Dáil debates

Tuesday, 17 July 2012

Consumer Credit (Amendment) Bill 2012: Second Stage [Private Members]

 

7:00 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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I move: "That the Bill be now read a Second Time."

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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I understand the Deputy is sharing time with Deputies Brian Stanley, Michael Colreavy, Martin Ferris and Gerry Adams.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Faoin reachtaíocht atá ann san am i láthair níl treoir ar bith leis an ús a bfhuil iasachtóirí ceadaithe a bhaint. Tá cuid des na hiasachtóirí ag baint rátaí bliantúla de 210%. Cén polaiteoir, Teachta Dála nó Aire a bhéádh sásta glacadh le táilli chomh hard seo dá mbeimís féin ag tógáil iasachta? Tá a fhios againn go bhfuil teaghlaigh ag strachailt leis an chostas maireachtála atá ag ardú go leanúnach, le méadaithe ar cháin agus ar tháillí agus le cailliúint ioncaim. Tá siad fágtha gan rogha ar bith ach iasachtaí ar chostas árd a thabhairt amach chun billí a íoc ó sheachtain go seachtain. De réir staidéir atá déanta ag Conradh na hÉireann de Chomhair Chreidmheasa, tá 10% de theaghlaigh ag iompú chuig iasachtóiri le billí tí a íoc. Tá cuid des na hiasachtóirí seo ag éirí saibhir ar dhroim theaghlaigh atá faoi chruatán. Ní tharlódh seo murab é go bhfuil an Rialtas ag ligint do rátaí ollmhóra úis tarlú.

Throughout the State low and middle income families are struggling to get by. As each month passes the recession bites deeper and deeper. Unemployment, wage cuts, tax increases, the household charge, cuts to rent supplement and rising mortgage distress are pushing more and more families into severe financial hardship. Hundreds of thousands of people are turning to moneylenders to make ends meet. Only recently I spoke to a constituent who had turned to moneylenders to pay basic household bills while waiting for a social welfare claim to be processed. The interest rates she had to pay on the loan put her into significant financial hardship but since it took several months to process her social welfare claim she took the view that she simply had no choice.

According to Social Justice Ireland, the State's poorest families experienced a disposable income drop of almost 18.7% in 2000 alone. We know that families are having to make impossible decisions on a daily basis, such as whether to pay the gas and electricity bills or pay the mortgage. Faced with these impossible choices, many are getting into even greater levels of debt simply to get by.

The What's Left Tracker 2012, published last week by the Irish League of Credit Unions, provides a graphic picture of the human face behind these figures. The report stated that 1.8 million families are left with €100 or less each month after bills are paid, some 25% of credit card holders rely on their credit cards to make ends meet each month and 40% of people have borrowed to pay household bills in the past 12 months. Astonishingly, 10% of people are using moneylenders. Incredibly, there is no cap on the rates of interest that moneylenders licensed in this State can charge.

Some 46 licensed moneylenders operate in the State and according to some figures they provide credit to more than 300,000 people. Much of this credit takes the form of short-term loans, often offered at high interest rates. Under existing legislation there is no cap on interest charged by licensed moneylenders. Some lenders charge an annual percentage rate, APR, of up to 210%. I have one question for every Member and Minister while we are dealing with this Bill. Can they stand over the imposition of such charges, especially on the poorest in society, who believe they have no option but to go to these lenders? The only reason these lenders can charge such excessive rates is that the House has not yet placed a cap on interest rates. As a result of the inaction of the Oireachtas over many years some lenders are, without doubt, getting rich on the back of hard-pressed families.

Let us consider the position throughout the European Union. Many EU member states operate interest rate caps on licensed moneylenders. A 2010 European Commission study identified 13 states that operated such a cap. These included Belgium, where the cap ranges from 10% to 19.5% APR, France, where the range is from 5.7% to 21.6% APR, and Spain, where the rate cap is 10% APR. In these and other states politicians have already decided there is a limit to the amount of interest licensed moneylenders can charge, especially when lending to low income families struggling under the weight of household debt.

The Bill tabled by Sinn Féin seeks to bring this State into line with our EU counterparts. Of the 46 moneylenders with licences in this State, 29 charge an APR of more than 100% while 14 charge more than 150% APR. One moneylender charges an APR of 210%. This means it would cost a person who goes to that moneylender and takes out a €500 loan for his family, who may be struggling to pay the bills and get by, a total of €186 if the loan were for six months and €375 if the loan were for 12 months. Given that loans of the same amount from the Credit Union would cost the same family €13 and €25 respectively, there is no justification for this vast mark-up. Such excessive interest rates push hard-pressed families further into financial stress and poverty. It is a vicious cycle and we all know it. There is no moral or economic justification for the absence of a cap on interest rates charges by licensed moneylenders.

The Bill under discussion proposes a cap of 40% APR. This would mean that while some moneylenders would be required to charge less, no lender could breach the 40% cap. What would this mean for the family to which I referred earlier, a member of which went to a moneylender for €500? At a maximum that struggling family would have paid €50 for a loan for six months or €97 for 12 months. This is a fairer level for customers and it would also allow licensed moneylenders to operate on a sound commercial basis.

Some licensed moneylenders in EU member states are significant businesses. The largest moneylender in this State is an organisation called Provident. Bloomberg reported recently that Provident is set to make €1.3 billion in profits next year from its operations in Ireland and other member states.

