Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 1:

In page 9, to delete lines 29 to 35, and in page 10, to delete lines 1 to 10 and substitute the following: “(2)(a)The Minister shall prescribe in respect of a loan (other than a running account) under a high cost credit agreement—

(i) the maximum rate of simple interest chargeable per week (being a rate less than or equal to 0.75 per cent), and

(ii) the maximum rate of simple interest chargeable per year (being a rate less than or equal to 36 per cent).

(b) A maximum rate of interest prescribed under this subsection shall apply to a high cost credit agreement entered into after the date on which the regulations, by which the rate is prescribed, come into operation and for a period of no longer than three years.

(3)(a) The Minister shall prescribe in respect of a loan (other than a running account) under a high cost credit agreement—

(i) the maximum rate of simple interest chargeable per week (being a rate less than or equal to 0.35 per cent), and

(ii) the maximum rate of simple interest chargeable per year (being a rate less than or equal to 18 per cent).

(b) A maximum rate of interest prescribed under this subsection shall apply to a high cost credit agreement entered into no longer than three years after the date on which regulations, by which the rate is prescribed, come into operation.

(4)(a) The Minister shall prescribe in respect of a running account under a high cost credit agreement, the maximum rate of nominal monthly interest chargeable on an outstanding balance (being a rate less than or equal to 1.92 per cent).

(b) A maximum rate of interest prescribed under this section shall apply to a high cost credit agreement entered into after the date on which the regulations, by which the rate is prescribed, come into operation.”.

I welcome the opportunity to speak on this amendment that concerns an issue that has been of great interest to me for some time. I introduced legislation back in 2018 to cap the levels of interest that moneylenders can charge and have been campaigning for changes to the law for several years. The permitting of ultra-high high interest rates charged by moneylenders is immoral and unethical. Had moneylenders never existed, no one would or could justify any lender charging the level of interest they do. That is precisely what the law does. It permits moneylenders to charge rates of interest that trap vulnerable borrowers into vicious cycles of debt. At present under law, under this and previous Governments, moneylenders licensed by the Central Bank have been permitted to charge annual percentage rates, APRs, of up to 187% on loans. This increases to 288% once collection charges are included. When compared with more affordable sources of credit such as credit unions with APRs of no more than 12.67%, there are no grounds on which high rates could ever have been justified.

Imposing a cap on the cost of credit that moneylenders can charge is fundamentally a moral issue. For several years, the Minister and the Department of Finance have resisted any calls to restrict the cost of credit moneylenders can charge, often on dubious grounds. European countries already have interest rate restrictions in place: in Spain on the grounds that ultra-high interest rates are excessive, in Finland on the grounds that they are unconscionable, and in Germany because they lack moral legitimacy. All of these assessments are correct. In 2018, the landmark report published by University College Cork and authored by Dr. Mary Faherty, Dr. Olive McCarthy and Dr. Noreen Byrne brought focus to this issue and found that 21 out of 28 European Union member states had an interest rate restriction in place. They also called for a cap on interest rates here.

In March, my legislation to put a cap on the interest moneylenders could charge was rejected by the Government. The argument deployed most often was that the cap on interest rates would lead to moneylenders leaving the market with borrowers being forced into the arms of illegal moneylenders. Despite their concerns, when the biggest moneylender in the State, Provident, left the market last year, the Department did not even issue a press release to advise borrowers of what to do.

My amendment would put in place a cap that this Dáil can morally stand over, one that could reduce the cost of credit moneylenders can charge, protecting consumers who are vulnerable to vicious cycles of debt, and reducing the interest they are charged. It proposes an initial cap of 0.75% in simple interest per week up to a maximum of 36% per annum on a cash loan. This would then reduce to 0.35% in simple interest per week up to a maximum of 18% per annum. This provides a more ambitious restriction than the one put forward by the Government in this legislation. The Government's proposal currently before the House would allow a moneylender to charge €480 on a €1,000 cash loan over a 12-month term, when a credit union would charge €60 for the equivalent loan. The Government's proposal would allow a moneylender to charge 129% APR. I do not believe this proposal should be supported in the Dáil. It is not one the Dáil can morally stand over. We in Sinn Féin cannot stand over it. That is why we have proposed this amendment.

The interest rate restriction we have proposed in our amendment is one the moneylending sector can bear as it moves towards a more professional and digitalised mode of business in which labour costs are substantially reduced. Crucially, it is one the Dáil can ethically tolerate, ensuring as it does that the total cost of credit a moneylender could charge would reduce from six to three times the average cost of credit of an equivalent loan from a credit union. I hope the Dáil will do the right thing and support this amendment.

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