Michael McDowell (Independent) | Oireachtas source

I welcome the Minister of State to the House. Many years ago, I worked as a barrister advising the providers of personal credit so this is an issue, as are collection charges and the like, that I have some experience of.

I agree completely with what has just been said about us now heading into a financial crisis where many people may be driven to borrowing money just to keep going. I will say a number of things before we sign off on this Bill. The Minister of State's speech is really just the explanatory memorandum. I would like to know far more about how it is intended this will all work. It is all very well to say the Minister will have the power to regulate the interest rate that can be charged. That sounds good, but I am slightly sceptical about how it will work for two reasons. For example, and I know this sum is probably too low, if €100 is lent on a collected-weekly basis, and if over six months the borrower pays €120 back over 25 payments, the APR on that will be approximately 40%. The actual amount collected each week would be €120 divided by 25. When we think about it, the amount involved does not seem enormous, given somebody arrives at someone's door every week to collect the money. There are people for whom that is a more satisfactory arrangement than having to go to some office somewhere, or to a pawnbroker or moneylender's office or whatever it is, to pay back the loan.

As the Minister of State pointed out, at present collection charges are charged separately and are not included in the APR. Once collection charges are included in APR, however, it rockets up to 40%. We then have to take into account the risk and the work involved in going to collect the money every week from a person. None of us would like to see somebody paying 40% per annum, but €20 over six months on €100, if it is collected, does not seem on the face of it to be a shocking amount, given the service involved in that. I ask Members to bear in mind that while these figures can suddenly look dramatically higher, and indefensible and unconscionable, and a rate of 40% per annum for people who are down at heel seems enormous, nobody else will lend them that money at that rate in a way that involves going to their houses and that is controlled and regulated. These are the kind of things we have to bear in mind. I am not speaking on behalf of moneylenders. I am just asking us to bear one thing in mind. If we give a Minister the power to regulate the maximum amount that can be charged, it is a politically very sensitive thing for a Minister to have to do because some clever journalist will stand up to say that Minister has just authorised 40% APR per annum, when it is really just about collecting €120 on a €100 loan over six months with daily collections. I am just pointing that out.

It is easy to say 40% is shocking but, and this is the second and most crucial point I will make, if we eliminate these areas of lending by making them uneconomic, the lending will still take place and there will be loan sharks. I recall when I was a child living on Leeson Street, off Appian Way, a man - long-since dead so I will not damage anybody's reputation - who was a newspaper vendor at the top of Chelmsford Road in Ranelagh. He was also a local moneylender. All the people who borrowed money in Ranelagh went to him. He appeared to be selling the Evening Herald and the Evening Pressin the evening but was, in fact, lending money and people were coming to him to pay it back. That was fine in its own way because he was not going to threaten to break people's legs if they did not pay. He was just a local service that was totally unregulated. The point is I want the Minister, at some stage, to spell out how he will protect people from loan sharks and unregulated people. If we regulate people very heavily, and leave people who need money badly in the hands of those who are not regulated and will not pay a blind bit of attention to what is in this Bill, we are exposing the weakest in our society to the most vicious in our society. The methods of getting money back and the whole question of having a licence with the Central Bank or anybody else regulating them is utterly irrelevant. They will just come, break people's windows, break people's legs and threaten somebody's children, or whatever they threaten to do.

It is all very well to do this but I just want to see the actual effect of it. Will we drive people into the hands of unlicensed moneylenders? Will the figures the Minister will fix by way of maximum interest rates be politically sustainable for any Minister because clever journalists will expose them to ridicule, even if at the same time these rates save people from loan sharks? This is something we should think about.