In 2006 the Polish Government introduced a cap of 20% on licensed moneylenders. As in Ireland, Provident is one of the largest moneylenders in the market in Poland. It has continued to trade profitably in Poland even after the introduction of a cap. An APR of 20% is the maximum charge in Poland whereas in this State the largest moneylender can charge a rate of 187%. It is no wonder the company is set to make €1.3 billion in profits globally. If the Government supports the principle of a cap but is unsure about the figure of 40%, I call on Government Members to let this Bill pass to Committee Stage. At that stage we could tease out the finer details and determine the appropriate level to ensure that moneylenders can continue to exist but people are not being fleeced at the same time. Sinn Féin is open to discussing the level of the cap but of greater importance to the party is that over the course of the debate the Government accepts the notion that there should be a reduction in the APR charged and that we need to follow the example of other European countries and introduce a cap. There is an urgent need for Government to introduce a cap on interest rates and there is also a need for a wide-ranging reform of the regulation of licensed moneylenders and the policing of illegal loan sharks. Last month the Minister for Justice and Equality, Deputy Shatter, in a reply to my party colleague, Deputy Stanley, confirmed there is no record of a successful prosecution for illegal money lending in the past seven years. Clearly, there is something wrong and that also needs to be reformed.

Earlier this month I asked the Minister for Finance to consider the issue of an interest rate cap on moneylenders as part of a broader reform of the regulation of licensed moneylenders. He stated that he had no plans to amend the existing regime and he quoted a 2007 research paper from the Central Bank which stated that a cap might not reduce the total cost of credit. I have read that piece of research to which he referred and its conclusion is not based on any empirical evidence. It took two similar loans with different APRs and different durations and from that comparison alone, it drew its conclusion. This is not a sufficient basis for making such an important policy decision.

Níl sa leasú atá molta sa Bhille seo romhainn ach leasú macánta. Is féidir go cinnte le gach Teachta tacaíocht a thabhairt don leasú. Má chuirtear an leasú seo i ndlí, beidh tionchar láidir aige ar an gcruatan airgid atá á fhulaingt ag na céadta mílte teaghlaigh, atá faoi ualach trom. Déanfaidh an leasú seo an saol níos fearr do líon mór daoine ag am nuair atá cuid mhór den tsaoil buailte ar dhrocham agus ar chruatan.

The amendment contained in this Bill is modest. It does not pretend to be anything otherwise. However, it is an amendment that I hope every Deputy in this House can support. It is also an amendment that, if put into law, would have an immediate impact on the financial hardship experienced by tens, if not hundreds, of thousands of hard-pressed families. It is an amendment that would make life better for a large number of people at a time when so much of their lives have been hit with bad news. It is an amendment that is being tabled in the genuine hope it can get cross-party support.

I sincerely hope there is no Deputy in this House who believes it is right or just to charge APRs of 150% or 210%, as is currently happening, on loans, especially those taken out to pay essential household bills. I urge the Minister and Deputies from all parties to stand together and support this Bill. It will not solve the burden of household debt but it will make a real and tangible difference to many of the most financially distressed families in the State.

Photo of Brian StanleyBrian Stanley (Laois-Offaly, Sinn Fein)
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The Consumer Credit (Amendment) Bill aims to introduce a cap of 40% on the amount of APR a licensed moneylender can charge a borrower.

To our shame, the State has failed to introduce any cap on interest charged by licensed moneylenders, allowing the 46 licensed moneylenders to charge as they will. The highest rate being charged, at 210%, is scandalous. This is forcing households into spiralling debt that will never be cleared. Households which cannot access credit from the banks or credit unions live in permanent debt. They are always burdened about how they will clear this. What should be enjoyable occasions, such as first communions, Christmas and birthdays, become a nightmare for them and turn into crises in that they worry and torment themselves about how they will find money for them.

The Bill is a reasonable response to a massive crisis. We are dealing with legal money-lending tonight, but I have seen the effects of both legal and illegal moneylenders, particularly on the most vulnerable. We fully understand that if we propose an APR that is too low - Sinn Féin is trying to be reasonable about this - we will force legal moneylenders underground, the sector will become totally unregulated and that will only lead to further and more sinister problems with illegal moneylending.

In County Laois I have witnessed the effects of the crisis, with both legal and illegal moneylenders. I have come across cases where children's allowance books are held as a surety by moneylenders and women are forced to hand over money each month outside the post office. As I found out in reply to a parliamentary question, there have been no prosecutions in the State in the past seven years for that type of activity by moneylenders.

Moneylending is not done by some small group of shady individuals sneakily driving around the estates. The biggest moneylender, as Deputy Pearse Doherty stated, is a multi-million euro institute called Provident, which is mainly owned by banks and large financial institutions. Provident has the largest share of the moneylending market in the State, yet, because its headquarters is in London, it is under no obligation to publish figures on its trading balance and profit here. All we know is that there are approximately 100,000 doing business with it, if one could call it that. We estimate its Irish profits are high. What we know is that Provident, internationally, is set to make millions of euro in profits again this year and in the coming year.

The Bill does not pretend to solve all of the problems facing families caught up in the awful spiral of debt but by not supporting the Bill, the Government remains out of step with our EU partners. There is much talk in this House about being in step with the rest of Europe and being good Europeans. Let us be good Europeans by supporting this Bill. Thirteen states have a cap on the interest rate moneylenders can charge, with an average APR of 15% to 20%.

One of the longer term solutions is that families which normally do not have access to bank or credit unions would have that. One in six adults are excluded completely from the banking and financial sector which means they have no access to loans or mortgages as those in the mainstream who are working have. The irony of this is that some of the banks which are refusing them permission to open a bank account are owned by the State. The State should use its influence - I appeal to the Minister of State, Deputy Brian Hayes, to bring this to the attention of the Government - to encourage banks to allow those who are poor and those with small amounts of money to be able to open bank accounts. To date, the banks have behaved disgracefully, keeping those on the margins in the grasp of legal and illegal moneylenders. Ultimately, there is a need for a not-for-profit lending institute the sole function of which would be to make small interest-free loans available. The credit unions could play a more active role in this regard.

I urge Deputies from all parties to back this Bill. The Bill is about relieving poverty in the State.

