A Government-funded service which advises the public on household budgeting and managing debt is to be given a role in the licensing of money lenders.
Minister for Social and Family Affairs Seamus Brennan said that legislation due to be published in March would mean the Financial Regulator must consult with the Money Advice & Budgeting Service (Mabs) before issuing money lenders a licence.
There are around 50 money lenders legally operating in the State and they must apply annually for a licence.
With some lenders charging interest rates of up to 80 per cent, Mr Brennan today said that under the terms of a Bill due to be published in March, Mabs would be given a consultative role in the licensing of money lenders.
"The Financial Regulator would not be able to give an annual licence without consulting the Money Advice [and Budgeting] Service and therefore he could turn to a licence [holder] to say the interest rate is excessive, the report from the advice service is quite clear, this is too much and I'm refusing your licence", Mr Brennan said.
Speaking on RTE radio he said it was well known that "the poorer you are, the more you pay".
Mabs has also called for measures to help those with difficulties accessing banking services and Mr Brennan also said today that his department was involved in ongoing discussions with banks with a view to establishing a new type of "basic banking account" scheme similar to one operating in the UK.
"If for example [someone] needs a short-term facility of an overdraft they can get that at a normal rate instead of having to pay at 39 per cent - or up to 80 per cent - interest."
Mabs spokesman Michael Culloty said that alternative sources of credit were essential for the new measures to be effective.
"We would love any measure that would reduce money lenders' interest rates without pushing them underground. But any capping of their rates must be accompanied by a banking and savings mechanism. We must have joined up thinking on this," Mr Culloty said.
Mabs evolved from a 1998 Combat Poverty Agency report on the hardship caused by money lenders. It began with €350,000 funding for five pilot projects in 1992.
It now operates as a network of 53 separate services with funding of €27 million and the minister wants to unify its structure to modernise it and give it greater power to address issues on a national level.
He has in the past suggested establishing Mabs on a statutory basis but Labour Party leader Pat Rabbitte was critical of the Government's slowness in tackling the issue.
He said the Bill being brought forward by Mr Brennan was published in 2002 without action by the minister nor his two predecessors. Credit Unions should be approached with a view to establishing reliable sources of credit at reasonable interest rates, Mr Rabbitte said.
"If Minister Brennan is serious about this let him produce his proposals, bring then before the Dail and provide some practical assistance for people who cannot get credit," he added.