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Doherty moves Moneylenders Bill

17 July, 2012 - by Pearse Doherty TD

Sinn Féin Finance Spokesperson Pearse Doherty this evening introduced the Consumer Credit (Amendment) Bill 2012 to the Dáil during his party’s private members’ time.

The Bill seeks to cap the interest rate charged by licensed money lenders at 40% APR.

Below is the speech delivered this evening in the Dáil by Deputy Doherty.

Sinn Féin PMB – Money Lenders Bill – 17.7.12

Pearse Doherty TD

Faoin reachtaíocht atá ann san am i láthair níl teora ar bith leis an ús atá iasachtóirí ceadúnaithe a bhaint amach. Tá cuid de na h-iasachtóirí ag baint amach ráta bliantiúil de 210%. Cén polaiteóir nó Aire Rialtais ar b’fhéidir leo tacú le táillí chomh hard seo?

Tá teaghlaigh ag streachailt leis an chostas marachtála atá ag ardú go leanúnach, meaduithe ar cháin agus ar tháillí, agus cailliúint ioncaim agus tá siad fágtha gan rogha ar bith ach iasachtaí ar chostas ard a thabhairt amach chun billí a íoc ó sheachtain go seachtain. De réir staidéar atá déanta ag Conradh na hÉireann de Chomhair Chreidmheasa tá 10% de theaghlaigh ag iompú chuig iasachtóirí le billí tí a íoc.

Tá cuid de na hiasachtóirí seo ag éirí sáibhir ar dhroim teaghlaigh atá faoi chruatán. Ní tharlódh seo murach go bhfuil an Rialtas ag ligeann do rátaí ollmhóra úis tarlú.

Across the state low and middle income families are struggling to get by. As each month passes the recession bites deeper.

Unemployment, wage cuts, tax increases, the house hold charge, cuts to rent supplement and rising mortgage distress are pushing more and more families into severe financial hardship.
Hundreds of thousands of people are turning to moneylenders to make ends meet.

Only recently I had a constituent that had turned to moneylenders to pay basic household bills while waiting on a social welfare claim to be processed. The interest rates she would pay on the loan would put her in significant hardship. But as it took several months for the claim to be processed she simply had no choice.

According to Social Justice Ireland the state’s poorest families experienced a disposable income drop of almost 18.7% in 2010 alone.

On a daily basis families are haveing to make impossible decisions – do they pay their gas or electricity bill or do they pay their mortgage.

And when faced with such impossible choices many are getting into even greater levels of debt just to get by.

The Irish League of Credit Unions ‘What’s Left’ tracker report, published last week, provides a very graphic picture of the human face behind these figures.

1.8 million families are left with €100 or less each month after bills are paid 25% of credit card holders rely on their credit card to make ends meet each month 40% of people have borrowed to pay their household bills in the past 12 months. 10% are using moneylenders.
Incredibly, there is no cap on the rates of interest that licensed moneylenders can charge.
There are 46 licenced money lenders operating in the state. According to the latest figures they provide credit to over 300,000 people.

Much of this credit is short term loans, often at very high interest rates.

Under existing legislation there is no cap on the interest charged by licensed moneylenders. Some lenders charge an APR of up to 210%.

What politician or Government Minister could support such high charges?

In fact, the only reason lenders can charge such excessive rates is because this house has not yet placed a cap on interest rates,

As a result of the inaction of the Oireachtas some lenders are getting rich on the back of hard pressed families.

Across the EU many EU member states operate interest rate caps on licensed moneylenders. A 2010 European Commission study identified 13 states that operated such a cap.

In Belgium for example the cap ranges from 10% to 19.5% APR. In France the range is from 5.7% to 21.6%. In Spain the rate is 10%.

In these and other states, politicians have decided that there is a limit to the amount of interest that licensed money lenders can charge, particularly when lending to low income families struggling under the weight of household debt.

The Bill that Sinn Féin has tabled for debate today and tomorrow seeks to bring this state into line with our EU counterparts.

Of the 46 moneylenders with licences in the state, 29 of them have APR’s of more than 100%. Fourteen of these charge over 150%.

A 210% APR means that a €500 loan taken out by a struggling family to pay a gas or electricity bill would cost them €186 if the loan was for six months and €375 if the loan was for twelve months.

Given that a €500 loan from a credit union would cost the same family €13 and €25 respectively. There is simply no justification for this massive mark-up.

Such excessive interest rates push hard pressed families further into financial stress and poverty.

There is no moral or economic justification for the absence of a cap on interest rates charged by licensed moneylenders.

The Bill we are debating today proposes a cap of 40% APR. This would mean that while some lenders would be required to charge less than this, no lender could breach the 40% cap.

This would mean the €500 loan would cost the struggling family a maximum of €50 over six months or a maximum of €97 over twelve months.

This level is fairer to customers while allowing licenced lenders to operate on a sound commercial basis.

Indeed in 2006 the Polish government introduced a cap of 20% on licenced moneylenders. Like Ireland Provident is one of the largest lenders in the market. It continues to trade profitably in Poland even after the introduction of the cap.

If you support the principle of a cap but are unsure of the 40% rate then pass this Bill and let’s tease out the detail of the cap in Committee Stage.

Sinn Féin is open to discuss this. What is of most importance to us is the cap itself.

There is an urgent need for the government to introduce a cap on interest rates. There is also a need for a more wide-ranging reform of the regulation of licenced moneylenders and the policing of illegal loan sharks.

Last month Minister for Justice Alan Shatter, in a reply to my colleague Brian Stanley confirmed that there is no record of a successful prosecution for illegal money lending in the last seven years. Not a single prosecution. Clearly there is something wrong here that also needs reform.

Earlier this month I asked the Minister for Finance to consider the issue of an interest rate cap, as part of a broader reform of the regulation of licensed moneylenders.

He said that he had no plans to amend the existing regime. He quoted a 2007 research paper from the Central Bank which said that a cap “might not reduce the total cost of credit”.
I have read the research paper in question. Its conclusion is not based on any empirical evidence.

It took two similar loans with different APRs and different durations and from that comparison alone drew its conclusion. This is not a sufficient basis for making such an important policy decision.

Níl sa leasú atá sa Bhille seo romhainn anocht ach leasú macánta agus sin a bhfuil ann. Ach is leasú é gur féidir go cinnte le gach teachta sa teach seo tacaíocht a thabhairt do.

Is leasú é fosta, má chuirtear i ndlí é, a mbeidh tionchar láithreach aige ar an chruatán airgid atá ar na céadta mile teaghlaigh atá faoi ualach trom.

Is leasú é a dhéanfas an saol níos fearr do líon mór daoine in am a bhfuil cuid mhór dá saol buailte ag droch am agus cruatán.

The amendment contained in the Bill before us tonight is very modest. It does not pretend to be anything otherwise. However it is an amendment that surely every deputy in this house can support.

It is also an amendment that if put into law would have an immediate impact on the financial hardship experienced by tens if not hundreds of thousands of hard pressed families.
It is an amendment that would make life better for a very large number of people at a time when so much of their lives are hit with bad news.

It is an amendment that is being tabled in the genuine hope that it can get cross party support.
I hope there is no deputy in this house who believes that it is right or just to charge an APR of 150% to 200% on loans – especially loans that are taken out to pay essential household bills.

So I am urging all deputies to stand together and to support this bill. It will not solve the burden of household debt – but it will make a real and tangible difference to many of the most financially distressed families in the state.

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