Written answers

Wednesday, 16 September 2009

Department of Finance

Financial Regulation

9:00 pm

Photo of Caoimhghín Ó CaoláinCaoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 257: To ask the Minister for Finance if in view of the €29 million cost to the taxpayer of funding the Financial Regulator in 2009, he will provide a commitment that the full cost of financial regulation is borne by the financial institutions from 2010, which is in line with the practice in most other countries and particularly in view of the spending cutbacks in health, education and social welfare; and if he will make a statement on the matter. [30533/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Financial Regulator is currently funded by two sources. These are direct levies paid by financial entities that are regulated by the Financial Regulator and a subvention from the Central Bank, which is provided from the Bank's own resources generated from its activities in the financial markets. In 2009, it is estimated that the former funding source will raise approximately €34 million and the latter approximately €29 million for the Regulator.

As the Deputy is aware, most of the functions carried out by the Financial Regulator will be integrated with the Central Bank's functions in the new Central Bank of Ireland Commission. Accordingly, the new integrated organisation will be responsible for both the supervision of individual financial institutions and the stability of the financial system generally. The financing by the industry of the regulatory functions of the new organisation will be considered in the context of the transfer of functions to the new Central Bank of Ireland Commission.

Photo of Caoimhghín Ó CaoláinCaoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 258: To ask the Minister for Finance the reason he has not appointed the remaining members of the Financial Regulator's consultative consumer panel; when he will do so; and if he will make a statement on the matter. [30534/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Central Bank Act 1942 as amended provides that the Consultative Consumer Panel shall consist of not fewer than five and not more than 20 members. In January, I appointed eleven members to the Consumer Panel. Accordingly, all statutory requirements on the level of membership of the Panel have been fully met. The possibility of making further appointments to the Consumer Panel, subject to appropriate consultation, is kept under consideration.

Photo of Caoimhghín Ó CaoláinCaoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 259: To ask the Minister for Finance the budgets of the Financial Regulator's consultative consumer panel and consultative industry panel in 2009; the remit and conditions for expenditure of such moneys; and if he will make a statement on the matter. [30535/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Financial Regulator that the annual budgets for the Consultative Panels are agreed between the respective Chairs of the Panels and the Authority. The 2009 budget for the Consumer Panel is €208,000 and the budget for the Industry Panel is €85,000. These budgets cover the costs arising from external research and consultations, the publication of the respective annual reports and travel and subsistence costs paid to Consumer Panel members. Also, a daily attendance allowance is paid to Consumer Panel members when attending on Panel business. No such attendance allowance is paid to members of the Industry Panel. In addition, an employee of the Financial Regulator serves as Secretary to the Consultative Panels.

Photo of George LeeGeorge Lee (Dublin South, Fine Gael)
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Question 260: To ask the Minister for Finance the number of moneylender licences currently issued by the Irish Financial Services Regulatory Authority; the way the number of licences issued has changed since the year 2000; the interest charges, including the annual percentage rate allowable under these licences; if his attention has been drawn to the fact that some companies in possession of these licences are charging low income earners interest rates as high as 152% for loans; and if he will make a statement on the matter. [30540/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Licensed moneylenders are covered by a range of provisions under the Consumer Credit Act, 1995 (as amended) including the licensing process administered by the Irish Financial Services Regulatory Authority (Financial Regulator) under which a moneylender's licence is valid for a period of 12 months from the date on the licence.

The number of moneylender licences issued in the year 2009 to date is 51 and the number of licences issued in 2000-2008 is as shown by year in the Table hereunder.

YearNo. of Moneylender Licences
200064
200160
200257
200352
200452
200550
200648
200751
200852

Licence details are maintained by the Financial Regulator (FR) on its Moneylender Register which may be viewed via the following link: http://registers.financialregulator.ie/DownloadsPage.aspx.The number of licences in issue at a particular time does not vary significantly because the number of new licences is more or less equivalent to those who have ceased trading. Details of the precise annual percentage rate (APR) permitted to be charged under a particular moneylender licence may be obtained by consulting the Moneylender Register.

Loans offered by moneylenders are a relatively expensive form of credit where the moneylending agreement is usually for a small loan borrowed over a short period. Therefore, APRs charged by licensed moneylenders are, generally, much higher than those charged by lenders such as Banks, Building Societies and Credit Unions, who provide much larger loans for much longer periods. A possible higher risk of default is a further consideration for the moneylender.

Moneylenders are obliged to inform the Financial Regulator of the maximum APR they intend to charge to consumers. It is printed on each moneylender licence and an APR above this may not be charged. Inspections of moneylenders are carried out by the Financial Regulator in which moneylending agreements are examined to determine the APRs actually charged. A licence application can be refused on the grounds that the Financial Regulator is of the opinion that the cost of credit charged is excessive. There is no provision in the Consumer Credit Act with regard to the maximum APR that can be charged by moneylenders.

The Deputy may wish to note that the Financial Regulator, in its March 2007 A Report on the Licensed Moneylending Industry in Ireland, concluded that the introduction of an interest rate ceiling for moneylenders may not achieve the objectives of lowering the cost of credit for consumers. From late 2007 to late 2008, the Financial Regulator engaged with interested stakeholders (including Credit Union representatives) with a view to increasing transparency in relation to costs associated with loans from moneylenders. This included its March 2008 Consultation Paper CP33.

Chapter 1 of the Consumer Protection Code for Licensed Moneylenders Code, which came into effect on 1 January 2009, sets out 'General Principles' with which a moneylender must comply such as that it must act honestly and professionally, with due skill, care and diligence in the best interests of its consumers.

The Code's remaining provisions, including 'Common Rules for Moneylenders', are due to come into effect on 30 September 2009. These set out requirements in relation to the provision of information to the consumer, preservation of a consumer's rights, knowing the consumer, suitability, unsolicited contact (cold calling), disclosure, errors, handling complaints, consumer records, unsolicited credit facilities, arrears and guarantees; and debt collection. Among these is the requirement for the moneylender to assist a consumer in understanding the product provided, including the method of repayment, all related interest payments, charges and the cost per €100 borrowed.

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