A representative body of licensed lenders in Ireland has tried to prevent the public from finding out about its opposition to government plans to impose a cap on the interest rate its members could charge borrowers.
The Consumer Credit Association (CCA) also objected to the publication of a document which revealed that it strongly criticized Central Bank-funded research which had been carried out by academics from University College Cork (UCC) and recommended the imposition of a limit on interest rates.
The UCC report concluded that limiting the cost of credit was in the public interest and would ensure “fair and reasonable” interest rates, especially since pawnbrokers’ customers were more likely to come from from poorer backgrounds who had difficulty accessing other sources of credit.
The CCA said the report, which was used as “key intellectual support” for new legislation passed earlier this month, “lacks rigor and robustness” and draws “inappropriate conclusions” because the data has been misinterpreted.
He also claimed that the UCC report denigrated and downplayed British studies of illegal money lending.
The CCA, which represents more than 20 companies that offer ‘home lending’, had submitted its proposal for no limits on interest rates charged by approved lenders to a public consultation process. launched by the Ministry of Finance.
He also objected to the department’s proposal, which has been incorporated into the new Consumer Credit (Amendment) Act 2022, to replace the term ‘approved lender’ with ‘high cost credit provider’.
The CCA said the term was “a loaded term” and “misleading”, while it said “lender” was inappropriate for use in legislation as it was widely seen as a “pejorative” term.
The new legislation, introduced by Finance Minister Paschal Donohoe, sets a simple interest cap of 1pc with a maximum annual upper limit of 48pc to be applied to cash money lending agreements up to a term of a year. A second monthly ceiling of 2.83 pc must be applied to the unpaid balance of longer-term current accounts.
The CCA challenged the Office of the Information Commissioner (CIC) to prevent its submission from being made public. In its appeal to the OCI, the CCA claimed that previous information it had submitted to the Ministry of Finance had been used unfairly and negatively against lenders by certain unnamed third parties. For this reason, and because of the sensitive nature of her criticism of Central Bank-funded research, she asked that her submission be kept confidential.
Our Office dismissed the CCA’s appeal, saying it was difficult to accept that a party seeking to influence the Department of Finance’s decision-making on a matter subject to public consultation “could reasonably expecting her to have the right to do so in confidence”.
With the passage of the new legislation, CCA Chairman Kevin Carey said the group fears it will lead to an increase in the number of people borrowing from illegal lenders.
According to the latest figures, there were 36 Central Bank-approved lenders in 2020.
Approved companies issued more than 296,000 loans in 2020 worth €198.1 million, with €141.1 million remaining outstanding at the end of the year.