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Consumer Credit (Amendment) Bill 2018: Second Stage [Private Members]

Wednesday, 12 December 2018

Dáil Éireann Debate
Vol. 976 No. 5

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Consumer Credit (Amendment) Bill 2018: Second Stage [Private Members]

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty I move: "That the Bill be now read a Second Time."

  It has been six and a half years since I brought the Bill before the House. Is it not telling what the then Minister of State with responsibility, the former Deputy Brian Hayes of Fine Gael, told me? He said:

[T]his issue must be examined carefully to ensure the solution proposed does not adversely affect the most vulnerable members of society. This will be the Government's main aim in considering the findings of the examination to be carried out by the Central Bank and by the officials of the Department of Finance.

What has changed except the name of the Minister of State? This Fine Gael Government continues to look for time to examine this issue, but the answer is that it has had enough time and it is time to act.

  Let me provide some examples of why we must act. At that time, in 2012, we had the support of Fianna Fáil, Independents and, obviously, the Bill's sponsors, Sinn Féin. Unfortunately, however, Fine Gael and the Labour Party blocked the Bill. Licensed moneylenders continue to charge interest rates of 187% annual percentage rate, APR, such as Colm Keegan, Rossbro Financial, a company called Stalwart Investments or Provident Personal Credit, which is involved in an aggressive campaign targeting low-income and vulnerable individuals. These rates are despicable. They have no place in 2018 and they had no place in 2012, when I originally introduced the legislation.

  The Government has tabled an amendment but it is not about protecting the vulnerable or those low-income families. Rather, it is about protecting the moneylenders. I urge all parties to reject it. The Government knows well this law will not pass into being tonight if the Bill is allowed to pass Second Stage. We know it must undergo scrutiny and pass Committee and Report Stages, as well as all the Stages of the Seanad. It is time for us to do that scrutiny and preparation and begin this process of ensuring these astronomical rates are no longer charged by licensed moneylenders preying on vulnerable individuals.

  I pay tribute to the Social Finance Foundation and the Centre for Co-operative Studies at University College Cork, UCC, for putting this back on our agenda. Unfortunately, as Christmas approaches, this is a live issue for many every day. The report by the UCC academics cut to the chase of why we must act, when it leaves no doubt as to the economic reality of moneylending. The report said that it facilitates a considerable transfer of resources and potential assets from poor communities to the directors and shareholders of loan companies. Ireland is one of the few countries that still does not have a cap on high-cost lending. Germany's courts, for example, have struck down rates that were twice the market rent, in Finland a rate of 118% was deemed unconscionable, while in Spain a rate of 24% was deemed excessive. We do not have to look so far afield, however, because until 1933, our own legislation deemed a rate of 39% excessive, and allowed the courts to strike it down.

  Moneylending at these rates simply takes money from poor families and makes them poorer. We cannot allow another Christmas to come and go without action. I fully understand that there must be alternatives, but the credit union movement serves this country well, having done so for many years. It is prepared to expand its It Makes Sense loan scheme. As evidence of where people can save money by availing of these loans, a loan of €500 from It Makes Sense would cost an additional €15 to repay. In the case of these moneylenders, on the other hand, it will cost nearly €150 more. It Makes Sense is provided by a large number of credit unions. While the official number may appear to be dropping, that is only as a result of a number of mergers of credit unions. I urge all credit unions to take up the scheme.

  It was suggested by the Centre for Co-operative Studies and the Credit Union Advisory Committee, whose job is to review the Credit Union Act, that allowing a 2% cap instead of the current 1% monthly rate would encourage those credit unions which are reluctant to take up the scheme, which is an idea that could be considered. It is not a demand of the credit union movement but is worth examining. I would be happy to consider using this legislation to facilitate such a change if it was deemed helpful. It would be a choice for each credit union whether to utilise the extra space as it saw fit.

  The Bill is short but it has a profound effect on the 330,000 people who borrow from moneylenders. That is 7% of the entire population in the Twenty-six Counties. Section 1 relates to the APR chargeable on loans issued by moneylenders, and it provides that it shall not exceed 36%. That rate was chosen because it is three times the level that the credit union movement can charge and it keeps broadly in line with what existed in legislation passed by the House many years ago which deemed that 39% was excessive and which allowed the courts to find as such.

  Section 2 is simply the citation.

  It is straightforward legislation but it will help the 330,000 people who borrow from moneylenders. The amount of outstanding consumer loans is large, namely, €153 million, which is why we need to act. The borrowers caught in this trap are our neighbours, and predominantly women and people from low-income families. They are our family and friends. This year, the Irish League of Credit Unions found that more than a quarter, or 27%, of parents in debt said they have turned to a moneylender at back-to-school time in an effort to cope with the costs, which is a 20% increase from last year. All the research is clear that many people who use moneylenders do not look for other sources of credit. Some 70% of parents in debt have availed of other types of credit. They are attracted by the availability of this credit and many do not consider the APR rates that are being charged.

  For many people, this situation is getting worse and worse. The Central Bank has carried out a consultation and done valuable work considering regulations including restricting advertising, forcing moneylenders to provide more information and warnings and improving the professionalism of the people employed in the sector. That is all good work, but the Bill is complementary to it. The Central Bank's idea of adopting the Australian model of a cap based on the level of income misses the whole point. A cap needs to be applied to the interest rates that can be charged by the moneylenders.

  The Bill is the option before us, as it was in 2012. The Government proposes a 12-month wait, but what it means is that it has no intention of implementing a cap. It has had six and a half years to consider the issue, having blocked that Bill, but it is now trying to block it again with this manoeuvre.

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