Martin Ferris (Kerry North-West Limerick, Sinn Fein)

As I said during my contribution to the debate on the Personal Insolvency Bill last week, we need to take into account the reasons people are resorting to moneylenders, whether of the licensed or illegal variety. In most cases, we are talking about people who have been refused credit from the banks and other high street lenders for mortgages, personal loans or, in some cases, business loans.

On Monday last, a young woman came to my office in Tralee because her single parent payment had been stopped on the pretext that she was residing with her boyfriend, which was not true. For the past four months, she has been living on handouts from her parents, friends and so forth. She is so desperate that she is going to illegal moneylenders to try to feed her three children and the Society of St. Vincent de Paul has kept her alive up to this point in time. People are being forced into situations in which they feel they have no recourse but to seek loans from sub-prime lenders or moneylenders who charge much higher rates of interest than the mainstream institutions.

Last week I mentioned the Wise Mortgage Company in this context and specifically asked the Minister to respond to the fact that this company is in clear breach of Central Bank regulations. The Wise Mortgage Company is owned by an American citizen, Mr. Ronald Weisz, who has bankruptcy and convictions against his name both in the United States and in this State. That surely ought to preclude him from being involved in moneylending and providing mortgages, yet there is no legal structure covering companies such as the Wise Mortgage Company in regard to their suitability to operate here. During the debate in the House last week, I noted that the Minister of State, Deputy Perry, appeared to indicate to his Department officials that I had referred to this issue, and I hope there will be a response to the issues I raised. The Wise Mortgage Company came to my attention some eight years ago when a farmer in my constituency was having his land repossessed by this vulture. The fact that he was prepared to pay back the original loan and substantial interest would not suffice. When he got the loan initially it was at 9% interest, but this doubled to 18% if there was a late payment. This man is still operating. I am dealing with another case in the west in which the Wise Mortgage Company is involved. What is even more criminal is that a solicitor acting on behalf of the Wise Mortgage Company was also acting on behalf of the person borrowing the money. That solicitor was at that point in time on the board of the Wise Mortgage Company, yet there seems to be no regulation that can do anything whatsoever to prevent such people carrying out this type of activity against decent, honourable people who are struggling to make a living.

It is also a fact that while sub-prime and high interest mortgages and loan facilities may be necessary and welcomed by the people initially taking out the loans, in many cases they then find themselves in trouble, and the sub-prime lenders and moneylenders are more likely to take aggressive court action for repossessions on foot of outstanding loans. Of course, in the case of illegal moneylenders, the consequences can be far more serious for people who fall behind on repayments. I note the comments of my two colleagues that it is seven years since there was a conviction against illegal moneylenders, while we all know it is happening in every working class housing estate throughout the country.

While in some cases the mainstream lenders might feel the problems encountered by clients of moneylenders justify their having refused them loans, in many cases they have also driven them into that position. We are all familiar with people, including business people, who were at one time considered to be worthy of loans but are now considered too high a risk. Many, if not most, businesses in the State will attest to the difficulties of securing loans, even when they believe they have presented a viable repayment plan and when the loan requested has been to expand operations and employment. Indeed, there were cases in which businesses were refused loans to expand operations but were instead offered loans to invest in property. Of course, while all of that ended with the collapse of the speculative bubble, it spoke volumes about the attitude of some banks that were central to this madness.

Banks have also placed people in financial difficulties by increasing their credit card limits without applications from the people concerned. Human nature being what it is, most people probably welcomed that and spent accordingly. However, this does not absolve the banks of their responsibility, and the same applies to their role in the issuing of mortgages.

Another problem is that people who formerly found it easy to get loans from credit unions are now being turned down for a variety of reasons. In some cases this has been due to reductions in repayments or missed repayments, but in other cases they have been told they are ineligible for new loans until previous ones have been cleared. In some cases, such applicants have had substantial deposits with the credit union and, therefore, might be considered good risks. The point is that although the criteria have clearly changed, the attitudes of credit unions also appear to differ depending on the branch. One reason I have heard is that the IMF audit of credit union books has led to a tightening of loan criteria, which is generally known, but also that all credit unions are being made to pay for the sins of a few credit unions which were involved in reckless lending. Surely the rogue branches ought to have been taken to task rather than the institution as a whole being hamstrung by the intervention of the Central Bank on the instructions of the IMF.

The point of all this is that the restriction of loans, including from credit unions, is driving more and more people into the hands of high-interest moneylenders, including illegal moneylenders. A small six-month loan from a legal moneylender will typically have an interest rate from 187% upwards. One of the main lenders, Provident, has recently been reported as having 100,000 clients. It offers short-term loans at high rates but, presumably, in the vast majority of cases the people accessing the loans are able to meet whatever weekly repayments are involved in borrowing, say, €500 over three to six months. The real issue, of course, is that when someone is paying back €25 or €30 a week, they do not notice the huge interest being charged, even if they have been told they will be repaying a much higher amount than borrowed. All they are interested in is the short-term necessity of having €500 or €1,000.

Surely the mainstream institutions have a case to answer in driving people down that avenue when in most cases people, even those with a bad credit rating, would be able to meet repayments on small short-term loans.

Given the reliability of the credit unions, which were always considered to be the poor person's banks, the fact that such stringent criteria are being applied is driving people who find themselves in desperate circumstances - they may be trying to get children ready for first Holy Communion or confirmation or to buy books for children returning to school - into the hands of sub-prime moneylenders or illegal moneylenders. The matter becomes more insidious when one considers that in a high proportion of cases people are borrowing for the short term to deal with emergencies, including paying household bills and putting food on the table, and their mortgage repayments are in arrears.

It must be factored in also that Provident is not some homely corner shop but a massively lucrative company with profits of hundreds of millions of euro in this country and, as we have heard, billions of euro internationally. It is an integral part of the global financial octopus which is sucking the life out of this country. For many people, one of the tentacles is the extraction of more and more of their income. It is truly a vicious circle at every stage.

As with the mortgage and other personal debt issues, moneylending is something that must of necessity be tackled by the State. This Bill is an opportunity for the Minister of State, the Government and all Deputies who support the Government to show courage and stand with the people most in need in our society. They should take a stand against the vultures that are out there, including the Wise Mortgage Company, Provident and illegal moneylenders, by accepting this Bill and creating an opportunity for people to borrow in a reasonable way to feed and clothe their children or get themselves out of extreme difficulty.

See this speech in context