High cost credit loans (moneylender loans)

Under amended legislation moneylenders are now called high cost credit providers. They typically lend small amounts of money at a high rate of interest over a short period of time, which means the repayments are high.

There are a number of different types of high cost credit providers.  Some, such as door-to-door lenders may give smaller loans between €100 and €1,500 that you repay, in cash, over a number of weeks or months. Others may offer larger loans of €1,000 or more.

Some shops that offer credit for furniture, electrical or other goods and some catalogue companies may be authorised as high cost credit providers. This is because they may charge over 23% APR. Under the Central Bank’s Requirements and Guidance for High Cost Credit Providers, a high cost credit provider must give you certain information before you take out a loan with them including fees, costs and interest. They must also explain that the loan has a high cost, if the loan has an APR (Annual percentage rate) of 23% or higher.

How do you pay back these loans?

Door-to-door high cost credit providers will usually want to collect your repayments from you in cash each week. Under the amended legislation, high cost credit providers will no longer be allowed to charge a collection charge. You will also have the option to make your repayments online if you wish to do so.

Some high cost credit providers may allow you to repay larger loans directly from your bank account by direct debit.

A high cost credit provider, or their collecting agent, must carry an identity card and is allowed to call to you to collect payment from Monday to Saturday, between 10am and 9pm. If you agree, they can also call to you between 8am and 10pm, but you must agree to this in writing beforehand.

They cannot:

• Contact you on Sundays or bank holidays or
• Contact your employer or your family without your written permission

It is usually more expensive to borrow from a high cost credit provider compared to a bank or a credit union. The APR is usually at least 23% and, in most cases, much higher. There is a simple interest rate cap of 48% per year but the APR charge will be higher and, in many cases, significantly higher. However, with high cost credit loans, it is often better to look at the cost per €100 and the total cost of credit. The total cost of credit tells you the extra amount you have to pay on top of what you borrowed.

An example of the cost of a loan from a high cost credit provider:

Loan amount	Term	APR	Maximum Simple Interest	Weekly repayment	Total amount to repay	Total cost of credit	Cost of loan per €100 borrowed (%)
€500	25 weeks	152%	25%	€25	€625	€125 (€625 – €500=)	€25 (25%)

High cost credit providers are not allowed to charge extra interest or charges, So, if you miss repayments, the total amount you have to pay back should not go up.

How do you keep track of what you have paid?

Depending on the type of loan you get, the high cost credit provider gives you a repayment book or loan statement to keep track of what you have paid and what you owe. Keep your repayment book or loan statement safe, as it is the main record of your loan and the repayments you have made. You will also have the option to have an online repayment book if you want to make repayments online or access your loan statement. 

Your repayment book or loan statement will show:

• The total amount of your loan and the rate of interest (APR) that will be charged
• The amount of each payment and the total number of payments due

Each time you pay, the amount and date must be written on your repayment book, or recorded on your next statement so you have a record of how much you have paid and how much is left to pay.

What if you cannot afford to pay back your loan?

Start with our debt action plan which will help you to tackle your debts. If you have missed payments and are finding it difficult to pay back your loan, contact your high cost credit provider as soon as you can.  If you fall behind with your payments, a a high cost credit provider cannot:

• Charge you any fee or penalty or
• Give you another loan to pay off the first one

If you cannot sort out the matter directly with your lender, you can get help by contacting the Money Advice and Budgeting Service (MABS).  They offer free, confidential and independent advice to people in debt and have at least one office in every county. They can help you:

• Draw up a budget
• Find out about any entitlements you may have
• Talk to your lenders and try to work out new loan arrangements for you
• Get details of your local MABS office by calling the MABS Helpline on 0761 07 2000 or from the MABS website

Check your high cost credit provider is regulated

The Central Bank sets out standards and rules on how high cost credit providers must deal with their customers.

• Do make sure the high cost credit provider is licensed. It is illegal for a high cost credit provider to operate without a licence. Check the Central Bank’s registers website. If an illegal high cost credit provider approaches you and offers you a loan, do not be tempted to deal with them. High cost credit providers operating without a licence should be reported to the Gardai