Photo of Michael ColreavyMichael Colreavy (Sligo-North Leitrim, Sinn Fein)
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The economic crisis gripping this country has left many in difficult situations. Every one of us in this Chamber has heard the harrowing tales of those who simply do not have enough money to afford the bare necessities. It puts so many people in a difficult situation. What do they choose to spend their little amount of money on? Do they spend it on crippling mortgage payments? Do they spend it on food for their families? Do they spend it on school books and uniforms for their children? There are people willing to sacrifice heating their home just in order that they can afford essential medical services. These must be some of the most difficult questions that any household could face and it is our duty, our responsibility as elected representatives, to help alleviate their suffering in any way we can.

The purpose of this Bill is simple. It is, essentially, to place a cap on the interest rates that legal moneylenders can enforce on those who must borrow from them. The difficult questions people are forced to ask of themselves places many in that difficult situation where they have little choice but to seek money from the easiest, and often only, possible route. When one is not able to obtain a loan from a credit union or from a bank, one is forced to seek a loan from moneylenders. The current legislation means those who find themselves in difficult situations can suffer extortion from moneylenders and extremely high interest rates. This is immoral. Moneylenders are using the suffering of people to make a profit off them, which simply cannot be allowed to continue. A 40% interest rate cap is a necessary step to bring these moneylenders into line with reality. We cannot, as legislators, let them extort from the most vulnerable in this society.

We also need a wider debate on the role moneylenders play in our society. First, we must address why people are forced to seek loans from these outlets. It is not a healthy sign for our society that so many people are forced into a situation in which they must go to such lengths to cover essential items. Second, we need to have a discussion as to how we may find an alternative to the current system of moneylenders. There must be an easier and better way for people in difficulty to attain small, short-term loans.

We also need to take cognisance of the recent report by Social Justice Ireland showing the alarming and growing imbalance between the poor and the wealthy in this country. We must re-examine the level of disposable income required to maintain an individual or a family with some dignity, we must put protections in place to support those whose income drops through no fault of their own, we must eliminate the inexcusable delays in deciding on applications or on appeals for social welfare and we must make the supplementary welfare scheme fit for purpose.

Moneylenders, licensed or unlicensed, are an indictment of the State and its failure to protect our people. This Sinn Féin Bill merely seeks to put a cap of 40% on licensed moneylenders' interest. If the Government Deputies oppose this Bill, it will certainly appear to us and, more importantly, it will be obvious to the public that the Government is opposing a very modest but real attempt to make life better for at least 100,000 of our citizens.

8:00 pm

Photo of Martin FerrisMartin Ferris (Kerry North-West Limerick, Sinn Fein)
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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.

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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Ba mhaith liom an Teachta Pearse Doherty a mholadh de bharr an Bille seo. This is an important initiative to introduce a cap on what is paid back to licensed moneylenders. However, we should not forget that many loan sharks are intimidating and extorting exorbitant rates from citizens. Last week saw a mother of five receive a suspended sentence after loan sharks forced her to grow cannabis plants in her children's bedroom.

Every day this Dáil discusses the impact of the Government's savage austerity policies on the lives of citizens. In our constituencies we meet community and voluntary groups and individuals desperately struggling with the consequences of unemployment, austerity, cuts to public services and debt. It is the austerity policies of this Fine Gael and Labour Party Government which are driving more and more citizens into the hands of moneylenders. This is evidenced in the ESRI report which found that budget 2012 disproportionately affected citizens on low and middle incomes. Beidh an Rialtas ag pleanáil an chéad bhuiséid eile ó seo ar aghaidh. Tá éileamh á dhéanamh don séú austerity budget seo nach gcuirfear leis an mbochtanas atá ag 1.8 milliún duine atá ag maireachtáil ar €100 nó níos lú. Sin €25 a week. Very few Deputies or Ministers could live on €25 a week. One of the bleakest findings in the report was that 17% of adults - that is, 600,000 people - have absolutely nothing left for discretionary spending once all bills are paid. These are the citizens who are being forced to borrow not to buy drink, luxuries or pleasure but to pay utility bills, make mortgage payments and put food on their tables.

According to the Irish League of Credit Unions, 10% of households are turning to moneylenders to pay household bills, and many find that once caught in the moneylending trap it is almost impossible to escape. There is no cap currently for licensed moneylenders, and some lenders charge up to 210% APR. These lenders are making super profits on the back of hard-pressed families. They can do that only because the Government has done nothing to tackle excessive interest rates. A 210% APR means that a €500 loan taken out by a struggling family to pay a gas or electricity bill would cost them €186 if the loan was for six months and €375 if the loan was for 12 months. With little prospect of work or increased earnings, families are forced to return to moneylenders even before they have the last debt paid to try to pay the next bill. It is a vicious circle. Given that a €500 loan from a credit union would cost the same family €13 and €25, respectively, the excessiveness of these rates is obvious.

There is undoubtedly a broader issue in regard to the way those on low incomes interact with financial institutions. One in six of the population do not have a bank account, a bank card, or access to an overdraft or other borrowing facilities. These citizens are dependent on cash and credit from legal or illegal moneylenders. Of the 46 licensed moneylenders in this State, 36 offer a doorstep collection service. That means that every week someone calls to collect the money. Of the 46 moneylenders currently operating licences, 29 have APRs of more than 100%. Fourteen of them charge 150%. Sin fiacha ar bharr fhiacha. Tá neart scríofa agus ráite faoi na deacrachtaí atá acu siúd atá faoi riaráistí morgáiste.

