Labour Finance spokesperson Joan Burton, speaking on the introduction of the Central Bank and Financial Services Authority of Ireland Bill 2003 to establish a Financial Services Ombudsman, said she welcomed the establishment of the office, even if this was a long overdue promise by this Government.

The Irish economy along with most modern economies was significantly driven by consumer credit and the high-pressure advertisement of banking and financial services. Post Christmas many families were now counting the cost of the pre-Christmas spending sprees and many were waking up to horrendous costs being charged to them by various financial institutions.

She said it was clear that in a number of cases consumers continue to be ripped off by a number of financial institutions and service providers. Recent examples include exceptionally high interest rates being applied to credit cards and store cards despite interest rates being at an historic low in the Euro zone, extortionate rates of interest, some at several hundred percent being charged by banks and financial agencies providing door to door financial credit and collection services and the extraordinarily wide variation of insurance quotes for young drivers by agents and insurance companies.

The Bill provides for both the appointment of a Financial Services Ombudsman to deal with consumer complaints about financial institutions and for two panels, the consultative consumer panel and the consultative industry panel. Deputy Burton said it was important that consumer interests were strongly represented on both panels and not just the usual suspects in terms of the banking and financial services industry and party political hacks.

Labour is demanding that consumer organisations such as the Consumer Association be given rights of representation on the new panels. Unless this happened, there would be a justified suspicion that the new regulatory structure, rather than being strong and independent, would be a creature of the central bank and of the financial services industry.

Deputy Burton said she has a number of questions for the Minister on Section 8 of the Bill which deals with administrative sanctions under the new bill and provides for fines of up to €5m in sanctions on financial service providers who are in breach of regulatory requirements of the Bill. She said she was concerned that the powers in this section came very close to the operation of a judicial function and could be successfully challenged in the courts as unconstitutional.

In addition, where action is taken against a transgressor under the Bill, it would appear to rule out criminal or civil court actions against the alleged transgressor. The Bill will also provide for new reporting and auditing obligations for financial institutions.

Deputy Burton said she would take the opportunity to raise the legal status and role of the internal auditor in financial institutions. IN her experience as an accountant, internal audit was the key protection for consumers and bank customers against transgressions by such institutions. A strong internal audit function, independent, high-quality, non-executive directors, together with a strong audit committee were the greatest safe guards against fraud and malfeasance in banks and financial institutions as shown by the DIRT inquiry and the All-First scandal in Allied Irish Banks, Maryland subsidiary.