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Law360, London (June 9, 2020, 3:49 PM BST) -- The Central Bank of Ireland has set out measures to strengthen protection for customers of regulated money lending services, which include forcing lenders to include warnings in adverts for high-interest loans.
The Irish regulator published new regulations on Monday to safeguard consumers from loan companies that provide high-cost, short-term credit to borrowers, known as money lenders. The measures include forcing money lenders that charge an annual percentage rate above 23% to include prominent warnings in all advertisements to prompt consumers to consider alternative providers.
Money lenders will no longer be able to make unsolicited contact with customers who have paid off, or are nearing full repayment, of a high-interest loan, the central bank said. The lenders will also have to ensure that their marketing strategy is fair, which means they cannot target individuals with low incomes.
"It is important that people who use money lenders are fully aware of the high-cost nature of their loans," Gráinne McEvoy, director of consumer protection at the central bank, said. "By strengthening the rules, we are providing the customer base with further protections and raising the expected professional standards in this industry.
The central bank said that the rules will limit the ability of money lenders to offer loans to consumers. It will also give individuals greater control to decide if they want to be contacted by the companies.
The Irish watchdog has also introduced requirements designed to enhance professional standards for employees working in the sector. This includes forcing staff to disclose to consumers that a money lending loan may not be appropriate for paying for basic needs, such as accommodation or electricity.
The regulations will come into force in January 2021. But money lenders must include high-cost warnings in their advertisements from September because of the financial harm caused to individuals by COVID-19, the central bank said.
The U.K. has also cracked down on high-cost credit products during the pandemic. The Financial Conduct Authority published temporary measures in April that freeze payments for three months on payday loans, car finance, rent-to-own contracts and buy-now-pay-later deals.
--Editing by Rebecca Flanagan.
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