AFTER A TOTAL lock-down for some years, the advertisements enticing us to buy cars on HP or new homes with a mortgage are creeping back. The reality for most people is that they need credit to buy these big goods. If all goes well, they will be able to get that credit at an acceptable rate and pay it back in an orderly and affordable way. That’s the best case scenario. However, what happens when the happy-ever-after story doesn’t happen, when things go wrong?
In fact, the protection available to consumers when they take out credit is still quite inadequate. Current systems take little account of the fact that people getting credit are not the experienced equals of the institutions making that credit available. What protection exists is difficult to understand and redress systems are often frustrating, opaque and expensive for the consumers who need them. The result is that many never understand their rights in the first place and, very often, do not have adequate standards of redress when things go wrong between them and the credit provider.
An analysis of consumer credit protection
Over the years, FLAC has had dealings with people who were bewildered or frightened or angered by these inadequacies. As a result, it has put together its own analysis of consumer credit protection in Ireland, resulting in a substantial report entitled ‘Redressing the Imbalance’. To our knowledge, this is the first report which examines the full range of laws, regulations, codes and complaints systems governing consumer credit protection in Ireland from a consumer perspective. Consumers who had used the complaints system of the Financial Services Ombudsman were interviewed for the report, as were money advisors with MABS, and officials of the various relevant oversight and monitoring agencies.
The discussion with those who had looked for justice from the Financial Services Ombudsman was instructive. The Ombudsman’s office is free to consumers and is funded by the financial services industry. The report found that both consumers and money advisors interviewed had, by and large, found the Ombudsman’s complaints process to be demanding, impersonal, legalistic and convoluted. People were upset that they were not given the opportunity to actually ask a straight question of the financial institution that they believed had wronged them. Few financial institutions agree to mediation of their complaints and, by comparison to the similar UK office, there is a low success rate for consumers’ complaints.
While the concept of an Ombudsman’s office to deal with financial complaints is a good one, it is clear from the report that this office could now do with some independent evaluation, 10 years into its functioning. It is also clear that its systems need to be more transparent and more accessible to consumers – and that the current appeal from the Ombudsman’s office to the High Court is unnecessarily intimidating, expensive and difficult and should be changed.
Ireland took the most cautious approach possible
It is depressing that despite all the damage that recklessly easy and plentiful credit did during the bubble that we thought was a boom, the system remains much as it was during that bubble. Responsible lending principles which were being discussed ten years ago in the overarching European Union legislation which governs us in Ireland were thoroughly watered down. A timid regime in Ireland took the most cautious approach possible to implementing EU law.
Simple protections are missing for a wide range of credit. There is no stress test to assess the suitability of a person who signs a Hire Purchase Agreement for the money they are being offered. A person in arrears with a hire purchase agreement is not entitled to the admittedly weak protection of the Central Bank’s Consumer Protection Code. Nor are credit unions bound by that Code when one of their borrowers gets into arrears.
A responsible credit regime under which consumers are informed, protected and can get redress is key to minimising the level of consumer indebtedness that has crippled many in our society and which has been recognised as a scourge as Ireland aims for recovery. Yet no steps have been taken throughout this recession to plug the many gaps in the scheme of consumer credit protection. It is high time that our government and the European Union took action to put a fair system for protection in place for consumers of credit and other financial services.
Noeline Blackwell is the Director General of FLAC (Free Legal Advice Centres) an organisation which campaigns for the equal right of access to justice for everyone.
Column: 8 Financial Rules of Thumb