Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I appreciate Mr. Joyce's comments. I know our submission came quite late in the day but I want to tease out the issue of collection charges. This is an opportune time to move on this issue because the pandemic has impacted on the way moneylenders have operated. Door-to-door collection was the nature of moneylending and is one of the reasons many people go to a moneylender, because of the ease of access. They are there on people's doorsteps and they are familiar with their family and children, which lines up the next level of borrowers and so on. However, that has changed as moneylenders have moved to an online system of collection. They were forced to do so by the pandemic and that shows that the system can operate not just on a door-to-door basis. The principle of this legislation is that the cost of credit should be no more than three times what is available on the market, and that includes things like collection charges because they are part of the cost of credit. Whether a company is involved in door-to-door dealings could be taken into account by the Central Bank but the cost still should not exceed three times what is available on the market.

Mr. Joyce's point about the duration of the loan was well made and speaks loudly to the fact that APR was not an appropriate way of dealing with this issue. The proposal here is for three times the cost of credit of what is in the market. If, for example, the credit union offers a loan of a duration of a year and the cost of credit is €50, that means the moneylender can only charge a maximum of €150 for the cost of credit for that term. If the credit union offers a six-month loan with a cost of credit of €30, then the moneylender will only be permitted to charge €90 for that same amount of credit. It is the same amount of loan but for different durations and both the moneylender and the credit union charge a higher interest rate because of that. The principle is to benchmark the rates against what is in the market and apply a maximum of three times that rate. To tell the truth, I am still a bit uncomfortable with that because it is still very high but my job here is to get it moved away from 288% down to an appropriate level. The legislation allows for further reporting on this matter to see if it needs to move further based on Central Bank reports.