THE Central Bank has tightened the rules for moneylenders in a bid to give greater protections to those using the door-step lenders.
Moneylenders, who can legally charge more than 86pc, will in future have to warn customers that their lending is high cost, and will be restricted in how they offer and promote loans to consumers.
The clampdown comes after St Vincent de Paul claimed that moneylenders are taking advantage of the impact of the coronavirus.
It is estimated that there are over 300,000 customers of moneylenders in Ireland. There are 38 moneylenders licensed by the Central Bank.
There have been numerous calls for an interest rate cap to be applied to the door-step lenders. Credit Unions are restricted in what they can charge under law.
Now the Central Bank has published new regulations which it said will strengthen protections for consumers and to enhance professional standards in the sector.
However, the new rules do not come into effect until next January.
Moneylenders will be required to include prominent, high-cost warnings in all adverts for loans. The warning must also prompt consumers to consider alternatives.
The new rules will limit the moneylenders’ contact with consumers and limit the offer and promotion of loans to consumers.
Central Bank regulators said moneylenders will not be allowed to make an unsolicited offer to apply for credit to consumers who have recently made, or are nearing, full repayment of a moneylending loan. Moneylenders will also be required to ensure that their marketing strategy is fair and reasonable.
Where the loan is required for basic needs, such as accommodation or electricity, moneylenders must inform the consumer that a moneylending loan may not be in their best interest and provide contact information for MABS (the Money Advice and Budgeting Service).
Moneylenders will also be prohibited from making unsolicited contact with a prospective consumer based on a referral from an existing consumer.
Central Bank director of consumer protection Gráinne McEvoy said: “It is important that people who use moneylenders are fully aware of the high cost nature of their loans. By strengthening the rules, we are providing the customer base with further protections and raising the expected professional standards in this industry.”
She added that although the change in the regulations does not come into effect until next January, the rule that requires moneylenders to warn their loans are high cost comes into effect from the start of this September.The Central Bank is introducing this rule earlier to recognise the financial effects of Covid-19 on people, she said.
Ms McEvoy said any decision on an interest rate cap was a matter for the Oireachtas rather than the Central Bank, as an interest rate cap would require a legislative amendment.
She said that neither the Consumer Credit Act nor the Consumer Credit Regulations provide for an interest rate cap.
“Therefore, the Central Bank has no statutory power to impose a market wide cap on rates,” Ms McEvoy said.
The Department of Finance issued a public consultation in May last year on capping the cost of licensed moneylenders.