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Sometimes attack is best form of defence

In recent times we, as a people, have bowed down -- we have shown no real or sustained resistance. There is a price to be paid for such acquiescence -- unemployment, emigration, despair, the list goes on.

It is said that the people are angry but there is no evidence of this. Why? The people are paralysed by fear.

The brave generation in any society -- the new generation whose role is to foster and to create, to build and to nurture, is the engine of any nation. From its ranks will come the parents and the teachers, the entrepreneurs and the artists. It will define the future -- that human link between the young and the old.

In Ireland in 2010 that brave generation is burdened by unimaginable debt, both public and private. The public debt is well documented and efforts are being made to bring it under control. But the private debt is, in the main, being ignored. This was the debt that a generation took on, not to build palaces, but to buy modest homes in which to raise its children.

We must accept that a significant part of the debt taken on by thousands of young men and women can never be repaid. The current moratorium on taking proceedings against defaulting borrowers is typical of government policy -- it is debilitating fudge which ignores the problem in the hope that it will go away. But the debt will not go away. It will grow and as it grows it will stifle and restrict our people and our nation. We are sitting on a social and economic time-bomb which, in the interest of the people, must be defused.

Recently, the lenders have started to increase interest rates. This can only be the beginning. The Financial Regulator claims that the lenders are already fleecing borrowers so as to improve their own self-inflicted balance sheets. And it gets worse. It is sickening to think that some of the homeowners who helped rescue our banks in the biggest single financial bailout in the history of the State are now facing the prospect of having their homes repossessed by the very same lending institutions.

Is there anything that can be done? Yes.

Firstly, we must admit the problem in all its reality. We must realise, or be brought to realise, that the problem is, in truth, a national, even an international problem and it's only when it is dealt with justly and effectively that our economy can grow and our people can begin to thrive.

Secondly, we must commit to ourselves as a people. By coming together there is no problem that cannot be solved. In fact the very act of coming together, in whatever form, will release the courage and energy we so badly need. We must not trust others to fight our battles. We must fight them ourselves. If we rely on the EU or Fianna Fail to come to our assistance, we will be bitterly disappointed.

Thirdly, we must act intelligently. You can make a representation to your local county councillor or TD, but will it be effective? You can drive a lorry through the front gates of Leinster House, but when the dust settles, the problem remains.

At the foundation of our State we declared our right to the unfettered control of our own destiny. In 1937 we gave ourselves a Constitution which declared the people as sovereign and the law to be subject to the common good.

Now, in the face of a national crisis, we are required to turn to these noble ideals. The general law of debt is unambiguous -- if you borrow, you owe. In the case of the tens of thousands of mortgage holders in this State who can't afford to repay the ridiculous loans they were given, lenders are entitled to take their homes and to sell them on the open market. The lenders are then entitled to recover from those borrowers the difference between the original mortgage loan and what was recovered from the sale of the house plus interest and penalties and legal costs.

The severe negative equity ensures that the financial shortfall which remains to be paid will be significant. So even after repossession, the ex-homeowner remains in significant personal debt.

For every borrower there was a so-called regulated lender. Those lenders were licensed to lend in the State. As experts in their field, they advised, encouraged and promoted unprecedented lending. In many instances, the borrowers were ordinary citizens who could not have been expected to be versed in the ways of international finance.

There is abundant evidence that lenders utterly failed the public. They played fast and loose, cajoled, harried and offered representations and promises that all would be fine. In the meantime they made fortunes.

And it goes further.

There is evidence that some lenders worked hand in glove with borrowers to manipulate figures or to misrepresent circumstances in order to meet credit committee guidelines. Borrowers were told, or encouraged to tell, stories and massage the truth for the purpose of getting a loan.

Should the institutions now get off scot free when they were involved in misrepresentation to their own credit committees?

Is the lender duty-bound to analyse and properly consider the borrowers ability to pay as well as acting in their best interest? The Consumer Protection Code 2006 which lenders were obliged to comply with as a matter of law provides, amongst other stipulations, that the lender must ensure that in all its dealings with customers it acts honestly, fairly and professionally in the best interests of its customers. The code also obliges lenders to act with due skill, care and diligence in the best interests of its customers. This code modifies the age-old principle of caveat emptor (buyer beware) and places a statutory duty on professional lenders to their borrowers on a par with, or close to, the duty of care owed by a doctor, lawyer or accountant.

Remember these are regulated entities. When they gave an interest-only loan representing multiples of current income, where did they envisage the ability to repay the loan would come from? They lent based on their own assumption that property values would only go one way. They were the experts and ordinary people relied, and were entitled to rely, on them.

This is not to say that retail borrowers are completely innocent victims. They also have to share responsibility but at the moment there is only one voice being heard, one interest being protected and it is certainly not that of the borrower. Where is the fairness in applying the black-and-white principle that the borrower must take all the pain? Where is the fairness in letting the lender off the hook when it was he, as financial expert, who advised a butcher or a plumber or a nurse to take out a loan representing many multiplies of his or her income -- a loan that, by any reasonable criteria, represented a millstone around the borrower's neck?

The time has come to bring these matters to a head. Whether the law or the lawmakers will recognise it or not, the financial institutions ran amok in this country, making vast fortunes for some and burdening the majority with crippling debt.

Our parliament has to date failed us, but our courts have yet to be tested.

Vincent P Martin is a practising barrister.

Sunday Independent