Joan Burton
Ceist:197. Deputy Joan Burton asked the Minister for Finance the steps he has taken to combat the uptake of loans with high-cost, high-risk moneylenders; and if he will make a statement on the matter. [54497/18]
Amharc ar fhreagraTuesday, 15 January 2019
Ceisteanna (197)
Freagraí scríofa
It is important to any society that a responsible and sustainable financial sector provides appropriate credit to consumers. Many regulated financial service providers meet this need in Ireland and provide cIredit of various duration and price for a variety of purposes. Licensed moneylenders are part of this credit landscape and provide credit to consumers who are often unable to obtain credit from another cheaper source for various reasons.
A number of members within the credit union movement in Ireland offer the Personal Micro Credit (PMC) Scheme. This 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 48% 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.
Anyone wishing to engage in the business of moneylending requires a licence from the Central Bank in accordance with the Consumer Credit Act 1995 (the Act) and the Central Bank assesses applications in line with the criteria set out in the Act. The Act provides that the Central Bank can refuse to grant a licence to a moneylender if it is of the opinion that the cost of credit is excessive.
One of the specific challenges that the Bank faces in considering rates charged by licensed moneylenders on specific loans is finding a balance between, on the one hand, the availability of credit for people who do not have access to legitimate credit elsewhere or who do not use other regulated credit providers and, on the other hand, the provision of short term unsecured loans at what can be a high cost.
There is a strong framework of protection in place for consumers who choose to avail of the services of licensed moneylenders including the Bank’s Consumer Protection Code for Licensed Moneylenders.
In March 2018, the Central Bank proposed new measures to enhance the framework of protections for customers of moneylenders, including
- Measures aimed at further ensuring that moneylenders adopt and implement a responsible lending culture.
- Moneylenders to prompt consumers to consider alternatives, including cheaper options, to moneylending loans.
- Measures to reduce the possibility of consumers over-extending themselves when borrowing from moneylenders.
The Bank undertook a public consultation on the proposals and it expects to finalise and publish Regulations under Section 48 of the Central Bank (Supervision and Enforcement) Act 2013, to replace the Consumer Protection Code for Licensed Moneylenders, in 2019.