Middle classes are now turning to moneylenders
Spring slams Government as an extra 60,000 people seek loans
Published 02/02/2014 | 02:30
AN extra 60,000 people are now using licensed moneylenders as middle-class homeowners turn to them after being refused loans from banks and credit unions.
Labour TD Arthur Spring has slammed the Government over its "mistake in not tackling licensed moneylending harder'' in the wake of a Central Bank report which reveals that more people are using the services of moneylenders.
The Labour TD also expressed concern that restrictions on the capacity of credit unions to lend money was leading to a surge of borrowing from licensed moneylenders.
Mr Spring was commenting on the Report on the Licensed Moneylending Industry – commissioned by the Central Bank – on trends in the industry since 2007.
The report reveals a stark rise in the use by middle-class people of the services of moneylenders.
Previously, moneylending has been associated with local authority estates with a large proportion of clients on social welfare.
Some of the key trends include an increase in the percentage of customers of moneylenders who own their own home outright or are paying a mortgage, up from 41 per cent in 2007 to 53 per cent in 2013.
It reveals that "nearly a third of customers are making mortgage repayments, which has increased from 22 per cent in 2007'' and a majority (58 per cent) "have some level of savings with another institution''.
Intriguingly, although repayment levels are high, "77 per cent of customers who have used moneylenders in the past 12 months claim to have been refused credit by a credit union or a bank/building society''.
The report also reveals that "the overriding catalyst for borrowing from money-lenders is convenience and ease of availability'' and that "customer numbers have increased from approximately 300,000 in 2005 to about 360,000 at present".
Mr Spring told the Sunday Independent: "Moneylending has spread from the local authority housing estate into private estates. The groups being targeted increasingly are married couples with children living in a private home."
The report also reveals that the most common loan amount is between €200 and €500 at an average yearly rate of 125 per cent. The most frequent term loan offered is approximately nine months.
The reasons for borrowing include family events (23 per cent), sports club membership (14 per cent), paying bills (9 per cent), holidays (9 per cent), car-related expenses (7 per cent) and home improvements (4 per cent).
Mr Spring also warned: "We must be careful that restrictions on worthy institutions such as the credit union do not mean credit unions cannot live up to their remit as loan providers to ordinary citizens."
He added: "In this regard it is not insignificant that convenience of access is such a key factor in the replacement of credit union lending by moneylenders."