would like the Minister to expand on the implications of the EC Directive on consumer credit, to inform us how that will impact on the different areas of credit here, particularly on the problematic area of illegal moneylending. Will the Minister comment on the genesis of the concept of “friendly societies” also, their relevance in this day and age, and where they, as a particular segment, fit in with all our other credit organisations? In regard to paragraph 5 of the statutory instrument which refers to the regulation before us, will the Minister tell us what exactly is being revoked?
Dr. McCarthy Dr. McCarthy
Dr. McCarthy: I should like to welcome the Minister to the House, to congratulate her on her appointment and wish her well. From past experience and my knowledge of her I have no doubt that she will perform these new duties in the same exemplary capable manner she performed her duties in other ministries. She has been a very good example to all of us of how Ministerial duties should be undertaken. Always she was amenable to us for discussion of subjects of concern to us in our constituencies.
I welcome these regulations. It is appropriate and timely that they be updated, all the more so since legislation governing friendly societies dates back to 1896, which Act consolidated the legislation dating back to 1875. This alone highlighted the need for change. As the Minister said the purpose of friendly societies was to fulfil a type of socioeconomic need in society, in times of special family needs, for example, when there were weddings, funerals, First Communion ceremonies or even in circumstances in which farmers might have had livestock disasters, when fishermen might have experienced problems in meeting their requirements. These needs were very obvious when the legislation was introduced originally. I suppose it is a sad reflection on all of us that these needs and special requirements obtain a century and a half later. Equally, it  highlights how important it is that we work together to endeavour to make life easier and better, improving family economics so that families will no longer be required to avail of such services.
The Minister and Senator Doyle adverted to moneylenders. It is particularly satisfying to note that such friendly societies at short notice can provide responsible essential needs. Otherwise people would be forced to go to legal and/or illegal moneylenders. Indeed, there is very little difference between the two categories; they are all vultures and parasites in our society, their exorbitant interest rates are criminal, to say the least. I am glad the Minister, and the Minister of State at the Department of Industry and Commerce will take special note of consumer requirements and protection in the future since to date these parasites have lived off the poor, those in dire need, in our society. Indeed, they have used all sorts of methods, ranging from physical and mental violence to intimidation. Therefore, I am glad the friendly societies, to some extent, replace the need for such people.
Looking at the titles of friendly societies to which the Minister referred one sees clearly that they are almost all parochially-based and were started by communities endeavouring to satisfy their needs. There were, for example, the Mill Sawyers Friendly Society; the Shamrock Friendly Tontine Society; the Ballsbridge Christian Burial Society and so on, all parochially-based. It was good that communities saw the clear need to help their citizens.
Nowadays many of the functions of friendly societies have been taken over. In fact it is true to say that their obligations and functions have been subsumed almost completely by the credit unions, marvellous community-based organisations transcending all levels of society and providing a truly nationwide service. I am glad to note that these friendly societies and credit unions work together but also independently in filling a clear need in society.
I am glad to note also that the Minister  has ensured there will be adequate supervision of these societies last they overstretch themselves, by the Registrar of Friendly Societies and supervisory committees.
Mr. Harte Mr. Harte
Mr. Harte: I too welcome these regulations. It was absolutely necessary that they be updated since 11 small societies had not been brought within the full control of the Registrar of Friendly Societies. The regulations before us are confined to a limited number of small societies and I believe they will not only protect the societies concerned but the public in general. There is a great need to have proper auditing and accounting procedures as this did not always apply in the past. From experience we know people did not always behave correctly and submit reports regularly. Even if this was not the case in particular societies, we are entitled to assume that the Registrar of small societies was less vigilant in the past.
Updating the regulations is very welcome. Many but not all, small societies got into difficulties, perhaps as a result of bad management or sharp practice, and some people absconded with the money, leaving some unfortunates penniless.
We do not have the opportunity often to discuss regulations, as they are usually passed quickly. I am delighted the Minister has given us this opportunity and it will not be her fault if we do not have a full debate.
