High-interest Irish moneylenders experience big drop in activity

Decline of 50% in value of loans since 2013 peak may be down to tightening of credit

The regulator has stopped short of an interest rate cap. Photograph: iStock

The regulator has stopped short of an interest rate cap. Photograph: iStock

 

The number of Irish people borrowing from moneylenders at rates of as much as 288 per cent continues to fall, with latest figures showing a 50 per cent decline from the peak. However, the decline may be due to tighter availability of credit, rather than muted demand.

Moneylending in Ireland hit a high in 2013, when some 360,000 people borrowed €301 million. Since then, however, it has been in decline, with latest figures from the Central Bank of Ireland showing that 283,000 people borrowed €151 million from moneylenders in 2020, with an average loan of €509.

This is down by 50 per cent in terms of the value of loans, and by 21 per cent in the number of borrowers, since the peak in 2013. It also marks a further decline of 5 per cent (borrowers) and 29 per cent (loan value) on 2019, when €214 million was loaned to 299,000 borrowers. People using moneylenders are also borrowing less, as the average loan issued in 2019 was €630.

According to the regulator, there are now 36 licensed moneylenders operating in Ireland, down from 52 in 2013. These include UK groups Provident Personal Credit and Amigo Loans; catalogue operators Littlewoods and Oxendale; and Cork operator Marlboro Trust. The Central Bank’s figures do not include illegal moneylending.

Moneylenders offer short-term loans at high levels of interest. Provident, for example, is authorised to offer a maximum APR of 187.2 per cent and promises your money will be delivered “direct to your door”, while Dublin operator Southside Finance has a maximum interest rate of 288 per cent, including collection charges. The high interest rates can turn a €450 loan into a €585 repayment in just 26 weeks, based on an APR of 187.2 per cent.

Market tightens

The continued decline in lending figures may surprise, coming as they do in the midst of a pandemic. However, the figures are based on 2020 annual licence applications, which means that some of the data may refer to lending in 2019, and the figures may not accurately reflect demand for loans.

Moneylenders themselves have been hit by the pandemic, with rising funding costs restricting the amount they have available to lend. Last November, Amigo decided to pause all lending in Ireland, while the largest player in the Irish market, Provident, moved to restrict its underwriting criteria, which has led to a decline in lending.

Regulation has also increased. Last summer the Central Bank announced new rules for the sector, which came into effect in January. The rules restrict moneylenders in how they offer and promote loans to consumers and ban unsolicited offers of loans. In addition, from September 2020, moneylenders have had to carry a “high-cost warning” in their lending material.

However, the regulator stopped short of an interest rate cap, which would restrict the cost of lending to a certain limit. St Vincent de Paul and other organisations have called for this move for some time. The Central Bank said such a cap was a question for the Oireachtas, as it would need a legislative amendment.

Minister for Finance Paschal Donohoe last month said he was reviewing this issue, with a view to publishing a report in the coming months.