Q&A

We have approximately €15,000 left on our Irish Nationwide Building Society mortgage and sufficient cash savings to clear that amount. The only thing stopping us from clearing the mortgage is the potential windfall from Irish Nationwide Building Society going public. We think we have read conflicting reports on who is eligible.

Irish Nationwide

We have a mortgage with Irish Nationwide but we do not have savings with Irish Nationwide.

Are we eligible should Irish Nationwide Building Society demutualise?

Mr J.S., Kildare

The situation is likely to be clearer for mortgage holders than for savers. As it stands, the current Building Societies Act gives anyone with an outstanding mortgage balance of €635 a vote on demutualisation and the likelihood is that anyone with a reasonable mortgage outstanding will figure in any windfall. A new Building Societies Bill due before the Oireachtas shortly should not change that.

While Irish Nationwide has raised the savings threshold for eligibility in recent years to see off carpetbaggers, no similar move has happened on the mortgage side. In previous building society flotations - Irish Permanent and First National Building Society - the €635 figure was respected.

However, it seems less likely all the time that Irish Nationwide will go public. If, as appears more probable, the society sheds its mutual status only to become a private bank, you would have to wait for any subsequent trade sale before any windfall would materialise.

The good news is that this should not take too long as managing director Mr Michael Fingleton has clearly signalled that the society would be on the market following demutualisation.

The fact that you do not have savings with the society should not affect your eligibility to a windfall at all.

What, in your view, are the indications that Irish Nationwide will move to demutualise in the near future? What would the likely timescale be for such a move?

In other words, if a qualifying account were opened in the early months of 2003 would it qualify for any relevant payout?

Ms. H.N., Dublin

The indications are growing that Irish Nationwide will demutualise sooner rather than later. The society's boss, Mr Michael Fingleton, has made no secret of his desire to alter its status and has been restrained solely by the existing law, which forces demutualised building societies to retain independent status for five years.

The Government is expected to publish a new Building Societies Bill next month which will reduce this period to 28 days. If, as expected, this passes through the Oireachtas, it could well be in place on the statute books by the summer recess.

That would give Irish Nationwide the signal to trigger a demutualisation. The consensus appears to be that the society wants to change its status without following the previous route to a stock market flotation. By becoming a bank owned privately by its members who qualify for shares, it would then set itself up for a trade sale to another financial services group.

The key point for you is the two-year requirement for windfalls laid down in the Building Societies Act. It states that any qualifying account would have to be open for two years before demutualisation is announced. An account opened in early 2003 would have to hope such an announcement was delayed till early 2005 - which seems unlikely. Still, there is no guarantee in these things.

Credit cards

You have featured this issue recently but I do not think you have pointed out the "double taxation" that occurs if you simply change your credit card from one bank to another.

I recently consolidated my banking affairs by moving all business to the bank that has my mortgage. This involved cancelling my Visa account and a current account with AIB and opening a new Visa account with Permanent TSB.

The closing of the Visa account with AIB has incurred a stamp duty charge of €40, which became the only debit on that account as I had paid off all previous transactions some time earlier.

These past few months, the balance on that Visa account has risen to about €60 incurring "unpaid payment fees" each month of €4.44 plus interest.

In the meantime, the new Visa card with Permanent TSB will also incur a stamp duty charge of €40 on April 1st, 2004.

I have had discussions with officials in Revenue who are more than aware of the anomaly. They indicated that consideration might be given to a change in the Finance Bill 2004 but I do not see any mention in it now that it has been published.

They pointed out that the current arrangement was to thwart those sad people who would regularly cancel their credit card coming up to April 1st each year and then open one again after that date and escape the stamp duty.

Should I pay up (on the double) or just ignore the monthly increasing demand from AIB Visa?

Mr G.P., Dublin

If I were you, I would pay up quickly before your card switch becomes even more expensive. Regardless of the unfairness of the situation, the fact remains that AIB is simply enacting the rules as they exist.

Your situation is one that I have referred to in this continuing debate about stamp duty on credit cards. It is manifestly unfair that people should be penalised for switching providers.

The Minister for Finance, Mr McCreevy, has deliberately ignored an opportunity in this year's Finance Bill to iron out the contradictions of the card stamp duty provisions which, as Revenue suggests, were framed to stop people cancelling cards coming up to the March 31st year end and opening a new account after April 1st.

It is arguable that very little tinkering would be required as the rules state that the ownership of a card at any point during the year triggers the payment, not just ownership at year-end.

All of this is little help to you, especially after the trauma that is changing bank accounts in the Irish market.

I'm afraid you have little option as the law stands but to accept that you are liable to one dose of stamp duty in respect of each credit card account you hold during any given year. Thus you are liable to the stamp duty (and subsequent penalties) for the closed AIB account and will, as you acknowledge, face another liability in respect of the new Permanent TSB account on April 1st.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.