CIB welcomes new protections for consumers of licensed moneylending services
The Citizens Information Board (CIB) welcomes the Central Bank’s announcement of new regulations to strengthen protections for consumers of licensed moneylending services and to enhance professional standards in the sector. Moneylenders will now be required to include prominent, high cost warnings in all advertisements for moneylending loans with an Annual Percentage Rate (APR) over 23%.
CIB and the Money Advice and Budgeting Service (MABS) engaged in stakeholder consultations regarding the review of the Consumer Protection Code for licensed moneylenders with a submission made back in 2018. These changes reflect a number of the recommendations in that submission with regard to protecting low income consumers. CIB has also advocated for interest rate restrictions on moneylending loans in a separate submission to the Department of Finance.
Speaking about the announcement Angela Black, Chief Executive said: “We have been aware for some time that MABS clients were finding it difficult to access low cost credit for contingencies as part of their debt management process. This left little option but to use moneylenders. Given the high interest rates involved – at up to 188% APR, before collection charges, I would strongly advise people to consider other options, such as a Personal Microcredit, or “It Makes Sense” loan. Loans under the scheme operated by many credit unions, range in value from €500 to €2,000 and have a maximum interest rate of 12.68% APR. I welcome the Central Bank’s statement encouraging people in financial difficulty to seek free debt advice, guidance and assistance from the experts in MABS.”
The new rules will limit the moneylenders’ contact with consumers and limit the offers and promotions made to them. They will not permit unsolicited offers of loans to consumers who have recently made, or are nearing, full repayment of a moneylending loan.
Professional standards will be improved under this new regulation. Where the loan is required for basic needs, such as accommodation or electricity, moneylenders must inform the consumer that a moneylending loan may not be in their best interest and provide contact information for MABS.
The regulations will come into effect on 1 January 2021. However, recognising the urgency of financial effects of Covid-19 on people, the ‘high-cost warning’ will come into effect on 1 September 2020.