Ar an 18 Eanáir bhí tuairim agus 70,019 duine i riaráistí ar feadh 91 lá. Fine Gael and the Labour Party promised a lot for mortgage holders when in opposition. Sinn Féin welcomed the arrival, belatedly, of the Personal Insolvency Bill, but that Bill hands the banks a veto over personal insolvency arrangements. The reality is that 15% of mortgage holders are now in serious distress. The Governor of the Central Bank, Patrick Honohan, has told us that 25% of all mortgages, by value, are in arrears or have been restructured. That is illustrated by the huge increase in claimants of mortgage interest supplement in recent years. That is the payment which provides short-term support to help an individual make mortgage interest repayments. In 2007, in my constituency of Louth, only 75 citizens were in receipt of this payment. By March of this year, that number had leapt to 465. The State-wide figure is 18,000. By any measure, therefore, we have a huge crisis in regard to mortgages. The Taoiseach has stated that this is the single biggest crisis facing our people, but the problems of debt, moneylenders and austerity have more profound implications. Figures show that the number of suicides rose last year to 525 - an increase of 7%. Those are the ones that are reported. Some 439 men and 86 women are recorded as having taken their own lives in 2011. Deputy Dan Neville, President of the Irish Association of Suicidology, acknowledged that these figures were frightening but not surprising given the state of the economy. Yesterday's report made a clear connection between austerity and suicide. It revealed that of the 190 deaths in Cork - that is a huge number of citizens in that city - 31% were unemployed.

The excessive interest rates being charged by licensed moneylenders, and all the other pressures upon pressures, are pushing hard-pressed families further into financial stress, real distress and increased poverty. There is no real moral, economic or political justification for the absence of a cap on interest rates charged by licensed moneylenders. The Bill introduced by Sinn Féin proposes a cap of 40%. This level is fairer to customers while allowing licensed lenders to operate on a sound commercial basis. It may be that the Government did not know the detail or the consequences of all of this. I say that in a very fraternal way. Having heard the facts, there is obviously an urgent need for a cap to be introduced on interest rates and for there to be more wide-ranging reform of the regulation of licensed moneylenders and the policing of illegal loan sharks. I ask all Deputies to support the Bill.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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I wish to share time with Deputies Mary Mitchell O'Connor and Gerald Nash.

Photo of Jack WallJack Wall (Kildare South, Labour)
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Is that agreed? Agreed.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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I thank Deputy Pearse Doherty for preparing the Bill we are debating tonight and tomorrow night and for presenting it for the information of the House. There is a comprehensive licensing system in place for moneylenders. In that regard, I will outline shortly for the information of the House the main provisions of Part VIII of the Consumer Credit Act 1995 which deal with moneylenders. However, I wish to inform the House that the Government intends to oppose the Bill.

The most likely impact of applying a cap rate of 40% APR - or a lesser rate as is outlined in the explanatory memorandum - is that moneylending would no longer be viable, licence renewals would not be sought and it would effectively close down the industry. The Government is aware of the burden placed on customers because of the high rates charged by moneylenders. However, as Deputies will appreciate, moneylending is an inherently expensive business. Licensed moneylenders serve a high-risk borrower segment, by way of a labour intensive operational model, and through offering loan amounts which are too low effectively to cover the costs of running the business if offered at low interest rates. Given that many customers of licensed moneylenders would have few, if any, other sources of licensed credit available to them, the proposal regarding a cap on the APR would likely increase growth in illegal moneylending. That is one unintended consequence of the Bill and it is something that all of us, I presume, oppose. Pushing more people into the hands of unscrupulous and unregulated moneylenders would make no sense and would further marginalise those who need protection most.

Licensed moneylenders service a varied group of customers but are closely identified with marginalised or vulnerable consumers. Meeting the financial needs of such consumers is a complex multidimensional policy issue. The Government is already engaged in a number of measures, such as the provision of basic payment accounts and the implementation of a national financial education programme, both of which are designed to support persons and families targeted by moneylenders and, more generally, promote financial inclusion and reduce over-indebtedness.

For the information of the House, an EU proposal will shortly come into being, which will provide for a basic payment account. It is crucial to give everyone the right to have an account so that their financial transactions can be carried out. The basic payment account, if properly designed and marketed, provides marginalised consumers with an opportunity to engage with mainstream credit providers, build up a good savings record and ultimately access mainstream credit. I was surprised to hear the information that has been estimated that currently 17% of Irish householders do not have access to a bank account that can make payments through the clearing system. The implications for people are stark if one does not have access to a bank account. The question arises as to how one pays a bill, makes debit payments, and collects and transacts with financial institutions. What is required in this case is a further exploration of the need to have basic payment accounts for all citizens rolled out over a period. Without that, we are not going to make a great difference. It is no surprise that people would call around to one's house to collect money if one does not have a basic bank account because one cannot work through the clearing process. It is a major inequality if people do not have access in the normal way to the banking system that is in place for everyone else. It can have a significant impact on the financial well-being of citizens. As part of the Government's policy to improve financial inclusion levels, a pilot project has commenced to introduce a basic payment account. The project is being tested until the end of this year and it will be evaluated to ensure it is meeting the needs of the target population before a more refined offering will be rolled out on a nationwide basis next year.

Deputy Pearse Doherty referred to a study from 2007, but the House might wish to note that a more recent UK study from 2009 found that a licensed moneylender, to be financially viable, must charge a high cost of credit, even on a not-for-profit basis. Specifically, the study found that a not-for-profit home credit business to break even by year five would require an £18 million subsidy of start-up capital and APR of 123% on an average £288 loan over 56 weeks to be commercially viable. Given the Irish context, in particular the small market size, and taking into account the above findings, it is not likely that many moneylenders would be commercially viable operations by offering loans at rates of credit of substantially less than they are currently authorised.

While licensed moneylenders may be the subject of adverse comment, which I understand, they service a gap in the market not served fully by mainstream lenders, in a manner which is deemed to suit the particular needs of their customers, for example, convenience in payment and collection, speed at which a loan may be granted and a long-standing or family relationship with a particular moneylender. As I indicated, there is a comprehensive licensing system in place for moneylenders. Currently, 46 licensed moneylenders operate in the State. Annually, each must complete and return the appropriate moneylending application form to the Central Bank, together with a number of items for review and consideration. A moneylender's licence granted by the Central Bank is specific to a moneylender, in that each individual moneylender's licence outlines the specific products that the moneylender offers, the 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. Under section 93(10)(g), of the Consumer Credit Act, 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, again in the bank's opinion, unfair.

