But who will rescue indebted consumers?

13 October 2008

Now that a rescue package is being put in place for lending banks in Ireland and worldwide, FLAC (the Free Legal Advice Centres) has today urged legislators to step in on behalf of borrowers.

The non-governmental organisation which campaigns for consumer debt reform has called on the Government to take measures to prevent the repossession of family dwellings as a result of the recession.

"Despite the guarantee being offered to banks, indebted consumers in arrears with their mortgages will continue to be brought before the courts by lenders seeking repossession of the family home" said FLAC's Paul Joyce. "Some of these borrowers may be numbered amongst the 23,500 or so employees made redundant in the first 8 months of 2008. Others will have seen their small businesses collapse with catastrophic consequences. Still others were lent money in dubious circumstances where their ability to repay was at best cursory and at worst non-existent, so that regardless of economic circumstances, problems were always likely to occur".

FLAC noted that while lenders are being given a safety net, vulnerable borrowers are left exposed when it comes to repayment. According to Mr. Joyce "If emergency legislation can be introduced to prevent the collapse of the banking system, then it can be introduced to prevent the eviction of taxpayers. If a court can see that a borrower cannot repay because of a change in financial circumstances beyond his or her control, the court should have a right to put a moratorium on any right of the lender to enforce its security. But if it can see that a loan was reckless in the first place, the court should have the power to re-schedule it. This could be made a condition of bailing out the banks."

FLAC also pointed out that firm data on mortgage arrears and repossessions is difficult to access so that it is hard to establish the true extent of the problem. FLAC called upon the Financial Regulator, the courts, and the lending institutions to work together to provide a more complete picture.