Paul Gavan (Sinn Fein) | Oireachtas source

The Minister of State is always welcome. I welcome the opportunity to speak on this legislation. The issue of moneylenders has been of great concern for many years. The permission for ultra-high interest rates charged by moneylenders is immoral and unethical. The law currently permits moneylenders to charge rates of interest that trap vulnerable borrowers in a cycle of debt. Under this and previous Governments, moneylenders licensed by the Central Bank are permitted an APR of up to 187% on loans. That increases to 288% once collection charges are included. When compared with more affordable sources of credit like credit unions, which have an APR charge of no more than 12.67%, there are no grounds whatsoever on which such high rates can be justified.

In 2013, the Central Bank published a report that found typical moneylender customers are predominantly female and from lower-income backgrounds. The excessive rates charged by moneylenders risk driving borrowers into an unsustainable and vicious cycle of debt and in many cases they already have. Imposing a cap on the cost of credit moneylenders can charge is first and foremost a moral issue and one that can and should be addressed. In 2018, my colleague, Deputy Doherty, introduced the Consumer Credit (Amendment) Bill 2018 to place a cap on the cost of credit moneylenders could charge, only for the Government to block its progress for years for reasons that were party political rather than in the interests of consumers.

There are many provisions of this Bill that Sinn Féin supports. These include the separation of home collection moneylenders, the elimination of collection charges from home collection loans, the use of the simple rate of interest rather that the APR for home collection loans, the term limit of home collection loans at 12 months and the ability of the Minister for Finance to amend rates further by regulation. All of that is welcome.

However, the biggest weakness of this Bill is the proposed interest rate cap. It will allow moneylenders to continue to charge levels of interest that are excessive, immoral and unjustifiable. Deputy Doherty has spoken about this in the Dáil and I am going to speak about it again because it is so important. One does not have to be a smart journalist to given an example. The Government proposes an interest rate cap based on simple interest of 1% per week up to a maximum of 48% per annum. Let us flesh this out properly. At present, on a cash loan of €1,000 a typical moneylender can charge interest of €560. That is extortion. In contrast, a credit union would charge interest of €60 on the same loan amount. Under this legislation, the Government proposes moneylenders will in future be able to charge €480 on a €1,000 cash loan. That is what is proposed in this Bill. That is still extortion.

I must take up the argument Senator McDowell made. He made the point that because it is broken down into small amounts it is actually not as bad as it sounds. With the greatest of respect to the Senator-----