Minister Seán Fleming welcomes passage of the Consumer Credit (Amendment) Bill 2022 through the Oireachtas

Seán Fleming, Minister of State at the Department of Finance with special responsibility for Financial Services, Credit Unions and Insurance, welcomes the completion of the Consumer Credit (Amendment) Bill 2022 of all Oireachtas stages this week.

For the first time ever, this Bill will allow the Minister for Finance to set the maximum interest rate at which a high cost credit loan can be provided.

The name ‘moneylenders’ will be officially changed to ‘high cost credit providers’. The purpose of this is to accurately inform people in advance of the high cost of these loans.

This will assist people and families who have difficulty obtaining credit from other lenders. Research shows that the majority of people who take out home collection loan are women with children, who typically borrow money for family purposes at various stages throughout the year. Research shows that the average high cost credit loan was €785, with the most frequent term being 9 months.

The Bill prohibits high cost credit providers from charging for home collection services. It will also allow for online repayment books if a consumer so wishes, showing people the outstanding balance on their loan. This is necessary as many borrowers were reliant on paper records previously.

The Central Bank will examine the effectiveness of the interest rate caps and the government will consider any recommendations they make in the future.

The Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Seán Fleming, said:

The Bill will restrict interest rates by providing the Minister for Finance with the power to make regulations setting the maximum interest rate at which a moneylending loan can be provided.

The Minister is required to have regard to the following factors and to consult the Central Bank of Ireland before making such regulations:

• competition in the high cost credit sector
• the supply of credit in the high cost credit sector
• the average rates of interest offered to customers in the high cost credit sector and any trends in such interest rates; and
• where setting the proposed rate would reduce the supply of credit in the high cost credit sector, the impact of such a reduction on financial inclusion

In making the regulations, the Minister must also adhere to the following parameters:

• in relation to cash loans under a high cost credit agreement:

o the maximum rate of simple interest chargeable per week can only be set at a rate less than or equal to one per cent, and

o the maximum rate of simple interest chargeable per year can only be set at a rate less than or equal to 48 per cent

• in respect of a running account under a high cost credit agreement, the maximum rate of monthly nominal interest can only be set at a rate less than or equate to 2.83 per cent. A running account operates similarly to a tied credit card and is a product sometimes offered by catalogue companies

Information on the market:

• the Central Bank register currently lists 32 licensed moneylenders
• the number of providers is gradually declining. The largest operator in the Irish and UK market stopped issuing loans in 2021
• the Central Bank estimates that there were 283,000 customers with moneylending loan balances outstanding totalling €141,146,290 at the end of 2020