Credit & Debt

It is almost impossible to live in our society and economy without availing of financial services. Borrowing money is the main way that most people buy or rent accommodation, a means of their own transport, to go on holiday or to purchase a very wide range of goods and services. Cards may be taking over from cash but if you cannot repay what you have borrowed, it’s all debt in the end. 

Our economic model encourages the borrowing of money, you might say it relies upon it. If you had to save up all the money needed to buy a house, to buy a car or for any other major purchase, it would take a lot of saving. There would be less economic activity as a result; fewer businesses and fewer jobs.  

A market economy relies on lending and borrowing and related financial services to create growth. In buying now and paying later, there are costs for consumers. The obvious cost is paying interest on the money that has been borrowed, providing a profit for the creditor that has lent the money. A less obvious cost is that the borrower may not be able to repay, often due to changes in personal and financial circumstances outside his/her control – unemployment, business failure, inadequate income, illness and relationship breakdown – and other unforeseen events, the pandemic and adverse economic cycles being recent examples.

Since the consumer is often vulnerable, creating a stronger consumer protection culture is therefore the key FLAC guiding principle in the areas of credit and debt.  

When availing of credit and related financial services such as payment protection insurance, consumers must be entitled to transparent written information and protection against excessive rates and charges and unfair practices. Independent sources of reliable information and effective and free to use complaints mechanisms must be in place for consumers. Providers must be vigilantly regulated by the State and meaningful sanctions must be imposed when standards are breached. 

The debt side of this policy area presents a wider range of problems and challenges and resolutions are more difficult to achieve. During the credit boom and then debt bust of the first decade of the millennium, our bankruptcy, insolvency and debt enforcement laws were hopelessly outdated and ill prepared for what was to come. Clear warnings from FLAC in 2003 and 2009 reports (see below) that researched more progressive European and UK models and made substantial recommendations for change, fell largely on deaf ears.  

Some tangible progress has been made in the past decade, but there is still a long way to travel. Central Bank codes setting out procedures for credit providers to follow in arrears cases are in need of greater balance. Our personal insolvency legislation introduced in late 2013 has struggled to deliver sufficient numbers of resolutions and the required reforms to make it better fit for purpose are slow to arrive. The significant range of services in place to assist borrowers in difficulty are not properly streamlined and there is still insufficient mechanisms in the courts to establish ability to pay. 

FLAC has published three major reports concerning debt and credit issues. These are: 

An End Based on Means – A Report on how the legal system in Ireland treats uncontested debt cases with an examination of alternatives and proposals for reform (May 2003) 

To No One’s Credit – The Debtor’s experience of Instalment and Committal Orders in the Irish legal system (June 2009) 

Redressing the Imbalance – A study of legal protections available for consumers of credit and other financial services in Ireland (March 2014) 

In addition, FLAC has provided detailed submissions to Government and Oireachtas members on many legislative initiatives in these areas over the past twenty-five years, leading to significant reform in a number of instances. Examples of recent submissions include: 

• Submission In response to the Central Bank of Ireland Consultation Paper (CP 146) – The mortgage measures framework review, March 2022. 
• Submission to Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach, on the General Scheme of the Consumer Credit (Amendment) Bill 2021, September 2021. 
• Submission to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach on Pre-Legislative Scrutiny of the General Scheme of the Consumer Protection (Regulation of Retail Credit Firms) Bill, March 2021.