Supervisory committees were established under the 1988 regulations and together with the Registrar of Friendly Societies will play a very important role in regulating friendly societies. They will be vigilant on our behalf and as a result more effective auditing and accounting procedures will be put in place. The likelihood that money may be misappropriated will be substantially reduced. Nobody can guarantee that things will not go wrong, but these regulations will ensure that this will become a remote possibility. In saying that, I am not sure that I am interpreting the regulations correctly, but if not, I am  sure the Minister will correct me when replying.
The regulations provide the Registrar with the power to intervene. I am not suggesting that the regulations guarantee absolutely that we can safeguard everybody's money, but will the Minister confirm that in the event of things going wrong people will be compensated by the State? If her reply is in the negative, will she state that the possibility of losing one's life savings or substantial sums of money will be treated in a proper manner? We must believe this is the case but I would like to hear her views.
It is vital that small societies are not allowed to over-reach themselves. It is also important that they are watched so that they are not prosecuted because of their failure to submit annual returns to the Registrar of Friendly Societies. Since we are aware of the failures to handle money in a proper manner, we must be ever vigilant.
The regulations provide for an extension of the limits for loans and deposits, but is there not a danger that the activities of the societies may develop beyond the membership arrangement by the societies looking for more business? I am not arguing about them looking for more business but in such an event, greater vigilance is required on the part of the Minister and the Registrar. I am not sure that the regulations go far enough to be totally effective where expansion takes place and protection becomes less effective, I hope the Minister appreciates my concern about this.
A great many smaller societies are controlled on a perpetual basis and, without wishing to have a go at them, may I say they are controlled by a group with a clique mentality. They may be friendly but nobody gets inside the clique. We all know in politics that when cliques get together, difficulties arise. If the societies go out and look for business what parameters will be set?
I would be the last person to deprive people who find themselves in difficulties of the opportunity of going to their friendly society to look for assistance. Nevertheless, from experience we know  we must be careful and we must do everything possible to protect people's interests. I believe the regulations as they stand are not adequate; if the smaller societies get into difficulties as a result of expansion, it may be necessary to look at the regulations again. The Minister may not agree but I would like to hear her reaction to that point of view.
We must recognise the value of these small societies. The credit union and these small societies form a bulwark against illegal moneylending and, therefore, must be given the fullest possible support to give a service to those in need of short term assistance.
I thank the Minister for giving us this opportunity to discuss the regulations. I look forward to the Minister taking on these illegal moneylenders. I am sure she will be tenacious and successful in tackling this problem.
Éamon Ó Cuív Éamon Ó Cuív
Éamon Ó Cuív: Ba mhaith liom i dtosach báire fáilte a chur roimh an Aire go dtí an Teach.
The regulations we are discussing today are not earth shattering but it is appropriate that I refer to two issues, first, the question of the availability of money and, second, the Friendly Societies Acts and regulations in general. Consideration must be given to the problems posed by the shortage of money, particularly the whole question of credit to people who do not have ready access to money from high street banks and so on. Very often I meet people who have borrowed money, quite legally, at rates of 25 and 30 per cent. This is a heavy burden on them and often puts them in the position where they cannot meet the repayments.
I have witnessed the growth of credit unions, which are a form of society under the Registrar of Friendly Societies. Credit unions provide a very valuable source of funding at reasonable rates of interest. These regulations are another step in that direction. However I would quibble on a very small point, that is, that perhaps the limit of deposit could be raised to £6,000 in line with the sum that applies in credit unions. There is huge  potential for mutual societies to provide credit where necessary. Considering the number of societies involved it appears that this mechanism has not been sufficiently explored or developed. Certainly when compared with credit unions, these societies have not reached their potential.
As a person who works in the development sphere I realise that we lack some type of society which would channel money within communities for productive purposes. I accept that this is not the role of the credit unions. We should consider in the future the possibility of extending the role of these societies to make available reasonable sums of money, sums in excess of what we are talking about here, to young people to develop small businesses. If a structure was set up whereby money could be kept within communities, some system of bonding would need to be in place. One of the great strengths of the credit union movement is that they provide for bonding. Perhaps it would be possible in the future to set up a similar system under a structure such as that provided for here.
