CONCERNS have been raised that local families could be paying interest rates of close to 300 per cent on loans from licensed moneylenders following a report published earlier this month by the Central Bank of Ireland.
The report into the licensed moneylending industry found that if a collection charge is included, the annual percentage rate (APR) from legal moneylenders can range from 37.79 per cent to a massive 287.72 per cent.
Sinn Féin representative, Noeleen Reilly, who’ll be contesting the Ballymun ward for a council seat during next year’s local elections, believes hard-pressed local families could be tempted into taking out loans they could find difficult to pay back.
“People in traditional working class communities like Ballymun and Finglas are at particular risk from moneylenders as strict credit requirements from banks and other institutions means that many people can’t get access to cash elsewhere,
? she said.
“Many people are attracted to moneylenders as they offer quick access to credit which may not have been available from more traditional sources. Loan drawdowns are often available within a matter of days from when application was first made with people not realising the cost of such loans.
“With Christmas coming up, members of the public may see no other choice but to take loans from these lenders but at a huge cost. I hope people make themselves fully aware of the terms and conditions and also read any small print very carefully.
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The Central Bank report found that the most common loan amount from licienced moneylenders is e200-e500, with the most frequent term offered around nine months at an APR of 125 per cent.
Borrowers typically use loans from moneylenders to purchase goods (30 pre cent) or for family events (23 per cent). Nine per cent borrowed to pay bills or other debts.
A significant proportion of borrowers surveyed (25 per cent) experienced difficulties in making repayments in the past 18 months, with 63 per cent of those reporting that repayment difficulties were caused by a drop in household income.
A total of 77 per cent of borrowers said they had been refused credit from a credit union or a bank, even though more than half also reported having savings with these institutions.
Despite the concerning statistics, a majority of borrowers reported a high level of satisfaction with their moneylender, citing ease of availability and convenience as the main reasons.
Most borrowers (84 per cent) know the cost of credit on their loan and 69 per cent understand the amount of interest charged. A majority (65 per cent) reported that they have repaid a loan off early, but almost one in three (31 per cent) don’t recall receiving a rebate for doing so.
Director of Consumer Protection at the Central Bank, Bernard Sheridan, said loans from moneylenders could be
“very expensive, especially when used on an ongoing basis
?.
“While there are some positive findings in relation to how licensed moneylenders are treating their customers and also in the increasing level of awareness of the costs of such loans, the Central Bank will continue to monitor this sector closely and take action where necessary to protect borrowers’ interests,
? he said.
“I would encourage consumers who are struggling with repayments on loans to seek advice from MABS who will help them consider their options.
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The Society of St Vincent de Paul (SVP) described the report on moneylending published by the Central Bank as
“benign
?. It said it had failed to include any recommendations for further regulation of the sector and shows worrying levels of acceptance of high cost loans from consumers.