3.18 Article 31(2) of CCD2

The fixing of caps on borrowing rates, on annual percentage rates of charge or on the total cost of the credit to the consumer is a common practice in a number of Member States. Such caps have proven beneficial in protecting consumers and under CCD2, Member States have some discretion to maintain their current legal regime. In an effort to increase consumer protection without imposing unnecessary limits on Member States, adequate measures, such as caps, should exist to effectively prevent abuse and to ensure that consumers are not charged with excessively high borrowing rates, annual percentage rates of charge or total cost of credit to the consumer.

In Ireland, the Consumer Credit (Amendment) Act 2022 introduced an interest rate cap on high cost credit agreements as follows:

• 1% per week simple interest on fixed rate loans, up to a maximum of 48%,
• 2.83% nominal interest on the outstanding balance per month on running accounts.

Also, Section 14 of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 introduced a new Part – Part IIA – to the Consumer Credit Act 1995 which provides that, for agreements entered into after the commencement of the 2022 Act, the maximum APR on credit (other than a high cost credit agreement), and hire purchase agreement within the scope of the 1995 Act shall not be greater than 23 per cent.

Finally, the Credit Union Act 1997 states that the interest on a loan shall not at any time exceed one per cent per month on the amount of the loan outstanding at that time. That equates to an annual interest rate of 12% (12.68% Annual Percentage Rate).

However, in April 2024 the Minister for Finance signed legislation (Section 38 of the Credit Union Act, 1997) for the interest rate cap to be increase to 2% per month.

Question 18 – Should Ireland provide for any further prohibitions or limitations regarding specific charges or fees applied by creditors?