Mr. Paul Joyce:

Free Legal Advice Centres, FLAC, is pleased to contribute to the debate. We made a detailed submission last November. Since then, there have been many appearances before the committee from a number of people such as the Centre for Co-operative Studies and the Social Finance Foundation, SFF. The debate has moved on as a result of the number of appearances by different witnesses. The scope of the legislation seems to have narrowed to a number of issues, one of which was understanding APR and how it works in particular for short-term loans. Loans of under a year always carry high APRs. Another was that perhaps a tiered system would be best in terms of creating maximum interest rates.

Another was that tiered rates might be introduced depending on the length of the term of the loan. I also note that Deputy Doherty made a number of requests for information from the Central Bank of Ireland at the last debate, when the director of consumer protection appeared before this committee. The suggestion was made by Deputy Doherty that perhaps a standard of three times the market rate might be an appropriate rate to strike and he requested data from the Central Bank on interest rates charged by various lenders. That seems to be the nub of the issue.

I wish to make a couple of observations. It is not true to say that there are no maximum rates of interest that can be charged by moneylenders right now. Each moneylender applies for a licence annually and sets out the rate that it proposes to charge and the Central Bank either agrees or does not agree to that rate. A fact that is often missed in the media debate on this issue, in terms of the scandal of moneylending rates and so on, is that the State actually authorises each moneylender to charge what it currently charges. If one looks at the moneylenders register, one sees that some moneylenders have two different rates, one for short-term loans and the other for longer-term loans. A number of lenders also charge collection charges and a different APR applies for such charges. It is also worth noting the advisory note at the top of the register which reads as follows: "Please note that while the below register provides detail on the maximum rates a moneylender can charge, each moneylender may have a range of additional products with lower APRs and costs of credit available." That is a particularly interesting statement in the context of setting maximum rates. It seems to suggest that there is some degree of competition among moneylenders. The fear that Ms O'Connor has articulated and which has been articulated by many is that by setting maximum rates, the licensed moneylender option will be cut off and people will migrate to illegal moneylenders. Discussions with the industry, with the Consumer Credit Association which licenses moneylenders and with Provident, which has withdrawn from the market, on how this might work would be worth considering.

The director of consumer protection at the Central Bank suggested that setting one maximum rate might lead to a situation where licensed moneylenders would just extend the term of their loans, thereby defeating the purpose of having a cap in the first place. Obviously that fear could be dealt with by having a tiered set of rates depending on the length of the agreement. The Minister for Finance in his contribution made it very clear that APR is significantly affected by the term of the loan if the latter is less than one year. That is correct. He said that he agreed completely that current interest rates are too high but that a sudden change of this magnitude could be very difficult for the industry. There seems to be a broad consensus emerging that existing rates are too high. We all probably accept that but setting maximum rates needs to be well researched and needs to still allow for some measure of profit for licensed moneylenders in the market.

On the issue of collection charges, 14 of the 35 lenders currently on the register purport to charge collection charges. Our legislation is totally outdated in this regard. Section 103 of the Consumer Credit Act obliges the moneylender to inform a borrower that payments can be made at the business premises of the moneylender but nobody actually does this. It would be more expensive to go to the business premises of the moneylender in the first place. What is extraordinary is that the legislation has not been updated to allow borrowers to make electronic payments. If there are going to be tiered rates for different lengths of agreement, they have to distinguish between home-collected loans, which are obviously much more expensive for the lender to service, and loans that are paid by electronic means which are obviously going to be far cheaper and should attract much lower rates.

It seems to us that a cap, or caps, is needed and tiered rates seem like a good idea. It will be interesting to see what response Deputy Doherty gets to his request to the Central Bank to provide data. Some broader questions also apply here, some of which were touched on by Ms O'Connor. In our lengthy submission in November we touched on a number of them. Credit unions are seen as the main alternative source of credit to licensed moneylenders should a lot of the latter leave the market. It would be useful to evaluate and review the It Makes Sense loan scheme to understand the problems with it. Our understanding is that while a lot of credit unions participated in the scheme, a number of the larger unions did not.

There are obviously huge issues of income inequality in our society. In that context, the supplementary welfare scheme needs to be looked at to see whether the urgent needs payment mechanism is actually working for people who, as Ms O'Connor suggested, get into temporary financial difficulties when their washing machine or cooker breaks down, for example. There is also the issue of the minimum living wage which a number of organisations, including the Vincentian Partnership for Social Justice among many others, have suggested should be set at €12.30, which is approximately €2.10 above the national minimum wage.

The last point I would make is that apart from maximum interest rates for licensed moneylenders, we should also consider maximum interest rates for other lenders. We gave an example in our November submission of an absolutely scandalous loan that was offered by a sub-prime lender to a client in the boom years. We would also like to see the consumer credit legislation changed in some other areas. Top-up loans are banned, for example, but there is no limit on the number of loans that a customer can have simultaneously which defeats the purpose of the top-up loan ban.

This committee is also looking at the Consumer Protection (Regulation of Credit Servicing Firms) Bill. In our submission on that legislation, we made the point that consumer credit legislation in Ireland needs to be properly codified. We have an Act and a number of statutory instruments. It is about time that the legislation was updated into one cogent statute that people can understand properly. There are two very significant directives in this area; one is the 2010 directive on consumer credit and the other is the 2016 directive on mortgage credit. They were both transposed by statutory instrument, thereby depriving the Houses of the Oireachtas and the committee of the opportunity to debate them properly.