There is provision in the Consumer Credit Act to appeal the decision to the Circuit Court. There is a view that there may be a lack of transparency in how the Central Bank determines the authorised limits of APR and total cost of credit of moneylenders, nor are there guidelines in place to steer the bank in its authorisation-making process. The Minister for Finance proposes to engage with the Central Bank with a view to deciding if the bank can develop guidelines, which will provide greater transparency on the rates charged by moneylenders. The benefits that the introduction of guidelines could achieve include increased transparency for the public, a greater emphasis on the total cost of credit as the primary metric, a better understanding as to why the APR is a poor measure for typical moneylender loans, that is, low value and short-term loans, and greater confidence that licensed moneylenders are not earning big profits as a result of an express linkage between authorised terms and conditions and the underlying cost of providing the service.

The Minister for Finance has also asked the Central Bank to assess the situation in other EU countries, because, as Deputy Pearse Doherty and others have said, a variety of responses is evident. Some countries have a cap while other countries do not. However, one is not comparing like with like because the legislative framework in each of the countries is different. Consequently, on foot of the Bill outlined by Deputy Pearse Doherty and his colleagues, the Minister for Finance proposes to engage with the Central Bank to undertake a thorough assessment of the position across other member states to get the best possible model, albeit at a guideline level, which the bank might propose.

In 2011 the Central Bank published the results of a themed inspection of licensed moneylenders. The Central Bank has advised the Department of Finance that this inspection showed a high level of compliance with the law among firms. Overall, the inspection found that customers were charged in accordance with the moneylender's authorised annual percentage rates, APRs, and the cost of credit. Members also will be aware of the Central Bank's consumer protection code for licensed moneylenders. The code sets out the general principles with which a moneylender must comply. The code also places requirements on moneylenders in respect of the provision of information to the consumer, preservation of consumer rights, knowing the customer, suitability and unsolicited contact, debt collection and the contents and presentation of advertisements. For example, all advertisements must contain the following warning in large font: "WARNING: This is a high cost loan". In addition to the annual licensing regime, moneylenders are subject to new fitness and probity requirements under sections 20 and 22 of the Central Bank Reform Act 2010.

As I have outlined, the Central Bank is the competent authority with regard to licensed moneylending and in overseeing and regulating this activity. It is an offence under the Consumer Credit Act to engage in the business of moneylending without the appropriate licence granted by the Central Bank. Any suspicion of moneylending activity should be brought to the attention of An Garda Síochána for investigation. As the Minister for Finance pointed out recently in reply to an oral parliamentary question, it is appreciated that enforcement can be difficult when moneylending is carried out on a small scale and the persons to whom the money is lent are reluctant to come forward to assist the Garda in bringing forward proceedings.

Before concluding, I wish to acknowledge the important work of the credit union sector in providing low cost loans for the unbanked and other vulnerable consumers. The Government will continue to support the restructuring of the credit union sector to ensure its continued contribution to communities nationwide. I thank Deputy Pearse Doherty and his colleagues for raising the issue of interest rates charged by licensed moneylenders. The Government is aware of the concerns raised in this debate. However, this issue must be examined carefully to ensure the solution proposed does not adversely affect the most vulnerable members of society. This will be the Government's main aim in considering the findings of the examination to be carried out by the Central Bank and by the officials of the Department of Finance.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I welcome the opportunity to contribute to the Second Stage debate on the Consumer Credit (Amendment) Bill 2012. I commend Deputy Pearse Doherty and Sinn Féin for introducing the Bill. On behalf of the Fianna Fáil Party, I confirm we will support it. It echoes a call by the Irish League of Credit Unions, which is at the coalface in respect of dealing with such matters. It is fair to state the question of how to regulate the practices of moneylenders has long challenged legislators. All Members should acknowledge that for the vast majority of people, moneylenders, be they legal or illegal, are the lenders of last resort. Members also should acknowledge it is understandable that a risk premium would be charged with regard to the interest rate. The question posed by this Bill concerns what constitutes an acceptable risk premium to charge to customers who avail of the services of moneylenders. Many such customers have a poor credit history and many of them turned to moneylenders because they are unable to access credit through the conventional routes normally are open to people, including the local bank or credit union. Consequently, the Bill takes cognisance of this fact and in allowing for an APR of up to 40%, it recognises the reality that some of the loans being extended by moneylenders are of a risky nature. Members should be fair and should acknowledge this point. Moreover, that is the reason such interest rates are being tolerated, even within the proposals being made by Sinn Féin.

I listened to the Minister of State's speech on the monitor and do not believe anyone is trying to outlaw the practice of moneylending. The question is what represents a fair interest rate to charge them? The Minister of State referred to the Central Bank's report into the sector of 2007, as in the past has the Minister for Finance, Deputy Michael Noonan. However, it would be reasonable to impose some level of a ceiling to the interest rate being charged by moneylenders. In his opening remarks, Deputy Pearse Doherty asked the Government to accept the principle that a ceiling would be put in place and the finer details with regard to the precise APR could be worked out subsequently. This is a reasonable position and the Bill should have been allowed to proceed to Committee Stage for a more detailed debate. Perhaps the Oireachtas Joint Committee on Finance, Public Expenditure and Reform could have held hearings, involving groups such as the Irish League of Credit Unions, FLAC and the Society of St. Vincent de Paul, at which its members could listen to those who deal with people who are customers of moneylenders on a day-to-day basis. When one deals with a regulator or a Central Bank, one often gets one perspective on an issue but the perspective of individual customers is equally important.

