Government weighs capping interest rates charged by moneylenders

The Department of Finance has launched a consultation on whether a limit should be put on the rates charged by licensed moneylenders, which are as high as almost 300 per cent here.

“The department wants to get views on whether the introduction of a cap on interest rates would have a negative effect on the regulated supply of credit and might lead to an increase in illegal moneylending, or to financial exclusion for customers of these regulated firms,” it said on Friday as put a paper out to consultation.

There are currently 39 moneylenders authorised by the Central Bank of Ireland, which had €153 million out on loan to 350,000 borrowers as of the end of 2017, according to the department.

That compares to a total personal unsecured lending market, including credit unions, in Ireland of about €14 billion.

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The maximum annual percentage rate (APR) that moneylenders can charge, including collection charges, ranges from 152 per cent to 287.72 per cent, under legislation dating back to 1995.

There are two main types of moneylender: those who operate on a home collection basis, and catalogue companies, who can charge rates of between of between 43 per cent and 73 per cent.

A report carried out last year by the Centre of Co-operative Studies at UCC, on behalf of Social Finance Foundation, called for strict controls to be imposed on licensed moneylenders to protect vulnerable borrowers.

Female customers

The report, which was partly funded by the Central Bank, suggested that most customers of moneylenders are female, drawn from lower socio-economic background and use home credit to cover costs for back-to-school, Christmas or emergency household spending.

It urged the Government “to adopt a policy that prohibits usurious rates of interest in the interests of fairness to the most vulnerable in society by the introduction of a restriction on interest rates and charges”.

Interested parties have until July 31st to make submissions.

“The department is interested in hearing from all stakeholders who have views on this subject, including licensed moneylenders and, in particular, their customers who have first-hand experience of borrowing from them and how they operate,” it said. “Responses from people who have worked with customers of moneylenders and have indirect experience of dealing with them would also be welcome.”