Legislation to cap annualised interest rates at 40% rejected
LEGISLATION TO cap interest rates charged by moneylenders at 40 per cent annualised percentage rate has been rejected by the Government, which claims it would be likely to increase illegal moneylending.
Minister of State for Finance Brian Hayes also said such a move was likely to result in moneylending no longer being viable and “it would effectively close down the industry”.
Sinn Féin finance spokesman Pearse Doherty introduced the Consumer Credit (Amendment) Bill. It was “incredible there is no cap on the rates moneylenders licensed in this State can charge”.
Mr Doherty asked the Minister to accept the principle of a ceiling and allow the Bill go to committee discussion.
There are 46 licensed moneylenders providing credit to an estimated 300,000 people, 29 of whom charge more than 100 per cent. He also said 40 per cent of people had borrowed to pay their household bills in the past 12 months and 10 per cent were using moneylenders.
The Donegal South West TD said 13 EU states operated such a cap and the Bill sought to bring moneylenders into line with them.
In Belgium it ranged from 10-19 per cent and in Spain it was 10 per cent.
Mr Hayes said different systems and legislation operated in different EU states. He said 17 per cent of people did not have a bank account and the Government was providing a national financial education programme as well as basic payment accounts to help marginalised consumers build up a good savings record and ultimately access mainstream credit.
The Minister for Finance will discuss with the Central Bank the development of guidelines to provide greater transparency in the rates charged by moneylenders.
Fianna Fáil supported the Bill and the party’s finance spokesman Michael McGrath said it reflected a call by credit unions and “recognises the reality that some loans would be of a risky nature”. He did not understand how the regulator could stand over moneylenders charging up to 287 per cent.