- Central Bank announces new rules for moneylenders to strengthen protections for consumers.
- Prominent warnings must be included in all advertisements for high-cost credit and consumers must be prompted to consider alternatives.
- Moneylenders to be restricted in how they offer and promote loans to consumers.
The Central Bank of Ireland has today published new regulations to strengthen protections for consumers of licensed moneylending services and to enhance professional standards in the sector.
Moneylenders will be required to include prominent, high cost warnings in all advertisements for moneylending loans with an Annual Percentage Rate (APR) over 23 per cent. 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, giving greater control to consumers to decide when to be contacted by a moneylender.
Moneylenders will also not be permitted 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.
There will also be a number of new requirements for people working in the sector, designed to enhance their professional standards. 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 the Money Advice and Budgeting Service (MABS).
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.
Given the high interest rates associated with these loans, I would strongly advise consumers to consider other options before using the services of licensed moneylenders, and to never use an unlicensed moneylender. At this time of financial stress for so many Irish households, I would also encourage people in financial difficulty to seek advice, guidance and assistance from MABS.”
The regulations will come into effect on 1 January 2021. However, recognising the financial effects of Covid-19 on people, the ‘high-cost warning’ requirement in respect of advertisements for moneylending loans with an APR in excess of 23% will come into effect on 1 September 2020.”
- The new regulations can be summarised as follows:
1. Moneylenders will be subject to a number of new requirements and restrictions in relation to the promotion of loans. The regulations will increase the regulation of moneylenders’ initiation of loan sales particularly at certain pressure points and locations, as detailed in the accompanying Moneylending Questions and Answers and give greater control to consumers to decide when to be contacted by a moneylender. These requirements include:
i) Moneylenders must ensure that their marketing strategy is fair and reasonable, taking into account the particular circumstances of consumers. For example, the Moneylending Questions and Answers detail that it is unacceptable to target low income consumers or named individual customers in a way which is not in their best interests;
ii) Moneylenders will not be permitted to make an unsolicited offer to apply for credit to consumers who have recently made full repayment of a moneylending agreement or are nearing full repayment;
iii) Moneylenders will be prevented from undertaking unsolicited contact with existing consumers for the purposes of sales and marketing, without specific consent. Moneylenders will also be prohibited from making unsolicited contact with a prospective consumer based on a referral from an existing consumer. Furthermore, contact and communications from a moneylender must be proportionate and not excessive;
iv) Catalogue moneylenders will be prevented from providing discounts predicated on availing of credit.
2. Currently, moneylenders who offer loans in excess of 23% APR are required to prominently display a warning of the high cost nature of the credit in pre-contractual information. Moneylenders will now be required to include enhanced, prominent, high cost warnings in all advertisements, for such credit, and to prompt consumers to consider alternatives.
3. Moneylenders will be required to provide prescribed information that prompts consumers to consider if a moneylending loan is their best option and, where the loan is required for basic needs, signpost consumers to the Money Advice and Budgeting Service.
4. To enable consumers to proceed on a more informed basis, moneylenders will be required to provide aggregated repayment information to consumers with more than one moneylending agreement with that moneylender.
5. Provisions of the European Communities (Consumer Credit Agreements) Regulations 2010 (S.I. No. 281 of 2010) will be applied to moneylending loan amounts below €200. This will align the requirements applicable to loans under €200 to those that apply to loans above €200.
6. To enhance the professionalism of the sector and to align with existing rules in the Central Bank’s Consumer Protection Code 2012, moneylenders will be subject to new requirements on training, policies and procedures, engagement with third parties, requirements in relation to vulnerable consumers and earlier signposting to the Money Advice and Budgeting Service for consumers in arrears.
7. The issue of an interest rate cap is a question for the Oireachtas rather than the Central Bank, as the introduction of an interest rate cap would require a legislative amendment.
8. 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. The Department of Finance issued a Public Consultation in May 2019 on capping the cost of licensed moneylenders and other regulatory matters.
- The list of licensed moneylenders can be accessed at the Central Bank’s Register of Moneylenders.