Flac's proposals on a new regime for dealing with debt are timely, writes CAROL COULTER, Legal Affairs Editor
LAST WEEK Morgan Kelly wrote in this newspaper that the recklessness that impelled banks to lend hundreds of millions to builders also led them to fling tens of billions in mortgages, car loans, and credit cards at people with little ability to repay.
Other credit institutions lent smaller amounts, but face similar problems with repayments, especially as people lose their jobs or have their incomes drastically reduced by wage cuts, short-time working and tax increases.
Yet the machinery for debt management and, ultimately, the enforcement of debt, has not changed for over 60 years.
The legal rights campaigning organisation, Flac (Free Legal Aid Centres), has in recent years been campaigning for reform of the law and of practice concerning debt enforcement, pointing out that a system that sees over 200 people a year jailed for the non-payment of debt is devastating for the people involved, expensive for the State, and ineffective for the lenders.
In addition, this system has opened Ireland to international criticism from human rights bodies, with the UN Committee on Human Rights drawing attention three times to its view that imprisonment is an inappropriate response to debt.
Two weeks ago the High Court ruled unconstitutional section 6 of the 1940 Enforcement of Court Orders Acts, permitting a person to be jailed for debt without them being heard, as breaching a person’s rights to fair procedures and personal liberty.
The system for enforcing debt is examined in Flac’s latest report on the subject, To No One’s Credit, which examines it from the point of view of the debtor. It is based on a survey of clients of the Money Advice and Budgeting Service (Mabs), with a questionnaire drawn up by Flac and the interviews conducted by Mabs staff.
The report says this research “gives a voice to the views and experiences of people about whom assumptions are made that often have little foundation in fact”.
Among the findings is the fact that three out of four of those surveyed failed to understand the language of the legal documentation served on them. The overwhelming majority did not understand the consequences of the court proceedings being threatened by the lender.
They also generally had little interaction with court officials or staff, with only 14 of the 38 having any contact with them. The court was not seen as a source of assistance or advice in these circumstances.
Most of the debtors felt they had no option but to allow the process run its course, though the instalment system is meant to assist people to pay. However, often instalments are set without the person being present in court or their financial circumstances being known to the court, so they can be unrealistic and of no assistance in resolving the debt problem, leading inexorably to default and the threat of imprisonment.
Many of the debtors had problems like illness or family difficulties at the time. They were ashamed and fearful of going to court for a public airing of their financial problems. When arrest and imprisonment did take place the effects were traumatic for the whole family. The average time spent in prison for debt is 27 days, and the person emerges still owing the debt. While the intervention of Mabs led to the resolution of the problem for many of those who attended the service, if often came very late in the day.
Flac makes a number of proposals to deal with the situation of those who find themselves facing instalment and committal orders.
But this is only part of the debt enforcement picture, which will be visited by the Law Reform Commission in a consultation paper in the autumn. Following a process of consultation, a final report will be issued which will contain proposals for law reform. It cannot come too soon.