Is it legal to give a "private" personal loan?

Donald Trump · 25-09-2020 9:32pm #1

How would a person go about giving a loan? I mean in the sense to do it above board. There are illegal moneylender so what differentiates the illegal moneylenders from those genuinely giving money to help out with the understanding it will be supposed to be paid back. (whether or not it eventually is is a different tangent)

I'm not talking about a fiver for the bus home. I'm talking about giving either a sizeable personal or business loan, say to a family member, zero or very low interest with a proper repayment schedule.

I say "very low interest" to mean if the recipient wanted to pay interest to the amount that the giver would have otherwise earned in a bank.

I'm not talking about collateral or credit risk. I mean whether it's strictly legal and would there be tax implications? Would it qualify as some sort of "gift" that they would be getting the money at well below market rate?

In the case of a loan to set up or improve a business, the recipient would be able to write off the interest paid to a normal bank.

Irishphotodesk · 25-09-2020 9:37pm

To quote Shakespeare, “ neither a borrower nor a lender be”

The primary problem with an unregistered loan, if the person stops making repayments what route of recourse do you have to get the money owed?

I believe a parent can gift 10k to a child but don’t know if you are related to the loanee, I would guess that if you are happy to gift the money and they are happy to accept/declare the stumbling block would be revenue and any tax implications either of you could face.

The Hound Gone Wild · 25-09-2020 11:12pm

If it's over €3000 there are tax implications for the borrower if they make no repayment efforts. If you pass away the executor of your estate can chase the balance of the loan.

If it's under €3000 you can give it as a free gift.

You need professional advice.

Donald Trump · 25-09-2020 11:48pm

The Hound Gone Wild wrote: »

If it's over €3000 there are tax implications for the borrower if they make no repayment efforts. If you pass away the executor of your estate can chase the balance of the loan.

If it's under €3000 you can give it as a free gift.

You need professional advice.

I shouldn't need professional advice for a simple hypothetical question - would it probably be ok to do so? Are you somehow an illegal moneylender if you do it? Even if you are charging little or zero interest.

People can pretend that in this hypothetical world that there is no credit risk etc. and that everything goes to plan. I am only saying that to prevent discussion going off on a tangent.

Note - I am not seeking any kind of definitive answer. I just wondered if anyone had gone through something like this and how they did it. It is a hypothetical scenario.

Irishphotodesk · 26-09-2020 7:37am

Donald Trump wrote: »

I shouldn't need professional advice for a simple hypothetical question - would it probably be ok to do so? Are you somehow an illegal moneylender if you do it? Even if you are charging little or zero interest.

People can pretend that in this hypothetical world that there is no credit risk etc. and that everything goes to plan. I am only saying that to prevent discussion going off on a tangent.

Note - I am not seeking any kind of definitive answer. I just wondered if anyone had gone through something like this and how they did it. It is a hypothetical scenario.

I have received 10k from my parents - as a dig out to help clear debts, it was given on a repay it when you can type of situation, never heard of any tax implications, I told my accountant where the money came from and what it was for.
I think I had to get a statement from my parents outlining the transfer for the accountant to have proof of where the money came from.

In the past my car died and my parents offered their car for me to use (I still have it ...11yrs on , ownership was transferred after a few weeks) again, I’m unaware of any tax implications, I haven’t had to make any payments and everything was declared through my accountant (I made sure to tell them at the time).

All of these events were a number of years ago, more stringent anti money laundering legislation has since been brought in.... it might be best for either lender or borrower to talk to an accountant and/or solicitor to get correct advice on how best to proceed.

CBear1993 · 26-09-2020 7:47am

.........the first pieces of advice you received above, some amount of pencil pushers and PC brigade on here.

People in this day and age still get “gifts” from their family members or parents upto all sums of money, even €100K.

You don’t need “legal advice”. I know first hand of friends who have went out and bought houses with big sums of “gifts” and the only back up they needed was a piece of paper/letter signed by the person giving the gift to say they are passing on these funds. And the solicitors and all parties involved, including banks like AIB were fine with this.

If it’s good enough for the top brass it’s good enough for you to give a gift in whatever way you wish to do so. Revenue never came near the people in question above.

Not everything has to be declared and putting your hand up in this country despite what a lot of board warriors on here would have you think, good neighbor law abiding citizens. Sure don’t they take enough money off of us!

bobbyy gee · 26-09-2020 7:48am

Lend money lose friend and money

Irishphotodesk · 26-09-2020 8:31am

CBear1993 wrote: »

...... the first pieces of advice you received above, some amount of pencil pushers and PC brigade on here.

