Struggling families forced further into debt to survive

PEOPLE struggling to make ends meet are being forced deeper into debt in greater numbers, with cases getting more complicated “by the week”.

This was the view of a broad network of consumer and financial support services who appeared before an Oireachtas committee on social and family affairs to lay bare the country’s debt problems.

Debt-ridden families who seek state help have clocked up on average €8,000 on their credit cards, the committee was told.

Most clients who contact the Money and Advice Budgeting Service (Mabs) also have outstanding bank loans of about €13,000.

Mabs business manager Anne Marie O’Connor said: “The average credit card debt for Mabs clients was just over €8,009 in 2009, compared with €3,833 in 2006.

Ms O’Connor hit out at callous debt collection agencies, claiming some firms were making calls seeking payment every hour while others phone people’s homes out-of-hours.

“This greatly adds to the vulnerability of clients who may have, for example, lost a job or suffered a loss of income through illness or family breakdown and are already making significant adjustments in all aspects of their lives,” she said.

Ms O’Connor said the profile of those seeking help had remained consistent. Some 63% were social welfare recipients, but mortgage problems had become a growing problem.

Acting Financial Regulator Mary O’Dea called for a more effective debt collection system based on successful models elsewhere.

“At present the law does not allow for debt collection firms to be regulated by any agency,” she told the Oireachtas Social & Family Affairs Committee.

The number of Mabs clients with mortgage difficulties has risen from 18% in 2006 to 27% this year.

The Free Legal Advice Centres (FLAC) said some were being hounded by companies who were reckless in their lending practices and exploited “a very open field” of regulation outside the formal banking sector.

John Kelly, head of statistics at the Central Bank, said the proportion of personal debt in Ireland exceeded every other eurozone country.

Tony Quilty, representing the Health Service Executive’s specialist social inclusion services, said community welfare officers were being swamped by requests for emergency support payments. “People who obtained substantial mortgages in good times, and in good faith, and who sometimes may have consolidated other debt into the mortgage as part of an equity release, now find that they have no means of meeting their obligation to pay. The volume and complexity of cases appears to rise by the week.”

Mr Kelly said the Central Bank had seen some positives in relation to the level of credit card debt, which appeared to be falling. This was because a lot of SSIA money had gone straight to paying off credit cards.

However, Paul Joyce, senior policy researcher with FLAC, said legal problems for those defaulting on debt apart from mortgages would hit the headlines this year.

“The focus has been principally on mortgage debt, as the State confronts the dilemma of supporting banks. However, FLAC anticipates, from observing the pattern in lending over the years, there will also need to be much greater concentration on the difficulties of borrowers in other personal debt in the year ahead.”

“Firm statistics are hard to access, but we believe there is clear evidence of a growing problem,” he said.