I would like to refer to the law governing friendly societies. As chairman of a co-operative who are governed by the Registrar of Friendly Societies I have had dealings in this whole sphere over a long number of years and I have made the case that the law dealing with mutual societies, co-operatives and so on is out of date. The operation of returns and so on dates back to an era which is a century old. I would ask the Minister, in her new role, to see whether the regulations governing co-operatives, friendly societies and so on need updating to deal with the realities of modern life.
I was very disappointed to see the ordinary co-operatives go the way of the plc. I understand that this was done for business reasons, within the rules of societies in general, but it was a perfect example of the lack of expansion, which is necessary to survive. The lack of proper definitions of co-operatives and friendly societies and of detailed regulation which would ensure that societies are run in a proper fashion and that membership is  widespread and open needs to be addressed. Community based organisations in particular should have a legal standing. That would go a long way towards tackling the financial crisis and unemployment, particularly in rural communities. The creation of properly bonded structures could be one of the greatest ways of recycling money within communities, thereby ensuring that the whole principle of self-help is adhered to and developed.
Molaim na rialacháin atá á gcur i láthair an Tí seo. Cuirim an-fháilte rompu, mar a chuirim roimh rud ar bith a thugann an dlí suas chun dáta agus a chuireann reachtaíocht ar chaighdeán ceart.
Mr. Cosgrave Mr. Cosgrave
Mr. Cosgrave: I welcome the opportunity to contribute briefly to this matter. I would first like to welcome the Minister to the House. I wish her well in her new portfolio. I know she will carry out the work with dedication, as she did in her previous portfolios, and I wish her every success.
The matter before us is quite limited and brief. However, as other speakers have mentioned, it raises matters which, if not addressed here, should receive further thought and discussion. First I would like to pay tribute to the various friendly societies who have done tremendous work down the years in local areas. I would ask the Minister whether she is satisfied with the existing safeguards. I pose that question particularly in the light of recent events both here and abroad in relation to pension funds, moneys that went missing and certain matters relating to the setting up of banks and societies. While the safeguards have been improved I wonder whether the Minister is entirely happy that breaches and loss of savings can be prevented. Perhaps investigations, audits and checks need to be carried out by her Department. Obviously some of these matters are the responsibility of the Department of Social Welfare but perhaps the Minister would address the issues that come under her Department.
There is great concern about the security  of moneys invested. Obviously the whole question of the development of friendly societies and the rules and regulations governing them must be addressed. One aspect which should be considered is the whole question of borrowing from moneylenders who charge exorbitant rates of interest, resulting in great difficulty for many families. I know this matter does not come under the regulations but I am sure the Minister is concerned about it. Perhaps she and her colleague in the Department of Social Welfare would consider the matter at an early date.
It has been said here that various organisations have benefited but I do not know if that includes fishermen and fire insurance. Perhaps the Minister of State would update the position. There are also people who want to borrow relatively small amounts — and for whom borrowing is a matter of life and death — who do not want to put literally everything into the bank as collateral. Even for relatively small amounts the bank wants to ensure that they either have deposits, title deeds or guarantees to ensure that those sums are repaid. Provision should be made for those who wish to borrow relatively small amounts from time to time to help them over an interim difficulty. I do not think the regulations should concern us unduly. I would ask the Minister of State to examine the matters I have raised and in particular the safeguards.
Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke) Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke)
Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke): I thank the Members who have contributed, Senators Avril Doyle, Sean McCarthy, Jack Harte, Éamon Ó Cuív and Liam Cosgrave. As in the Dáil the debate turned into an interesting one of social concern and I thank the Senators for so expressing it. Senator Avril Doyle asked about the EC directive on consumer credit, when and where it would be available and if legislation was necessary. I explained that in my opening speech and I reaffirm that the memorandum for Government and various matters relating to Government are being  considered at present in the Department and I would hope that will be completed in a matter of weeks. Then the necessary legislation which will, of course, take some time will be framed. It is my intention that it should proceed with all haste. The EC directives on various consumer matters are also in the process of being studied here and are receiving very careful attention within the Department. I expect to be able to attend to them shortly.
