Big rise in numbers using moneylenders

The number of people taking out high-cost loans from licensed moneylenders has increased by 20 per cent since 2007 to 360,000 borrowers, new figures from the Central Bank will reveal this week.

According to figures compiled by the regulator and due to be published in its latest Report on the Licensed Moneylending Industry, licensed moneylenders now have 360,000 customers, up from the 300,000 reported the last time the Central Bank conducted this study in 2007.

Moneylender licences are granted to institutions which provide credit to consumers where the interest rate or APR is greater than 23 per cent. At the end of October, the Central Bank oversaw 40 moneylenders, down from 47 in 2007. There are no figures available on the number of people who avail of the services of illegal moneylenders.

Credit requirements
For people who have been closed out of traditional financial services, either due to a poor credit history or a tightening of credit requirements, moneylenders can provide vital access to credit, promising "cash delivered to your door within days". Some moneylenders allow borrowers to take their loan in the form of One4all vouchers or hampers and will typically call to the borrower's home to collect repayments. It is an expensive form of borrowing, with annual interest rates of more than 200 per cent levied on borrowers. Moneylenders also frequently impose a "collection charge".

Rate of interest
While loans structured over a shorter period of time will incur a lower rate of interest – for example €300 borrowed over 26 weeks with Provident Personal Credit has a cost of credit of €90, or an interest rate of 30 per cent – should the loan be extended to 52 weeks, the cost of credit will jump to €468 (or 56 per cent).The Central Bank can refuse licences if it feels the cost of credit proposed is excessive.

According to a spokesman for Mabs, the debt advisory service has noted a “slight increase” in the number of people coming to it and citing money lending as their primary difficulty. He said people see such loans as offering a “quick fix” but he said “if you can’t afford to save then you can’t afford to borrow”.

Earlier this year the St Vincent de Paul warned of a “ potential money lending crisis” and said it was alarmed at the prevalence of money lenders .

In the UK, the issue of so-called payday lending hit the House of Commons, yesterday with three of the UK's biggest payday lending firms appearing before MPs. Labour leader Ed Miliband accused the firms of preying on the vulnerable.