The pandemic has meant that we are getting used to the unprecedented.
It has turned our world upside down, and the latest shock is seeing a financial institution cancel all loan money owed to it by its customers.
Money lender Provident has surprised in a good way with its decision to write off borrower debts now that it has gone out of business here.
This is great news for customers, who will also see their credit reports updated to reflect the decision to write off debts.
Don’t expect this to happen with your mortgage or other loans.
The main reason Provident made this unusual move is that they have decided to close their lending operations here.
He does not speak, but if he has decided to give up the ghost when it comes to collecting the money he has loaned, it is probably because he feels his chances of getting it back are slim. .
It is said to be in the process of closing, which means that some borrowers may be reluctant to accumulate what they owe.
Its debt collectors are self-employed, so many will have already stopped working for Provident.
There were probably few takers, even vulture funds, for the sale of a pawnshop’s loan portfolio.
All of this means that the Provident movement makes some sense, but other financial providers are unlikely to follow suit.
KBC and Ulster Bank are also leaving this market, but are selling their loans.
Provident’s move is expected to benefit many middle-income people.
When we think of clients of money lenders, we traditionally have the image of a woman with children in rented accommodation or people in social areas whose families have used the same lender for generations.
These people use pawn shops, but more high-income people are borrowing from them, most of those who do have jobs, the Oireachtas finance committee said in February.
Credit Union Advisory Committee chair Lorraine Corcoran told members that resorting to moneylenders was not just something associated with a “woman with children in rented accommodation, she creeps in. other areas and other sections of society. We see it with the ABC1s ”.
ABC1 is a term used for a consumer from one of the three higher social and economic groups.
Few people will mourn the departure of a lender whose interest rates vary from 157pc in this market to 187pc.
A typical loan of € 500 at a rate of 187 pc will cost € 150 in interest payments. This means that it will cost you a total of 650 € to pay off a 500 € loan.
At least Provident had the good grace to leave and also to cancel the debts of his clients.
Credit unions must now step up their efforts to fill the void, as there will continue to be demand for short-term loans.
Finance Minister Paschal Donohoe could play his role in driving the legislation
he promised to give credit unions the ability to charge a little more for subprime loans.
At the moment, they can only bill 1 pc per month, or 12 pc per year. The legislation would allow them to charge up to 2 pc per month.
There is now an urgent need to pass this law unless we want other moneylenders to step into the loophole left by Provident.