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Licensed Moneylenders

Dáil Éireann Debate, Thursday - 16 October 2014

Thursday, 16 October 2014

Ceisteanna (76, 77, 82, 83)

Terence Flanagan

Ceist:

76. Deputy Terence Flanagan asked the Minister for Finance the maximum interest rate that moneylenders can charge; and if he will make a statement on the matter. [39737/14]

Amharc ar fhreagra

Terence Flanagan

Ceist:

77. Deputy Terence Flanagan asked the Minister for Finance his plans to have his Department carry out an assessment of the impact on consumers of an industry wide interest rate cap; and if he will make a statement on the matter. [39738/14]

Amharc ar fhreagra

Terence Flanagan

Ceist:

82. Deputy Terence Flanagan asked the Minister for Finance his views on setting a maximum interest rate of 50% APR charged by moneylenders; and if he will make a statement on the matter. [39746/14]

Amharc ar fhreagra

Terence Flanagan

Ceist:

83. Deputy Terence Flanagan asked the Minister for Finance if his attention has been drawn to the fact that 13 EU countries have a legal cap regarding the maximum rate of interest that moneylenders can charge; if there is a European directive in this regard; and if he will make a statement on the matter. [39747/14]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 76, 77, 82 and 83 together.

Moneylenders have to apply to the Central Bank on an annual basis to have their licences granted or renewed. Part VIII of the Consumer Credit Act 1995 (as amended) sets out the Central Bank's powers, duties and responsibilities in relation to the granting or refusal of a moneylender's licence and in relation to their regulation when such a licence is granted.

The Central Bank has advised me that there is a rigorous process involved in the granting or renewal of a licence. The Central Bank can refuse to grant a moneylender's licence on a number of grounds. One of these grounds is:

- where, in the Central Banks opinion, the cost of credit to be charged is excessive, or where any of the terms and conditions attaching thereto are unfair.

Each application for a moneylending licence is individually assessed.

The Central Bank publishes a register of licensed moneylenders on its website.  This register includes the maximum Annual Percentage Rate (APR) that each moneylender is authorised to charge. The maximum APR charged by a licensed moneylender has not increased since the Central Bank assumed responsibility for the licensing and regulation of moneylenders in 2003.  APRs on moneylending agreements range from 23% to a maximum of 188.45%, excluding collection charges. The highest APR including collection charge is 287.72%.  APRs vary significantly, depending on the duration of the loan.

Each licensed moneylender is also required to display a copy of its licence in its business premises.  The licence contains a schedule of each product which the moneylender is entitled to offer, together with details of the related cost per €100 borrowed, the collection charge (if applicable) and the APR. 

I appreciate that vulnerable consumers, sometimes as a last resort, are using licensed monelylenders and therefore, consumer protection is crucial. The Central Bank's authorisation regime and its Code of Conduct provide a significant degree of protection to these consumers. My Department is also significantly engaged with other consumer protection measures in the financial services area which include the proposed legislation to protect consumers on the sale of loan books, the transposition of both the Mortgage Credit Directive and the Payment Accounts Directive into Irish law as well as the implementation of the Credit Reporting Act 2013 and ongoing work in relation to mortgage arrears.

I note from the topical issues debate last week on the matter of moneylenders that the Deputy referred to the situation in other European countries where usury rules prevail. EU consumer credit legislation does not specify the rate of interest which a moneylender may charge although moneylenders are of course subject to the European Communities (Consumer Credit Agreements) Regulations 2010 (Statutory Instrument 281 of 2010) which transposed the Consumer Credit Directive. As was indicated last week, the setting of a cap on interest rates (sometimes used as a target, and not a cap) may not achieve the objective of lowering the total cost of credit and could result in excluding low income households from access to credit.

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