One third of credit card holders in Ireland are being charged higher rates of annual interest that have been out of date since a statutory limit was put in place 2022, the Central Bank of Ireland has warned.
In a letter sent to the chief executives of regulated firms on Friday, the Central Bank said a recent review had identified “weaknesses and gaps” in supports for credit card lending customers in the Republic.
“Of particular concern”, it said, is the large proportion of credit card customers who are paying annual percentage rates (APR) above 23 per cent.
The charging of annual rates higher than 23 per cent was outlawed with the passage of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022, which made 23 per cent the statutory maximum rate a lender can charge.
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The Central Bank review found some 32 per cent of credit card accounts in the Republic, around 400,000, are still on APRs higher than the 23 per cent limit.
It also found lenders had gone to “minimal effort” to inform customers of the implications of remaining on higher APRs and “to meaningfully promote switching to lower APR credit cards”.
This behaviour indicates that “some firms” are not acting in the best interests of their customer”, the Central Bank said.
“On foot of this finding, the Central Bank is telling the relevant lenders to now engage with these customers to make them aware that they are on this higher historical rate, that lower rate products are available, and the steps for the customer to take to see if one of those products would better suit their needs,” the regulator told chief executives.
“Given the minimal efforts to date to inform these credit card customers about alternative options, the Central Bank also now expects these firms to assess the extent of actions taken, and information provided, since November 2022 to customers of all retail credit products where there are options to switch, and to take further action where necessary.”
In a statement, Colm Kincaid, director of consumer protection at the Central Bank, said there is no need for credit card customers to wait until they are contacted by their lender. “Check your credit card statement now and see if your firm, or another, can offer you a better rate,” he said.
“For many of us, this is the biggest spending time of the year, and credit cards are an important part of the market in offering consumers payment choices – but don’t leave yourself paying more than you have to.”
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