The Government has approved the drafting of a bill which will introduce a cap on the interest rates that moneylenders can charge.
The legislation proposes two rate caps, one for cash loans, and one for running accounts - these are similar to tied credit cards, and are often used by catalogue companies.
For cash loans, an interest rate of 1% per week to a maximum of 48% per annum on the amount borrowed is proposed.
The Consumer Credit (Amendment) Bill 2021 will allow that rate to be adjusted in the future by Ministerial Order.
In a statement, the Department of Finance said this is "straightforward and transparent and appropriate for the sort of loans concerned."
Cash loans will also be subject to a maximum duration of 12 months.
For loans provided on a running account basis, nominal interest of 2.83% per month on the outstanding balance will be allowed.
Minister for Finance Paschal Donohoe said the bill seeks to ensure "fairness" for consumers in terms of the rate charged by moneylenders, while also allowing for moneylenders to continue to operate where that service is needed.
"By simplifying and reducing the rate that is being charged and taking steps to modernise the sector, we can better protect those who avail of these short-term services," he said.
The legislation will also prohibiting moneylenders from charging for home collection services and will rename the term 'licensed moneylender' to ‘High Cost Credit Provider’ to differentiate between licensed and unlicensed moneylenders.
The Central Bank register currently lists 35 licensed moneylenders.
This figure includes Provident Personal Credit, which announced on 10 May that it would cease operations in Ireland and the UK.
The Central Bank estimates that there were 313,500 customers with moneylending loan balances outstanding in 2018.
Kevin Johnson, CEO of the Credit Union Development Association, which represents over 50 credit unions, said the new maximum of 1% per week is still four times more than the maximum that a credit union wiukd charge the same person for the same risk.
"We believe that lower interest rate caps on moneylenders will improve outcomes for consumers, resulting in a lower cost of borrowing and default rates.
"We would hope that with the ongoing attention this topic has received across the media, many of the 300,000 people that borrow from moneylenders will start to appreciate the absolute cost of credit, and that many of them could secure a loan at far lower cost elsewhere," he said.