‘Debt trap’ is recipe for undermining society
Using insolvency laws to rid people of this terrible yoke will do our country a service
But the consequence of the Central Bank’s Code of Conduct on Mortgage Arrears is that distressed home owners have found themselves in a state of stasis, where nothing meaningful is happening.
The Code of Conduct on Mortgage Arrears was introduced by the Central Bank in early 2010 as a way of giving some protection to home owners who had fallen into arrears on mortgage payments. It made sense that the State, through the Central Bank, would force lenders to behave in a responsible manner in their dealings with distressed borrowers.
The primary protection of the Code was to prevent lenders from instituting legal proceedings seeking repossession of the family home. That restriction meant that where a borrower was co-operating the lender had to wait 12 months before it could go to Court.
It is obvious that the Central Bank hoped that during this time responsible deals would be worked out by borrowers and lenders so that repossession was not necessary. The alternative was and continues to be home repossessions on a scale never seen in this country.
But the actual consequence of the code is that distressed home owners have found themselves in a state of stasis - where nothing meaningful is happening. This vacuum is in nobody’s interest. Families are forced to live in suspense, not knowing from month to month where their futures lie. The only thing these families really know is that without some intervention they cannot pay their debts and will be forced to live their lives in a form of slavery to the very banks that have done such damage.
This is so very bad for our country.
Having such a large demographic caught in a debt trap is the recipe for social exclusion and for undermining society itself. Why or how should people have faith in a system which seeks to turn them into serfs? How can people, forced to live just to pay unmanageable debts, be expected to behave as citizens. In reality, the events and responses of the last half decade have destroyed faith in society and have set us against each other. The ramifications here are enormous.
On the other hand the beneficiary of the inaction has been the financial world itself. The vacuum allows it go on living in a make believe world where property prices grow by double digit percentiles year on year and where ordinary people can and are happy to repay vast sums of money. We are happy in this Alice in Wonderland existence to sacrifice our children’s’ future to pay billions to unknown foreign investors. We are happy to hope that somebody will someday come to our rescue.
This make believe world is, in truth, a nightmare and the time has long since come for us to wake up from it.
So the new Code of Conduct and the repeal of the Gunn judgement will make it far easier for banks to repossess homes. The protections are gone and we will be at the mercy of the bankers!