Dáil Éireann debate -
Tuesday, 26 Feb 1991

Vol. 405 No. 6

Ceisteanna—Questions. Oral Answers. - Legislation on Moneylending.

Michael Bell

Question:

16 Mr. Bell asked the Minister for Industry and Commerce if, in connection with monerylending and the statement issued by the Minister for Social Welfare regarding same on 21 November 1988, he will outline the present state of the examination on the law on moneylending, in particular in connection with the EC Directive on Consumer Credit 87/102; whether this directive will curb the problem of defining (a) moneylending, (b) penalities, (c) evidence of breaches and (d) maximum rates of interest; if he proposes to draft a Bill or issue regulations to implement same; and if he will make a statement on the matter, with particular reference to a timetable for legislation and his discussions with the Ministers for Social Welfare and Justice.

Proinsias De Rossa

Question:

22 Proinsias De Rossa asked the Minister for Industry and Commerce if he will outline the latest position regarding proposals to implement an EC directive on consumer credit by the introduction of legislation to update our moneylending law; and if he will make a statement on the matter.

Mr. O'Malley

I propose to take Questions Nos. 16 and 22 together. Work in my Department is well advanced on the preparation of draft legislation to give effect to Council Directive 87/102/EEC on consumer credit. The general intent of this legislation will be to lay down rules which will, as far as possible, apply to all agreements under which credit is provided for consumers, including moneylending agreements.

The main effect of these rules will be to ensure that the consumer, when taking out a loan or otherwise availing of credit, will be given the maximum amount of information possible so that he or she is fully aware of the commitment being undertaken. The legislation will also lay down rules in relation to such matters as early repayment by the consumer, repossession by the creditor of goods sold on credit, the use of promissory notes, liability for faults in goods sold on credit etc.

Moneylending is one of the forms of consumer credit which is at present governed by detailed legislation. It was necessary to review this and other relevant legislation in the light of the measures now being prepared. In particular I am considering, in consultation with the Minister for Justice, the extent to which the special nature of moneylending as a form of credit needs to be recognised in the new legislation.

In regard to (d) of Deputy Bell's question I would point out that the European Community Directive does not contain any provision with regard to setting a limit on rates charged for credit. Some of the provisions of the Moneylenders Acts do relate to maximum rates; this issue is being addressed in the review of those Acts.

In regard to (b) and (c) the proposed legislation will provide for appropriate penalties for breaches of its provisions.

Mr. Bell

I thank the Minister for such a detailed reply and for giving us the up-to-date information. Would the Minister agree that, in the replies to the question I put down on the subject of moneylending to the Ministers for Social Welfare and Justice, they were indicating that the delay in introducing legislation and effective regulations on moneylending was because of delays in the Department of Industry and Commerce? May I ask the Minister when he expects legislation to be introduced in the House and whether it will put a limit on the interest chargeable on loans by moneylenders?

Mr. O'Malley

I am loath to say exactly when legislation will be introduced because I have found from experience that if one makes a promise in all good faith one may not, due to circumstances outside one's control, be able to fulfil it. I am informed that the work is well advanced on this matter and that there are prospects of the necessary legislation appearing quite soon. By "quite soon" I do not mean a matter of weeks; it will probably be a couple of months.

So far as the question of putting a limit on interest rates is concerned, the Deputy may be aware that under the existing Moneylenders Acts, I think in particular the 1933 Act, there is a limit on rates in percentage terms. However, difficulties have arisen in regard to this because it is not clear and will have to be worked out by the courts whether the interest rate referred to is a true interest rate or whether it is a flat rate of interest. There is also a lack of clarity as to the extent to which additional charges may be made for expenses.

Deputy De Rossa rose.

Mr. Barry

May I ask a brief question?

An Ceann Comhairle

I call Deputy Proinsias De Rossa whose Question No. 22 refers.

Proinsias De Rossa

Is the Minister aware that the Combat Poverty Agency have indicated they believe there are about 500 illegal moneylenders and about 140 legal moneylenders operating in the State? Does the Minister accept that, as the Moneylenders Acts have been under review since 1987, legislation which would restrict the operations of both legal and illegal moneylenders should be introduced as a matter of urgency so that the issue of additional charges such as collection and service charges which are used by both the legal and illegal moneylenders to boost their rates could be addressed?

