Moneylending is the practice of giving cash loans or supplying goods or services repaid at a high level of interest over a short period of time. Banks, building societies, insurance companies and credit unions are not considered moneylenders.
Moneylenders are generally either individuals or companies whose main business is to lend money. They are required to hold a licence to trade in moneylending. The Central Bank of Ireland regulates the activities of moneylenders and is responsible for issuing moneylending licences in Ireland.
Money lending licences
The Central Bank (before granting a moneylending licence), will take into consideration a wide range of factors, including the trading background and reputation of the moneylender and the cost of credit that is proposed to be charged. Licences are renewed each year. The Central Bank maintains a register of licensed moneylenders.
A moneylending agreement is defined as a credit agreement where one or more of the following apply:
- The agreement was concluded away from the business premises of the moneylender or the business premises of the supplier of goods or services under the agreement
- Any negotiations for, or in relation to the credit, were conducted at a place other than the business premises of the moneylender or the business premises of the supplier of goods or services under the agreement
- Repayments under the agreement will, or may, be paid by the consumer to the moneylender or their representative at any place other than the business premises of the moneylender or the business premises of the supplier of goods or services under the agreement
- Where the total cost of credit to the consumer under the agreement is in excess of an APR of 23% or such other rate as may be prescribed.
Under the Central Bank’s Consumer Code for Licensed Moneylenders you must get detailed information about the loan in your lending agreement and your money lender must also tell you that the loan has a high cost.
The lending agreement must:
- Be in writing and include the names and addresses of all parties to the agreement
- Show the total amount lent, the rate of interest, the total amount payable (the cost of credit) plus any collection charges that may apply. The lender cannot add other charges, such as administrative or transaction costs.
- Be signed by both the lender and the customer.
- Notify you of your right to a ten day "cooling-off" period in which you can inform the lender in writing that you have decided not to proceed with the loan. If a moneylender and you agree that that neither wish to observe the ten-day cooling-off period, you must sign a separate part of the agreement stating that you consent to waiving your right to a cooling off period.
You must also get a repayment book, separate to the lending agreement, which states the total amount of the loan and the total number of repayments due. Each time you make a payment the amount and date must be written into the book. Some moneylenders issue loan statements instead of a repayment book, which set out the same information. The moneylender must keep a record of each lending agreement.
Repayments and collection
Many moneylenders collect loan payments in cash each week, and include a collection charge for this service. (You must be given the option of paying at the moneylender’s business premises to avoid the collection charge.) Some money lenders allow you to pay by direct debit.
Any collection charges must be outlined in the lending agreement before you sign it. If the moneylender is sending an agent to the customer's house, the agent must have written authorisation from the moneylender to do so (generally in the form of an ID card). The agent is only allowed to collect repayments and cannot initiate new loans.
The moneylender or their agent can only call to your home from Monday to Saturday between 10am to 9pm. If you have agreed in writing beforehand collection can be allowed between 8am and 10am. A money lender cannot contact you on Sundays and public holidays and they cannot contact your employer or your family without your written permission.
Under Section 11 of the Non-Fatal Offences Against the Person Act 1997 it is an offence to demand payment of a debt in a way designed to alarm, distress or humiliate. This also covers both blackmail and extortion. (Extortion means using intimidation or the threat of violence to obtain money, information or anything else of value from another person). Read more about debt collection.
A moneylender's loan will generally have a higher APR (Annual Percentage Rate) than a credit union or bank loan. The APR is at least 23% and may be much more in some cases.
As with all loans, consumers should look at the total cost of the loan. That is, the amount of extra money that has to be paid back over and above the amount of the original loan.
The amount you have to pay back on a moneylending loan stays the same no matter how long it takes to pay the loan back. This is because moneylenders are not allowed to charge any extra interest or charges over and above what they are licensed to charge and what they have stated they will charge at the start of the loan.
Moneylenders are not allowed to offer top-up loans or a second loan to pay off the first loan that will place the customer further in debt. Moneylenders are also not allowed to take an amount from the overall loan and treat it as a first repayment.
Defaulting on loans
If a customer fails to pay one or more instalments due under the lending agreement, legal action may be taken by the moneylender. The moneylender must serve the customer with a notice in writing stating that legal action will be taken and giving an estimate of the legal costs the customer may have to pay. The customer has 21 days after being served with the notice to pay the instalments before legal action can be taken, although if a customer persistently fails to pay instalments during the period of the loan, the moneylender may get permission from the courts to waive this waiting period.
Illegal or unlicensed trading
It is unlawful to provide someone with moneylending services without a moneylender's licence. The Central Bank and Irish Financial Services Regulatory Authority Act 2003 increased the penalties on conviction of illegal trading in moneylending to a fine of up to €63,486.90 and/or up to 5 years imprisonment.
If you believe you have dealt with an illegal moneylender or know the identity of someone you believe to be an illegal moneylender, you should contact either the Competition and Consumer Protection Commission or your local Garda station. Only the Gardai can take legal action against illegal moneylenders, but the Competition and Consumer Protection Commission can give advice on whether the moneylender is trading illegally and how to proceed with your complaint.
How to apply
If you are experiencing difficulty in paying off a loan, you should contact your moneylender as soon as you can. If you cannot resolve the matter directly with your moneylender, you can get help by contacting the Money Advice and Budgeting Service, a free and confidential service for people in Ireland with debt or money management problems.
More information about moneylending is available from the Central Bank including the Consumer Protection Code for Licensed Money Lenders
Where to apply
Applicants for moneylending licences must apply to:
Central Bank of Ireland
PO Box 559
Tel:(01) 224 6000
Locall:1890 777 777
Fax:(01) 671 6561
Competition and Consumer Protection Commission
PO Box 12585
Opening Hours:- Lines open Monday - Friday 9am - 6pm
Tel:(01) 402 5555
Locall:1890 432 432
Fax:(01) 402 5501