People in this day and age still get “gifts” from their family members or parents upto all sums of money, even €100K.

You don’t need “legal advice”. I know first hand of friends who have went out and bought houses with big sums of “gifts” and the only back up they needed was a piece of paper/letter signed by the person giving the gift to say they are passing on these funds. And the solicitors and all parties involved, including banks like AIB were fine with this.

If it’s good enough for the top brass it’s good enough for you to give a gift in whatever way you wish to do so. Revenue never came near the people in question above.

Not everything has to be declared and putting your hand up in this country despite what a lot of board warriors on here would have you think, good neighbor law abiding citizens. Sure don’t they take enough money off of us!

The highlighted part above I find strange, are you aware of all of your friends dealings with revenue? Or is there a chance these friends may not be telling you every detail of their finances, just what they want you to hear.

I also take exception to your post suggesting the first posters are either PC brigade or pencil pushers....I’m neither.

CBear1993 · 26-09-2020 8:40am

Irishphotodesk wrote: »

The highlighted part above I find strange, are you aware of all of your friends dealings with revenue? Or is there a chance these friends may not be telling you every detail of their finances, just what they want you to hear.

I also take exception to your post suggesting the first posters are either PC brigade or pencil pushers....I’m neither.

ThTs why I said the first few, I thought yours was the only one that was a valuable contribution.

The Hound Gone Wild · 26-09-2020 8:48am

"CBear1993 wrote: »

the first pieces of advice you received above, some amount of pencil pushers and PC brigade on here.

People in this day and age still get “gifts” from their family members or parents upto all sums of money, even €100K.

You don’t need “legal advice”. I know first hand of friends who have went out and bought houses with big sums of “gifts” and the only back up they needed was a piece of paper/letter signed by the person giving the gift to say they are passing on these funds. And the solicitors and all parties involved, including banks like AIB were fine with this.

If it’s good enough for the top brass it’s good enough for you to give a gift in whatever way you wish to do so. Revenue never came near the people in question above.

Not everything has to be declared and putting your hand up in this country despite what a lot of board warriors on here would have you think, good neighbor law abiding citizens. Sure don’t they take enough money off of us!

?

You can receive 330k from your parents tax free over your lifetime.

Take advice from people like this and someone will end up committing tax fraud.

Professional advice.

26-09-2020 9:09am

I don't think anyone has addressed the OP's question yet. I don't know the answer myself for sure.

Donnie.

Isn't there a new peer to peer lending online company. Is that something similar, dont know if they have a banking licence?

I think it would help the OP (if I understand the OP correctly) if we ignore the relationship between the borrower and lender. Basically, could I loan you 50k at 5% interest and for you to pay me back over 3 years. Would you be able to claim the interest as a business expense and I claim it as income?

Bubbaclaus · 26-09-2020 9:13am

CBear1993 wrote: »

the first pieces of advice you received above, some amount of pencil pushers and PC brigade on here.

People in this day and age still get “gifts” from their family members or parents upto all sums of money, even €100K.

You don’t need “legal advice”. I know first hand of friends who have went out and bought houses with big sums of “gifts” and the only back up they needed was a piece of paper/letter signed by the person giving the gift to say they are passing on these funds. And the solicitors and all parties involved, including banks like AIB were fine with this.

If it’s good enough for the top brass it’s good enough for you to give a gift in whatever way you wish to do so. Revenue never came near the people in question above.

Not everything has to be declared and putting your hand up in this country despite what a lot of board warriors on here would have you think, good neighbor law abiding citizens. Sure don’t they take enough money off of us!

Who is "they"?

antoinolachtnai · 26-09-2020 9:23am

Lending money is a form of investment.

You can lend money if you want to. If you operate a money lending business then you likely need a licence but you should get professional advice if you do this frequently.

There is in general no tax implication if you receive repayments of the capital on a loan. However the interest is A form of income and subject to tax.

If you are paying back a loan received and used for business purposes you would expect to be able to get a benefit in relation to income tax.

If you dont pay back money loaned to you there is a capital acquisitions tax implication for you.

If you are owed money but not paid it back, you may be able to offset this loss against future capital gains tax.

If any of the above are a concern for you then you should seek professional advice.

I would strongly suggest having some form of loan agreement in place.

