|GO TO JAIL – In Ireland, debt default is landing hundreds of consumers in jail. Hard to believe these headlines are from national newspapers in the 21st Century. More face prison in economic downturn but one judge takes 'non-committal' approach to bad debtors.
|COURTS JAIL 276 PEOPLE FOR DEBT DEFAULT
By Seán McCárthaigh, Irish examiner, Friday, January 30, 2009
An alarming 276 people were jailed last year for failing to repay loans to banks and other financial institutions.
The Irish Human Rights Commission (IHRC) has warned more people will face imprisonment for defaulting on loan repayments due to the worsening economic climate.
Figures from the Irish Prison Service confirmed 276 people were jailed last year for failing to repay loans. It is estimated that loan defaulters account for just over 3% of all offenders imprisoned each year.
The average sentence was 27 days. However, one person spent 90 days in prison last year for the non-repayment of a loan. People who are jailed are automatically released if they settle their debt while in prison.
Justice Minister Dermot Ahern confirmed 276 people (256 men and 20 women) were responsible for 306 debt offences during 2008 as some had been imprisoned on more than one occasion. In comparison 201 people were jailed in 2007 and 194 in 2006 for the non-repayment of debts.
Offences include the failure to meet loan repayments to banks and other financial institutions including credit unions as well as the failure to pay maintenance, hire purchase agreements and creditor loans. In addition, more than 1,000 people are jailed each year for refusing to pay fines imposed by the courts.
IHRC president Dr Maurice Manning has pointed out that the European Convention on Human Rights stated that nobody should be deprived of their liberty because of their inability to fulfil a contractual obligation.
Earlier this week, the IHRC was granted permission to be legally represented in a forthcoming High Court case in which a Monaghan woman is facing a jail term for the non-payment of a credit union loan. The single mother-of-two is trying to halt a district court ruling which sentenced her to one month in prison for failure to repay a credit union debt of €5,800.
“The IHRC considers this case raises an important issue around imprisonment for debt which in these worsening economic times is likely to be an issue which will affect more and more people,” said Dr Manning.
The IHRC noted that the UN Human Rights Committee had called on the Government last year to ensure that its laws are not used to imprison a person for their inability to fulfil a contractual obligation.
The woman’s solicitor, Colin Daly, said his client’s proposed committal to prison ran contrary to her natural and constitutional rights as she was being given a criminal sanction for a civil matter.
“Ireland is one of the few countries left in the world where you can be sent to prison for failing to pay a debt,” said Mr Daly. “We’re not trying to make it more difficult for creditors to get money from defaulters, but to have a system that is more humane and more effective.”
Legal experts claim the woman’s challenge to legislation dating back to 1926, if successful, could set a precedent which would remove the risk of loan defaulters being sent to prison in future.
Anglo Celt, 14th January, 2009 12:00
JUDGE TAKES ‘NON-COMMITTAL’ APPROACH TO BAD DEBTORS
Judge Sean MacBride will be using committal orders sparingly, he has stated, and only in cases where debtors have the means to pay rather than where they are being sought against people who have fallen on hard times, writes Sinead Hogan.
The judge made his comments at a district court sitting when an application was made by Cavan Credit Union for a committal order against a debtor.
“Sending people to prison for debts is a relic of the Victorian era,” said Judge MacBride. “Committal orders can be used sparingly, where people have assets and aren’t paying out of obtuseness. Most cases are of people falling on hard times.”
Speaking about financial institutions’ attitude to lending during the years of the Celtic Tiger, he said that “money was thrown around like confetti at an Italian wedding” with little or no questioning as to whether people could repay it. “If the banks are owed so much money, they have to take the hit... Financial institutions can’t expect the courts to bail them out,” he said.
Speaking about the application in hand, Ms Lorraine Tighe, witness for Cavan Credit Union, pointed out to the judge that she had spent the last three and a half years chasing the client. “The last thing I wanted to do was come to court. We would have accepted a minimum payment,” she said, adding that the debtor did not co-operate.
Judge MacBride adjourned the application for six months, telling Ms Tighe that if the debtor was not making a payment by then, he might entertain her.
DEBT SENTENCES - LENDERS HAVE QUESTIONS TO ANSWER TOO
Friday, January 30, 2009
The grim prospect of another 120,000 workers losing their jobs led to the recognition, in the framework document for national recovery, that people will need help in meeting their obligations to lending agencies.
Many families, who gladly met all of their commitments while their jobs were secure, may need help to servicing mortgages so they can stay in their homes.
The Government proposes a statutory code of practice for troubled mortgage holders, and will also review its mortgage interest scheme. The initiative, administered by the Department of Social and Family Affairs and the HSE, will provide short-term support for mortgage holders with interest payments.
It is a practical recognition that the vast majority of people who borrow money do so in good faith and fully intend to meet their responsibilities. It is a good proposal and hopefully it will help protect some of us from one of the worst consequences of losing a job.
However, it will come as a great surprise to many people to learn that nearly 300 people were jailed last year for not repaying loans to various banks and credit unions. The Prison Service tells us that 276 people were imprisoned in 2008 for debtor offences. Many, many others will have been through the courts over unpaid debts without being sent to prison.
Reading the words “bank” and “jail” in the same sentence may send a frisson of excited anticipation through a society confronting the nuclear winter caused by the profligacy and greed of our financial institutions but, sadly, it is the banks’ customers who are availing of our prisons’ hospitality. At our expense, naturally.
Certainly some of the defaulters deserved a jail sentence, but how many of those people should never have been lent the kind of sums the banks were throwing at virtually anyone with a pulse at the height of the property epidemic?
Just this week we saw reports from a Dublin court where a young couple with very ordinary, run-of-the-mill jobs and everyday incomes were in trouble because they defaulted on mortgage repayments of over €3,000 a month.
More than €3,000 a month after tax, after feeding and clothing yourself, after paying credit card bills and the car loans? Though the couple did seek the loan, surely the bank had an obligation to take a realistic perspective and reject any application that so extended a couple on a moderate enough income.
This same story is at the root of much of the misery unfolding all around us, and it illustrates how susceptible we all are to allowing greed be the driving force in our decision-making process.
Greed on the banks’ behalf to secure the business, and greed on the borrowers’ parts by imagining that the unattainable was just a mortgage away.
The lessons are obvious, but will we learn them and try to ensure that we put laws in place that will mean that reckless lenders will get to share a cell with reckless borrowers?
In a country where individuals at the very centre of casino banking and insider loan scandals strut around looking “tanned and fit” it might not be a good idea to hold your breath.
Created: 30/01/09. Last changed: 04/02/09.
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