Consumer Credit (Amendment) Bill 2022 will restrict rate charged by moneylenders, modernise the sector and better protect those in need of short-term money lending - Donohoe

The Minister for Finance, Paschal Donohoe, TD, today (Monday) welcomed publication of the Consumer Credit (Amendment) Bill 2022.

The main purpose of this Bill is to restrict the total cost of credit on moneylending loans.

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, and by prohibiting moneylenders from charging for home collection services.

The Bill also contains a range of measures to modernise and streamline the sector, including:

• Allowing repayment books to be maintained online;
• Allowing licenses to be issued for periods of five years at a time rather than one;
• Removing the requirement for moneylenders to register for a particular District Court area, and register State-wide instead; and
• Changing the term ‘licensed moneylender’ to ‘high cost credit provider’ to differentiate between licensed and unlicensed moneylenders.

The legislation follows a comprehensive review of the moneylending sector undertaken by the Department of Finance and the proposals take into account the submissions received during the public consultation held by the Department in respect of the issue. Minister Donohoe published a Moneylending Policy Proposals Report on reform of the moneylending sector in July 2021.

Speaking today, the Minister said:

ENDS

Note to Editors

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 market stopped trading on 28 June 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.

Relevant links:

Bill - Consumer Credit (Amendment) Bill 2022

Explanatory Memorandum - Explanatory Memorandum - Consumer Credit (Amendment) Bill 2022

Regulatory Impact Analysis on the Bill - RIA Consumer Credit (Amendment) Bill 2021

Moneylending Policy Proposals Report - Moneylending Policy Proposals