Doorstep credit ban ruled out

SOCIAL Protection Minister Joan Burton has ruled out banning doorstep credit, despite an estimated threefold increase in the number of new people seeking financial assistance from the Clare Money Advice and Budgeting Service (MABS).

In 2002, over 240 new people experiencing financial difficulty and 200 existing clients received assistance from Clare MABS. This jumped dramatically to 640 new and 600 current dependants last year.
It has also emerged this week that there have been reports of illegal money lending in Kilrush.
Minister Burton officially launched a new information leaflet Say No to Doorstep Credit in Ennis on Friday as part of a joint initiative between MABS, Citizens’ Information Service, St Vincent de Paul and the Credit Union to assist people in financial difficulties.
In addition to outlining a series of good and bad money habits, the leaflet, according to Minister Burton, pointsout that borrowing €500 from doorstep credit can cost approximately €650 26 weeks later.
Asked if door-to-door selling of credit should be banned in view of the increasing numbers of Clare people in financial difficulty, Minister Burton disagreed with this approach because she felt everyone isn’t totally familiar with what is available in banks or the Credit Union.
“We have to focus on educating people with the help of MABS and organisations like St Vincent de Paul and Citizens’ Information.
“It is about educating people about the cost of this doorstep loan compared to the cost of getting a much cheaper service in the Credit Union.
“The doorstep credit agencies did a lot of selling during the boom by calling to people in local authority estates by telling people ‘your house is now worth much more than what you borrowed from the council’.
“Many people ended up with very large loans which, even in the height of the boom, they didn’t have the ability to repay. Things have become even more difficult now that people have lost employment or income,” she said.
Asked if there is a need for more undercover work by gardaí to detect unscrupulous moneylenders, who are charging huge levels of interest for credit, the minister favoured an information awareness campaign as the lenders usually have licences.
“The new leaflet is very helpful. It sets out very clearly the different cost of credit. The cost of this credit is extraordinarily high but people feel it is a friendly service that arrives at their doorstep and are very tempted,” she added.
Clare MABS co-ordinator Dennis Corbett confirmed there is no cap on the interest rate being charged by moneylenders, which can be up to 187% over a six-month period.
Mr Corbett acknowledged the number of people availing of moneylenders is on the rise in Clare and across the country because of increasing accessing credit from mainstream institutions.
He said it is hard to quantify the real extent of illegal moneylending because of the covert nature of this activity in local communities. He pointed out moneylenders also provide goods and vouchers at high levels of interest.
“Sometimes people can’t make a reasonable choice when they need credit in a crisis situation. When a person works with their Credit Union, there is hope to come out of a difficult situation. The most important comparison is what getting a loan from the Credit Union would cost a borrower and what they would pay from a moneylender,” he added.
There have been reports about the operation of illegal moneylenders in Kilrush. Inspector John Galvin confirmed Clare gardaí investigate any complaints concerning illegal moneylenders in the county.
“There is an increase in moneylending associated with any downturn in the economy. People who are finding it difficult to get credit tend to resort to moneylenders.
“Some of these individuals are engaging in other criminal activity. Illegal moneylending can cause a lot of misery for people who are unfortunately caught up in it,” he said.