Few organisations are better placed than St Vincent de Paul (SVP) to assess the burden that expensive debt places on low-income households as they struggle to meet that challenge. As the country's largest charity of social concern, with 10,000 members active throughout Ireland, the society has found that many who request financial support are reluctant to acknowledge their reliance on money lenders for temporary credit – whether to pay bills or for special occasions like Christmas.
The SVP in a submission to the Central Bank, which is reviewing money-lending operations, warns of a potential money-lending crisis. Many households, it finds, have become more dependent on doorstep credit, where borrowing costs are excessive. A borrower who takes out a €1,400 loan from a money lender and repays it over 52 weeks, pays back €2,184 in total. The loan interest amounts to more than half the sum borrowed.
The SVP has asked the Central Bank to collect and publish more extensive data on the money-lending sector. Details of how many households take out these loans, and for what amount, would facilitate analysis of the extent and impact of door- step credit in Irish society, about which we know far too little. The Central Bank, which licences and regulates money lenders, has found a slight increase in the recourse to money lenders since its earlier review in 2007. However, it too has concerns about aspects of the sector’s activities.
High-cost loans offered by money lenders offer to the most financially vulnerable, who are poorly informed about financial matters – and largely unaware of the exorbitant rate of interest charged – should be more tightly controlled. One way, as the society has suggested, would be to restrict the number of loans per household, with tighter loan limits set, at no more than four times weekly income. For those in greatest need, access to credit has become more difficult. But what is needed, as the society points out, is a low-cost solution to the credit needs of those on low income.