Monday, 20 December 2010


Nat O'Connor: The Irish Times reports on the €113 million owed to legal moneylenders, who can charge over 180 per cent interest.

This is not a new issue. It was highlighted by Caroline Corr and Dr Pauline Conroy in TASC's publication, Life and Debt: Financial Exclusion in the Age of NAMA, which is an update of earlier work on this issue by the same authors.

For example, "In 2005, 23 per cent of households – or nearly a quarter – had no bank account. Many of these households – a large number of which are headed by women – are therefore forced to access financial products at prices they cannot afford. Such ‘services’ range from high-cost credit to expensive chequecashing facilities."

While a lot of attention has been focused on the ECB's concern about emergency banking legislation, the Government could do much worse that use draconian powers to require banks to provide, as a right, a basic bank account for everyone in this country. This would not necessarily include any overdraft facilities, but simply be an account free of stamp duty and transaction costs, incorporating a cash card (ATM card), with flexible account opening requirements, and no minimum opening or monthly balance.

However, instead of being helped to stablise their finances, it is highly likely that many of the people paying debts to moneylenders are badly affected by the cuts in social welfare and the minimum wage; which will drive ever more people into a cycle of poverty and further debt this Christmas.

1 comment:

Rory O'Farrell said...

I have an idea for a simple, 100% guaranteed banking institution to complement the others.

It would offer no interest or provide any loans, so there would be no risk. It would provide the basic day to day services that most people use (eg ATM card, credit transfer, foreign exchange). Basically this 'bank' wouldn't need the expertise of lending or handling risk. I would just need the expertise of handling data.

Then if someone gets a loan from a credit union or bank the money would be transferred into this account, or when they get paid they just electronically transfer it to their loan account at a bank.

I think such an account could be very cheap if they embrace the internet and electronic banking to the same extent as other countries.

I'm not sure how to handle cash lodgements, but they could make a deal with An Post (or An Post).

I'd like it to be set up as a mutual, and model the very successful Credit Unions.