As all Members are aware, many people use moneylenders in the hope it will be a short-term measure to tide them over. However, they end up by getting in deeper and find it hard to extricate themselves from being involved with them. Statistics from the Money Advice and Budgeting Service showed that in a nine month period last year, 830 new clients were indebted to moneylenders, while the equivalent figure for the whole of 2010 was 1,418. The Society of St. Vincent de Paul has raised concerns about how moneylenders operate by targeting people at certain times of the year and sending agents door-to-door offering cash. More than 40 years have elapsed since the now infamous "Seven Days" RTE documentary on the practice of moneylending in Ireland was broadcast. The programme caused significant controversy as it alleged there was a scourge of illegal moneylending in Ireland at the time and that moneylenders were using strong-arm tactics to extract payment from customers. The programme's presenters, including current RTE sports presenter Bill O'Herlihy, were condemned at the time for what were believed to be exaggerated claims. The Oireachtas set up a tribunal which to some extent shone a light on the moneylending sector.

While I am sure that some of the worst practices of that era are now behind us, it certainly is the case that the history is not without problems that must be addressed. All Members can agree the Consumer Credit Act 1995 put in place a robust licensing regime in respect of moneylenders. For example, it provided that a customer is entitled to a proper written agreement when borrowing money from a licensed moneylender, that a customer is entitled to a properly filled out repayment book, that it is illegal for a moneylender to charge interest on interest and that it is illegal for a moneylender to grant another loan to clear an existing loan. Moreover, it is illegal for a moneylender to contact one at one's place of work without one's permission and it is illegal for a moneylender to trade without a licence.

Most Members will agree these are sound measures, in so far as they go, and provide a good basis for underpinning the operation of the sector. However, the legislation does not address the question of potentially excessive interest rates. The annual percentage rate allowable under each moneylending licence is set out on the Central Bank website and while no maximum rate of interest is set out in legislation, under section 93 of the Consumer Credit Act, the Central Bank may refuse to grant a moneylender's licence if, in the opinion of the bank, the cost of the credit sought by the moneylender is excessive or if any of the terms or conditions attaching to it are unfair. Consequently, it beggars belief that the Central Bank is approving APRs at present levels and some of the previous speakers put on record the APRs that are being charged by the 46 licensed moneylenders in the country. The true measure is an APR that includes the collection charge because when one examines, as I did today, the schedule of licensed moneylenders, one finds, for example, that one moneylender has a collection charge of 14 cent in the euro. Many of them have collection charges of 10 cent in the euro. By any measure, these are extremely exorbitant collection charges to be imposing on customers who are, by their very nature, vulnerable and who are accepting loans from moneylenders at a time when they are put to the pin of their collar. When we include the collection charge, the APR can rise as high as 280%. One licensed moneylender, based in Stillorgan, County Dublin, has an APR of 287.72%, including the collection charge. There are many others with an APR in excess of 200%. Any person who has experience of drawing down and trying to repay a loan will know exactly the impact of the interest rate on the amount of money being repaid. It is scandalous that the State is standing over a situation where licensed moneylenders that are complying with all of the rules - I do not wish to suggest otherwise - are in a position where they can charge upwards of 300% APR when the collection charge is included.

I note that in February, the Central Bank published the results of a themed inspection of licensed moneylenders. Inspections were conducted in 11 of the 46 licensed moneylenders currently operating in Ireland. Overall, the inspections found a high level of compliance with the requirements and that consumers were being charged in accordance with the moneylenders' authorised APRs and costs of credit. I have no evidence to the contrary. I am sure the licensed moneylender sector is generally adhering to the rules that govern its operation. This is hardly surprising, given the leeway under which licensed moneylenders can operate. The rules on interest rates are so broad and so generous that it is no surprise they are operating within them. It begs the question: if the Central Bank is approving moneylenders and allowing them to charge an APR of 288%, including the collection charge, then at what level of interest would the Central Bank shout "stop"? At what level will the Central Bank declare that this is not acceptable and will put customers who are already in a difficult financial situation into an even worse situation? How many applications is the Central Bank refusing? Is it refusing applications by moneylenders who want to charge an APR of 400% or 500%? There are moneylenders abroad who charge that level of interest. I cannot understand how it is acceptable for the regulator, the consumer watchdog, to stand over a situation where moneylenders are allowed to charge 288% APR, including the collection charge.

I looked at the list of licensed moneylenders on the Central Bank website today. Some of the charges are truly staggering. In the case of a company called Southside Finance, the APR is 287%, including the collection charge. When we consider the profile of people who go to moneylenders looking for help, this is nothing short of extortionate, but it is entirely legal and entirely licensed. The fact that they are operating within the letter of the law is irrelevant. They are engaged in a predatory practice exploiting very vulnerable citizens. The typical client of a moneylender is a parent who is trying to get money together to pay the electricity or gas bill, or cover a family event like a First Holy Communion or Christmas presents. The vast majority of clients of such firms do not have the time to study APRs across different providers to ascertain the best deal available. The Minister of State acknowledged that much of this activity is focused on disadvantaged areas. We all know from our own constituencies that this is the pattern of activity in the moneylending sector. These consumers need the protection of the law and setting a maximum APR for moneylenders is the obvious way to do it. Even lending at 40% APR would still be a profitable activity for such providers.

