Welcome to another MABS Investigates blog.
We get a lot of great questions about personal money matters and how to tackle debt. Questions that we know many people are asking but don’t know where to go for answers.
MABS Investigates is here to help! In this blog series, we will investigate and answer many of these common questions. We will work to make the answer clear and break down the jargon.
This week we are looking at moneylenders and will answer the following questions:
What is a moneylender?
A moneylender is a person who lends money to others, charging interest on the money they lend. Loans from moneylenders are usually high-cost loans. There are 39 licensed moneylenders regulated and supervised by the Central Bank of Ireland. Moneylenders must renew their license each year.
The Consumer Credit Act 1995 sets out specific rules for moneylending agreements. Moneylenders licensed by the Central Bank must also follow the rules set out in the Consumer Protection Code for Licensed Moneylenders. It is safe to borrow from licensed moneylenders as the law governs them. However, it is important to consider all your options before taking out any form of credit.
Listed below are things that are important to know when borrowing from a licensed moneylender;
- You are entitled to a proper written agreement
- You are entitled to a properly filled-out repayment book
- It is illegal for a moneylender to charge interest on interest
- It is not legal for a moneylender to grant another loan to clear or pay off an existing loan
- A moneylender contacts you at your place of work without your permission – this is illegal!
A licensed Moneylender must have the following general requirements when giving customers cash loans or sales of goods.
- The amount of money loaned should be in writing and signed by all parties to the agreement
- A copy of the agreement should be handed to the customer or sent by the moneylender within 10 days
- The credit agreement should include a statement of the cooling-off period that gives the customer the right to withdraw from the agreement
- The agreement must contain a statement of all names and addresses of all parties to the agreement
- Any costs or penalties that the customer may become liable for must be outlined
- The date the money has been loaned should be recorded
- The frequency and number of each repayment should be clear
- The rate of interest charged and APR should be clear
- The amount or value of the repayments should be clear
- The expected end date of the loan should be listed
Since 1 January 2021, moneylenders are now required to provide extra information.
- Tell you the total amount of money you owe and the total amounts of repayments if you have more than one loan with the same moneylender
- They must not offer you a new loan if you have just finished repaying an existing loan
- For catalogue loans or credit, you must not be offered a discount to encourage you to sign up
- The moneylender must provide the contact details of MABS before you take out the loan
How much does a moneylender charge?
A moneylender’s loan has an APR of at least 23% and maybe more in some cases, and can be up to 188.45% APR. It’s important to remember that some moneylenders may charge a collection fee on top of the listed APR. The following is a list of the different types of loans a moneylender offers;
Cash Loans: Here the moneylender loans you cash and you can spend it on whatever you wish. You repay the money, usually in weekly instalments at high-interest rates over a short time. There is usually a collection charge built-in if the money is collected at your door.
Goods Loans: Goods or services are supplied to you on credit and this can be done in different ways.
Direct Sales: The moneylender sells you goods (toys, furniture or jewellery, for example) directly at a marked-up price and you repay the price of these goods in instalments. Some people operating a goods-only business claim that they are not moneylenders as they do not charge interest and so the Act should not apply to them. However, since there is a mark-up on the goods, it can be argued that this is a form of interest.
Credit Sales: Here the sale is made in a retail store, for example selling electrical goods or furniture. The shop provides you with the goods that are paid for by the moneylender. You then pay the moneylender back in instalments, with interest, often over longer periods than for cash loans.
Vouchers & Catalogues
Vouchers: Here the moneylender provides you with vouchers or cheques that can be used to buy goods in certain shops only. You repay in instalments, with interest, to the moneylender.
Catalogues: Here you can order goods from a catalogue. They are usually sent by post and repayments, with interest, can also be made by post or collected at your door.
I have bad credit, so are moneylenders my only option?
No, you may have access to other forms of credit but they are usually called high-risk loans.
Other options could be:
- A loan from the local Credit Union
- An ‘It Make Sense Loan’ (Micro Loan) from participating Credit Unions. These loans are normally for a maximum of €500 at a time, but are charged at a much lower interest rate and more affordable. Repayments are taken at source and taken out of the weekly social welfare payment through the Household Budget Scheme or through the bank.
The advantages of this way of borrowing is quick decisions, interest is cheaper than the moneylender and it’s a pathway to financial inclusion.
What happens if I don’t pay on time?
If you fall behind with your loan, you should contact your moneylender as soon as you can. If you cannot sort it out directly with the moneylender, you should contact MABS.
The amount you have to pay back on the loan stays the same, no matter how long it takes to pay back the loan. Moneylenders are not allowed to change the interest or charge above what they are licensed to charge. They cannot charge for late payment or a different rate to what they stated at the start of the loan. Remember, they are not allowed to offer you a top-up loan or a second loan to pay off the first loan.
What happens if I can’t repay the loan?
If you cannot repay the loan, the moneylender may give you 21 days written notice and tell you that they will take legal action. There will be legal costs involved. After a period of time, when there is no involvement or engagement from the customer, the moneylender may pass the loan collection on to a debt collector. If this happens, your credit rating may be affected.
Are there alternative options?
Debt is expensive and using your own savings to pay for expenses is much cheaper in the long run. This mightn’t always be possible, so talk to MABS about making a plan. Use our budgeting tools to assess your income and expenses.
Once you decide how much you can afford to save, you can set up a standing order to withdraw a small amount directly out of your wages. This is called ‘saving at source’. It might be less tempting to dip into your savings if you have a savings account that is less visible or accessible such as a deposit account. Savings will provide you with the peace of mind that you have a safety net for emergencies.
Get in touch
If you are having difficulty making repayments for any loan or credit, you should speak with your credit provider about your situation. If you don’t feel you can talk to credit provider, contact MABS, we can help. You can contact your local office here, call the MABS Helpline on 0818 07 2000, Monday to Friday, from 9am to 8pm, or on WhatsApp 086 035 3141.
We hope this #MABSInvestigates blog was useful in helping you get to grips with moneylenders. We understand that sometimes you simply need a loan. We’d encourage you to be informed and money advisers from MABS are available to help. Call the MABS Helpline on 0818 07 2000, Monday to Friday, from 9am to 8pm, WhatsApp 086 035 3141 or contact your local office.
Do you have a question for MABS Investigates? Get in touch and let us know email@example.com.
Disclaimer: This blog does not represent legal advice and is intended for guidance only. If you are concerned about your current or future personal financial situation, please contact an adviser from MABS. Advisers are available by phone and email and through our WhatsApp 086 035 3141. You can call the MABS National Helpline on 0818 07 2000, Monday to Friday, from 9am to 8pm or contact your local office.
Follow @MABSinfo on Twitter and Facebook and Instagram for further updates.