The Irish League of Credit Unions (ILCU) has today published the results a new research project into moneylending in Northern Ireland. With the level of personal indebtedness and financial exclusion in Northern Ireland, the ILCU commissioned this independent research to gain an insight into the relationship that the people of Northern Ireland have with moneylenders and payday loans companies.
Credit unions across Northern Ireland have been campaigning over the past years against moneylenders and payday loan companies believing strongly that some members of the community are becoming trapped in a vicious cycle of debt from which it is very difficult to escape. The research reveals that over 270,000 people in the North have used the services of a moneylender or payday loan company to date with a further 193,000 saying they would consider using this service. These are extremely worrying statistics say the ILCU.
In late 2014, Credit Unions in Northern Ireland welcomed a move by the Financial Conduct Authority (FCA) to introduce a cap on fees and interest rates charged by pay day loan companies & moneylenders. In the case of moneylenders loans are being offered which are up to 15 or more times more expensive than those available from local credit unions.
Credit Unions in Northern Ireland are urging members of the public to approach their local credit union first before approaching a pay day loan company or moneylender. Credit unions, which are owned by their members, are a not for profit movement that specialise in low cost loans at fair rates and basic savings products. Local credit unions are also on hand to offer advice be it by way of savings plans, budget plan or family finance plans which help people plan ahead for expenses throughout the year. There are now 95 credit unions operating in Northern Ireland with a membership of over 400,000, a number which is growing year on year.
Over 25% of those surveyed have had experience of a moneylender / payday loan company, with a further 50% considering using a moneylender/ payday loan company. In general, the research reveals that moneylenders are considered a fall back credit option with 8 out of 10 people feeling that borrowing from a moneylender / payday loan company was their only option and this type of easy access credit has never been as readily available as it is today. 60% stated that their moneylender loan was approved in a matter of hours.
There are many moneylender / payday loan options available but the research reveals that online moneylender (61%) options are most popular among those who have borrowed followed by doorstep lenders (23%) and a money shop (13%). 39% of those who have borrowed from a moneylender stated that they have approached a bank (39%) or a credit union (9%) before they applied for credit from a moneylending source.
Of those that have borrowed from a moneylender, 56% stated that they used the loan to pay household bills or clear bill arrears. A further 23% borrow from a money lender to repay debt, 10% said they borrowed to pay their mortgage or rent and 10% said they borrowed to go on holiday. Of those that would consider borrowing (26% said they would do so in an emergency situation, 23% said as a last resort, 16% said of the fast access to cash and 7% said ease of loan approval. Of those that have experience of moneylenders, 30% said that they are likely to top up their existing moneylender / payday loan.
62% of those who have borrowed from a moneylender have borrowed an amount of between £100 and £750 (AVERAGE) Of those that have borrowed from a moneylender / payday loan company, 11% said they borrowed amounts between £1,500 and £3,000. Of those that have never borrowed before, 40% have said they would borrow the bigger amounts (£1,500+). Those who have borrowed from a moneylender before are more cautious. Unsurprisingly, awareness / expectation of the level of repayments re highest among those who have borrowed before.
Shockingly, 84% of those that have used a moneylender / payday loan were unaware of the interest rate / APR being charged on their loan. Only 16% said they were aware of what it was. Those that have used a moneylender / payday loan company - 885% APR is the average rate being charged. Those who had not used a moneylender before believed interest rates to be much lower than they were. 77% of those that have borrowed from a moneylender in the past have done so between 1-3 times.
27% of those who have borrowed from a moneylender have experienced some level of intimidations with 32% of this group saying they were intimidated because of constant phone calls and emails. A further 21% said they were forced to pay back their loan prematurely, 16% said they were contact in work and 11% there was a threat of physical injury or goods seizure. Of those that have not borrowed from a moneylender before but would consider say they would be put off borrowing from this source because of high interest rates (49%), untrustworthiness (19%), a fear of falling behind on payments (14%). 24% of those who have been approached by a moneylender have been approached in their own home.
Almost half of those who have borrowed from a moneylender were given between 1 and 4 months to repay the loan. 9% were given a week, 12% were given 2-3 weeks, 13% were given 5-10 months and 12% were given 11 months or over. One third had difficult repaying their loan. 48% of those who have borrowed from a moneylender in the past would not consider borrowing again primarily due to the exorbitant cost of credit (58%), 15% believed in led to bad debt, 8% said they didn’t need to borrow at the moment and 19% believed a combination of high interest rates with a struggle to repay.
Moneylenders and pay day loans companies are predators to those struggling financially. They offer almost immediate access to quick credit, but lurking in the small print are staggering interest rates that often result in those who can least afford it paying back nearly twice what they borrow, or worse still, getting caught in a cycle of debt that they cannot get out of. It is very worrying to see that 84% of respondents with experience in borrowing from a moneylender reported that they did not know they APR they paid on their loan. Credit unions in Northern Ireland would like to remind people that they offer fair, competitive loan rates, that are capped by law, which are significantly cheaper than pay day loans or loans from moneylenders. Moneylenders and payday loan companies are quoting loans of £400 over 31 days at a cost of £129 – the same loan from a Credit Union costs about £4.”
It comes as no surprise to learn that households throughout Northern Ireland are finding it increasingly difficult to make ends meet on a daily basis, and with the countdown to Christmas well underway, the financial pressures which many are under are more of a strain than ever, resulting in people turning to expensive sources of credit. Ahead of the Christmas holidays we would urge everyone to careful consider their budgets, look at what they can reasonably afford and if there is a need to borrow to do so sensibly through your local credit union and not through high interest ‘fast’ cash moneylending services. As Christmas looms, we would encourage anyone facing financial difficulties to speak to their credit union first and see how they can help before getting trapped in a vicious debt spiral of interest and charges at the hands of unscrupulous lenders. Unlike other lenders we are a not-for-profit community owned organisation and exist solely to meet the needs of our members.’