Lenders should face up to irresponsible deals

28 October 2008

Better legislation and money advice needed to curb reckless lending

Lenders who offered loans to people who clearly could not repay them should face up to their part in the current credit crisis, says FLAC (Free Legal Advice Centres). The government should legislate to protect vulnerable borrowers and prevent a further spiral into homelessness, unemployment and ill health.

RTE's Prime Time programme tonight which featured FLAC Director Noeline Blackwell showed that in the current downturn, vulnerable borrowers are left exposed on their repayments. The non-governmental organisation, which campaigns for consumer debt reform, has called on the Government to take action to prevent such drastic outcomes as the repossession of family dwellings.

As illustrated in the RTE programme, loans were issued where the lender clearly should have known that the borrower could not meet repayments. These included situations where monthly repayments far exceeded monthly income.

"The key question is: 'What did the lender think would happen here?'" asks Ms. Blackwell. "People who were offered sums of money with no prospect of affording the set instalments are now faced with repossessions and even imprisonment. The lenders' speculation that property prices would continue to escalate did not pay off. However, this gamble has also had a hugely negative impact on society - particularly home owners - while lenders seem to escape all responsibility."

Giving the courts more options to put moratoriums on loans or to reschedule them will provide a more practical solution to many over-indebted people, according to FLAC. The organisation also echoes a call by Minister Mary Hanafin made today for increased access to expert advice to head off money problems before they get to a critical stage.

"The bottom line for FLAC is that if emergency legislation can be introduced to prevent the collapse of the banking system, it can be introduced to prevent the eviction of taxpayers."