Budgeting service warns over high-interest loans

A DOOR-TO-DOOR loan service offering small cash sums at almost 190 annual percentage rate (APR) could cause major problems for people in the recession, the Money Advice and Budgeting Service (Mabs) has said.

Provident Personal Credit, a UK-based company which has a call centre in Donegal, offers cash loans from €100 to €1,000. Agents visit customers in their own home and repayments are made on a weekly basis.

According to its website, the company will accept applications from customers with poor credit histories or with judgments against them. It is registered with the Irish Financial Services Regulatory Authority. On a loan of €500 repaid over 26 weeks, a customer will repay €650 or an APR of 187 per cent. This compares to an average of 11 per cent APR with high-street banks and 9 per cent with credit unions.

Fine Gael councillor for Dún Laoghaire-Rathdown, Mary Mitchell O’Connor, said there had been an increase in high-interest door-to-door loans as people struggle to deal with the recession.

“People are taking out these small personal loans to pay their rent and meet other daily expenses, but unfortunately they are paying well over the odds for the loans and are becoming caught in a debt trap,” she said.

“I am extremely fearful that we’re seeing the emergence of a form of legalised, but no less dangerous, moneylending. The Government should step in immediately and protect the public.”

She has called for legislation to safeguard against such lending.

A spokesman for Mabs said that there were many registered moneylenders offering loans at similar APRs to Provident. High-interest loans could cause major problems for people who were struggling due to the recession.

“Anyone seeking a personal loan should take impartial advice, such as that offered by Mabs, instead of borrowing their way out of a difficulty,” he said.

A Provident spokesman said: “Other lenders do not include administration and penalty charges in their APRs and do not have the expense of making over 90 million home visits a year.”