No responsibility for the folly of her purchase …’They knew I couldn’t afford it’.

Craig Emerson has pointed out that, despite the stories coming from the Banking Royal Commission, ‘not every poor decision of a customer is the bank’s fault’.

As he says,

‘if an elderly parent goes guarantor for a loan there can be consequences if the loan is not repaid. … If a couple on a modest income borrows a million dollars to buy properties and can’t service the loan, what is the bank supposed to do …?’.

Others have made similar comments. 

There will be elements of information and power asymmetry in such examples, and a change in access to credit, and in culture, it reminds me of comments from a former Registrar in Bankruptcy, speaking in 1984, about what he saw as change on culture in relation to debt since the 1930s:

“When I started, nearly all bankrupts were the victims of circumstances completely beyond their control.  The economic conditions were such that bankruptcy was inevitable.  In the 1930s drought and low prices for wheat sent thousands of farmers bankrupt and forced them from the land into the cities.  Nowadays it is very rarely that bankruptcy is brought about by factors for which the bankrupt cannot be held responsible to at least some degree. In most cases, over commitment is obvious even to a bankrupt upon reflection.  However, I am mindful of the part-time tea lady who bought a Ford Galaxie to enable her to get to work. She would accept no responsibility for the folly of her purchase. Her opinion was emphatically stated on her public examination – ‘They should never have sold it to me. They knew I couldn’t afford it’. Creditors must bear, perhaps, an equal responsibility in most cases of over commitment. In another case, a bankrupt purchased on credit two new Kingswoods, a sedan and a station wagon.  On the application for credit for he disclosed he was an invalid pensioner”.  

Comments welcome.

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