Moneylending in Ireland

Information

Moneylending is the practice of giving cash loans or supplying goods or services that are repaid at a high level of interest over a short period of time. Banks, building societies, insurance companies and credit unions are not considered moneylenders. Moneylenders are generally either individuals or companies whose main business is to lend money. They are required to hold a licence to trade in moneylending. The Central Bank of Ireland regulates the activities of moneylenders and is responsible for issuing moneylending licences in Ireland.

Moneylending licences

The Central Bank (before granting a moneylending licence), will take into consideration a wide range of factors, including the trading background and reputation of the moneylender and the cost of credit that is proposed to be charged. Licences are renewed each year. The Central Bank maintains a register of licenced moneylenders, and if you have a query about whether a moneylender is licensed or not you can find out by contacting the Central Bank - see 'Where to apply' below.

Illegal or unlicensed trading

It is unlawful to provide someone with moneylending services without a moneylender's licence. The Central Bank and Irish Financial Services Regulatory Authority Act 2003 increased the penalties on conviction of illegal trading in moneylending to a fine of up to €63,486.90 and/or up to five years imprisonment.

If you believes you have dealt with an illegal moneylender or knows the identity of someone you believe to be an illegal moneylender, you should contact either the National Consumer Agency or your local Garda station. Only the Gardai can take legal action against illegal moneylenders, but the National Consumer Agency can give the customer advice on whether the moneylender is trading illegally and how to proceed with your complaint.

Moneylending agreement information

Moneylenders are required under the Consumer Credit Act to provide their customers with detailed lending agreements that show the total cost of credit and the rate of interest, plus any collection charges that may apply. No other charges, such as administrative or transaction costs, are allowed to be applied by the lender. The lending agreement must also be signed by both the lender and the customer.

The agreement must also notify the customer of your right to a ten day "cooling-off" period in which you can inform the lender in writing that you have decided not to proceed with the loan. This right is guaranteed under Section 50 of the Consumer Credit Act but the law also allows moneylenders to ask customers to waive this right. If a moneylender and a customer agree that that neither wish to observe the ten-day cooling-off period, a separate signature by the customer is required in a prominent position on the lending agreement stating that they are consenting to waiving their rights in this regard. It is not legal for moneylenders to require that customers sign this waiver in order to receive the loan, but customers should bear in mind that the moneylender can decide to withdraw their services at any time prior to the signing of a loan agreement and that the customer will not receive the cash or goods until after the ten-day cooling-off period if they decides to observe it.

The customer must also be issued with a repayment book, separate to the lending agreement, which sets out the details of the lending agreement, and shows the customer how much they have paid off and how much is left to be paid. Some moneylenders issue regular statements instead of a repayment book, which set out the same information. The moneylender must also keep a record of the details of each lending agreement.

Loan categories

A licensed moneylender can provide loansin the form of cash loans or goods loans.

Cash loans

Generally, door to door lenders give smaller loans over short periods, for example between €100 and €500 paid back over 3 to 6 months. These are usually paid back by cash, and payments are often collected from the customer on a weekly basis by the moneylender or a collection agent appointed by the moneylender.

Some moneylenders provide larger loans for €1,000 or more, and these loans are sometimes repaid over a longer period such as a year or more. These moneylenders operate more like finance houses, issuing monthly statements on the loan and collecting repayments by standing order or by direct debit.

Goods on credit

Some moneylenders also offer goods to customers on credit. This can be done in several different ways;

• Direct goods sales
• Goods loans
• Voucher loans and catalogue loans

Direct goods sales: involve a moneylender selling goods like toys, furniture or jewellery directly to the customer at a marked-up or increased price and then allowing the customer to repay the cost in installments. While there is no actual interest charged, the increase on the usual price or value of the goods can be considered as a form of interest.

Goods loans: are also offered by moneylenders in the form of credit sales, whereby the moneylender buys the goods, such as electrical goods or furniture, from a normal retailer, provides the goods to the customer and then allows him/her to repay the moneylender with interest for the cost of the goods over a longer period of time than for cash loans.

