Holly Cairns
Ceist:405. Deputy Holly Cairns asked the Minister for Finance the steps he is taking to address the rates of interests charged by moneylending companies. [43795/22]
Amharc ar fhreagraThursday, 8 September 2022
Ceisteanna (405)
Freagraí scríofa
The Consumer Credit (Amendment) Bill 2022 was signed into law on 29 June 2022.
The main purpose of the legislation is to cap the interest which high cost credit providers can charge borrowers. The Bill will also:
- ban cash loans with terms longer than 1 year;
- ban collection charges on loans;
- extend the licence period from 1 year to 5 years;
- remove the requirement for high cost credit providers to register in each District Court area;
- introduce a choice for consumers between a paper or online repayment record; and
- replace the term ‘moneylender’ with ‘high cost credit provider’.
In making the regulations, the Minister must also adhere to the following parameters:
- in relation to cash loans under a high cost credit agreement.
- the maximum rate of simple interest chargeable per week can only be set at a rate less than or equal to one per cent, and
- the maximum rate of simple interest chargeable per year can only be set at a rate less than or equal to 48 per cent
- in respect of a running account under a high cost credit agreement, the maximum rate of monthly nominal interest can only be set at a rate less than or equate to 2.83 per cent. A running account operates similarly to a tied credit card and is a product sometimes offered by catalogue companies.
These changes will assist people and families who have difficulty obtaining credit from other lenders.
Consumers of licensed high cost credit provider are protected by a range of provisions that high cost credit providers must adhere to.
For example high cost credit providers are required to undertake a creditworthiness assessment before entering into a moneylending agreement with a consumer. High cost credit providers must ensure that their lending policies and practices are responsible. This means seeking to ensure that each borrower can afford to repay a loan without suffering hardship and considering the affordability of the loan to the consumer.
There are important protections provided in the Consumer Credit Act 1995 whereby licensed high cost credit providers are prohibited from applying additional charges to a moneylending agreement.
High cost credit providers are also prohibited from applying any additional charges in the event of a default in the payments due under the agreement (i.e. the total amount repayable by a consumer is limited to the amount specified in the moneylending agreement (the only exception being the awarding of legal costs by a Court of law).
The Central Bank will examine the effectiveness of the interest rate caps and the Government will consider any recommendations they make in the future.