Ms Annmarie O'Connor:

The Deputy asked about the cycle that leads to our clients using licensed moneylending. In our submission in November, we described the issue as being as much about economics as about ethnography, so it is something that arises in particular communities. It is habituated. It is cultivated by the people who lend in this way. It is targeted at certain individuals and demographics. Certainly, in the research we did for the submission, we saw that with people parenting alone and single females parenting alone. It is about two cohorts, as I described in the opening submission. One is the cohort who live on a low income all the time and are targeted for particular events. I guess that when one always has to say "No", it is important to be able to say "Yes" sometimes. One of the things advisers say to us is that the moneylender can be viewed as a friend. It is a convenient model of lending. There is not a lot of judgment involved in it and that is important.

We have another cohort. We are seeing in our data more recently an increase in the number of males using this type of lending as well as an increase in the number of waged people using it. In those cases what we think is happening is that people experience a loss of income and cannot re-engineer their finances quickly enough so they have a gap to bridge. Then they have an urgent need and they look to the licensed moneylender to bridge that gap. We think there is significant potential for us to work with clients to bring them across. As we said, we use the words "near prime" and that might be what that higher rate the Deputy is proposing is, albeit lower than what is currently on offer in the licensed market from high-cost lending to near prime and then to mainstream, to get it to be as low as possible.

Regarding the illegal lending, we highlighted this because we have looked at the research, both from UCC and other international research. We have also looked at our own experience. The people who use licensed moneylending are well aware of the risks of illegal moneylending so that pathway from licensed to illegal is not a natural one. We think that perhaps it has coloured this space. In fact, sometimes when regulation in this area is proposed, the providers of high-cost credit highlight the risk of the contraction of the market and the migration to illegal lending. We need to look underneath that. We said in our submissions in November and today, which is very much with the idea of a tiered approach over a period, that if the change that is currently proposed was implemented, it is a perfect opportunity to situate that within a broader policy on financial inclusion. We have set out all the things that could be done. They are all possible. They are not high-cost policy measures. They are more about a focus on the stakeholders working together to bring the range of things that are possible to bear on this issue, so that we approach it strategically and bring all the stakeholders involved together. Each has a role to play, and that is the backdrop needed for introducing this change. It is positive to hear what the ILCU said. That is important. That is one element of it. There are probably other solutions and innovations possible within the fintech world and so forth. This is a great opportunity to tackle this issue and to do much better by the clients we support.