Tuesday, 21 February 2012
Department of Finance
Financial Services Regulation
Question 165: To ask the Minister for Finance his plans to regulate high interest pay day loan companies, and other financial institutions that charge exorbitant annual percentage rates for short term loans given out through the Internet including a company (details supplied) which has an APR of approximately 4,400%; if he will consider introducing an upper limit on the APR chargeable; if he will outline the regulations that currently apply; and if he will make a statement on the matter. [9395/12]
The Central Bank have advised me that the company referred to in the Deputy’s question is not regulated by them and that there are no authorised providers of pay day loans in the State at present. If a company wishes to offer a pay day loan service in the State it would have to seek a money lender’s licence from the Central Bank to do so. Moneylenders have to apply to the Central Bank annually to have their licences renewed. A money lender’s licence granted by the Central Bank is specific to that moneylender in that each individual moneylender’s licence outlines the specific products that the moneylender offers, the APR for each product and the total cost of credit for each product.
Moneylenders often lend small value loans for short periods and hence such loans tend to be more expensive than other forms of credit. I have no plans at present to introduce an interest rate cap on moneylending.
In addition to the licensing system, the Central Bank has in place a Consumer Protection Code for Licensed Moneylenders (the Code). The Central Bank has power to impose sanctions on moneylenders for a contravention of the Code. The Code sets out General Principles with which a moneylender must comply. For example, a moneylender must act honestly and professionally, with due skill, care and diligence in the best interest of consumers. The Code also places requirements on moneylenders 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, debt collection and the contents and presentation of advertisements.