Moneylenders charge average interest of 125%, study finds

Licensed moneylenders in Ireland charge an average of 125 per cent interest on loans, according to a report to be published by the Central Bank today.

The highest annual percentage rate charged, which included an additional fee for collection at home, was 288 per cent.

The numbers of customers borrowing has increased by 20 per cent since 2005, from 300,000 to 360,000. The most common loan ranged from €200 to €500 and had a nine-month term.

The Report on the Licensed Moneylending Industry also found more than 60 per cent of people who use moneylenders are women, and more than 70 per cent of customers are from lower socio-economic groups. More than half are married or cohabiting.

Amárach Research, on behalf of the Central Bank, surveyed 500 customers of moneylenders in the study, as well as all 40 licensed moneylenders. There are no figures available on the numbers of illegal moneylenders in Ireland.

Some €200 million in loans are outstanding to licensed moneylenders registered with the Central Bank. It can refuse licences if it believes the cost of credit is too high.

Some 80 per cent of moneylenders offer to collect money from borrowers’ homes and more than a third of these charge for that collection.

It found the most common reasons for borrowing were to buy personal items or fund family occasions.

More than one in five borrowers had loans from more than one moneylender, and almost 40 per cent had the money collected from their home, down from 60 per cent in 2007.There was a growth in payments at the post office, by direct debit and online.

A quarter of the customers surveyed reported they had difficulties in meeting their repayments in the last 18 months, and a majority said it was because their household income had dropped.

Three-quarters of the customers had been refused credit from a credit union or a bank even though more than half said they had savings with the institution. The majority of borrowers received cash loans, but loans in the form of goods, vouchers and hampers were also supplied.

The study also found the majority of customers were satisfied with their moneylenders, many describing them as “a friend”, though of those that reported they repaid a loan early only a third said they received a rebate despite being entitled to one.

More than a third of licensed moneylenders said they were aware of illegal operators but few borrowers were.

Director of consumer protection at the Central Bank Bernard Sheridan said loans from moneylenders could be very expensive, especially when used on an ongoing basis. “While there are some positive findings in relation to how licensed moneylenders are treating their customers and also in the increasing level of awareness of the costs of such loans, the Central Bank will continue to monitor this sector closely and take action where necessary to protect borrowers’ interests.”