Banking Law

Topic 1 – Consumer Protection

Consumer protection was not always at the fore of company strategy. Things began to improve in the 1970’s and thereon however. The development of banking and banking law very much reflect the political and socioeconomic developments at that time (70s/80s).

Consumers, generally, have protection in both the common law and statute law (regulatory). Legislation is perhaps the most important instrument for protection and will be taken into consideration more so here than the relevant case-law on the matter. Also, there is quite limited case-law in banking law in Ireland.

The central question surrounding the type of protection that is afforded to consumers is whether legislation provides for formal equality or substantive equality.

  • Formal equality – This is where an act applies to everybody (treating everybody the same).
    • Note: treating the same does not mean treating equally.
  • Substantive equality – this is real rights – not necessarily treating equally. Treating equally in substance.

In Ireland, the history of the development of such consumer protection provisions is important. The chronology of the following is important:

  • *1978 Consumer Information Act – The purpose of the Act was/is to make people aware of their rights in relation to goods, services, accommodation and facilities (e.g. holiday brochures etc.) and what information or types of information consumers are legally entitled to have.
    • It also established the office of the Director of Consumer Affairs (effectively put a management structure in place). The function of the office is to carry out examinations of practices in relation to advertising or descriptions of the following: goods, services, accommodation and facilities.
  • *1978 Merger, monopoly and Takeover (Control) Act – This has been amended and superseded by the 1991 Competition Act.
    • NB: The competition act was brought in despite a de minimis rule exempting Ireland from EU competition law.
    • NB: Companies in a monopolistic position generally abuse their power. When companies operate in tandem it is called “collective theft.” Collusive practices = collective theft. This applies to banks and insurance companies. If they are not properly regulated, then they are thieving collectively.
      • Monopolies have a welfare loss to society.

From the two acts above, we can see that in the 1970’s Ireland went from having virtually no protection for consumers to heavy protection.

  • *1980 Sale of Goods and Supply of Services Act (Superseded the 1893 Sale of Goods Act – but this is still on the books) – Referred to as the 1980 Act.
    • This changed one important thing – we now regulate not only the sale of goods, but also the supply of services – For this, there was no recognition before 1980 – that the services industry contributed to the economy in any significant way. But, the government decided in the 80s that the services industry does contribute to the economy and therefore deserves to be regulated.
    • More specifically, for banking and insurance companies, they are quite heavily regulated – why? Simply because they are the largest holders of money and also largest investors and re-investors in the State. Further, why should banks/insurance companies be so heavily regulated?
      1. The number of financial institutions (it is quite small (monopolistic, dualistic, oligopolistic practices resulting in a welfare loss).
      2. The number of people who are consumers of these institutions (virtually all the adult population)
      3. Because they are the biggest re-investors in the State.
    • The regulation of unsolicited goods and financed houses came into play as well and is covered under the Act. The big thing about the 1893 Act – the implied terms – s. 12, 13, 14, 15 (4 implied terms). s. 12 = title, s. 13 = description, s. 14 = merchantable quality, s. 15 = sample.
      • The big difference between the old and new act, is that the implied terms are now just in s. 11? of the 1980 Act.
  • *1963 Companies Act
  • *1963 Registration of Business Names Act
    • It won’t be registered if there is another reason, apart from registration, why the use would not be permitted.
      • E.g. The tort of passing off (IP and tort law) (cannot pass off your goods as those of another). E.g. Adidas v. Adidos.
      • Or if it would be contrary to public policy or morality.
  • *1989 Industrial Relations Act
    • This was very important at the time – it regulated the labour market – giving rights to the “small” labour employee.
  • *1989 Health, Safety and Welfare at Work Act
    • Regulated the work conditions of employees.
  • *1989 Casual Traders Act
    • This is important – even the casual trader must have a license. License = legal permission.
  • *1990 Companies (Amendment) Act
    • The 1963 Companies Act was a copy-cat  of the UK legislation. However, when the Beef industry collapsed (Larry Goodman scandal) – the industry was so endemic to the Irish economy – the Gov’t felt that if the beef industry collapsed the Irish economy would collapse. In 1989 the beef industry was in trouble and they made the 1990 Amendment and this is why it was passed before the 1990 Companies Act.
    • The Amendment Act put in place an examiner-ship process.
      • ***So there was legislation put in place to protect the beef industry, but none put in place to protect the consumers of the Financial Services Industry. – this is a seminal point in the revelations of 2007/2008/2009 during the endemic and absolute collapse of the banking sector not just in Ireland, but throughout the world. 
        • In 1982, the Gallagher Merchant Banking Group collapsed
        • In 1983, the PMPA (private motorists etc) collapsed.
        • In 1986, the ICI (Insurance Corporation of Ireland) was in trouble.
      • So, during the 80s it was evident there may be trouble in the financial services industry, but nothing was done preemptively. Now, had the Gov’t acted in the 80s to control the ICI, PMPA etc. we may not have had the crisis we have just had.

^The acts mentioned above are of general importance to banking law as they set out the historical background to recognition of consumer protection.

More specifically however to banking law are the following three acts:

  • *1989 Central Bank Act (replace the 1971 Central Bank Act, which replaced the 1942 Central Bank Act (Primary Act))
    • The Central Bank Acts are important as they mirror the political progression of the founding/reincarnation of  Ireland as an independent state.
  • *1989 Building Society Act (replaced the 1976 Building Society Act)
  • *1989 Trustee Savings Bank Act (Replaced the 1979 TSB Act)
  • Building societies only gave loans for the purchase of homes
  • Banks only gave loans for the purpose of business.
  • What happened was, banks began to give loans for the purposes of buying houses – + building societies got into the business of banking – there was a competition between the banks and building societies.
  • This is why 1989 was a very important year. Also, this was they year the IFSE was established in Dublin
  • Ireland was on the move economically.

 

 

 

 

Topic 2 – The Development of Banking (law) in Ireland

 

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One response to “Banking Law

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