Moneylenders adding to debt spiral in Galway estates

The Central Bank has found that out of nine moneylenders inspected, a number were giving out multiple loans before the initial loan was paid off, creating a vicious circle of debt for hard-pressed householders.

The Central Bank revealed it had discovered “some serious issues in a small number of firms” and these breaches were being pursued individually, according to the head of consumer protection at the bank, Bernard Sheridan

“We also found cases where some consumers were provided with new loans before existing loans were repaid in full which is not necessarily in the consumers’ best interests.  Using short-term, high cost loans for longer-term needs should be avoided and I would encourage consumers in such a situation to contact MABS for help and advice,” he remarked.

The Galway branch of St Vincent de Paul (SVP) recently warned against using moneylenders after it emerged that one firm had been dropping advertising leaflets into houses in the city.  With legal money lenders charging interest rates of up to 187% – and illegal moneylenders reportedly charging rates in excess of 300% – resorting to a loan through this channel can lead to an impossible debt burden.

“What our members are telling us – including members in Galway – is that these companies are offering second and third loans and they’re even getting a second person in the house to sign up to a loan. Suddenly a household that’s struggling with bills and food has to come up with these repayments to a moneylender,” explained SVP spokesman Jim Walsh.

“When people go to a moneylender it’s usually for a specific thing – they might have to meet funeral expenses, they might need a new washing machine. They don’t think about what they have to pay back. They only think about what they need. They don’t realise what they’re getting into. It’s not like a bank who won’t chase you for further loans.” 

The SVP insists that the number of people taking loans from moneylenders was rising in the current recession, made worse by an increasing succession of charges and higher household costs.  They point to the increase in advertising by these companies and this practice of doing leaflet drops.

However the Central Bank said the increase among licensed moneylenders was only slight. They did, however, reveal for the first time there were 300,000 customers currently in debt to the 43 licensed moneylenders.

For more on this, see the current issue of the Galway City Tribune