The Central Bank of Ireland today (8 November 2013) publishes a report on the licensed moneylending industry in Ireland.
The research was undertaken to inform the regulatory approach to the licensed moneylending industry in Ireland and to see how the firms are treating their customers.
The licensed moneylender sector has not changed significantly since the Central Bank published its Report on the Licensed Moneylending Industry in 2007. The number of licensed moneylenders has declined and while the rates charged by some moneylenders can be very high, overall the rates of interest charged have remained largely at 2007 levels. In addition, the Central Bank has not allowed practices such as pay-day moneylending to enter the Irish market.
The main findings of the research are as follows:
- The most common loan amount is €200-€500.
- The most frequent term offered is approximately 9 months, with an APR of 125%.
- Customers typically use loans from moneylenders to purchase goods (30%) or for family events (23%). 9% of customers borrow to pay bills or other debts.
- A significant proportion (25%) of customers surveyed experienced difficulties in making repayments in the past 18 months, with 63% of those reporting that repayment difficulties were caused by a drop in household income.
- 77% of customers reported being refused credit from a credit union or a bank, even though more than half also reported having savings with these institutions.
- The majority of customers report a high level of satisfaction with their moneylender, citing ease of availability and convenience as the main reasons.
- A majority of customers (84%) know the cost of credit on their loan and 69% understand the amount of interest charged on their loans. This is a significant improvement from 2007, when 71% of customers did not understand the amount of interest being charged on their loans.
- A majority (65%) of customers reported that they have repaid a loan/line of credit early, however almost one in three (31%) of those recall receiving a rebate for doing so.
Commenting on the findings of the research, Director of Consumer Protection Bernard Sheridan said, “Loans from moneylenders can 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. I would encourage consumers who are struggling with repayments on loans to seek advice from MABS who will help them consider their options”.
The report is available to view here.
Moneylending is the practice of providing credit to customers on foot of a “moneylending agreement” (as defined in the Consumer Credit Act 1995). The credit will usually take the form of a cash loan but may also involve the provision of goods on credit from a retailer or the purchase of goods from a catalogue. Moneylenders are generally either individuals or companies and the number of customers of existing firms ranges from less than one hundred to in excess of one hundred thousand. Customer numbers have increased from approximately 300,000 in 20051 to around 360,000 at present and outstanding loan amounts are in the region of €200 million.
Of the 43, 40 are actively engaged in lending. The business models operated by moneylending firms fall into four categories:
- home collection firms where repayments are collected at the customer’s home;
- remote firms where payment is made directly to the firm e.g. by direct debit;
- retail firms involved in the provision of goods on credit with repayments being made by a variety of methods e.g. cash, direct debit; and
- other firms who operate on the basis of running accounts e.g. catalogue companies.