Senator Avril Doyle drew attention to regulation 5 in the draft regulations. That is a matter of technical definition as laid out in original Acts and regulations. She also asked about the history of friendly societies. As the name and the dates of the legislation implied, they were set up within a parish, as Senator Sean McCarthy said to deal with people in difficult circumstances who did not want to go to large, anonymous institutions, who perhaps would not entertain them anyway or their needs. They were set up in that spirit of intimacy whereby people felt comfortable going to their neighbourhood friendly society. The friendly societies were established over a century ago but, as Senator Sean McCarthy said, the issues which concerned people in their daily lives — bereavements, expense of the time of a birth, a farming loss or fishing loss — still remain the daily concerns in a more sophisticated environment. I imagine that is how the term “friendly societies” came about. They were there to serve in our hour of need and you went to them and expected to see a friendly face, hear a friendly voice and receive some help. That may sound like a fairytale now. There is increasing need for constant checks and supervision on all matters of lending, be they small or large because they are all open to abuses of one kind or another of which the registrar is aware. The Registrar of Friendly Societies works with the Departments to ensure there are no abuses and, and I said earlier, supervisory committees are being set up.
Senator Sean McCarthy welcomed the introduction of the regulations as did all of the Senators who spoke on the matter.
 He listed the various societies, which I had spoken about in the Dáil, The Mill Sawyers Friendly Society, the Shamrock Friendly Tontine Society, St. Canice's Mortality and Tontine Society — all kinds of societies to give help at times of bereavement and birth. Marriage is not mentioned as having been expensive but I am sure people sought money to tide them over the marriage feast, even though their needs were simpler then than now.
Senator Harte spoke about the need for supervisory committees. I am glad to say there was a general tightening up of all of that due to the natural concern of the registrar. This led to the 1988 regulations which are being constantly examined. Furthermore, 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 are studying the up-dating of credit union legislation, and the Registrar of Friendly Societies is examining the updating of the Friendly Societies Act.
Senator Jack Harte expressed legitimate concerns about supervisory committees and asked if people would be compensated if their money vanished. The task of both the Registrar of Friendly Societies and the supervisory committes, of which I spoke, is to ensure that that will not happen. I believe the supervisory committees will operate satisfactorily and that the wishes of the registrar will be carried through, but it requires constant vigilance to ensure no wrong is done through the operation of these friendly societies. I am satisfied that the regulations we have put in place plus the intergroup committee of which I spoke have this matter in hand.
Senator Ó Cuiv asked about the safeguards and I think they are addressed in what I answered to Deputy Harte. He referred to the co-ops and the idea of self-help. He welcomed the regulations and indeed he wished the thresholds and the limits of the money to be paid out could have been raised. Coming as he does from a background of work in the self-help, co-operative area, knowing as  he does how that ethos — that spirit of get-up-and-go, with people working together within parishes and communities — can ignite a local community, the Senator had every right to express his concerns. On the Order of Business today there was much talk of the need to help the west of Ireland and the need to have such a debate in this House. Senator Ó Cuív said people with a project should be able to go to a local institution which would listen to their idea and grant them the necessary funding to get started on it. I would like to think that the spirit and ethos will be embodied as well in the legislation being prepared on consumer credit.
Senator Cosgrave broadened the debate to ask if I was satisfied about the safeguards in relation to pensions in the light of the disquiet caused for himself, other members and the public by such issues. These regulations will not address that matter which obviously needs to be tightened and looked at. I will bear this in mind when I speak to my colleagues in the Department of Social Welfare both about this matter and the moneylending issue which was addressed also by Senator McCarthy. He spoke of the near desperation for people from time to time in relation to the operations of illegal moneylenders as distinct from legitimate and registered moneylenders. At the outset I said all of us have great and grave experience of such matters. I referred to the worry and desperation caused for people in relation to the operations of illegal moneylenders. As I feel very strongly about this matter I intend to address it within the ambit of the proposed legislation.
I thank Members for their interest and attention.
Question put and agreed to.
Seanad Éireann 131 Friendly Societies Regulations, 1992: Motion.