A new money lender who charges an interest rate of 49.9% has been criticized by consumer rights watchdogs.
UK-based Amigo, which launched in Ireland on Monday, offers loans to people with poor credit histories.
The company, which has 207,000 customers in the UK, is initially testing its service in Ireland over the internet and over the phone.
Amigo offers loans between â¬ 500 and â¬ 5,000 for a period of between 12 and 36 months at a fixed APR of 49.9%.
He uses a model that forces friends and family to vouch for the borrower, arguing that this allows people who might not be able to access credit to do so.
Amigo said he was trying to provide a better option for people with bad credit histories who would otherwise have to borrow from pawn shops charging more than 100% interest.
But Demott Jewell of the Consumers’ Association of Ireland said that lending money always hurts people, and he doesn’t see how high interest rates will help those who are already struggling to get out of debt. He added: âMoney lending will always be a problem because the interest rate is an additional burden on people who are already in trouble. From a starting point, it’s hurtful.
âI know this organization is suggesting that their rate is high and that their business model is designed so that those with a credit rating problem can ultimately escape it.
“I don’t see one iota of how doable or realistic this is.”
But Daniel Hawkins, managing director of Amigo Loans Ireland Ltd, insisted the lender is working to help people with bad credit histories get back on their feet.
He said: “We believe there is a need to make access to credit possible for ordinary people who have limited credit history, often through no fault of their own, and who cannot get a loan from their bank. or credit union. ” In November last year, news that Amigo Loans had been granted a money-lending license from the Central Bank drew criticism from opposition parties, and Taoiseach Leo Varadkar said the government may have to consider cap lender rates, although this has yet to happen. Ireland’s Insolvency Service has said debt can be crippling for many – but there are plenty of options available for those who are in trouble.
A spokesperson added: “When unpaid debts become such a burden that it keeps you from getting up in the morning, causes a feeling of dread when you answer the phone or open the post, it’s time to take control. of the situation.”
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