Thursday, 22 November 2018

Questions (25, 31, 38)

Pearse Doherty

Question:

25. Deputy Pearse Doherty asked the Minister for Finance his plans to legislate to place a cap on the rates that can be charged by moneylenders; and if he will make a statement on the matter. [48598/18]

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Joan Burton

Question:

31. Deputy Joan Burton asked the Minister for Finance if he has examined the recent report by an organisation (details supplied) on the perceived extortionate level of interest and charges charged on loans by moneylenders particularly in the run up to Christmas; his plans to regulate and or cap interest and charges on moneylender type products; and if he will make a statement on the matter. [48583/18]

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Michael McGrath

Question:

38. Deputy Michael McGrath asked the Minister for Finance his views on whether stricter controls are needed on interest rates charged by licensed moneylenders here; and if he will make a statement on the matter. [48566/18]

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Written answers (Question to Finance)

I propose to take Questions Nos. 25, 31 and 38 together.

I met with the Social Finance Foundation last week and was briefed on the report it had commissioned from the Centre for Co-operative Studies in University College Cork. The purpose of the research was to examine the extent and variety of interest rate restrictions within the EU and further afield and to assess the appropriateness of introducing such a restriction in the Irish market, given its specific circumstances and financial environment. The key report recommendations highlighted by the Social Finance Foundation are that an interest rate restriction should be introduced but that this is conditional on there being a reliable alternative for consumers who are able and willing to repay and that consideration should be given to increasing the statutory 1% monthly cap on credit union interest rates.

The report did not specify the type or level of interest rate cap that should be introduced. Both the report and the Social Finance Foundation highlight that this and other issues should be the subject of further research. The Social Finance Foundation also advised that the only thing worse than high cost credit is no credit.

The Social Finance Foundation points out that the credit union movement is a viable alternative for the community currently serviced by licensed moneylending firms because of the Personal Micro Credit (PMC) Scheme that many of its members participate in. It began as a pilot scheme, supported by Government, in November 2015. Loans under the initiative are branded "It Makes Sense" loans. The PMC Implementation Group was established to oversee and drive the implementation of the scheme through its pilot phase and subsequently through to implementation nationwide. My Department is represented on the PMC Implementation Group, which is chaired by the Department of Employment Affairs and Social Protection.

It should be noted that credit unions are independent and it is at management discretion if they sign up to offer the "It Makes Sense" loan to consumers. Additionally Credit Unions can only lend within their common bonds. Currently 47% of credit unions are involved in the PMC scheme and, therefore, only consumers within the common bond of these credit unions can avail of the “It Makes Sense” loan. As a result the "It Makes Sense" loan is not yet available as a nationwide mainstream alternative of affordable credit for current users of licensed moneylenders.

The report and its recommendations will be examined by my Department.

Question No. 26 answered with Question No. 20.
Question No. 27 answered with Question No. 17.
Question No. 28 answered with Question No. 24.