Irish Times on major social problem – Legal Money Lenders and Savage Interest rates

Moneylenders owed €113m by borrowers at rates of up to 188%

JAMIE SMYTH, Social Affairs Correspondent

AN ESTIMATED €113 million is out on loan to poor households and families from legal moneylenders, who can charge annual interest rates of between 23 and 188 per cent, new figures show.

The value of moneylender loans last year is estimated to be at a similar level, while the figure for 2008 is estimated to be €90 million, reflecting an increase in loan activity since the recession began.

The Central Bank’s register of moneylender licences lists 47 moneylenders in Ireland. Four firms – Southside Finance, Allied Credit Limited, Greenfields Financial Services and Provident Personal Credit Limited – are authorised to charge annual percentage rates of interest above 180 per cent.

Charities and non-governmental organisations said yesterday the loan figures were worrying because moneylenders tend to target poor families and can charge punitive rates of interest.

St Vincent de Paul said it was very concerned about aggressive pre-Christmas marketing campaigns mounted by some of the big moneylenders in recent weeks.

“We are hearing about aggressive leafleting taking place from moneylenders in housing estates about an hour outside Dublin. We are worried that this could lead to a very potent cocktail of indebtedness for poorer households after the Christmas period,” said John Mark McCafferty, head of justice and policy at St Vincent de Paul.

He said moneylenders typically target lone parents and those on welfare or low incomes. But he said the problem was spreading out to the wider population now because people were finding it difficult to get credit elsewhere.

Pat Quinn, who runs the legal moneylender RP Credit and is a member of the industry group, the Consumer Credit Association, said moneylenders lent out a small amount when compared to banks.

He said the annual percentage rates charged by moneylenders look much bigger than they are in practice because moneylender loans tend to be short-term loans.

“There is also a different cost structure between moneylenders and banks or credit unions because of door-to-door collection,” said Mr Quinn, who added recent surveys showed customers were very happy with the services.

Free Legal Advice Centres, which published a guide to moneylenders in 2008, says there may be a case for the regulator to set a maximum rate of interest for moneylenders to protect customers.

“We support the idea of investigating whether a maximum rate of interest should be set as the current situation means the principle that ‘the poor pay the most for credit’ applies,”said Paul Joyce of the Free Legal Advice Centres.

Provident, which is the biggest moneylender in Ireland, said its Irish customer base had increased to 88,000, up from 75,000 last year. In a statement it denied it was engaged in an aggressive pre-Christmas marketing campaign.

“We use normal marketing campaigns just like any other company to draw potential customers’ attention to our products and services,” said Provident.

The Central Bank, which regulates moneylenders, does not publish the value of loans issued by moneylenders. However, this can be calculated from the levies it collects from moneylenders, which are based on a percentage of loans outstanding at the start of a year.

The bank has said it expects to collect €309,000 in 2010 at a levy of 0.2739 per cent of loans outstanding. In 2009 it collected €244,000 and €162,000 at levy rates of 0.215 per cent and 0.18 per cent respectively, according to replies to a parliamentary question by Labour TD Tommy Broughan.

COST OF CREDT MONEYLENDERS WHICH CHARGE TOP RATES

PROVIDENT PERSONAL CREDIT LTD

The biggest moneylender in Ireland with 88,000 customers. It offers loans from €100 to €500. It is authorised to charge an annual percentage rate of interest (APR) of up to 187.22 per cent on loans. No collection charge is listed.

SOUTHSIDE FINANCE LTD

The Dublin-based lender is authorised to charge an APR of up to 188.45 per cent on loans. A collection charge is listed as 287.72 per cent APR, which includes 7 cents in the euro collection charge.

ALLIED CREDIT LTD

Moneylender based in Santry, Dublin. It can offer loans at an APR of up to 183.66 per cent. No collection charge is listed.

GREENFIELDS FINANCIAL SERVICES

It is based in Tullamore, Co Offaly. It is authorised to offer loans at an APR of 187.22 per cent. No collection charge is listed.

EXPRESS LOANS

Moneylender based in Gorey, Co Wexford. It can offer loans at an APR of up to 163.91 per cent. No collection charge is listed.