Free legal advice centre demands tough laws to tackle reckless lending

RECKLESS lending which has left thousands in debt and seriously damaged the economy should be curbed through tough new consumer codes and laws, a new report has recommended.

In a comprehensive study on over-indebtedness, FLAC (Free Legal Advice Centres), urges the Government to consider introducing new laws to tackle irresponsible lending head-on.

In its report, To No One’s Credit, launched yesterday, FLAC outlines how the South African government created an agency to implement new consumer laws to get tough on lenders. Under the legislation, a court may declare a credit agreement to be reckless if the credit provider failed to assess the borrower and the risks involved with the loan.

While the report acknowledges this would likely be an unpopular notion with lenders – and some borrowers – legislating for irresponsible lending in Ireland in a manner similar to South Africa would concentrate the collective mind of the credit industry when lending money in the future.

According to FLAC, we need only look at some of the arguably very dubious housing loans made by subprime lenders in recent years, some of which have culminated in the loss or repossession of family homes, to see what havoc reckless lending can cause.

The Financial Regulator, too, according to FLAC could take a more active role this regard, and is criticised for its seemingly mild approach to enforcing the Consumer Protection Code which contains similar – although not statutory – provisions.

The report also signals concern about the new status of MABS – a State-funded agency to support people in debt – which now falls under the umbrella of the Citizens Information Board, saying it is not clear exactly what implications this will have for the future development of money advice.

Another finding of the comprehensive report which surveyed people in debt, is that a busy district court sitting in public is not the place for a decision to be made on a debtor’s ability to repay a debt by instalments.

It points out that, under the current system, if ever debtors did turn up as they are supposed to, courts would end up in session late into the evening.

“In a very real sense, therefore, the current system depends for its survival on the nonappearance of debtors, a fundamental contradiction in terms,” it states.

Emergency legislation around debt and imprisonment is set to be debated in the Seanad tomorrow.