Friday 21 October 2016

Moneylenders set to escape new rules on credit checks

Published 27/01/2016 | 02:30

The average moneylender loan is between €200 and €500
The average moneylender loan is between €200 and €500

Moneylenders are set to escape new rules that will require lenders to check out the credit history of consumers.

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The Central Bank is introducing a new credit register later this year, but lenders will be required to carry out a credit check through the new register only where loans are more than €2,000.

The average moneylender loan is much lower than this, with most between €200 and €500, according to research, which means moneylenders can avoid carrying out credit checks.

Financial expert Frank Conway said moneylenders were getting an “opt-out” and he claimed that the Central Bank was being too accommodating to them.

Moneylenders are legally allowed to charge an interest rate of up to 187pc. It is estimated that around 400,000 people use these door-to-door lenders.

The Central Bank plans to have the building blocks for a central credit register in place by the end of this year, but it will not be operational until next year, as the project has fallen behind schedule.

The lack of a centralised source of credit data has been identified as one of the culprits for the country’s catastrophic lending, since banks and other institutions weren’t able to see the full borrowing history of consumers and companies.

A spokeswoman for the Central Bank said the €2,000 threshold could be revised, adding: “The current thresholds are in the lower range of European public registers reviewed by the Central Bank.”

But Mr Conway said: “So what the Central Bank appears to be saying is that because moneylenders don’t have the technical capacity to report, then they won’t be required to. Sounds like a very accommodating position from the Central Bank in respect to the moneylending industry.”

Fianna Fáil’s Michael McGrath criticised the move to effectively exclude moneylender loans from the register.

He said: “It is very concerning that smaller loans, typically from moneylenders, are excluded from the register.”

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