One debtor sent to jail every day since bank bailout deal

AT least one person was sent to jail every day because they were unable to pay credit card bills or meet loan repayments to banks, credit unions or other lenders in the months following the Government’s rescue of financial institutions.

Despite banks promising a more flexible approach to loan defaulters, there was a rise in the rate of imprisonment for debtor offences after the state guarantee was introduced just over a year ago.

Figures show 32 people were handed down sentences in the run-up to Christmas last year because of inability to meet loan repayments despite banks getting a capital injection of €5.5 billion in December.

The official Department of Justice figures show the problem of spiralling debt led to 306 cases of imprisonment last year and 186 cases up to June of this year – the latest date for which figures are available.

This does not include the estimated 25,000 cases of homeowners in mortgage arrears.

In a written response to a Dáil question Justice Minister Dermot Ahern said: “The average length of sentence imposed on each offence was 27 days. The average length of sentence served was 20 days. Some persons paid their debt while in prison which would automatically release them from their sentence.”

He said: “The number of such persons held in custody at any one time is a tiny fraction of the overall prisoner population.”

Despite an almost doubling of the rate of imprisonment in the first six months of this year compared with 2007, Mr Ahern said there is no one in custody due to a failure to meet repayments.

Cases are expected to reduce because of a High Court ruling in June that places the onus of proof on banks that a defaulter has refused to pay.

However the laws were last night described as outdated and the Government was urged to bring in legislation to ensure debt cases are not dealt with in the courts and defaulters are not sent to jail.

The Free Legal Advice Centre (FLAC) is calling for new laws to put formal debt management plans between banks and debtors on a statutory footing.

Senior policy researcher at FLAC, Paul Joyce, said the current laws are “woefully inadequate in terms of their appropriateness for 2009” and are “not adjusted to the reality of our consumer credit society”.

He said: “A lot of the bubble was based on consumer spending. Where did the people get the money? They borrowed it.”

The revised Programme for Government agreed between Fianna Fáil and the Green Party last month promised to “create a new system of personal insolvency regulations”.

But there are no concrete plans to do so and legislation has not been drawn up in the area.

The Irish Bankers Federation said it has developed a new protocol on debt management which requires lenders to work with borrowers.