Voucher loans and catalogue loans: are less common moneylending practises. A moneylender can provide a customer with vouchers that can be used to purchase goods in certain shops only. The cost of the vouchers is then repaid to the moneylender with interest in installments. Catalogue loans involve purchasing goods from a catalogue that is sent to the customer by post and then paid for in installments by the customer, sometimes also by post.

Repayments and collection

Many moneylenders will want to collect loan payments from customers by cash each week, and will charge a collection charge for this service.

Any collection charges that may apply must be outlined to the customer in his/her lending agreement before he or she signs it. If the moneylender is sending an agent to the customer's house, the agent must have written authorisation from the moneylender to do so, in practice often in the form of an ID card. The agent is only allowed to collect repayments and cannot initiate new loans.

Under law, the moneylender or their agent agent can only call to a customer's home to collect repayments at designated reasonable hours. These are usually 10am to 9pm Monday to Saturday, with collection not allowed on Sundays and public holidays. In certain cases, collection may be allowed between 8am and 10am on weekdays but the customer must have given permission for this on the lending agreement.

The customer must be given the option of paying at the moneylender's business premises to avoid the collection charge. This premises must be a separate premises that is not used as a residence by any person and the moneylender's licence must be prominently displayed at the premises.

A moneylender or their agent is prohibited from visiting or telephoning a customer at the customer's place of work or visiting or telephoning a customer's employer or relative without the customer's consent unless the moneylender has been consistently unable to contact the customer at home or if the moneylender is calling to serve notice of legal action.

Under Section 11 of the Non-Fatal Offences Against the Person Act 1997 it is an offence to demand payment of a debt in a way designed to alarm, distress or humiliate. This also covers both blackmail and extortion. (Extortion means using intimidation or the threat of violence to obtain money, information or anything else of value from another person).

If someone is charged with this offence and it is tried as a summary offence (that is, in a District Court by a judge only) the maximum penalty is a fine and/or 12 months imprisonment. If tried as an indictable offence (that is, in the Circuit Criminal Court or Central Criminal Court before a judge and jury) the maximum penalty is a fine and/or 14 years imprisonment.

Top-up loans

Moneylenders are not allowed to offer customers 'top-up loans' or a second loan to pay off the first loan that will place the customer further in debt. Moneylenders are also not allowed to take an amount from the overall loan and treat is as a first repayment.

Interest

A moneylender's loan will generally have a higher APR (Annual Percentage Rate) than a credit union or bank loan. The APR is at least 23% and may be more in some cases.

As with all loans, consumers should look at the total cost of the loan. That is, the amount of extra money that has to be paid back over and above the amount of the original loan.

The amount you have to pay back on a moneylending loan stays the same no matter how long it takes to pay the loan back. This is because moneylenders are not allowed to charge any extra interest or charges over and above what they are licensed to charge and what they have stated they will charge at the start of the loan.

Defaulting on loans

If a customer fails to pay one or more installments due under the lending agreement, legal action may be taken by the moneylender to recoup the losses. If a moneylender is planning to take legal action against a customer, he/she must serve the customer with a notice in writing stating that legal action will be taken and giving an estimate of how much legal costs the customer may have to pay. The customer has 21 days after being served with the notice to pay the installments before legal action can be taken, although if a customer persistently fails to pay installments during the period of the loan, the moneylender may get permission from the courts to waive this waiting period.

Money Advice and Budgeting Service (MABS)

If you are experiencing difficulty in paying off a loan, you should contact your moneylender as soon as you can. If you cannot resolve the matter directly with your moneylender, you can get help by contacting the Money Advice and Budgeting Service, a free and confidential service for people in Ireland with debt or money management problems. Trained Money Advisors in MABS offices around the country will:

• Help you deal with your debts and make out a budget.
• Examine your income to make sure you are not missing out on any of your entitlements.
• Contact your creditors on your behalf with offers of payment if you are not able to do it yourself.
• Help you decide on the best way to make the payments.

All contacts with MABS are in strictest confidence. Details of your local MABS office are also available in your public telephone directory or Citizens Information Centre.