Borrowing from a moneylender
A moneylending loan is a type of loan that is for a short term and at a high cost. Using a moneylender is one of the most expensive ways to borrow money.
Moneylending loans are generally:
- For small amounts compared to other types of loans
- For short periods
- At a high rate of interest compared with other loans available
Banks, building societies, insurance companies and credit unions are not moneylenders. You can read more about other types of loans.
Borrowing from a licensed moneylender
Moneylenders must have a licence to offer moneylending services in Ireland. The Central Bank of Ireland supervises moneylenders. It is responsible for issuing moneylending licences and it sets the rules moneylenders must follow.
You should only borrow from a licensed moneylender (sometimes called an ‘authorised moneylender’). This protects you and your money from predatory lenders or bogus websites. If you are unsure if the company that you are dealing with is authorised, you should check the Central Bank’s Register of licensed moneylenders. The Central Bank has an explainer on why it is important to deal with an authorised company.
Moneylending licences are granted for one year and must be renewed each year.
Before granting a moneylending licence, the Central Bank will consider a range of factors, including:
- The background and reputation of the moneylender
- How much they propose to charge for providing loans
Illegal or unlicensed moneylending
It is against the law for any person to offer moneylending services without having a licence. Any person found guilty of unlicensed moneylending can be fined or sent to prison, or both. Only the Gardaí can take legal action against illegal moneylenders.
Rules for moneylenders
Adverts for moneylending loans must:
- Include clear warnings that the loan is a high-cost product
- Prompt you to consider alternative loans from other lenders
- Give you additional key information before and after you take out a loan and if you take out subsequent loans
- Tell you the total amount of repayments you owe if you have more than one loan with the same moneylender
- Give you contact details for MABS before you take out the loan
- Not offer you a new loan if you have just repaid an existing loan
- Not give you a discount that requires you to take out a loan (for catalogue moneylenders)
A moneylending agreement is defined as a credit (loan) agreement:
- The agreement or negotiations (or both) were made away from the business premises of the moneylender or
- Under the agreement, you make your repayments to the moneylender or their representative at any place except the business premises of the moneylender or
- The agreement has an APR (annual percentage rate) of 23% interest or higher
The lending agreement must:
- Be in writing and include the names and addresses of you and the lender
- Show the total amount loaned, the rate of interest, the total amount payable (the cost of credit) and any collection charges that will apply (the lender cannot add any other charges, such as administrative costs)
- Inform you about your right to a 10-day ‘cooling-off’ period – the right to withdraw from the loan. If you give up this right, you must sign a separate part of the form stating this
You must get a repayment book, separate to the lending agreement. The repayment book:
- States the total amount of the loan and the total number of repayments due
- Must note the amount and date of each repayment you make
Some moneylenders issue loan statements, which set out the same information, instead of a repayment book.
You can read more information about the rules in the Central Bank's Questions and Answers on Moneylending Regulations (pdf).
The rules only apply to licensed or authorised moneylenders. You can make sure the company you are dealing with is authorised by checking the Central Bank’s Register of licensed moneylenders.
Repaying a moneylending loan
Many moneylenders collect loan payments in cash each week, and include a collection charge for this service. Some moneylenders allow you to pay by direct debit.
- Give you the option of paying at their business premises to avoid the collection charge.
- Outline any collection charges in the lending agreement before you sign it.
- Give a written authorisation to any agent sent to your house to collect payment. This is usually an ID card. The agent is only allowed to collect repayments and cannot start or agree to new loans.
- Only call to your home from Monday to Saturday between 10am and 9pm. If you have agreed in writing beforehand, they may make the collection between 8am and 10am.
- Not contact you on Sundays or public holidays and they must not 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 includes 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.
How is interest charged?
A moneylender’s loan will generally have a higher APR (Annual Percentage Rate) than a loan from a credit union or a bank. The APR will be at least 23% and may be much higher in some cases.
As with all loans, you should look at the total cost of the loan. That is, the amount of extra money you will have to pay back that is over and above the amount of the original loan.
Moneylenders are not allowed to charge any extra interest or charges 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 you top-up loans or a second loan to pay off the first loan, as this would place you further in debt. They are also not allowed to take an amount from the overall loan and treat it as a first repayment.
If you fall behind on repayments
If you are struggling to pay back a loan, you should contact your moneylender as soon as you can.
If you cannot sort out the problem directly with your moneylender, you can get help by contacting MABS (the Money Advice and Budgeting Service). MABS is a free and confidential service for people with debt or money management problems.
The moneylender can take legal action against you, if you do not pay instalments due under the lending agreement. The moneylender must:
- Give you 21 days’ written notice that they will take legal action
- Give an estimate of the legal costs you may have to pay
- Give you 21 days to pay the instalments before legal action can begin
If you repeatedly miss repayments during the term of the loan, the moneylender may get permission from the courts to start legal action immediately, without waiting 21 days.
How to make a complaint about a moneylender
If you have a complaint about a moneylender, you should first discuss your complaint with the individual or company itself.
If, after following the firm’s complaints process, you are still not satisfied with the response, you can refer the complaint to the Financial Services and Pensions Ombudsman (FSPO). The FSPO is an independent, statutory body that can investigate your complaint.
You can read more in our document on how to complain about a financial services firm. The Central Bank also has an Explainer: How do I complain about a financial services firm?
The Central Bank of Ireland has information on moneylending including on legislation and regulatory requirements and guidance. It also provides Frequently Asked Questions for Moneylenders.