Prime Time - 24th January 2012

Katie Hannon blogs ahead of tonight's programme on illegal moneylenders:

Where do those on low incomes with few assets and perhaps a poor credit history turn to for credit in a severe credit crunch?
Until recently they would have gone to their local credit union, which has a fine tradition of offering affordable credit to those on social welfare or low incomes.
But recent moves by the financial regulator in placing restrictions on credit union lending has in practice meant that even long-standing customers who have never defaulted on a repayment may now be refused credit.
For many of those customers the only option open to them for sourcing credit is now moneylenders.
Any company or individual wishing to offer credit at rates of over 23% must apply to the Central Bank for a moneylender’s licence. There are 47 moneylenders currently licensed by the Central Bank. The interest rates they are authorised to charge vary. When collection charges are included, a loan from the most expensive moneylender would cost 287.72% APR.
Moneylenders argue that it is unfair to quote APR, or annual percentage rate, in relation to the short term loans that they provide as it exaggerates their rates. They also point out that this type of credit carries more risk and is expensive to administer, as it involves agents calling door-to-door for relatively small repayments. But there is no doubting that the doorstep credit offered by moneylenders is very expensive when compared to the rates charged by mainstream lenders.
There are calls for the interest rates to be severely capped but there are fears, not least by the Money Advice and Budgeting Service (MABS) that, in the absence of any other social lending mechanisms, such a move might actually make matters worse by restricting the market and driving more people into the arms of the illegal moneylenders.
It is impossible to quantify the levels of illegal moneylending but there is anecdotal evidence that it is thriving in these difficult times. The 1995 Consumer Credit Act gave the Gardaí robust new powers in this area. However, with few people witnesses willing to come forward to give evidence against illegal moneylenders, convictions have remained elusive.
In the UK, the Stop Loan Sharks project by the Trading Standards Office has had considerable success. Since its launch as a pilot project eight years ago, it has written off almost £40 million of illegal debts and helped over 18,000 people. More than 200 prosecutions have been secured.
Fianna Fáil’s Senator Marc MacSharry has called for even more draconian legislation which would allow as on the sworn testimony of a superintendant.
The crackdown in the UK was in tandem with key measures such as offering social lending at low interest rates to those on welfare. Until policies such as these are introduced here, those who can least afford it will continue to pay the high price.
So what can we do here? Should interest be capped? What can be done to get easier credit for those who need it? And what can be done about the illegal end of the spectrum? Join us tonight at 21:35 on RTÉ 1.
Katie Hannon