The NSW Law Reform Commission is seeking people who have signed as guarantors for someone else's debts (or signed as co-borrower) to complete a confidential questionnaire as part of its review into the laws and practices that relate to third party guarantees and joint debts.'Relationship debt', as it's known by the legal profession, is a growing concern and includes situations where one person becomes liable for a joint loan or a joint credit card debt. Detailed information about who becomes a guarantor or co-borrower and why is scarce.NSW Law Reform Commissioner Professor Reg Graycar said that the Commission is interested in the first-hand experience of guarantors and co-borrowers to find out if the law has a more severe impact on particular groups within the community - for example people from non-English speaking backgrounds or those living in rural or remote areas.
"Lenders may agree to a loan secured against the property or other interest of a third party, but the debt is 'transmitted' to the guarantor if the borrower doesn't pay," Professor Graycar said. 'Borrowers may have every intention of repaying a debt, but if they can't, guarantors can experience real hardship, like losing their home.'
A lender - usually a bank or financial institution can demand that the guarantor pay the amount owing as well as the cost of recovery.Professor Graycar said that case law suggests that emotional issues, from subtle pressures about loyalty and trust to physical violence, are often central to the signing of guarantees and joint loans.
'Guarantors often have nothing to gain personally, and it's not uncommon that family members, or people with close personal relationships to the borrower, become guarantors," she said. "However, guarantors may have a lot to lose. Parents and partners are often the ones who get burned.'
Denise Iosifidis, Principal Solicitor from the Consumer Credit Legal Centre said that people can become guarantors without fully understanding what they are signing.
'Guarantees are often hard to read and written in complex language, so people tend to sign without taking in the fine print,' she said. 'And people whose first language is not English may have even more difficulty understanding guarantees.'
The Commission is inviting people with experience of third party guarantees and joint debts to complete the questionnaire. Please contact the Commission on (02) 9228 8230 for a copy or alternatively click here to access the survey from the Commission's website.For media inquiries or interview requests please contact Jenny Lovric on (02) 9228 8230.