Anyone who has ever been at home during the day and put on a UK TV channel will be familiar with the advertising of short term or pay day loans. The advertising is certainly slick and promises people a way out of their financial difficulties with easy access to credit, even if they have previously had an impaired credit record. As with most consumer products, it is likely that the services of legal moneylenders will migrate online. One such provider advertising heavily in Ireland is Provident Financial. I took a look at its website today, which certainly looks good. It offers "money advice, hints and tips" and a budget planner. In addition, it promises no complicated forms to complete, cash delivered to the client's door within days, and manageable, fixed repayments. The "representative example" cited by the website sets out the cost of a typical loan - other Deputies have referred to this - where essentially the APR is 157%. This is not a small scale problem. This company has thousands of customers throughout the country. An Irish Examiner investigation in 2009 revealed that Provident Financial had 75,000 customers here. This rose to 88,000 in 2010 and the firm now lends to 100,000 people. We would simply be failing in our duty to citizens if we did not legislate to outlaw such excessive charges. I am the first to acknowledge that this should have been done sooner, but it is more important now than ever, at a time when people are really struggling. They are struggling to meet their day to day basic financial commitments. This is a golden era for moneylenders, both licensed and unlicensed. They are preying on very vulnerable customers and it has never been more important for the Oireachtas to step in and provide those people with some level of protection on the interest rate that such moneylenders can charge.

In 1988, a report by the Combat Poverty Agency indicated that there were three unlicensed moneylenders for every licensed moneylender. It would be interesting to know the ratio today. We cannot be sure because we have no mechanism for keeping account of the activities of the illegal moneylenders. We can only rely on consumer advocacy groups and others who are directly helping consumers to deal with the consequences of accepting loans from illegal moneylenders. That is a different matter from this debate, but it is equally important. While there is a regulatory regime for licensed moneylenders, there is an unknown number of illegal moneylenders who are using tactics that are entirely unacceptable within the licensed sector. That issue needs to be tackled. The lack of any evidence of enforcement action by the authorities on illegal moneylenders is disturbing.

In respect of legal moneylenders, we should apply a reduced maximum interest rate. Collection charges, whereby money is charged to customers for collecting payment at their home, should be outlawed or strictly limited. Up to 14 cent in the euro is currently charged legally and that is absolutely outrageous. If the Government is not going to accept this Bill, it should find some other mechanism of giving consumers the protection they deserve. The people who are going to moneylenders are the people who can least afford to pay the exorbitant interest rates being charged. I do not think it is fair or reasonable that the Oireachtas would stand over that situation. I know the Central Bank's theory is that introducing a low cap could bring about the end to the sector and that could have unforeseen consequences for those who rely on it at the moment. However, I think we can strike a balance between those issues. I am disappointed the Government is rejecting the Bill, but I hope this issue is tackled at an early date.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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We have a ten minute speaking slot and Deputy Arthur Spring and Deputy Gerald Nash wish to share time. Is that agreed? Agreed.

Photo of Arthur SpringArthur Spring (Kerry North-West Limerick, Labour)
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Any licensed business is under great duress to be upstanding to citizens. The reason financial and lending institutions are licensed is because they can cause great stress and harm to people and society. I agree with the sentiments expressed by the non-government parties. As Deputy Michael McGrath stated, the most vulnerable in society are those who are always exploited by moneylenders, licensed or unlicensed. One of the first television programmes I recall was a "Today Tonight" episode from the early 1980s in which Pat Cox chased cars, pointing out extortionate moneylenders who were preying on people, offering loans for communions, Christmas and other family events.

In a proper society, everyone would either have a bank or, more importantly, a credit union account. One priority taught by grandparents in my day was how to set up a credit union account as soon as one could to save the few quid from a first communion or the selling of a calf. It showed people the benefit of delayed gratification. Every citizen should be encouraged to follow this example.

The transferability of bad loans causes me some concern because a licensed institution could send a bad loan to be chased by a debt collection agency. We have seen these agencies under many guises. Some of them have resorted to violence, taking personal belongings and crystallising unsecured assets to get back loans.

The credit unions must be promoted in society. We have a wonderful credit union tradition, particularly when compared with the United Kingdom. Members of credit unions contribute deposits which, in turn, provide for lending. In times of hardship, I do not believe any credit union would deny people some level of lending. People who use credit unions are also conscious that their credit history will also be impaired if they do not pay back a credit union loan.

There are 40 licensed moneylenders in the country. If a lender is in trouble with one, more than likely he will borrow from another to pay off the original loan, taking from Peter to pay Paul. This kind of show should stop.

The sentiment of the non-government parties, as I like to call them, is correct. However, the specifics may have problems. A 2009 UK study on high credit called for a non-profit payday loan service, funded by a government subsidy of £18 million. To cover operating costs the loans would need to cost at least 123% APR. This is a bad business model that will not serve society, lending or prudent business well.

I am glad the Central Bank will examine this Private Members' Bill and deliver a better form of management in the area of high credit. It will also have to examine, however, the elephant in the room, namely, unlicensed moneylenders. They have put many vulnerable people to the pin of their collars and have acted violently in some cases of non-payment. I thought those days were well and truly and over. We are in a credit crisis and the least well-off need to be protected most of all when it comes to accessing credit.

When it comes to the budget I will be saying the most well-off need to take a fair share of the burden and maybe even a little more. When people are stressed financially and emotionally, they will turn to what appears to be the easy option of the moneylender when it is far from it. Licensed lending institutions are obliged to provide a form of business that is beholden to the people. They make money through a banking system that we allow them to carry out. At no stage should their profits or the debt burden on individuals be extraordinary.

I am concerned about the Central Bank's ability to get things right. It needs to be given a specific mandate to examine microlending and educate people on how money works. People should understand why they need to save and how to borrow in ratio to their earnings for items like the family home or a family car. I know people from school in Tralee, with similar intelligence and ambition, who are now in debt to moneylenders because of their lack of knowledge in how to deal with money and borrowing.

While I agree with the sentiments expressed by the non-government parties on this matter, the specifics of the legislation are not accurate and need to be worked on. We need to push moneylenders out of society. That can only be done through education and encouraging credit unions to develop.

