Cash-strapped consumers warned on verbal loan deals
Published 16/08/2010 | 05:00
DEBT-ridden consumers have been urged to avoid verbal agreements with credit institutions after several reneged on such repayment deals and demanded more cash.
The Money Advice and Budgeting Service (MABS) is advising people facing personal debt to only negotiate written deals with lending institutions -- and to approach their creditors at the earliest possible stage.
The warning came as MABS confirmed it was dealing with so many people facing financial problems that it had posted sample debt and financial statement letters on its website.
MABS has recorded an almost 11pc hike in the number of people seeking financial advice in the first quarter of this year, compared to 2009.
But the scale of Ireland's consumer financial crisis is borne out by the fact that, compared to the first quarter of 2008, the agency has recorded a 42pc hike in the number of people seeking help in just two years.
Household debt in Ireland is now estimated at more than €100bn, with Ireland second-highest in Europe if debt is calculated as a percentage of gross national product.
Incredibly, Ireland's household debt soared by more than 600pc in the 10 years between 1995 and 2005.
Since 2005, Ireland has gone from having one of the lowest per capita credit card debt ratios in Europe to one of the highest.
MABS official Michael Culloty said it was vital that people facing financial difficulties adopted a unified approach to all their debts -- and exercised caution when prioritising one debt at the expense of another.
A substantial number of cases involve consumers who used credit cards as a source of temporary finance but were unable to make repayments.
"Only deal with them (institutions) in writing because then you have evidence of agreements or whatever," he said.
"People need to sit down and make out a realistic budget. They also have to get in touch with all their creditors and negotiate with them.
"Try to plan your way through this. The banking industry has to take responsibility for some of it.
"Individuals were responsible, the culture was responsible but the banks were also responsible," Mr Culloty said.
"We all have to take our share of the responsibility. The banks exercising bully-boy tactics is not appropriate in this climate.
"What people should do is put everything in writing -- explain their scenario, make out their budget and outline what is realistic. Talking to creditors over the phone is not the wisest policy."
MABS stressed that judges were taking a reasonable view of debt issues and making a clear distinction between those who "cannot pay" and those who "will not pay".