It’s time to tackle the problem of lending money

In 1984 today tonightthe precursor of RTÉ Prime timeaired a groundbreaking pawnshop show featuring a young Joe Little stepping on the doorstep of some of the most usurious moneylenders doing dodgy business in the state and, on occasion, chasing them down as they leaked his microphone in cars.

Scandalous interest
The program highlighted some of the outrageous interest rates charged by lenders and the levels of intimidation used by some of the worst practitioners to collect money from vulnerable people. It grabbed headlines for weeks after it aired, led to the creation of the Money Advice and Budgeting Service (Mabs) and sparked a long debate in the Dáil.

When the then justice minister was quizzed by his TD colleagues on the morality of lending money after the show aired, he said there was little he could do to curb the excesses legal lenders. “There is no power given to the Garda to prosecute excessive charges,” the minister said, adding that “charging more than 39% is not a criminal offence.”

Fast forward 30 years and the same minister is dealing with pawnshop issues, although as finance minister Michael Noonan now has a new portfolio and more power to change things.

Earlier this week, St Vincent de Paul asked the Central Bank to publish the amount of money lent by approved lenders and the cost to consumers of the credit involved.

The call is timely. Contrary to the figures of the Central Bank. Its most recent figures, which revealed that 300,000 people had used the services of lenders over a 12-month period, were published more than six years ago. Since 2007 no figures have been published on money lending and given the changes in the general economy and in the individual circumstances of many thousands of Irish people since the economic collapse of 2008, it is likely that the numbers using both legal and illegal lenders have increased dramatically.

Lack of information
As Vincent de Paul pointed out this week, in the absence of information from the Central Bank, there is no way of knowing how much money is being lent because borrowers are understandably reluctant to admit that they need to use the services.

Information is necessary if the problem of money lending is to be properly dealt with. And that’s a problem. Interest rates charged by pawnbrokers are at least 23% APR – or worse than the worst credit cards, with some lenders charging rates much, much higher than that. And they are careful in their targeting by offering loans to people on welfare – or those who need it most but can least afford it.

The SvP said it was a “contradiction in terms” to offer families below the poverty line interest rates between 157.2% and 187.2% and its social justice coordinator Brendan Hennessy said lenders are exploiting the fact that many borrowers don’t pay attention to the interest rate.

The charity is right to ask the Central Bank to act and introduce rules which state that loans cannot exceed four times a person’s salary while under its guidelines only one loan per adult in a household would be allowed. He also called for a ban on top-up loans. Such rules are long overdue. At least 30 years late, in fact.

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