Rise of moneylenders - Regulator must impose rate ceiling

AS Finance Minister Brian Lenihan prepares to play Scrooge with a vengeance this Christmas, hitting low earners and social welfare recipients in the harshest budget in decades, the appalling vista is that charities combating poverty will be hit by a tsunami of requests for aid and more people will be driven into the clutches of moneylenders.

The outlook could hardly be darker. Plunged into financial crisis for the first time in their lives, Ireland’s new poor are struggling to make ends meet. There are 450,000 unemployed workers on the Live Register, with little hope of getting a job.

Some 36,500 people behind on their mortgage payments live in fear of losing their homes. Their plight was typified recently by a couple that asked the High Court to repossess their home as quickly as possible so they could apply for council housing.

Some 110,000 households are in arrears with the ESB and Bord Gáis and have signed up to arrears repayment plans. When families came under financial pressure, the initial response of the ESB, one of the most profitable of state agencies with the highest pay in the public sector, was less than humane as electricity was cut off to around 900 customers a month.

Perhaps this bleak backdrop explains why an estimated 200,000 people are now in the hands of licensed moneylenders. The figure reflects a sharp increase in a matter of months since an Irish Examiner investigation found 150,000 people were in debt to moneylenders.

The business of Ireland’s biggest money lending company, Provident, which employs around 500 agents on a door-to-door collection policy, has dramatically increased from 75,000 customers to 88,000, an extra 13,000 borrowers. It charges an APR of 187%.

Despite pleas from St Vincent de Paul (SVP) and MABS, which provides advice for people in debt, the interest rates charged by moneylenders are scandalously high. Surely this is an issue where forceful intervention by the Financial Regulator is warranted?

Besides regulating the activities of moneylenders and issuing licences, the regulator should impose a realistic ceiling on the rates lenders can charge. With 50 licensed moneylenders in the country, rates range from 35% to a staggering 188.45%. In the shadows are illegal lenders who charge even higher rates and are not averse to using bullyboy tactics when customers fall behind.

At the coalface of Ireland’s poverty crisis, the SVP has introduced a pioneering scheme in the southern region in a bid to wean people away from moneylenders. While the initial response to its offer to act as guarantor for credit union loans in Cork has been relatively slow, those behind the scheme are hopeful it will catch on.

Meanwhile, with the onset of Christmas, people will come under pressure to buy presents for children blissfully unaware of the financial crisis. Forced to borrow yet more credit, many families will end in the clutches of unscrupulous moneylenders.

As the Government prepares to inflict a four-year budgetary dose of pain on the people of Ireland, who are in no way responsible for the collapse of the economy, highly paid politicians with their perks, Mercs, big pensions, outrageously long holidays and over-generous expenses, should try living for a while on €200 a week before imposing swingeing cuts on the needy.


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