TheDalioLama · 26-09-2020 10:37am

The Hound Gone Wild wrote: »

?

You can receive 330k from your parents tax free over your lifetime.

Take advice from people like this and someone will end up committing tax fraud.

Professional advice.

+1.

The signed letter the above poster is referring to is something the lender seeks before approving the loan. It doesn't mean you will not owe inheritance tax down the line.

OP, I was pondering the same a while back and the below article was one of the better explanations I came across

https://www.google.com/amp/s/www.irishtimes.com/business/personal-finance/dealing-with-an-interest-free-loan-from-the-bank-of-mum-and-dad-1.3232993%3fmode=amp

Akrasia · 26-09-2020 10:46am

Irishphotodesk wrote: »

The highlighted part above I find strange, are you aware of all of your friends dealings with revenue? Or is there a chance these friends may not be telling you every detail of their finances, just what they want you to hear.

I also take exception to your post suggesting the first posters are either PC brigade or pencil pushers....I’m neither.

Revenue tend to leave private citizens alone until they die when their estate goes through ptobate. An unexplained asset such as a free house or large cash deposit will have tax implications for the estate and can delay the next of kin from receiving the proceeds of the estate for years

homer911 · 26-09-2020 12:42pm

The Hound Gone Wild wrote: »

?

You can receive 330k from your parents tax free over your lifetime.

Take advice from people like this and someone will end up committing tax fraud.

Professional advice.

Its currently €335k actually, it was increased in the last budget.
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds.aspx
If its a single lump-sum gift, then you are also allowed an additional €3k. If its up to €3k gift paid annually, then its completely ignored for the purposes of the €335k threshold. Only gifts over €3k are counted. The €3k annual allowance does not apply in the case of an inheritance

I was recently cajoled into lending a family member and her partner money for a deposit on a house (the parents were not in a position to help). As far as the bank and the solicitor was concerned it had to be a gift although informally (but in writing) its a loan with monthly repayments (which are being made). I am certainly nervous that the payments may stop at any time and the amount is significant.
From a tax pov, it created issues that I never found out the outcome of: the family member is not married to her partner and joint purchase of a property between unmarried partners where the capital contribution is different amounts to a capital gift from one to the other based on Revenue's rule of unrelated parties, and is theoretically taxable. Dont know if they found a way around this..

JustAThought · 26-09-2020 12:50pm

CBear1993 wrote: »

.........the first pieces of advice you received above, some amount of pencil pushers and PC brigade on here.

People in this day and age still get “gifts” from their family members or parents upto all sums of money, even €100K.

You don’t need “legal advice”. I know first hand of friends who have went out and bought houses with big sums of “gifts” and the only back up they needed was a piece of paper/letter signed by the person giving the gift to say they are passing on these funds. And the solicitors and all parties involved, including banks like AIB were fine with this.

If it’s good enough for the top brass it’s good enough for you to give a gift in whatever way you wish to do so. Revenue never came near the people in question above.

Not everything has to be declared and putting your hand up in this country despite what a lot of board warriors on here would have you think, good neighbor law abiding citizens. Sure don’t they take enough money off of us!

The problem is if you are caught. If you are a beneficiary in a will ( eg a non related inheritance from a different faMily member or non related person) you will find yourself filling out probate benificiary forms for probate and signing legally binding declarations to say that you have or have not been the recipient of cash gifts in the past x years. Inheritance and revenue tax have different allowances and requirements and tou can bet the forms are sent to both. GDPR gives you some hope as they cannot just casually call your bank for your bank details for the past 20 years ( like in the US) but if there is a paper trail - and bear in mind there is now an unaccounted for deposit threshold that has to be reported to revenue by the banks ( anti money laundering acts). You could find yourself quickly up to your eyeballs in a lot of issues if you did not manage it ‘properly’.

Donald Trump · 26-09-2020 3:15pm

Deleted User wrote: »

I don't think anyone has addressed the OP's question yet. I don't know the answer myself for sure.

Donnie.

Isn't there a new peer to peer lending online company. Is that something similar, dont know if they have a banking licence?

I think it would help the OP (if I understand the OP correctly) if we ignore the relationship between the borrower and lender. Basically, could I loan you 50k at 5% interest and for you to pay me back over 3 years. Would you be able to claim the interest as a business expense and I claim it as income?

Exactly. I'm not bothering about quotes from Shakespeare etc. (although thanks to people for making an effort to answer the question even if they did get sidetracked).

