Borrowing from a moneylender
A moneylending loan is a short-term and high cost form of loan (also knows as credit). Using a moneylender is one of the most expensive ways you can borrow money.
Moneylending loans are generally:
- For amounts that are small compared to other forms of loans
- For short periods
- At a rate of interest that is considered to be high compared with other loans available to you
Banks, building societies, insurance companies and credit unions are not considered moneylenders. You can read more in our document on borrowing money.
Borrowing from a licensed moneylender
Moneylenders must have a licence to offer moneylending services in Ireland. The Central Bank of Ireland supervises moneylenders and is responsible for issuing moneylending licences and sets 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.
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
Moneylending licences are granted for one year and must be renewed each year.
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 up to €63,486.90 or up to five years’ imprisonment, or both. Only the Gardaí can take legal action against illegal moneylenders.
Rules that apply to moneylenders
The Consumer Credit Act 1995 sets out specific rules for moneylending agreements. Moneylenders licensed by the Central Bank must also comply with the rules set out in the Consumer Protection Code for Licensed Moneylenders (pdf). New rules on moneylending were published on 29 May 2020– see ‘Rules to protect consumers’ below.
A moneylending agreement is defined as a credit agreement where one or more of the following apply:
- The agreement or negotiations (or both) were concluded away from the business premises of the moneylender
- Under the agreement, you make your repayments to the moneylender or their representative at any place except the business premises of the moneylender
- The agreement has an APR (annual percentage rate) of 23% or more
Rules to protect consumers
Under the Central Bank’s Consumer Code for Licensed Moneylenders, your lending agreement must give you details about the loan and your moneylender must also tell you that the loan has a high cost. The moneylender must keep a record of each lending agreement.
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)
- Be signed by both you and the lender
- Inform you about your right to a 10-day ‘cooling-off’ period – the right to withdraw from the loan. If you waive your right to the 10-day ‘cooling-off’ period, 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.
New Moneylending Regulations
The Central Bank has published updated rules which give you stronger protections when you use a moneylender. The revised rules are set out in the Central Bank (Supervision and Enforcement) Act (Section 48) (Licenced Moneylenders) Regulations 2020. (S.I. No. 196 of 2020) – known as the ‘Moneylending Regulations’.
From 1 September 2020, moneylenders will be restricted in how they offer and promote loans. Adverts for moneylending loans will be required to:
- Include clear warnings that the loan is a high-cost product
- Prompt you to consider alternative loans from other lenders
From 1 January 2021, moneylenders must:
- 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 if it is dependent on you availing of credit (for catalogue moneylenders).
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 in the form on 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 more 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 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 back the loan. This is because 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 experiencing difficulty in paying off 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), a free and confidential service for people in Ireland 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.
All moneylenders must have a written complaints procedure in place and must handle complaints speedily, efficiently and fairly. There are detailed rules on complaints handling that moneylenders must follow. These are set out in the Central Bank’s Consumer Protection Code for Licensed Money Lenders (pdf).
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?.
More information about moneylending is available from the Central Bank, including:
Where to apply
If you wish to apply for a moneylending licence, contact: