Mr. Ed Farrell:

I thank the committee for the invitation to discuss the Consumer Credit (Amendment) Bill 2018. I wish to restate clearly the support of the Irish League of Credit Unions, ILCU, for the principle of the Bill. Putting a cap on the interest rates of moneylenders is the right thing to do. I welcome this opportunity to outline the view of the ILCU and will briefly, by way of conclusion, put our position on this issue in the broader context of credit union policy.

On moneylending, the ILCU believes it is vital that the Government ensures that extortionate interest rates are not charged. Credit unions know first hand how they trap families and individuals in a lifetime of debt. Everyone, whether employed or not, should have access to affordable credit.

Credit unions are part of a social movement with a financial purpose and are not financial institutions with a corporate social responsibility programme.

Putting that ethos into practice, credit unions have, as the committee knows, rolled out the personal microcredit scheme, otherwise known as the "it makes sense" loan. The original aim was to prove that credit unions could offer a loan product that matched the convenience and ease of moneylenders' offers, address their exorbitant rates and operate within prudential lending guidelines. In an excellent co-operative effort with a range of agencies we have done just that.

The Bill the committee is considering is not simply aspirational. It exists in a context where an alternative exists and which the league is anxious to promote. It is in this context that we support the proposal for the introduction of a cap on moneylenders' interest rates. We note that the Bill proposes the amount of APR chargeable on loans by licensed moneylenders shall not exceed 36% and, in our view, this is appropriate.

We understand that there is concern that a cap may ultimately lead to a reduced supply of loans from licensed moneylenders, thus abetting legal lending. However, the league does not believe that an interest rate cap will result in increased lending by illegal moneylenders. Our rationale for this is twofold. First, as I said, is the fact that the credit union movement is an alternative source of credit which is in place as well as the international experience of where such interest rates caps exist. To expand on that point, I will refer the committee to a report on interest rate restrictions on credit for low income borrowers which was conducted by the Centre for Co-operative Studies in UCC. The report states that there is no empirical and undisputed evidence that interest rate restrictions result in an increase in illegal moneylending.

In the UK, it was feared that the price caps on payday loans would push a large percentage of people towards illegal moneylending. Citizens Advice in the UK has said that caps on payday loans have not led to an increase in illegal moneylending, with analysis of debt held by Citizens Advice clients showing that the number of loan shark debts has remained constant since the introduction of the cap.

Regarding fears of illegal moneylenders, the ILCU believes consideration should be given to the introduction of an interest rate cap over a period of years, thus providing as fluid a transition as possible. This could be achieved by way of a stepped down approach, so to speak, in advance of reaching the expired cap over a number of years. This would allow time to monitor the situation and take relevant steps, if and when required.

Credit unions are a social movement with a financial purpose. This issue has been a priority for the ILCU over several years. The wider policy context for credit unions and the committee is delivery by Government on its plans, as outlined in the programme for Government, which is for credit unions to become the community banking sector they have the potential to become. That bigger issue is outside the scope of today's conversation, but it is imperative if credit unions are to grow and deliver on the range of services people want from a people-led community-based movement. Moneylending is simply one example among many of the failures of conventional banking. I again thank the Vice Chairman.