Moneylenders condemned for targeting lone parents

Finance companies and moneylenders charging up to 200 per cent interest to vulnerable families on social welfare have been condemned by the One Parent Exchange Network (Open), which represents 78 lone-parent groups.

Francis Byrne, director of Open, told The Irish Times that predatory home credit "was absolute exploitation sanctioned by Government".

As it launches a new report on lone parents and debt in Dublin this morning, the network is calling on the Irish Banking Federation to review the "unethical" and "imprudent practice" of offering unsolicited credit to families living on welfare, while refusing them mainstream bank accounts.

For example, one lone mother in receipt of €900 per month child benefit was offered and accepted an unsolicited loan of €15,000, even though she could not pay it back.

The State's 50 licensed moneylenders are the most likely source of credit for lone parents, who cannot survive on social welfare allowances and thus get into rolling debt, according to the survey, Do the Poor Pay More?, commissioned by Open with the support of the Money Advice and Budgeting Service and the Society of St Vincent de Paul.

Moneylenders are often friendly neighbours giving cash within hours of a phone call, then collecting payments weekly at rates of 30 to 100 per cent and more. Some, however, are "gangsterish" and "intimidating", lone parents say.

Most lone parents were borrowing small amounts in order to pay for utility bills, birthdays, Christmas and voluntary contributions to schools, which they shouldn't be asked for in the first place, stated the report, which was written by Dr Pauline Conroy of Ralaheen Ltd. The report recommends that the ESB be asked by Government whether it is evading regulation by charging 22.9 per cent interest on hire purchase agreements, just one-tenth of a per cent lower than the level at which it would have to register as a money lender with the Irish Financial Services Authority.

Gas and electricity companies were "not seen as being altogether transparent" in their dealings with meter users and it was "especially bizarre" that meter-using households could build up arrears even though they were using pre-paid meters, states the report.

In the survey of 139 Money Advice and Budgeting Service clients who had sought help on handling overwhelming debts, 41 per cent were lone mothers. This figure was out of proportion to the number of lone parent households in the population - 12 per cent in 2002. Lone parents in the survey owed, on average, €1,000 in utility bills arrears and €8,000 in credit-based debt.Open has called on the Government to introduce a system of "basic banking", as in the UK.