I welcome the new customer protection regulations that have been announced for licensed moneylending services.
The regulations to be introduced by the Central Bank include advising borrowers of high cost interest charges in any advertisements for loans with an Annual Percentage Rate (APR) in excess of 23%.
People looking to take on high interest loans can be in a very vulnerable position so it is important to alert them about the potential obligations they face.
This is particularly relevant for those on low incomes who would be at risk of getting into a downward spiral of debt.
Some loans can be as high as 188% APR before collection charges. People should consult the free Money Advice and Budgeting Service (MABS) about their options before taking on any high interest loans.
Personal Microcredit and It Makes Sense loans could be an alternative. These types of loans are operated by many Credit Unions. They range from €500 to €2,000 and have a maximum APR of 12.68%.”
The new rules, which follow recommendations by MABS and the Citizens Information Board, will also limit moneylenders’ contact with consumers and limit the offers and promotions made to them.
They will not permit unsolicited offers of loans to consumers who have recently made, or are nearing, full repayment of a moneylending loan.
Where a loan is required for basic needs, such as accommodation or electricity, moneylenders must inform the consumer that a moneylending loan may not be in their best interest and provide contact information for MABS.
Most of the regulations will come into effect on January 1 2021, although the high-cost warning will come into effect on September 1 2020 in recognition of the financial difficulties that have arisen for many people as a result of the COVID-19 crisis.