Sinn Féin finance spokesman Pearse Doherty has, not for the first time, been beating the Government in setting the agenda. In this case, he has been pushing for a dramatic reduction in the rate of interest moneylenders can charge.
It's an emotive subject. Most customers in this space rank among the poor and those with impaired credit – people excluded from mainstream banking. But it also includes people buying on the never-never from catalogue shopping groups like Littlewoods or Oxendales.
Either way, it is an expensive form of borrowing, with current regulations permitting interest rates of up to 187 per cent per annum, or 288 per cent when the cost of collection is included.
Fleeing market
Doherty has been championing the Consumer Credit (Amendment) Bill he introduced in the Oireachtas in 2018, which would limit interest rates to three times the market average – or 36 per cent APR at present.
Minister for Finance Paschal Donohoe has been a determined opponent of the Bill, telling an Oireachtas committee hearing in May that a 36 per cent APR ceiling would send providers running from the market and risk chasing already poor or impaired borrowers into the hands of unlicensed moneylenders.
Now he has published his own promised alternative. It does include a ceiling – 1 per cent a week up to a maximum of 48 per cent a year. On the face of it, Donohoe’s proposal is at least in the same parish as the Sinn Féin one.
Critically, the Minister is talking in terms of simple interest, not APR rates. This runs counter to Doherty's proposal and also to proposals announced last month by the European Commission for the reform of the consumer credit directive.
20/20
At present, Mandarin Loans, a licensed moneylender, charges 20 per cent over 20 weeks on one of its products – within the terms of the Donohoe proposals. In APR terms, that's 61.45 per cent interest.
Another licensed operator, Penny Farthing Finance, currently charges fractionally above the Minister's upper limit, 49 per cent, on a 12-month loan. The APR on that? 131.59 per cent, according to the Central Bank of Ireland register.
The language in the Minister’s Bill may look to draw the sting from Doherty’s campaign but his reform is a long way short of the revolution in consumer credit Sinn Féin has been pressing for.
