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SVP warns about money lenders

By editor - 12 June, 2013

The Society of St Vincent de Paul (SVP) has called on the Central Bank to publish baseline data to take money lending out of the shadows.

SVP members are becoming increasingly alarmed at the prevalence of money lenders in the communities they serve. Of particular concern is that vulnerable households are being offered money by doorstep credit firms without sufficient background information being sought.

“We need to take money lending out of the shadows,” wrote Brendan Hennessy, SVP Social Justice and Policy team, in the latest edition of the SVP magazine The Bulletin. “The absence of data on the number of households using regulated money lenders in Ireland significantly hampers any investigation or analysis on the extent and impact on door step credit in Irish society. The Central Bank should publish baseline data on the number of loans and the number of households with such loans and update the information on a six-monthly basis.”

Newspaper reports suggest that there may be up to 100,000 ‘doorstep’ loans with the largest company operating in Ireland, and there are more than 40 regulated money lending companies. The Central bank has access to information on such companies and their loans.

The SVP strongly believes that there is a contradiction in permitting high costs loans, which are significantly targeted at the most financially vulnerable. A sample of typical loans from moneylenders shows that a loan of €1,400 repaid over 52 weeks results in a repayment of €2,184, making the cost of the loan €784. If the loan was €2,000 over the same period the repayment would be €3,120, a massive €1,120 cost to the borrower.

In its recent submission to the Central Bank on the subject, SVP quotes one family in debt to a moneylender:

“I need help for xmas… I have absolutely nothing to give my children for xmas. I’m in a lot of debt (to money lender), I wear my coat in the house and until kids come home from school as I can’t afford coal. I really don’t know what to do, after rend and bills I have nothing left.”

The experience of SVP is that borrowers from money lenders do not pay due attention to the interest rate. Their focus is on the principle borrowed for a specific purpose. In one Dublin SVP Conference members noted that “no one has ever either admitted or been able to tell us what the interest rate is.”

Low income is the key factor driving people to resort to doorstep money lending. But people on low incomes need low-cost solutions to their credit needs, not the exorbitant rates that characterises money lending. Amongst the concerns of the SVP is the potential reduction in the availability of small loans from credit unions to households who are in mortgage difficulties with other institutions.

Another problem is that households receive several loans and one tactic of money lenders is the ‘roll-over’ loan where additional loans are granted. In its  recent submission to the Central Bank the SVP called for tougher regulation to restrict the number of loans to one per adult in a household and to limit loans to no more than four times proven weekly income.

Other recommendations in the submission are:

-The total cost of credit clearly outlined in the loan agreement.
-Greater regulation regarding the amount that can be borrowed and how often a loan may be obtained.
-Money lending companies should be responsible for their agents and protection afforded to customers.
– details of complaint procedures  should be published and freely available and given to each new customer.
– The central bank should provide information booklets and financial education tools which highlight advice services, planned payment methods, and savings and loan options as alternatives to debt collectors.

The Central Bank has noted and welcomed SVP’s Submission.

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