Richard Bruton (Dublin North Central, Fine Gael)
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Question 193: To ask the Minister for Finance if merchants who provide credit to farmers are regulated by the Irish Financial Services Regulatory Authority; if there are any upper limits on the rate of interest which such merchants can charge. [6498/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Entities regulated by the Financial Regulator that provide credit include banks, building societies, credit unions, retail credit firms, home reversion (equity release) firms and moneylenders. These entities, excluding credit unions, must comply, inter alia, with the requirements of the Financial Regulator's Consumer Protection Code, with the exception of moneylenders who must comply with the requirements of the Regulator's Consumer Protection Code for Licensed Moneylenders. The Codes set out a number of general principles requiring regulated entities to act in the best interests of consumers and to treat consumers honestly, fairly and professionally and also include specific rules in relation to the provision of credit.

There may be other entities, outlets or arrangements through which consumers, including farmers, may receive credit. These include friendly societies, retail shops where in-store credit is provided and hire purchase arrangements. In these cases, the credit facilities provided would be outside the terms of the Consumer Protection Code and would not be regulated by the Financial Regulator. Friendly societies fall under the remit of the Registrar of Friendly Societies while credit intermediaries fall under the remit of the National Consumer Agency. Examples of credit intermediaries include garages and retailers who arrange loans, leasing and hire purchase for consumers.

The Financial Regulator has no statutory role in the setting of retail interest rates and there are no interest rate caps in relation to the industry categories which the Financial Regulator supervises in this jurisdiction, apart from the interest rate cap imposed on the credit union sector. Interest rates and products are not regulated so each institution determines the rate it charges its customers, depending on a number of factors such as cost of funds and commercial considerations such as competition, risk pricing and the impact on deposit rates.

The principal legislation under which credit unions are regulated in Ireland is the Credit Union Act 1997 as amended. One of the objects referred to in the conditions of registration of a credit union is the "creation of sources of credit for the mutual benefit of its members at a fair and reasonable rate of interest". In relation to interest on loans under Section 38 of the Credit Union Act, a credit union may charge interest on loans made to its members under certain conditions, one of which is that the interest on the loan shall not at any time exceed one per cent per month on the amount of the loan outstanding at that time. The interest on the loan shall in every case include all the charges made by the credit union in making that loan. The rate of interest charged on any class of loans granted at a particular time shall be the same for all loans of the class.

Moneylending firms in Ireland are authorised by the Financial Regulator under the Consumer Credit Act, 1995. Interest rate caps for moneylenders are not provided for in this Act and the Financial Regulator does not have the power to cap interest rates on an industry wide basis. However, the Consumer Director of the Financial Regulator may form an opinion on whether the cost of credit charged by a firm is excessive. A person must not conduct moneylending unless they hold a licence and maintain a business premises which is not a residence.