More than 100,000 are forced to use 'loan agents'
Legal moneylenders thriving in 'favourable market conditions'
Published 25/12/2011 | 05:00
MORE than 100,000 heavily indebted people are being forced to use legal moneylenders, who charge exorbitant interest rates, in order to obtain lending as other financial institutions continue to turn them away.
Internal documents obtained by the Sunday Independent from one of Ireland's largest moneylenders show the company has more than 100,000 customers nationwide -- and with 46 other licensed moneylenders in the business, the overall figure is much higher.
An internal memo, seen by the Sunday Independent, urged its agents to make an extra push in the run-up to Christmas in order to boost commission.
"This sustainable growth, coupled with favourable market conditions, has put the company on a strong footing," it said -- emphasising that agents must sign up more people as "This is Christmas week".
Fianna Fail TD and Finance spokesperson Michael McGrath said he believed an increasing number of people are going to be forced to use moneylenders considering the effects of the Budget.
"Given that the focus of the Budget hit those on low incomes and welfare-dependent families, I think it is only inevitable that more and more people are going to take on an increasing amount of debt and come within the grasp of moneylenders," Mr McGrath said.
"Especially now, in the run-up to Christmas, people will be going to these moneylenders as they seek to get some form of short-term lending in order to make ends meet," he added.
Many legal moneylenders charge a maximum interest rate of 157.3 per cent APR and many of them are making huge profits, with one of the market leaders in the money-lending area declaring a profit of over €145m last year.
A spokesperson for the Money Advice and Budgeting Service (Mabs) indicated that increasingly, more and more people are having to turn to lending agencies as it has become the only available access to credit they have.
"They [legal moneylenders] tend to be a feature of lots of people's debt. They tend to be very civil to clients and seem to be just a fact of life to some people on low incomes who will borrow from them for things like Communions and Christmas and this has always been the case," she said.
"They tend to be increasingly necessary for people who cannot borrow elsewhere. They are a place where people on low means go to borrow. The people who use these agencies have become acclimatised by continuously borrowing at these high rates, and ultimately end up seeking help from us," she added.
The Irish League of Credit Unions has urged its members to discuss their financial difficulties with them before seeking credit from a moneylender, insisting they are committed to helping as many people as they can.
"In the current difficult economic environment, people are more susceptible to the easy-money promises of moneylenders who are preying on the most vulnerable among us. To the best of our abilities, we will work with a member in difficulty," a spokesperson said.
"We would strongly urge any member who is under financial pressure to approach their local credit union and talk to us about their situation before they go to a moneylender. We want people to know that credit unions are on their side and want to help," the spokesperson added.
Moneylenders are licensed by the Financial Regulator and are able to charge 187 per cent APR on loans. The Central Bank has powers to impose sanctions on moneylenders for a contravention of the Code, such as a monetary penalty or disqualifying a person from the management of the firm.