Pádraig MacLochlainn
Question:190. Deputy Pádraig Mac Lochlainn asked the Minister for Finance his plans to put a cap on the rate of APR that moneylending firms may charge for loans. [42877/14]
View answerTuesday, 11 November 2014
Questions (190)
Written answers
My colleague, Minister of State Simon Harris T.D., said in the House on 9 October 2014 in a Topical Issues Debate, that the Government was concerned that the introduction of a cap on the interest rates that can be charged by moneylenders would not necessarily be in the interests of consumers or the wider financial system.
The Central Bank is the competent authority with regard to licensed moneylending and is responsible for overseeing and regulating their activity. Legislative provisions relating to moneylending are contained in the Consumer Credit Act 1995 (as amended). It is an offence under that Act to engage in the business of moneylending without a licence granted by the Central Bank. I understand that there are 39 licensed moneylenders operating in Ireland at present.
The legislation does not provide for an interest rate cap for moneylenders. The introduction of an interest rate ceiling may not achieve the objective of lowering the total cost of credit where, for example, the licensed moneylender chose instead to extend the duration of the loan.
Lower interest rate ceilings could also result in excluding low income households from access to credit that have repayment capacity, even at the high rates charged by licensed moneylenders. I would have some concerns therefore about the imposition of an industry-wide interest rate cap without a detailed assessment of its impact on consumers. Often the loans are for small amounts, are needed immediately by the customers and are made available and repaid at the home of the customer. The shorter the duration of the loan e.g. two weeks, the higher the Annual Percentage Rate of Charge (APRC) as the APRC is an annualised measure of the interest charged. This service may impose extra costs on the moneylenders. The Deputy may also wish to note that, under section 47 of the Consumer Credit Act, a customer may apply to the Circuit Court for a declaration that the total cost of the credit provided is excessive.