If I give someone a genuine loan interest free, or very small rate (and that will also distinguish it from a moneylender charging above legal rates) could/would I technically be doing something that could get someone into trouble?

The recipient might be my parent or child, or it might be the son of the prince of Nigeria who will give me a portion of his fathers USD 42,000,000,000 fortune once it is transferred. I'm not worried about that.

Donald Trump · 26-09-2020 3:24pm

Irishphotodesk wrote: »

I have received 10k from my parents - as a dig out to help clear debts, it was given on a repay it when you can type of situation, never heard of any tax implications

Yeah, this kind of thing.

I know it is an aside, but people mentioned CAT implications for the recipient if it is not paid back. I don't want to drag things off on a tangent as this is a new query, but if the person genuinely can't pay it back for a good while and Revenue come knocking on the door what would happen to them? If they haven't got the money to pay the loan back at that point in time would Revenue sting them for gift tax?

I remember a story in the paper a while back about a couple who scammed an old lady. I think it was in Donegal. She helped them out and they later tried to claim it was a loan rather than a gift. I'd imagine that they hadn't gone to revenue to pay their CAT at the time! I think they lost and were ordered to pay the money back. (obviously whether that happened or not is a different matter)

antoinolachtnai · 26-09-2020 9:33pm

If the borrower can’t pay the loan, how does the Revenue think they’re going to pay the CAT? In these situations the Revenue is typically trying to collect VAT and payroll taxes as its first priority.

The issue is most likely to arise where debt is restructured in some sort of arrangement with creditors.

Donald Trump · 26-09-2020 9:53pm

antoinolachtnai wrote: »

If the borrower can’t pay the loan, how does the Revenue think they’re going to pay the CAT? In these situations the Revenue is typically trying to collect VAT and payroll taxes as its first priority.

The issue is most likely to arise where debt is restructured in some sort of arrangement with creditors.

That was my question. Although Revenue aren't typically concerned with your ability to pay as long as you have something in your name that could be sold.

And I was also thinking about your second point but I'm not sure how that would be any different. Think of the likes of these people in the celtic tiger mansions who paid no rent for years and some of them then got write-downs to stay in their houses. I don't think they could be chased up for CAT. I'd know that if I was a lender and I wrote, say, 100k off a loan as part of a restructuring, I would want that to be the limit of what the borrower could reasonably afford. I'd be a bit pissed off if they could manage 70k write-off but I had to go to 100k so that they could pay Revenue 30k or the written off amount!!

Mooooo · 26-09-2020 10:02pm

Afaik if you give a loan and they pay it back in instalments or whatever way there is no issue. If they don't pay it back there may be gift tax or CAT liability on their side on the amount and if you charge interest I assume there may be some form of income tax on that. But if it's a straight forward you loan em 10k and they pay back say 200 over 50 months there would be no issue. A paper trail may be handy to prove reciever isn't getting a gift if audited I guess. If you have an accountant I assume they'd tell you exactly but that would be my understanding.

Heres Johnny · 26-09-2020 10:04pm

Watch judge Rinder if you want to see the real issues about giving a personal loan to friends and family!

Spanish Eyes · 26-09-2020 10:10pm

My view FWIW is give a loan if you want, but treat it in your head as a gift never to be repaid. Some will repay some won't. That's the reality.

Donald Trump · 26-09-2020 10:45pm

Spanish Eyes wrote: »

My view FWIW is give a loan if you want, but treat it in your head as a gift never to be repaid. Some will repay some won't. That's the reality.

That has nothing to do with the questions raised. Assume what you said to be true.

Now suppose that 10 years later the recipient wins the lotto and you are surprised to get repaid the principal and a small few quid extra thrown in to thank you and cover the pittance that it would have earned in the bank. Are you now an illegal moneylender?

I can pay the tax on the "interest" as if it was normal income I earned or got from an investment. I am not talking about that. I am asking about the strict rules concerning the situation I described. Not talking about P2P lending etc.

Donald Trump · 26-09-2020 10:48pm

Mooooo wrote: »

Afaik if you give a loan and they pay it back in instalments or whatever way there is no issue. If they don't pay it back there may be gift tax or CAT liability on their side on the amount and if you charge interest I assume there may be some form of income tax on that. But if it's a straight forward you loan em 10k and they pay back say 200 over 50 months there would be no issue. A paper trail may be handy to prove reciever isn't getting a gift if audited I guess. If you have an accountant I assume they'd tell you exactly but that would be my understanding.

