Thursday, 5 July 2012
Financial Services Regulation
Question 8: To ask the Minister for Finance his plans for improving the regulation of licensed money lenders and in particular the high interest rates these lenders may charge; and if he will make a statement on the matter. [32744/12]
Question 10: To ask the Minister for Finance if he is satisfied with the current legislation governing the operation of illegal money lenders; his plans to amend the Consumer Credit Act to increase penalties on illegal money lenders; and if he will make a statement on the matter. [32745/12]
I propose to take Questions Nos. 8 and 10 together.
There is already a comprehensive licensing system in place for moneylenders. I refer to Part VIII of the Consumer Credit Act 1995, as amended, for detailed information in this regard. Moneylenders have to apply to the Central Bank annually to have their licences renewed. Section 93 of the Consumer Credit Act 1995 sets out the Central Bank's powers on the grant or refusal of a moneylender's licence. I am advised by the Central Bank that the appropriate moneylending application form, for new licences or renewal, must be completed and returned to the Central Bank with a number of items for review and consideration. A moneylender's licence granted by the Central Bank is specific to that moneylender. Each individual moneylender's licence outlines the specific products that the moneylender offers, the annual percentage rate, APR, for each product and the total cost of credit for each product.
Before applying for a moneylender's licence, an applicant must give notice of this intention in a local or national newspaper, published in Ireland and circulating in the District Court area in which the applicant intends to engage in the business of moneylending. The Central Bank may refuse to grant a moneylender's licence if, in the bank's opinion, the cost of the credit to be charged is excessive or if any of the terms and conditions attaching thereto are unfair.
One of the conclusions of the report on the licensed moneylending industry published by the Central Bank in March 2007 was that the introduction of an interest ceiling for moneylenders may not achieve the objectives of lowering the cost of credit to consumers. In February 2011, the Central Bank published the results of a themed inspection of licensed moneylenders. The Central Bank advised me the themed inspection showed a high level of compliance among firms. Overall, the inspection found that customers were charged in accordance with the moneylenders' authorised APRs and cost of credit. I have no plans to amend the regulation of licensed moneylenders at this time. Currently, there are 46 moneylenders licensed by the Central Bank.
Persons who engage in moneylending and who do not hold the necessary licence granted by the Central Bank are in breach of the law under section 98 of the Consumer Credit Act 1995. Complaints may be made to An Garda Síochána, which has the power to bring prosecutions against such operators. A person guilty of an offence under the Act is liable, on summary conviction, to a fine not exceeding €3,000 or imprisonment for a term not exceeding 12 months or both, or, on conviction on indictment, to a fine not exceeding €100,000 or imprisonment for a term not exceeding five years or both. There are no plans to bring proposals to Government to increase these penalties.
A number of provisions in the criminal law may be of relevance to the practice of moneylending in particular circumstances. For example, these may include section 10, harassment, and section 11, demands for payment of debt causing alarm, of the Non-Fatal Offences Against the Person Act 1997, and the Criminal Justice (Public Order) Act 1994, which specifies offences of blackmail, extortion and demanding money with menaces.
This is an important issue and there is evidence of considerable activity in illegal moneylending. There are 46 licensed moneylenders but an unknown number are operating illegally. They prey on vulnerable people, especially at a time when people find it difficult to access loans from banks. Credit conditions tightened considerably and more people are turning to illegal moneylenders. Is the Minister satisfied there is sufficient enforcement? The Minister referred to the penalties that apply on conviction, but I do not read about convictions in the newspaper too often. Illegal moneylending activities are taking place. Is there enough focus on enforcement?
Enforcement can be difficult when moneylending is carried out illegally on a small scale and when the people to whom the money is lent are reluctant to come forward to assist the Garda Síochána in proceedings. There is reasonably good control and it is not out of control. A strong credit union movement is the best antidote to widespread moneylending coming in to our system.
I apologise for having to leave the Chamber. Credit unions have restrictions placed on them and this causes more people to go to moneylenders. I listened to a story on Joe Duffy's "Liveline" where a woman had to go to a moneylender. He sat outside the post office every week, gave her the post office card, she went into the post office to get payments and she handed the payments to the moneylender along with the card. She told the programme she considered committing suicide.
I asked a question about this a number of weeks ago. No illegal moneylender has been prosecuted in the State in recent years. The legislation allows legal moneylenders to charge an annual percentage rate of over 180% per year. Let us take the case of a moneylender lending money in Dublin over a 25-week period. A €500 loan accrues over €470 in interest. That is the case when a person goes to one of the 63 legal moneylenders licensed in this State. They all have different rates but many have rates of up to 180%. This is completely legal. Is it necessary to introduce legislation to curb the interest rates charged by legal moneylenders?
The Central Bank looked at this point recently in a review of moneylending and advised against it. My reply to the question referred to the detail in the report. Deputies should table questions to the Minister for Justice and Equality on the incidence of prosecutions.
It is not for me to frame the Deputy's questions but he might ask why, in the Minister's opinion, there are not more prosecutions if, as the Deputy says, there is widespread abuse. The legal money lenders are operating within the law and there are no complaints about them coming through. The complaints we are getting are about illegal money lending. Enforcement is a justice matter but the legal side is regulated.