Dáil Éireann Debate, Tuesday - 8 July 2014
204. Deputy Kevin Humphreys asked the Minister for Finance his plans to regulate pay-day lenders here; if companies (details supplied) were to begin to offer such loans here, the regulations by which they would be covered; his plans to introduce regulations and law similar to those in some Australian states where there is a cap of a 48% APR maximum loan rate, including fees and brokerage; and if he will make a statement on the matter. [29638/14]
Amharc ar fhreagraThe Central Bank has advised me that pay-day lenders typically offer very short term loans to tide borrowers over until their next pay-day. The representative APRs associated with these loans can be as high as 4,000-5,000 per cent. Although a number of firms have approached the Central Bank in relation to offering pay-day loans in the Irish market, no such business model has been licensed by the Central Bank.
On the issue more generally, the Central Bank has a robust authorisation process in place for assessing applications for moneylending licences. The Central Bank assesses every application for authorisation in accordance with the relevant legislation. Payday lenders are not permitted to operate in Ireland without appropriate authorisation from the Central Bank. The Central Bank will continue to monitor this sector closely and to take action where necessary to protect borrowers' interests.
The legislation under which moneylenders are supervised (the Consumer Credit Act 1995) does not provide for an interest rate cap. The introduction of an interest rate ceiling may not achieve the objective of lowering the total cost of credit for example, if the licensed moneylender chose instead to extend the duration of the loan. Any legislative proposals in this regard would therefore have to be careful to achieve an overall reduction in the cost of credit. There has been some public discussion about introducing an industry-wide cap on the rates moneylenders can charge. Lower interest rate ceilings could be ineffective and counterproductive in this regard and may result in excluding low income households that have repayment capacity, even at the high rates charged by licensed moneylenders. The Central Bank would have some concerns therefore about the imposition of an industry-wide interest rate cap without there having been a full assessment of its impact on consumers. The Central Bank has no statutory power to impose a market-wide cap on rates and examine, on a case-by-case basis, whether the rates are excessive.