So I wonder what would happen in the case of, as another poster described - a "pay it back when you can" type of situation....perhaps they'd have to start paying back a Euro a week or something when revenue come knocking! Or maybe Revenue would still charge them and you would have to fight Revenue to get the money back if/when it was repaid.

bobbyy gee · 26-09-2020 10:50pm

it's legal but not wise

Donald Trump · 27-09-2020 12:22am

bobbyy gee wrote: »

it's legal but not wise

So where is the technical line for you being a moneylender?

There must technically be some regulation. There are legal registered moneylenders. That implies to me that if you are not registered then you aren't supposed to be lending. Given that assumption, where is the line drawn? Is it on the amount, the rate, the relationship between the people?

So if you give the loan and you aren't registered then you could potentially be doing something you shouldn't be. I'm sure if you were sitting before a judge and had your evidence showing the scenario I proposed earlier, then you wouldn't get in serious trouble.

I wonder then where is the line between giving someone a loan and "investing" in them. For example, there are ways in the US where people "invest" in other people by paying for their education in exchange for a future return (with the person lending assuming full risk!).

27-09-2020 12:29am

Donald Trump wrote: »

How would a person go about giving a loan? I mean in the sense to do it above board. There are illegal moneylender so what differentiates the illegal moneylenders from those genuinely giving money to help out with the understanding it will be supposed to be paid back. (whether or not it eventually is is a different tangent)

I'm not talking about a fiver for the bus home. I'm talking about giving either a sizeable personal or business loan, say to a family member, zero or very low interest with a proper repayment schedule.

I say "very low interest" to mean if the recipient wanted to pay interest to the amount that the giver would have otherwise earned in a bank.

I'm not talking about collateral or credit risk. I mean whether it's strictly legal and would there be tax implications? Would it qualify as some sort of "gift" that they would be getting the money at well below market rate?

In the case of a loan to set up or improve a business, the recipient would be able to write off the interest paid to a normal bank.

You are supposed to be licensed to loan money. No license, no legal means. It's covered under the Moneylenders Act, 1933 and theres an offence of acting without one.

Whether a mate lending you the bus fare is included or not I'm unsure. The law is pretty black and white but there may be case law or amendment I don't know about.

Donald Trump wrote: »

there are ways in the US where people "invest" in other people by paying for their education in exchange for a future return (with the person lending assuming full risk!).

That's not usually a loan, generally that's part of an employment contract whereby they cover the costs and you either pay it back from future earnings or they get you in graduating. Presumable at better terms for them. It would be through the books, tax compliant and very clearly documented.

Donald Trump · 27-09-2020 1:04am

Niner leprauchan wrote: »

You are supposed to be licensed to loan money. No license, no legal means. It's covered under the Moneylenders Act, 1933 and theres an offence of acting without one.

Whether a mate lending you the bus fare is included or not I'm unsure. The law is pretty black and white but there may be case law or amendment I don't know about.

That's the kind of answer I was hoping for which was quoting an act. It kind of ties in with what I had assumed.

So it would seem that, technically, a person giving a "pay it back whenever you have it" loan is acting illegally. They would probably get away with it in front of a judge if it is a genuine case of a one-off to help someone rather than doing it as a business, but they are still doing something technically wrong.

27-09-2020 1:07am

Donald Trump wrote: »

That's the kind of answer I was hoping for which was quoting an act. It kind of ties in with what I had assumed.

So it would seem that, technically, a person giving a "pay it back whenever you have it" loan is acting illegally. They would probably get away with it in front of a judge if it is a genuine case of a one-off to help someone rather than doing it as a business, but they are still doing something technically wrong.

I'm going by an act from 1933 here. As I said above, new legislation or case law may have dealt with your question. Google may well have the answer at a more reasonable time tomorrow.

antoinolachtnai · 27-09-2020 6:32am

Niner leprauchan wrote: »

I'm going by an act from 1933 here. As I said above, new legislation or case law may have dealt with your question. Google may well have the answer at a more reasonable time tomorrow.

If the OP is going to be in the business of moneylending then you need authorization from the CBOI. By the sounds of it this is not the case in relation to the planned lending.

If the OP doesn’t want to lend the money for whatever reason then they just shouldn’t.

Donald Trump · 27-09-2020 10:43am

antoinolachtnai wrote: »

If the OP is going to be in the business of moneylending then you need authorization from the CBOI. By the sounds of it this is not the case in relation to the planned lending.

