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

I understand the Senator's point regarding credit unions. Wearing my hat as Minister of State with responsibility for credit unions, I would encourage everyone who is seeking a short-term loan for a family event - it is something that people used to do - to join his or her local credit union where possible. I fear that some of the people in question have exhausted their credit limits with their credit unions, every other institution and their family and friends, and that this is their lender of last resort. We want to keep the lender of last resort in the field so that that option is available. If such lenders are gone, we know what will happen to the people who are most vulnerable. It will not be an interest rate of 1% per week, but 2% or 3%. A money shark will give them €40 today and they will pay them back €50 on Friday. I would hate to try to do that annual percentage rate calculation, but it is what happens. The Senator and I know from dealing with people in vulnerable positions that they will take that loan even though the interest rate could work out being 1,000% if we ran the figures. We want to avoid that happening.

Credit cards are running at well over 20% and these loans are dearer than that, but 20% appears to be the minimum interest for a credit card loan to be profitable. There is probably a higher level of default than there is on traditional credit union or bank loans. However, I agree with the Senator. Through the Money Advice & Budgeting Service, MABS, and the Department of Social Protection, credit unions offer particular loans. I would encourage anyone to go to his or her credit union. Some people believe that credit unions are for their grannies or their parents and do not think they are for them, but they are for everyone.

I understand the Senator's point, which is to go a little further on day 1 and then make guaranteed reductions at fixed times as we go along. We are making major progress, though, and the 1% rate will be the maximum. Depending on the information we get from the Central Bank on how the rate operates, it can be reduced at a later date. My principal objective is to keep regulated lenders in the market. We could agree to reduce the rate to 0.5% today, but all of the lenders would disappear because it would not be economical for them to remain in the market. If that happened, everyone would be worse off. We believe we have struck a fair balance. I appreciate and agree with the Senator's sentiment, but I will hold firm on the 1%.