Borrowing from a moneylender

A moneylending loan is a type of loan that is for a short time 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 a short length of time (called the term of the loan)
• At a high rate of interest compared with other loans available

There are other types of loans available that are cheaper. Banks and credit unions, for example, are not moneylenders.

Moneylenders must have a licence to offer moneylending services in Ireland. The Central Bank of Ireland regulates moneylenders. It is responsible for issuing moneylending licences and it sets the rules that moneylenders must follow.

Since November 2022, the legal term for licensed moneylenders is high cost credit providers and their loans are called high cost credit.

You should only borrow from a moneylender that is licensed. This protects you and your money from predatory lenders or bogus websites. If you are not sure whether a moneylender is licensed, you should check the Central Bank’s Register of High Cost Credit Providers.

Illegal or unlicensed moneylending

It is against the law to offer moneylending services without a licence. The Gardaí can take legal action against illegal moneylenders. If found guilty, they can be fined or sent to prison, or both.

Adverts for high cost credit loans must:

• Include clear warnings that the loan is a high cost product
• Tell you to consider alternative loans from other lenders

High cost credit providers 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 that requires you to take out a loan (for catalogue moneylenders)

Moneylending agreements

An agreement with a licensed moneylender is called a high cost credit agreement if any of the following apply:

• The agreement or negotiations (or both) were made away from the business premises of the moneylender
• Under the agreement, you make your repayments at any place except the business premises of the moneylender
• The agreement has an APR (annual percentage rate) of 23% interest or higher

A high cost credit 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 and the total amount payable (the cost of credit). The lender cannot add any other charges, such as administrative costs.
• Tell 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. It may be on paper or online. 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

Many moneylenders collect loan payments in cash each week. They cannot charge you for home collection. Some moneylenders allow you to pay by direct debit.

Moneylenders must:

• 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.

A loan from a moneylender will usually have a higher interest rate than a loan from a credit union or a bank.

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.

For high cost credit agreements made since 14 November 2022, there is a maximum term and maximum rate of interest allowed for a loan. Loans can be for a maximum term of 52 weeks.

The maximum interest rate is:

• 48% per year or
• 1% per week

If the credit is provided as a running account, it can be for more than 52 weeks and the maximum interest is 2.83% per month.

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 are struggling to pay back a loan, you should contact the lender as soon as you can.

If you cannot sort out the problem directly with the lender, 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 lender can take legal action against you, if you do not pay instalments due under the lending agreement. They 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 lender may get permission from the courts to start legal action immediately, without waiting 21 days.

If you have a complaint about a moneylender, you should first discuss your complaint with the lender.

If, after following their 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 for high cost credit providers including information on legislation and regulatory requirements and guidance. It also provides Frequently Asked Questions for high cost credit providers.