If the OP doesn’t want to lend the money for whatever reason then they just shouldn’t.

It was a hypothetical question vis-a-vis people giving one-off loans on, as another poster put it, "pay it back if/when you can" basis.

Suppose you give a family member 20k to set-up or expand a business. You don't really care in reality if you get it back as long as they give it their best effort. The recipient genuinely intends to make it work and says they will repay you and reimburse whatever tiny interest you'd have gotten on deposit.

So they put the loan on their business account. They pay you back and write off the interest as an expense. You get the money back and you pay tax on the interest received. You're not worried about what Shakespeare said nor what cases TV judges on the telly have had. But if someone inspects those accounts they will see that you loaned money and received it back. Are you breaking rules doing that?

We all know people who have done this. I am sure that plenty of people get "loans" from their parents or family to buy houses for example. There you are somewhat covered as a gift when you remain under threshold. But suppose you are above threshold. Does that single once-off loan, technically speaking, make the giver an illegal moneylender?

Jim2007 · 27-09-2020 11:48am

Donald Trump wrote: »

But if someone inspects those accounts they will see that you loaned money and received it back. Are you breaking rules doing that?

No. And it happens on a fairly regular basis in families, you are way over thinking it. It’s not a gift, because it is clearly separated and it is not money lending because you are no behaving as a money lender within the meaning of the act.

Henry Ford III · 27-09-2020 8:04pm

CBear1993 wrote: »

.........the first pieces of advice you received above, some amount of pencil pushers and PC brigade on here.

People in this day and age still get “gifts” from their family members or parents upto all sums of money, even €100K.

You don’t need “legal advice”. I know first hand of friends who have went out and bought houses with big sums of “gifts” and the only back up they needed was a piece of paper/letter signed by the person giving the gift to say they are passing on these funds. And the solicitors and all parties involved, including banks like AIB were fine with this.

If it’s good enough for the top brass it’s good enough for you to give a gift in whatever way you wish to do so. Revenue never came near the people in question above.

Not everything has to be declared and putting your hand up in this country despite what a lot of board warriors on here would have you think, good neighbor law abiding citizens. Sure don’t they take enough money off of us!

CBear1993 I've edited your bad language. Don't repeat that stuff. In addition you've insulted our subscribers and contributors - that is unacceptable.

27-09-2020 9:47pm

antoinolachtnai wrote: »

If the OP is going to be in the business of moneylending then you need authorization from the CBOI. By the sounds of it this is not the case in relation to the planned lending.

If the OP doesn’t want to lend the money for whatever reason then they just shouldn’t.

Jim2007 wrote: »

No. And it happens on a fairly regular basis in families, you are way over thinking it. It’s not a gift, because it is clearly separated and it is not money lending because you are no behaving as a money lender within the meaning of the act.

Can you guys point out where this is written? The 1933 act doesnt state only for profit or by a commercial entity

antoinolachtnai · 27-09-2020 10:16pm

Niner leprauchan wrote: »

Can you guys point out where this is written? The 1933 act doesnt state only for profit or by a commercial entity

It doesn’t state that no. It is understood. The Act is just part of a much larger complex of banking and consumer protection legislation.

You could look at

http://www.irishstatutebook.ie/eli/1993/si/167/made/en/print

Which may give some comfort in relation to the type of loan the OP is talking about.

But reading bits and pieces of legislation is probably not the best approach. The law about investing and lending is pretty complex. You won’t get a grasp of it by just reading legislation. Get professional advice if in any doubt.

Jim2007 · 27-09-2020 11:04pm

Niner leprauchan wrote: »

Can you guys point out where this is written? The 1933 act doesnt state only for profit or by a commercial entity

CONSUMER CREDIT ACT, 1995

27-09-2020 11:22pm

Jim2007 wrote: »

CONSUMER CREDIT ACT, 1995

Cheers.

I'm a wiser man now.

coylemj · 28-09-2020 10:37am

As Jim stated above, the Consumer Credit Act 1995 is now the legislation covering this area. It repealed (among other provisions) the Moneylenders Acts of 1900 and 1933.

Section 2 sets out definitions and a 'moneylender' is defined as follows:

“moneylender” means a person who carries on the business of moneylending, or who advertises or announces himself or holds himself out in any way as carrying on that business; but does not include—

........

