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Debt warning as moneylenders target families

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ILLEGAL moneylenders are charging up to 400pc per quarter for term loans while legal moneylenders are charging anywhere between 180pc and 270pc annual interest.

The revelation came as the Society of St Vincent de Paul warned that the Government needs to take urgent action to ease the financial exploitation of vulnerable Irish families.

The charity's call came as the UK is examining new legislation to impose a maximum interest rate of 100pc APR for short term lending also known as 'pay day loans'.

regulated

UK loan firms are vehemently resisting the proposal but Ireland has not indicated any such measure as money lending is still regulated by the Central Bank.

It is now estimated that almost 250,000 Irish families rely on legal and illegal moneylenders to get through the week. One legal moneylender has over 100,000 customers nationwide.

Experts say that many families are forced to rely on illegal moneylenders because they are battling arrears on loans to banks and credit unions.

St Vincent de Paul officials including Brendan Dempsey and Brendan Hennessy warned that the increasing cost of living is driving vulnerable people into the arms of moneylenders.

"A very high number of people are using illegal money lending," Mr Hennessy said.

"When people are presented with a very high one-off payment demand, it is great news for illegal moneylenders."

December and September are the peak periods for illegal money lenders where families are under most pressure due to Christmas and children returning to school.

The majority of illegal money lending involves unsecured amounts of between €500 and €1,000.

But borrowers are then forced to give that loan priority repayment - and the high rates of interest of up to 400pc means they struggle to repay it within the set period.

"The problem then is that another loan is required to clear the remainder of the first loan and the person finds themselves trapped in a spiralling cycle of debt," Opposition Health Spokesman Billy Kelleher (FF) warned.

"This is a hidden crisis within Irish society where families are borrowing from these illegal moneylenders just to put food on the table."

spiral

The Money Advice and Budgeting Service (MABS) admitted they are very concerned at the spiral in reliance on money lending, both legal and illegal.

MABS revealed that, within one year of the recession hitting, the number of people relying on moneylenders here had soared from 830 for 2010 to 1,418 for just the first nine months of 2011.

St Vincent de Paul said it was "deeply concerned" at how some money lenders were targetting individuals at specific times of the year - including door-to-door calls to offer loans.

The charity said it believes the current legislation is not sufficient to deal with the problem of illegal money lending.

St Vincent de Paul said it also supports a fair maximum interest cap.

hnews@herald.ie


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