‘Loose’ moneylender regulations leave industry open to sharks

LOAN sharks legally charging up to 188% interest do not have to check customers’ ability to repay debts, under regulations published yesterday, and which have been described as “loose”.

The Financial Regulator’s new code for licensed moneylenders, drawn up after years of reports and consultation, insists loans must be “suitable” for a consumer.

But this requirement does not apply if a customer approaches the moneylender and asks for the loan, and there is no obligation to check income or outgoings.

Senator Brendan Ryan, Labour’s consumer affairs spokesman, said the regulations were “loose” and left the industry “wide open” to rogue lenders.

“There must be some accountability by the moneylender, they are operating like sharks out there. In terms of the suitability of a loan, there must be some capacity to repay and that’s obviously linked to a person’s income — there must be some evidence of that,” he said.

There are currently 52 licensed moneylenders here, some of whom legally charge interest rates up to 188%. Of these, 36 operate door-to-door collections, but the Financial Regulator has no official estimates of the number of illegal lenders in the state.

The regulator took responsibility for licensed moneylenders in 2003, and last year published a study on the industry.

The official Consumer Protection Code for Licensed Moneylenders was drawn up after submissions on the report from moneylenders, the Money Advice and Budgeting Service (Mabs), the Department of Social and Family Affairs and a consultative consumer panel.

It sets out a responsibility on moneylenders to advise customers struggling with repayments about credit counselling services such as Mabs.

The code, which comes into effect next September, requires all fees, costs and interest rates to be clearly stated.

Any loans with annual percentage rates of 23% or more must carry boldly printed warnings on all documents that it is a high-cost loan.

The regulator said offenders can be referred to the Financial Ombudsman.

Sanctions can include fines of up to €500,000 for an individual or €5 million for a company and a complete ban from the industry.

But Mr Ryan said the code was not strict enough on the industry.

“What controls have we over such people to see have they checked the suitability of customers and what checks they have done, and what records are there of that? I think this is wide open.”

The National Consumer Agency, set up by the Government to defend consumer interests, refused to comment on the code.

A spokeswoman for the agency said it was a matter for the Financial Regulator.

Kieran O’Donnell, Fine Gael’s deputy finance spokesman, said: “We can’t have a situation — particularly in this current economic climate — that a moneylender is not required to check the suitability of a product for a consumer.

“It’s absolutely critical that they must check in all circumstances the repayment capacity of customers in terms of any form of credit.”