Personal debt flashpoints remain amid dubious lending practices

Moneylending and car finance trends point to ongoing financial misery for many

Central Bank figures show that the number of Irish people using the services of licensed moneylenders is close to an all-time high at 350,000. Photograph: Getty Images

Central Bank figures show that the number of Irish people using the services of licensed moneylenders is close to an all-time high at 350,000. Photograph: Getty Images

 

Flashpoints of personal indebtedness remain a regular, depressing feature of the economy, two publications from the Central Bank have suggested this week.

Its figures show that the number of Irish people using the services of licensed moneylenders is close to an all-time high at 350,000, which is just 10,000 fewer than the number who used them in the peak year of 2013.

The bank has now announced a consultation process on a range of measures to protect this group of people, who may be subjected to exploitative tactics such as unsolicited contact and aggressively targeted advertising.

The overriding image of a moneylender as a cultural figure is of the local go-to amateur who will come up trumps in a short-term financial crunch, handing over cash, no questions asked, and then proving ruthless in its recovery.

However, licensed moneylending is more typically pursued by highly profitable, organised, professional enterprises, with just four firms accounting for about 84 per cent of the market. As far as annual percentage rates of interest go, they charge anything between 23 per cent and 288 per cent. It is unconscionable that anyone in Ireland should require their services to pay for basic needs such as accommodation, food, electricity, heating and other costs.

Increased indebtedness

Separately, the bank has also warned about the “increased indebtedness” of consumers who sign personal contract plans (PCPs) to buy cars. Such plans typically feature low monthly repayments over 36 months followed by a nasty balloon payment at the end. Analysis by the bank suggests people take out loans to finance the final instalment, while it has also queried the affordability of customers and extent to which credit checks are performed.

These bids to clamp down on the worst behaviour of moneylenders and the prevalence of PCPs in the car finance sector are welcome, and the hurdles involved in getting its warnings across to the end users of both make it even more vital for the Central Bank to take a strong regulatory hand on the supply side.

Its findings prove, if proof were needed, that not everybody is participating in this economic recovery. If someone is ensnared by predatory lending practices, it becomes less likely that they ever will.