Saturday 19 April 2014

Central Bank wary of capping rates

The Central Bank on Dame Street, the Occupy Dame Street encampment were removed by Gardai last night. Picture credit; Damien Eagers 8/3/12
The Central Bank on Dame Street

The Central Bank has said that any moves to cap the cost of loans from Irish moneylenders would need to be taken carefully.

Last month, the British government announced it would cap pay-day loans to stop companies charging huge amounts of interest.

Pay-day loans are expensive, small, and controversial short-term loans which have recently emerged in Britain.

Asked by this paper if it had any plans to cap the cost of loans in Ireland, the Central Bank said: "The Central Bank has not authorised any moneylender to operate a pay-day loan business model such as has been the focus of discussion in Britain recently. The legislation under which moneylenders are supervised does not provide for an interest rate cap.

"Our published research on the licensed moneylending industry in 2007 found that the introduction of an interest rate ceiling may not achieve the objective of lowering the total cost of credit for example, if the licensed moneylender chose instead to extend the duration of the loan. Any legislative proposals in this regard would therefore have to be careful to achieve an overall reduction in the cost of credit."

Sunday Independent

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