People who accumulate debt in the run-up to Christmas were yesterday warned to avoid rogue moneylenders who prey on vulnerable people at this time of year.
The Irish League of Credit Unions (ILCU) said it may seem premature to be talking about pre-Christmas spending in September, but this was the time of year when people were most susceptible to "the easy money promises of moneylenders who gloss over the frighteningly high costs involved".
With less than 14 weeks to Christmas, the ILCU and the Money Advice and Budgeting Service (MABS) launched their Christmas survival guide and anti-moneylenders campaign.
The "Keep the Wolves from the Door" campaign will use posters, leaflets, the media and public meetings to encourage people in debt, or in need of a loan, to contact their local credit union.
ILCU president Uel Adair said people were being charged up to 188.5 per cent interest by some legal moneylenders "and even worse by illegal moneylenders".
"The less well-off and less financially literate are most at risk," he said.
ILCU chief executive Liam O'Dwyer warned against the temptation to bundle several short-term debts into one long-term loan.
"You have quite a deal of short-term debt now being consolidated into long-term debt and you are paying, therefore, for white goods, holidays, cars over a long period," he said.
"It might appear to many consumers that the rate is cheaper. In fact they are paying vastly more in the longer term."
Mr Adair said it was "ludicrous" that people were buying cars and consolidating the debt over 25 years. "You could have five cars bought before you would even have the first one paid," he said.
Mr O'Dwyer also warned about the increase in credit card debt and gave the example of one credit union customer who had three credit cards and had accumulated €18,000 debt on the cards.
"It's very easy, and I think at times the money is too freely available," he said.
The ILCU yesterday called on the Government to cap interest rates charged by legal moneylenders, similar to the cap introduced by many European states.
"Credit unions are capped. We are capped at 1 per cent a month," Mr O'Dwyer said.
However, MABS spokesman Michael Culloty said balance was essential when a cap was being considered so that it would not encourage some legal moneylenders to go underground.
Minister for Social and Family Affairs Martin Cullen said he was "certainly open to the view" of introducing an interest rate cap but said it was a matter for the Financial Regulator.
Mr Cullen said he was "very concerned" about the problem of debt among low-income families.
"Christmas will be upon us very quickly. There's a lot of peer pressure on families as we know but if you can get a structured approach with good advice, it can help people to avoid getting themselves into a lot of serious difficulties," he said.
In 2005, a survey of people collecting welfare payments at post offices found that 39 per cent were borrowing from moneylenders.
Mr Culloty said the situation had not improved since that time, despite the economic boom.
"We are still getting the same numbers of people coming into our centres," he said.
