The Society of St Vincent de Paul (SVP) has today welcomed the move by the Central Bank to make it mandatory for all moneylending advertisement to carry prominent warnings and details of alternatives for those facing financial difficulty.
But it said the next Programme for Government must include a commitment to introduce an interest rate restriction on moneylenders.
The new rules for moneylenders announced under the Revised Moneylending Code by the Central Bank today include:
The charity also wrote to the Minister for Finance and the Central Bank at the outset of the COVID-19 crisis asking that enhanced protections for vulnerable customers are putting in place without delay, following a marketing drive by moneylenders for new business.
There are an estimated 330,000 customers of moneylenders in Ireland.
SVP Head of Social Justice, Dr. Tricia Keilthy said, “The measures introduced today by the Central Bank are very welcome, particularly as many people are now faced with reduced incomes and higher bills due to being at home all day. Moneylending loans may seem like a lifeline to people in financial difficulty but in our experience the high-cost credit often sends families into a debt trap with wide-ranging consequences, from difficulty making ends meet to an inability to build up savings.”
The new regulation state that where the loan is required for basic needs, such as accommodation or electricity, moneylenders must inform the consumer that a moneylending loan may not be in their best interest and provide contact information for the Money Advice and Budgeting Service (MABS). However, this regulation won’t come into effect until January 2021.
“Moneylenders tend to engage in heavy advertising at times when low income households are under financial pressure, and it is important that customers know at first glance that the adverts they are seeing are for high cost credit and that alternatives are available. In order for these new measures to be effective the Revised Code must be monitored and enforced in the industry and consequences for breaching these requirements communicated,” she continued.
As Programme for Government negotiations continue this week, SVP are also asking the 33rd Dáil should, as is the case with 21 of the 27 EU countries, introduce a cap on excessively high interest rates.
“Access to affordable credit is essential for individuals on a low income but we believe an APRs of up to 287% (including charges) are wrong and should not be permitted. It is a contradiction in terms to offer loans at such high costs to an individual or family who is living below the poverty line and struggling financially. SVP members are concerned at the amount of interest being paid to moneylenders by households on very low incomes, who often have to sacrifice other needs including food, fuel and education in order to meet loan repayments.” said Dr. Keilthy.