Moneylenders will have to provide customers with detailed information on the cost of repayments, under a new industry code to come into effect next month.
They will also have to demonstrate that the credit agreed with customers is suitable for their needs, and to provide information on debt counselling services such as the Money Advice and Budgeting Services (Mabs).
The Financial Regulator today publish the new statutory code for licensed moneylenders, following consultation with the industry and consumers earlier this year.
This showed that 80 per cent of consumers who use the services of a moneylender do not compare interest rates when taking out a loan and 71 per cent did not know the interest rate they were being charged.
Mary O'Dea, consumer director of the Financial Regulator, says the code will strengthen consumer protection in the area. "It will require moneylenders to assist each individual consumer in understanding the method of repayment and all related costs and charges. The code introduces a new measure requiring moneylenders to inform consumers of the actual repayment cost of every €100 borrowed.
"It will also mean that moneylenders must be able to demonstrate how they have concluded that each consumer's credit agreement is suitable to that consumer, within the range of products and services that they offer."
The code contains some provisions which do not apply to other lenders, such as a requirement to disclose the high-cost nature of the credit being advanced, where relevant, and the requirement to provide consumers who demonstrate difficulty in meeting their repayments with information on debt counselling services.
Following consultation on the best way of showing the costs associated with loans from moneylenders, the regulator decided to include the provision that the cost of credit per €100 borrowed be disclosed, rather than the Annual Percentage Rate (APR) of interest commonly used with other lenders.
The general principles of the moneylender's code will come into effect next January 1st, with the remainder of the code coming into effect later in 2009.