The Labour Party has called on the Government to introduce a new system to allow low-income families access to inexpensive credit. The call follows a report in yesterday's Irish Times that legal moneylenders, who are charging interest rates of up to 197 per cent (APR), have given loans of £60 million to low-income families.
Mr Pat Quinn, spokesman for the Consumer Credit Association of Ireland, which represents licensed moneylenders, told The Irish Times his members' interest rates were high because the risks and costs in the business were high.
"We are not the ogres we are often portrayed as. The rates we charge are necessary to stay in business," said Mr Quinn.
He added that he had more than once offered to explain the economics of money-lending to interested parties such as the media, but nobody had taken him up on the offer. But organisations such as the St Vincent de Paul knew the true story, he said.
Senator Joe Costello of the Labour Party said financial institutions had to be "encouraged to allow low-income families access to the credit facilities that the better off in society take for granted". Mr Eddie Hobbs of the Consumers' Association told RTE that expecting the major financial institutions to descend from their "Olympian" heights and lend to low-income families was like "waiting for a camel to win the Aga Khan [Cup]".
Senator Costello said the Government should examine the possibility of establishing a credit system through the Department of Social, Community and Family Affairs. This system could offer loans at low interest rates with repayment spread over a long period deducted from social welfare payments.
The Progressive Democrats said it was "totally unacceptable that the State-licensed moneylenders are effectively carrying out legalised extortion". The party's national chairman, Mr John Minihan, said the practice was "even more unpalatable at a time when interest rates in banks and building societies are at historic lows".
He said the Minister for Finance, Mr McCreevy, should introduce legislation to limit the interest rates that moneylenders can charge.
There are 65 legal moneylenders operating in the State. They are issued annual licences by the Director of Consumer Affairs under the Consumer Credit Act, 1995. The Office of Consumer Affairs has the power to set the APR charges and other lending conditions for moneylenders.
It is understood that the St Vincent de Paul society and the then director of consumer affairs, Mr William Fagan, lobbied against the inclusion of a clause in the 1995 legislation which would have set a maximum per cent interest rate.
The present director, Ms Carmel Foley, has said she wants to see interest rate charges reduced.