Fianna Fáil TD for Cavan-Monaghan Brendan Smith has called on the government to allow Credit Unions to provide low interest loans to low and middle income earners so that they are not forced to turn to moneylenders.
He made the call following the decision by the Central Bank to approve a new lender, which offers secured loans at a rate of 49.9%.
Deputy Smith said, “This time of year can put a huge financial burden on families, who in some cases feel as if they have no choice but to turn to moneylenders – many of which charge exorbitant interest rates – of up to 288%. While banks may not seem like an option, the Credit Union, whose core value is to assist their own communities, should be.
“Credit Unions already provide the “It Makes Sense” loan with an interest rate of 12%, but it is only available to social welfare recipients and only 40% of Credit Unions who could operate the loan are doing so. This is extremely restrictive and is forcing people on low incomes to engage with moneylenders because they cannot get loans from banks or Credit Unions.
“According to the Central Bank, 35,000 people were customers of high cost regulated money lenders in 2017. Compare that to just 3,000 loans a year approved by the Credit Union. In fact, there are some towns across the country, where money lenders are operating and the local Credit union doesn’t even offer these loans.
“The government should uphold its commitment in the Programme for Government to “develop a strategy for growth and development for the credit union sector”. Instead of restricting the “It Makes Sense” loan to social welfare recipients; it should be expanded so that anyone can apply. The current scheme is too limited and Credit Unions themselves need to step up to the mark to broaden their appeal.
“More must be done to give people the option to take out a loan from the local Credit Union, rather than leaving them with no option but to go to high interest money lenders. We need to see action on this now”, concluded Deputy Smith.