Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Senator for moving the amendment on behalf of his colleagues. I am aware that his party has a great interest in this legislation and I engaged with Deputy Doherty in the Dáil on the same amendment on all Stages of the Bill in recent weeks.

Lower interest rates are better for consumers and that is why the key purpose of this legislation is to reduce interest rates. Members of the Opposition will say that the Government is not being ambitious enough, but we have to strike a balance here to reduce rates without reducing access to credit.

I will outline what we are proposing for cash loans. There is currently a concentration of loan offerings at between 1% and 1.2% per week in respect of moneylenders in the market. An initial interest rate cap of 1% per week will allow all moneylenders operating at the rates above this to revise their business model and reduce their margins to enable them to operate within the new legislative cap. At present, most moneylenders in the market are above 1% per week and we want to bring them down to 1% per week. It goes without saying that some of them are at astronomically high rates and some of them charge money for every time they make a house visit to collect money. That really adds to the cost of the loan for the most vulnerable people.

Research has shown that the people who are mainly inclined to borrow from such moneylenders tend to be women in their early 30s and up to their 50s with young families who they are rearing alone. They are the most vulnerable. They have back to school, birthdays, first communions and Christmas expenses through the year and they get loans and try to roll them forward. They get a loan from one company on one occasion and another loan from another company at another time. The essence of this legislation is to ensure that any time an organisation gives a loan in future, it will check what other loans the borrower has. That has not been happening up to now. The company will want to make sure that the person can actually afford the loan being taken out. There is no point in accumulating loans that people will not be able to pay in the long term.

The 1% is our starting point. We are saying this is the maximum that can be charged, but it is planned to start with 1%. Over a period of a couple of years, when the Central Bank reports on how the approximately 30 companies are operating in Ireland, we will be able to assess if the 1% is still valid and whether there might be scope to reduce it as time passes.

The proposal in the amendment is to set the rate at 0.75% per week rather than 1% per week, with specific timelines to reduce it further. I propose to introduce the latter rate and to monitor it closely. We can return to it at a later date when we have evidence and information on how it is operating and whether it is valid to reduce it below 1% and by how much at that stage. The amendment is predetermining how the legislation will work in practice over the forthcoming period by providing for set times to reduce it, but I believe the most cautious way to do it is by doing what is provided for in the Bill, subject to review.

The most important point, as I said earlier, is that there is continued access available to these loan facilities. The biggest provider in the market, both in Ireland and the UK, closed shop in the last couple of years and no longer exists. The provider felt the market was too difficult. If we move too strongly, the people who need access to these loans may not have somebody to go to if the providers pull out due to us being too severe too quickly. We want to keep them in the market because, as everybody knows, if we reduce the number of people who are offering legitimate, regulated loans, we know where people will go. They will go to loan sharks and it will end up that when the borrower collects child benefit once a month, a guy will be waiting around the corner to collect that money.We want to avoid that. We do not want people calling to their houses and intimidating them to repay their loans. It is important that we keep a level of regulated operators in the field providing loans for a period. We can see how it works out over that period.

We are starting with the 1% cap, which will be the maximum. It can be reduced if we get information from the Central Bank's monitoring of the 30 or so companies in the business showing that a reduction is appropriate in due course, but to predetermine that there would be a reduction after a certain time would be premature at this point because we do not have any information on how that would affect the market and, above all, the people who were most vulnerable and needed to have a regulated moneylender. If we are too quick and some of the moneylenders leave, which the main one has already done, then people will not have access to proper funding and will instead become victims of money sharks, which is what we want to avoid.

We all agree on the need for the legislation, everything behind it, regulating this sector, applying time limits of up to 12 months on loans and having simple interest rates that people can understand. The only issue between us is the level of that interest. Otherwise, the Bill is broadly supported. We should stick with the maximum of 1% and see how it goes. It can be reduced when the Central Bank reverts with a report on how it is working after a year or two. This Bill will reduce the rates that people are being charged from day 1 because most lenders of these loans are charging up to 1.2%, but we want to keep them in the market so that people do not go to money sharks.

I hope that the Senator accepts the spirit of our position, notwithstanding the particular point of difference over the fractional interest rate in question. We are all travelling on the same road. It is just a question of how quickly we get there. I am not in a position to accept the amendment.