(e) a person who supplies money for the purchase, sale or hire of goods at an APR which is less than 23 per cent. (or such other rate as may be prescribed),

The inclusion of 'carries on the business of moneylending' would appear to exclude casual loans among friends or family. And the cap on an APR of 23% would appear to provide an exemption for retail stores who offer easy payment options where the effective APR does not exceed that number.

Donald Trump · 28-09-2020 11:09am

coylemj wrote: »

As Jim stated above, the Consumer Credit Act 1995 is now the legislation covering this area. It repealed (among other provisions) the Moneylenders Acts of 1900 and 1933.

Section 2 sets out definitions and a 'moneylender' is defined as follows:

“moneylender” means a person who carries on the business of moneylending, or who advertises or announces himself or holds himself out in any way as carrying on that business; but does not include—

........

(e) a person who supplies money for the purchase, sale or hire of goods at an APR which is less than 23 per cent. (or such other rate as may be prescribed),

The inclusion of 'carries on the business of moneylending' would appear to exclude casual loans among friends or family. And the cap on an APR of 23% would appear to provide an exemption for retail stores who offer easy payment options where the effective APR does not exceed that number.

Wouldn't that last point mean that an actual "moneylender" could carry on business with a licence as long as they only charged 22%?

Woman needs a loan of a few hundred near Christmas to buy things. Unregistered moneylender gives her 1000 quid to buy presents and Christmas items and wants interest paid at a rate of 22% ... with a large penalty for early repayment! Perhaps they buy the goods and resell to her and "finance" that purchase at 22%. Although if they were doing the latter, they could also mark up the goods. So that would be a major loophole, no?

I know of a vulnerable person who was preyed on by legal moneylenders a few years ago. When people found out they gave her the money to stop the fucker coming to her door every week and rolling over the debt...which he had done a few times......she still got charged about 95% of the interest that she would have been charged over the remaining life of the "loan".

Technically he wasn't allowed to roll over the debt the way he had been doing it but he would have been allowed to give "new" loans once she asked. So there was no point complaining about it because it couldn't be proven.

coylemj · 28-09-2020 11:44am

Donald Trump wrote: »

Wouldn't that last point mean that an actual "moneylender" could carry on business with a licence as long as they only charged 22%?

As long as it was for the purposes of 'purchase, sale or hire of goods', yes. And my reading of the act says that would not cover loans where the lender hands over cash. Which is how the vast majority of moneylenders operate.

Donald Trump · 28-09-2020 12:43pm

coylemj wrote: »

As long as it was for the purposes of 'purchase, sale or hire of goods', yes. And my reading of the act says that would not cover loans where the lender hands over cash. Which is how the vast majority of moneylenders operate.

hmmm. So a dodgy character could register a business selling toys for example and then when Mary wants a Playstation for little Jimmy at Christmas he can sell her one at double the normal retail price under a buy-now-pay-later scheme where he charges 22% interest on top of the inflated price.

I don't like the sound of that loophole.

coylemj · 28-09-2020 12:55pm

Donald Trump wrote: »

I don't like the sound of that loophole.

You’re inventing nonexistent loopholes, moneylenders aren’t operating shoe or toy stores, they hand out cash. And the act has been in force for 25 years, don’t you think they would have closed off any such loophole by now - if it existed?

Donald Trump · 28-09-2020 1:15pm

coylemj wrote: »

You’re inventing nonexistent loopholes, moneylenders aren’t operating shoe or toy stores, they hand out cash. And the act has been in force for 25 years, don’t you think they would have closed off any such loophole by now - if it existed?

Same as how they closed off the loophole for the vulnerable person that I knew who was struggling and the man calling every week to collect the payment making it known how easy it would be to take on a new loan to clear the old one.

Of course, they had her sign whatever paperwork to say that she requested it rather than being a victim of predatory lending. But it didn't stop the vultures did it?

Plenty of people in poorer areas are victims of moneylenders around times like Christmas or Communions when there is pressure to spend money they don't have. Those moneylenders are breaking whatever rules so if caught, they could be prosecuted. What you described is indeed a loophole for a smaller local moneylender. I would say that the reason they don't do it is probably that they don't need to as they aren't caught anyway.

sbsquarepants · 28-09-2020 1:24pm

If you are considering lending someone money (in a personal capacity) and wondering how you will get it back in the event of non payment - don't lend it to them. You already know they aren't to be trusted!

Is it legal to give a "private" personal loan?

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