Photo of Gerald NashGerald Nash (Louth, Labour)
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This is an important issue that needs to be debated not just here but across wider society. The moneylending business is a fact of life and it should be a matter of increasing concern for those of us concerned with those who find themselves on the margins of society. The uncomfortable fact is that moneylenders are often the last port of call for people who are brutalised and worn down by the challenges of just living to exist. This is a business, whether we are prepared to accept it, that profits from the misery of thousands of people. To say I am uncomfortable with this is an understatement.

I am also deeply uncomfortable that the State is presiding over a regulatory regime that has the effect of often compounding the financial problems of those driven into the arms of moneylenders in the first place. I note the facts outlined by the Minister of State earlier and I very much appreciate the position he proffered on how, if the provisions of this Bill as tabled were adopted, there could be unintended or unforeseen consequences which could exacerbate the horrendous circumstances in which many with relationships with licensed moneylenders and otherwise find themselves.

If we are to accept the status quo, however, we need to implement some urgent measures to take moneylending out of the darker recesses of society and the economy. The Central Bank's code of practice and a raft of consumer protection legislation, of which we are all aware, are all well and good. However, the Central Bank's code of practice does not come across the radar of most people struggling to survive and provide for their families in desperate circumstances. We are dealing here with many citizens who have severe literacy and numeracy challenges. We are dealing with people who have no idea whatsoever that they too have rights. We are dealing with dire situations where people have developed a dependency on the local moneylender and may even have an intergenerational relationship with him or her at the level of their own family. These are people who will not and cannot make a complaint because they do not know to whom they should complain or they distrust the institutions whose remit it should be to protect their interests. There could also be a fear of repercussions if complaints are made by those caught in this vicious cycle. That vicious cycle needs to be stopped.

Instead, it should be made easy to permit people to bring their concerns to the relevant authorities in respect of a moneylender, licensed or not. The public should be told repeatedly who these authorities are and awareness of them should be raised. I would prefer if moneylenders and loan sharks did not exist at all. Accepting that they do - human nature determines they always will be there – we need as a society to be much more forceful about bringing the practice of moneylending into the open while shining a light on the dark recesses and grey areas in which it operates.

Photo of Maureen O'SullivanMaureen O'Sullivan (Dublin Central, Independent)
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I wish to share time with Deputy Mattie McGrath.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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Is that agreed? Agreed.

Photo of Maureen O'SullivanMaureen O'Sullivan (Dublin Central, Independent)
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There is no doubt some people value doorstep credit, even if it could have severe consequences. It has to be acknowledged there are occasions when people need to quick access to credit. Representing Dublin Central, I know moneylending of the illegal kind has been a fact of life there for many years. Going back to the days of the Monto, the largest red light district in western Europe at the time, moneylending was a feature of life.

Another feature of life in Dublin Central was that people could buy goods "on tick" from various shops. The pawn shops in the constituency used to do a roaring trade but not anymore. There is a need to acknowledge that people need money and we must ensure they can access it easily.

I am concerned, as a result of the economic recession and the number of job losses that have occurred, about people turning to moneylenders and, in particular, those which are unlicensed. Community and voluntary workers have much evidence that this is happening. Deputy Michael McGrath and others have stated these are the lenders of last resort. However, I know people for whom they are the lenders of first resort. This is because those to whom I refer are not in the habit of going to credit unions or banks. I am a strong supporter of credit unions because I am aware of the work they have done to assist people in various communities. What is great about credit unions is the tradition on which they are based, namely, that people must save in order to borrow. Credit unions accept the smallest amounts in savings. The credit union in the East Wall area in which I live is one of the oldest in the country. I know young people whose parents encouraged them to join the credit union once they began to earn a few bob. That is how the tradition of saving in order to borrow is maintained.

The banks have fallen down considerably on this matter because they provide people with little or no encouragement to invest small amounts with them. Credit is due to An Post because of the stamp systems it operates. One example in this regard is that a person can purchase a stamp each week and put it towards paying for his or her television licence when it falls due for payment. The Money Advice and Budgeting Service, MABS, is often left to pick up the pieces when people get into difficulties.

A balance must be struck in respect of interest rates which must be capped but not to the extent that they discourage institutions from lending and thus oblige more people to turn to unlicensed moneylenders. A practice has developed whereby people borrow from moneylenders and then obtain a second loan in order to pay off the first. What is happening in this regard must be regulated in some way.

Sinn Féin hosted an interesting briefing on this issue earlier today at which reference was made to the TASC report, which indicates that the poor borrow more than the middle class and that they pay more for their loans. We are aware that some of the most dangerous moneylenders are those who would be termed "legal". These lenders charge high interest rates on loans and fees, for insurance. In addition, they offer multiple loans. I have read a report on one licensed moneylender in which it is indicated that for every €100 borrowed for one year, the company charges €56. This means that the APR on a six month loan is 187.2%. I must emphasise that this is a licensed moneylender. One can only imagine what illegal or unlicensed moneylenders are charging for loans.

The banks currently exclude 20% of the adult population from the services they offer. We are aware that there are people who would like to have bank accounts, but they are not approached by the banks as potential customers. I came across three recent newspaper headlines which read as follows: "Middle class families secretly caught by moneylenders"; "Illegal moneylenders 'instil fear in thousands'"; and "Caught in a trap". The Society of St. Vincent de Paul compares moneylending to a cancer. It states that if one person in a community borrows from a moneylender, the word gets around that there is money to be had. Suddenly, everyone in the community is borrowing from a particular moneylender. People in Dublin Central have been obliged to borrow from illegal moneylenders to pay the drug debts of their family members. This has led to massive intimidation.

I will support the Bill. However, the credit unions' suggestion the interest rate which should apply to loans from moneylenders should not exceed 25% rather than the figure of 40% put forward by Sinn Féin should be considered. After all, there are enough Shylocks about the place charging exorbitant amounts of interest, etc. The banks must take on board the fact that during the Celtic tiger era they sponsored personal recklessness when it came to borrowing.

Debate adjourned.