The obligation to pay half the value of the item, even if it is recovered after a week, is an onerous commitment by a guarantor or hirer. Are guarantors in this instance generally made aware that in the event of early default on an agreement they must pay half the price? Should some type of warning notice be provided, as is the case elsewhere? It is quite an undertaking because if the person defaults in the first week, the guarantor must pay half the price of the car.
SECTION 63.
Question proposed: "That section 63 stand part of the Bill."
Is the Deputy suggesting there should be a warning to guarantors?
I wonder if there should be a warning. If I was to go guarantor, although I have never done it, I would not have thought that I was committed to that extent. I would have thought I would be committed where someone ran into arrears of up to £2,000 on the repayments and I might be caught for those arrears. However, one could be caught for much more than the arrears.
Anybody going guarantor should be extremely cautious. One can read many of the provisions or agreed sections in many ways. How far do we go in attempting to safeguard every single person involved in any single transaction? I caution anybody about going guarantor for anything. I am sure there is not an elected person in the Dáil who has not at some stage made a bad mistake with regard to guarantors and decided never to be caught again.
I ask the Minister to take another look at the drafting of this matter. It states the liability of the guarantor but one is not told from where this guarantor has come.
The liability of the guarantor shall be limited to the amount——
What guarantor?
The person who has gone guarantor.
The phrase "the guarantor" is hanging there by its bootlaces in mid-air. Is it any guarantor under a hire purchase agreement? It is peculiarly drafted.
"Of" a guarantor, rather than "the" guarantor.
"Of" a guarantor. It is rather strange.
The Deputy is saying that "the" means one and "a" is an amorphous term.
I do not know the person who has suddenly appeared in the section.
He is a foolish person. He is not homo sapiens, rather homowhatever the Latin is for foolish.
The point is substantial. Do people become automatically aware as soon as they enter into hire purchase agreements or as guarantors that when they sign that document and the ten day cooling off period has expired——
Does the Deputy mean the guarantor or the person who takes the goods, the hirer?
Either or both. The guarantor is even more vulnerable in a sense because he does not control any of the subsequent decisions. Is that made sufficiently clear? We have made a number of provisions, such as that certain items should be shown on the cover sheet of different loans. Anyone who goes guarantor and who signs something should be made quite clear from the covering sheet, in big black print, that if his friend defaults on the payment, he will be liable for half the hire purchase price.
The Deputy is reverting the guarantor to his consumer role by giving him a warning.
In the section, where is what the guarantor is presented with covered?
The Deputy is saying in relation to the warnings previously given to consumers about various matters in the Bill that the guarantor is entitled to the same type of early warning or warning.
Certainly in respect of this commitment, which is quite exceptional.
What is the basis for that calculation, where it refers to section 61 (2)?
I am also mystified by section 61 (2).
What is that calculation? From where does it come? Is it a rule of thumb in the business?
I ask the Minister to take the example of where there is a five year HP agreement. In the fourth year, when half the money has already been paid back, I decide to determine the agreement. Under section 61 (2), which is the formula to which Deputy Rabbitte referred, how much more would I have to pay back?
We will come to various sections and amendments in that regard.
If I paid more, what happens?
Is the question from where we get the calculation?
What if I paid more? If I paid 55 per cent of HP price——
The Deputy is asking how we arrived at these calculations.
No, I am asking if a person repays 55 per cent of a hire purchase price, does the owner of the goods have no redress against him if he tells him to take back his tractor, for example?
Without being too pedantic, Deputy McDowell made a good point about specifying the type of guarantor in this context because there are many types of guarantor. The Minister recalled painful memories for those of us who were caught when people absconded with bail. I was caught twice in the same week when I was guarantor for two people — I was not a Member of the Dáil. Two bills arrived from the ESB for two single men who had rented apartments. The ESB would not install the supply unless a guarantor signed the forms. Rather foolishly, I signed for the two of them, but they left without paying. They put the bills on my account and the ESB tried to cut off my electricity unless the amount was paid in full. I did not mind paying half the amount, but I had to pay the full amount in both cases. Deputy McDowell has a point in specifying the type of guarantor. We have painful memories, although I learned from my experience. Will the Minister specify the type of guarantor she is talking about in that context?
Has the Deputy been caught since then?
No.
If one pays 55 per cent of the hire purchase on goods, can one leave them back at the owner's premises?
I do not know. The Deputy asked me where we got the figure of 50 per cent. It came from the Hire Purchase Act, 1946.
I do not want to put the Minister on the spot and I do not know if she has a briefing note to explain the rationale by which one half of the total cost of credit under the agreement exceeds the total of the sums paid——
And the sum due immediately before the termination of any such less amount as may be.
Outstanding arrears?
This is in the 1946 Act, which is being carried through.
It is also in the 1960 Act and it is being carried through.
Is it deemed to be equitable?
It has stood the test. The provision is directly from the 1946 Act which was amended in 1960. It is a transposition of it because we are dealing with hire purchase. Deputies asked about warning the guarantor. Amendment No. 101 to section 31 states:
(a) a copy of the credit agreement shall be—
(i) handed personally to the consumer .... delivered or sent by prepaid register post,
(b) a copy of the credit agreement and any contract of guarantee shall be—
(i) handed personally to any guarantor upon the making of the agreement.
It is one thing to hand something personally to the consumer, but it is another matter to tell what he is letting himself in for.
There is a warning notice in relation to a hire purchase agreement in sectin 31 (1) (j) which states: It is the duty of the hirer to take all reasonable care of the goods which are the subject of his hire purchase agreement. It would be equally important to tell them that if they default early in the agreement, they must pay half the price.
In other words, we should bring the clause of the Hire Purchase Act to their attention?
I think so.
I did not know about the Hire Purchase Act. Like Deputy Kemmy, I had a painful experience, but I did not know about the formula.
I also had a painful experience, but it will not happen again. We will look at the warnings.
It would be important, in the context of the ten day cooling off period, to bear this in mind because some people may enter into a hire purchase agreement in the hope that things will work out. However, it may be too much for them.
Is the Deputy still talking about the guarantor?
Either parties. It is important to know that one has made a commitment.
In other words, what the hirer and the guarantor will be liable for?
Yes.
The person will have an agreement. Will we ever stop warning people? We can bring a horse to the well, but we cannot make him drink.
We are making provision so that information will be on the front page of a credit agreement. It says one may withdraw from this agreement at any time within ten days of receiving this agreement or a copy of it. It should also say that if one commits oneself to the agreement, one will be liable for half the hire purchase price. It would not be an onerous addition because it would only be one more line in this section.
I will consider this point, if the Deputy believes it will strengthen people's knowledge.
Question put and agreed to.