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Families turning to moneylenders charging up to 200% interest ahead of Christmas

The majority of loans taken out this time last year were to cover debts consumers already had.
Dec 5th 2014, 7:30 AM 5,759 18

THE CENTRAL BANK has issued seasonal advice for individuals to avoid borrowing money from money lending firms.

In its Christmas advice, the bank has warned people against taking on debt “in addition to their existing loans”.

A problem that was identified by the Bank was that a large number of consumers were borrowing from moneylenders to cover debts that they already had.

Advice

Customers are advised that if they miss repayments, moneylenders are not in a position to charge them extra, and that they should seek advice from the Money Advice and Budgeting Service (MABS). 

Consumers are also encouraged to ensure that if they do go to a moneylender, that the company is licenced by the Central Bank. Moneylenders licenced by the institution are not permitted to keep any amount of a new loan to repay an existing debt.

Director of Consumer Protection, Bernard Sheridan, said, “households often have additional loans to cover these expenses, including from moneylending firms. This could take consumers into a rolling cycle of high-cost borrowing and potential debt.”

The Central Bank has held controls over the moneylending sector since 2003 – in which time it has not permitted an increase to maximum APR.

As of October, there were 39 moneylenders licenced to operate in the Republic of Ireland.

Reaction

The news has been welcomed by Fine Gael South Central TD, Catherine Byrne, who called for tougher regulation on money lenders.

These companies are currently allowed to charge extremely high rates of interest of up to 200%, far in excess of what you would pay with a traditional lender.
People often turn to moneylenders when they are in debt and feel like they have no alternative, but unfortunately these high interest rates can leave them in much deeper debt. The limits imposed on these interest rates must be looked at.

The website for MABS can be accessed here.

Read: Money returned to elderly woman who was conned out of savings

Also: Ireland is less corrupt than it used to be…

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Michael Sheils McNamee

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