Fears have been expressed that thousands of vulnerable people who have illegally topped-up loans with licensed moneylenders will be refused credit in future if they attempt to get refunds.
The worry emerged after this newspaper revealed that up to 100,000 people may be in line to have their moneylender loans written off and receive compensation.
Financial experts said a precedent had been set after a Donegal couple won a case through the financial ombudsman service when they argued they illegally had Provident loans topped-up before their original loans were paid off.
They were acting after Provident was fined by the Central Bank for topping-up loans.
Now the Money Advice and Budgeting Service (MABS) said there was a risk those who challenge their moneylender for issuing illegal topped-up loans will be refused further credit.
Michael Culloty of MABS said: "People look for top-up loans because they need them. If moneylenders are under pressure to compensate people they may stop lending to these people. This could drive people underground, to illegal moneylenders."
He said there was a need for a micro loan scheme. Credit unions were unable to fill the moneylender void because half of them have lending restrictions imposed on them, while there are complex regulatory rules around credit union lending.
"The more regulated credit unions become, the more loans from them are unavailable. People then look elsewhere."
A new micro loan scheme, for amounts up to €2,000, is due by the end of the year.
It is likely to be administered by credit unions, according to Brendan Whelan of the Social Finance Foundation, a body funded by the banks. There would likely be a one-hour turnaround for loans and no credit checks.
Chief executive of the rights group Free Legal Advice Centres (FLAC), Noeline Blackwell, called on the Central Bank to force Provident and other moneylenders to conduct a full audit of all of their loans.
Moneylenders should then engage in a systematic redress for any consumers provided with topped-up loans.
It is illegal for a moneylender to top-up a loan before the existing one is paid off.