That leave be granted to introduce a Bill entitled an Act to place a cap on moneylenders’ interest rates, by amending the Consumer Credit Act 1995.
Leaflets from legal and licensed moneylenders have been distributed recently in my part of County Donegal, an area of high deprivation which has more than double the national unemployment rate. Such leaflets are also being distributed in other working-class areas across the State. The moneylenders know that Christmas is on the way and that working and other families are under huge pressure to provide for a memorable Christmas.
Six and a half years ago, I first moved similar legislation. The then Fine Gael and Labour Party Government told me that moneylenders were a necessary evil and that many people had no alternative but to use them. I disagreed with that analysis then and I still disagree with it. However, several changes have taken place over the past six and a half years, especially the "It makes sense" credit union loan scheme which is available to those on low incomes. If the excuses offered at that time are again presented, they must be challenged.
The Centre for Co-operative Studies in University College Cork has reinvigorated the debate with an excellent report on behalf of the Social Finance Foundation which was published in recent weeks. It cites the economic unfairness inherent in this type of lending, referring to further research which indicates there is "A huge transfer of resources and potential assets from poor communities to the directors and shareholders of loan companies". We, as legislators, are allowing money to be transferred out of the pockets of the poorest in society and into the pockets of the shareholders and directors of companies that leech off the pain and poverty of those people. Global research, in particular that carried out in the United States, indicates that low-income house owners are stripped of approximately $9.1 billion each year through the practices of the so-called alternative credit sector.
Research in Britain found that from three streets, on which there were 40 households, a staggering £240,000 was being paid each year to high cost lenders. This type of lending simply takes money off poor families and makes them poorer. The lending is concentrated in the areas where there are high levels of deprivation, unemployment and poverty. We need to ensure proper regulation and that we bring forward laws within which the Central Bank can be allowed to work. The Central Bank is carrying out good research on this issue. It began a process of consultation. It is considering the issues of advertising and other regulations, but it is staying clear of the issue of a cap.
My legislation - it is a very simple Bill - proposes to introduce a cap. The rates we currently see being charged in the market - 100% and 200% - are simply wrong. I echo the words of the Tánaiste and the Taoiseach in saying people are being ripped off. Let us put our money where our mouths are. We need to act on behalf of these individuals. The rates being charged are completely wrong and immoral. The lenders have no moral authority to engage in lending of this nature, regardless of the circumstances. The legislation I propose would place a cap of 36% on the rates moneylenders could charge. There are no ifs and buts. That is the maximum amount any moneylender would be able to charge within the State. Credit unions can charge 1% per month or an APR of 12% for this type of lending. I am open to reviewing the cap if it would allow more credit unions to move into the space of lending to low income families. In introducing the cap many years ago we showed that we considered a 12% cap to be necessary for credit unions. On the other hand, we are happy to allow moneylenders to charge 187% per annum. I intend to proceed to Second Stage next week. I ask all parties to support the legislation to ensure the thousands of families who are forced to sign up to ridiculous rip-off rates just in order that they can have a decent Christmas, fix the car, pay for the First Holy Communion or birthday of their child or meet an unexpected funeral expense would no longer be forced to do so. I commend the Bill to the House.