Written answers

Thursday, 30 March 2006

Department of Finance

Banking Sector Regulation

5:00 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 42: To ask the Minister for Finance if his attention has been drawn to concerns expressed by the Consumers Association of Ireland that banks were fleecing consumers as a result of excessive interest rates levied on personal loans; if he intends to take action to provide additional protection for borrowers in this regard; and if he will make a statement on the matter. [12372/06]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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I am aware of the issue recently raised by the consumers association regarding personal loans. My function as the Minister for Finance in looking after the interests of the individual borrower is to provide an appropriate legislative framework for regulation of the financial services sector, one that is both comprehensive and robust. I am satisfied that on foot of the progress made over recent years, especially in establishing the Financial Regulator with a particular focus on the interests of the consumer, we have such a framework in place.

The Financial Regulator, with its statutory consumer protection mandate, has already drawn attention to the need for consumers to choose the right type of loan for their needs. The Financial Regulator has developed a number of specific initiatives to help consumers make informed choices in terms of the financial products they choose, the amount of risk they take on and the cost of financial products. These initiatives have been developed through the framework of the Financial Regulator's It's Your Money campaign and have involved publishing consumer guides on credit products, fact sheets, cost surveys on personal loans, all of which are intended to assist borrowers in making the most appropriate credit decisions given their circumstances.

The Financial Regulator has been very active in informing consumers about the range of interest rates in the market and produced two personal loan cost surveys in September 2004 and September 2005. In 2005, 10,000 consumers requested copies of the surveys that set out the interest charges of a range of lenders in the personal loans market, including lenders charging interest rates higher than the average rates available. The Financial Regulator's surveys highlighted the high cost of certain providers and drew consumer attention to potential savings of up to €1,200 on the cost of a €13,500 loan over five years. The Financial Regulator regularly highlights the importance of shopping around for loans. Both surveys received widespread media coverage. Additionally, the Financial Services Ombudsman offers redress to consumers who are dissatisfied with their treatment by financial institutions in relation to personal loans.

The Consumer Credit Act 1995 applies to all consumer lending. It sets out the form of loan agreement which includes details of the cost of credit. The Act also provides for the regulation of fees and charges imposed by credit institutions. The Financial Regulator requires all regulated credit institutions to notify it of charges to consumers. I fully support the position consistently reiterated by the Financial Regulator in relation to the importance of borrowers acting sensibly and the lending institutions acting prudently.

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