A MAJOR CENTRAL Bank report has found that more than 360,000 people are using licensed moneylenders.
The most common loan amount is between €200 and €500 with people most likely to use the loans to buy goods or for major family events such as Christmas or birthdays.
While the number of licensed moneylenders had declined and rates by some can be “very high”, the report said overall rates of interest have remained largely at 2007 levels.
There report also said that some 69 per cent of people now understand the amount of interest charged on their loans, compared to a meagre 29 per cent in 2007. A report by the bank that year said that 71 per cent of customers failed to understand the amount of interest they were being charged.
The report also revealed that more than three quarters of people have been refused loans from a credit union or bank despite more than half reporting having savings with these institutions.
The Central Bank looked at the 43 licensed moneylenders across the country in drawing up the report, most of which are small or medium-sized firms which work on a local level.
The number of people using moneylenders has increased by 60,000 since the last research was carried out in 2005; however despite this, the Central Bank said that the sector “has not changed significantly”.
The report found 9 per cent of people borrow to pay bills or other debt.
More worryingly, the report also found that 15 per cent of people are currently repaying two or more loans with their moneylender.
The Central Bank said that a significant proportion – 25 per cent – of people surveyed experienced difficulties in making repayments in the past 18 months, with 63 per cent of those reporting this was caused by a drop in household income.
However most people said they believed they were being “treated fairly” when in arrears.
A majority of 65 per cent of customers reported that they have repaid a loan or line of credit early, though almost one in three of those recall receiving a rebate for doing so.
Struggling with repayments
Director of Consumer Protection Bernard Sheridan said the Central Bank will “continue to monitor this sector closely and take action where necessary to protect borrowers’ interests”.
“I would encourage consumers who are struggling with repayments on loans to seek advice from MABS who will help them consider their options,” he said.
The Society of St Vincent De Paul was critical of the report today as it failed to include any recommendations for further regulation of the sector. The society said the report “shows worrying levels of acceptance of high cost loans from customers”.
Brendan Hennessy said it also “fails to question adequately why so many people, mainly in low income groups, resort to such expensive forms of credit – people who are least able to afford high cost credit”.
- Additional reporting by Christine Bohan