Mr. O'Malley

I am aware that this matter has been under review for the past couple of years but it is very complicated. As well as a very detailed and complex European Directive which approaches this issue from a point of view which is somewhat different from ours we also have to take into account the existing legislation here and the manner in which it works. As the Deputy is probably aware, there have been a number of prosecutions over the past number of years and a number of convictions. I am sure the Deputy will appreciate that it is not enough for the Oireachtas simply to make the regulations ever more stringent on licensed moneylenders. To do this would just mean fewer licensed moneylenders and more unlicensed moneylenders. A fairly delicate balance has to be achieved and considerable efforts are being made in my Department, in conjunction with the Departments of Justice and Social Welfare, to try to achieve this balance.

Mr. Bell

In view of the recent prosecutions in my constituency in regard to the withholding of children's allowance books by moneylenders in exchange for repayments to them, may I ask the Minister if he intends to include penalties in the legislation which will restrict this type of activity? How will his Department deal with this issue in view of the fact that it is currently dealt with by the Department of Social Welfare?

Mr. O'Malley

The issue of withholding children's allowance books as security or by way of pledge is, as I understand it, already an offence under the Social Welfare Acts and people are prosecuted from time to time for that offence. I do not think there is any need to change the law in that regard; the law is quite clear on this point.

An Ceann Comhairle

Deputy Peter Barry has been offering. I will then call Deputy De Rossa for a final question.

Mr. Barry

Given the complexity of this issue and if, as the Minister has said, the laws in regard to licensed moneylenders were made too stringent there would be an increase in the numbers of unlicensed moneylenders, which is a greater danger, is the Minister satisfied that his Department are the best Department to introduce the legislation and oversee it? Would the Department of Finance or the Department of Justice be more appropriate?

Mrs. Barnes

He wishes they were.

Mr. O'Malley

I do not have the slightest doubt that my Department would willingly hand the issue over in the morning to anyone who would take it but I have not got a willing recipient yet.

Mr. Barry

Which would be the best Department to deal with it?

Mr. O'Malley

I do not know. It covers a whole range of areas. I think the question of moneylending has traditionally been a matter for the Department of Justice. The question of consumer credit would be a matter for the Department of Industry and Commerce. As it happens, the division in the European Community of these topics is different from our traditional division. The two of them have come together and my Department have had to deal with both.

A Deputy

They drew the short straw.

Proinsias De Rossa

Would the Minister accept that the decision about whether his Department or the Department of Justice should handle the issue of moneylending is causing delays in the introduction of legislation in this area? May I ask him again to indicate if it is intended to include in the legislation a restriction on the amount of interest charged by moneylenders? He has said that the legislation is nearly ready for introduction. In a least one recent case in Limerick it was indicated in court that a rate of 1,300 per cent had been charged.

Mr. O'Malley

The question of whether my Department or the Department of Justice should deal with moneylending is certainly not causing any delay. I can assure the Deputy about that. I have already answered the Deputy's second question in my reply to a supplementary from Deputy Bell. So far as licensed moneylenders are concerned, there is a very strict limit at present in percentage terms on rates. Deputy De Rossa referred to a case of an unlicensed moneylender.

I want to avail of this opportunity to point out to people who borrow from these unlicensed moneylenders that the law makes it clear they are not under any obligation to repay them and if they do not repay them the people concerned cannot sue them.

(Interruptions.)

Mr. O'Malley

That is a fact which is not known by the great majority of those who have dealings with unlicensed moneylenders.

(Interruptions.)

An Ceann Comhairle

Deputy De Rossa for a final question.

Proinsias De Rossa

Would the Minister not agree that the legality or otherwise of the moneylender is the least of the worries of the person who is seeking money at this level and that their rights or otherwise in relation to repayments is of little importance to them because by and large it is a question of intimidation of the borrower by the moneylender? This is one of the big problem areas in relation to illegal moneylenders in particular.

Mr. O'Malley

If people are intimidated — and I am aware that they are from time to time — they should immediately go the Garda who will try to deal with the matter. They have done this with some success in cases where evidence was given to them and the people concerned were prepared to give that evidence in court.

(Interruptions.)

An Ceann Comhairle

Deputy Allen for a final question.

Mr. Allen

Surely the Minister must agree that the intimidation which goes on is of a very subtle nature and that people in areas of high deprivation are dependent on moneylenders. The furthest thing from the minds of people in areas of high deprivation is whether they can pay; their main worry is whether they can get their hands on badly needed money and articles.

An Ceann Comhairle

Can we proceed to Question No. 17?