More families may turn to illegal lenders this Christmas, SVP warns

Low-income families may turn to illegal moneylenders in bigger numbers than ever this Christmas following the departure of licensed lender Provident from the Irish market, the Society of St Vincent de Paul has warned.

A new survey for the charity finds Christmas was the most common reason for which most users of Provident turned to the high-interest lender, and while indications are that most are not, so far, turning to illegal lenders, there is a “real concern” that there could be a surge towards this form of credit in coming weeks, the charity said.

Compounding the worry is the spiralling cost of living, including in the areas of rent, energy and food.

Provident, formerly the largest moneylender in the Irish market, stopped lending and collecting repayments here at the end of June. It wrote off €21.3 million in outstanding loans, mainly with low-income households, as of the end of December 2020. It operated a house-to-house service, where cash was dispensed and collected at people’s front doors, and charged annual interest rates upwards of 186 per cent.

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St Vincent de Paul is calling for urgent steps to ensure the poorest households have options besides turning to other high-interest or illegal lenders, and to protect them from the increasing costs of living.

The call came as the society issued its annual appeal, saying it expects calls for help this year to be “at their highest level” in its history.

“We are once again appealing to the nation to help us assist the thousands of people who are struggling on inadequate incomes,” said St Vincent de Paul (SVP) national president Rose McGowan.

“We are facing a perfect storm for families contending with a cost-of-living crisis on multiple fronts. Energy prices are soaring, we are seeing rents rise well beyond what people can afford and increasing transport costs are also putting pressure on low-income households.”

‘Huge opportunity’

Although families were at increased risk of turning to other high-interest or illegal lenders to cover Christmas costs, the exit of Provident was a "huge opportunity" to overhaul the credit market and protect the most disadvantaged from "extortionate" lenders, said Tricia Keilthy, the charity's head of social justice.

The unpublished survey of 93 former Provident borrowers for the charity found that more than one-quarter (27 per cent) were worried about the loss of access to the lender, saying either they or their immediate family would be “very severely impacted”.

More than half had taken out two or more loans per year and Christmastime was the reason for which most (77 per cent) had borrowed in the past.

“The next most common borrowing needs in order were household goods, school costs, and bills for basics like food and bills,” says the survey.

Asked about alternative sources of credit, respondents mentioned “request support from SVP, borrowing from family/friends, go to their local credit union, go to another licensed lender/catalogue/buy now-pay later, or, illegal lender”.

The society is calling for an easing of access to the exceptional needs payment to help people struggling with increasing costs; that information be sent to all former Provident customers about low-income borrowers’ access to credit unions, and that a rent relief fund and separate energy-debt fund to support households who have accumulated arrears over the pandemic be established.

“This policy response would not only prevent evictions and disconnections but would also prevent people seeking legal and illegal lines of credit to cover their debt,” it says.