SOCIAL JUSTICE
SNAPSHOT INFORMED CHOICE
By Dr Andy Marks andy.marks@vinnies.org.au
11 January 2009
When all options are exhausted does our right to choose remain intact?
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s frustrating as it may be to witness people pursuing poor options, it is too simplistic to put their predicament down to a question of bad choices alone. More than 175 years of serving people experiencing disadvantage has shown the St Vincent de Paul Society that the causes of poverty and marginalisation are complex. Despite how it may appear, rarely does somebody actively choose to loose their job or have their family breakdown, nor do they choose to be physically, sexually or emotionally abused. When struggling to cope with deteriorating relationships, abuse, mental health or addiction, nobody chooses to compound their problems by becoming homeless.
“Making a real choice requires that we fully understand the options before us and we accept the implications of our decision.” One of the catchcries of modern life is “freedom of choice”. We are constantly reminded by the media and government that we have the right to choose between things like public or private healthcare, brand or generic goods, and even plasma or LCD televisions.
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In theory choice is a perfectly reasonable thing. Democracy is built on the principle of choice. The right to participate in community life is enshrined in the process of political choice, so to our right to choose not to take part in something we disagree with is an example of freedom of choice. For all of our efforts to promote the right to choose, little effort seems to be directed towards understanding exactly what choice means. Making a real choice requires that we fully understand the options before us and we accept the implications of our decision; this is often described as an informed choice. In the eyes of a large proportion of St Vincent de Paul Society members, serving people experiencing disadvantage means dealing with the fall-out from bad choices. In some cases, this may appear true – for example, in a situation where a homeless person seems intent on remaining on the streets despite the many recovery options available to them. But is this view entirely accurate? In many ways, modern society recognises the possible risks associated with choice, yet we remain reluctant to accept them. Choice has always involved risk. Without risk we would not have progressed as a civilisation. So conscious are we of the presence of risk in any type of choice, we now have a whole industry set up around the practice of risk management. The current global financial crisis is in many ways a reminder of the presence of risk. The record economic boom of the previous fifteen years led many in the financial market to believe their investment choices were infallible. One of the most disturbing factors about the financial collapse is the reality that countless professionals making supposedly informed choices were unable to predict nor prepare for the devastation that came when the crisis hit.
“In the eyes of a large proportion of St Vincent de Paul Society members, serving people experiencing disadvantage means dealing with the fall-out from bad choices.� In a world where even those able to exercise informed choice are at risk, what chance do ordinary people have? This is the question many analysts and policy makers are posing in the wake of the global economic crisis. In an effort to ensure vulnerable groups, such as low income earners and pensioners are protected from the bad choices of others, the federal government has tabled legislation designed to protect people from predatory lenders.
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The new measures, due to come into effect in November this year, require lenders to lend money responsibly. Until now, the onus has been on the consumer – the person seeking the loan – to make an informed choice about their ability to meet the repayments. In recent years the intense marketing of so-called ‘low-doc’ loans, such as those with interest free periods or no credit checks, has prompted many people on low incomes to seek credit they would typically be refused. The lack of regulation surrounding these loans has meant that many consumers are now trapped in impossible situations where they are unable to meet repayments and confronted with the many risks associated with defaulting on a loan.
“A Canberra loan broker was convicted for providing a $340,000 home loan to a 20-year-old homeless man” The government’s decision to put unscrupulous loan providers on notice is an acknowledgement that to date, the risk associated with credit choices has not been fairly distributed. Predatory lenders have deliberately marketed their credit to people who aren’t in a position to make an informed choice. Most people who resort to ‘low doc’ loans do so because they have run out of choices. A person who seeks a loan to avert eviction, for example, is hardly exercising choice. Predatory lenders place little emphasis on the applicant’s ability to pay or comprehend the risk. In some instances the St Vincent de Paul Society has seen clients facing repayments greater than two-thirds their total income. This is unsustainable. In recent years various state and territory governments have been unable to adequately police predatory lending, with few prosecutions occurring. Notably, in 2007 a Canberra loan broker was convicted for providing a $340,000 home loan to a 20-year-old homeless man.
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The proposed legislation will bring disparate state laws under the federal umbrella. For the first time, it will be an offence for lenders to provide loans that do not meet clearly designated guidelines concerning an individual’s capacity to pay. Equally, lenders will be obligated to change credit contracts in cases of financial hardship.
“Predatory lenders have deliberately marketed their credit to people who aren’t in a position to make an informed choice.” This new legislation will not eliminate the inequities that abound in present day society surrounding questions of informed choice. They will however, encourage a greater consideration of the risks involved for both parties. The reforms are an important first step in restoring meaning and parity to the fundamental human right to choose.
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