Managing director at Jamaica Collections and Recovery Services Limited Christopher Johnson says financial institutions should shoulder some blame for the rise in the “debt trap” as consumers struggle to meet financial obligations amid the novel coronavirus pandemic.

Johnson, who was speaking during the Jamaica Observer Business Webinar last Wednesday, indicated that financial institutions must evaluate their lending practices to prevent customers from taking on more debt than they can manage, which may result in them falling behind on repayments.

“At Jamaica Collections sometimes we’re called in to assist with the collection of a debt and it’s impossible to collect. When a field investigator visits a location you can see that the person is not able to pay the debt,” he shared.

“The institutions need to do some more investigation and check the credit applications, because people do lie. There are persons who are friends with [someone] from the financial institution that will get the loan for them,” he charged.

He pointed out that one of the agency’s main challenge is collecting debt from large unsecured loans.

“…They then send them over to the agency thinking that we’re magicians. When our investigators do a location visit— it’s an empty lot. We find that the institutions are giving away their money sometimes… we can’t collect a debt that you are giving away,” Johnson contended.

However, chairman of Jamaica Micro Financing Association Andrew Mais argued that lending institutions prefer for clients to meet their financial obligations as it costs more to manage delinquency.

“Having a situation where you now have to engage staff to call individuals to remind them of payments, to go out and follow up with them, or even the whole process of repossession if it comes to that… Usually that entire situation is a costly exercise and most financial institutions take a prudent approach in determining how much and who they’re going to lend. If you lend everybody that walks through the door, you end up in a situation where the returns to you are eroded by the costs of managing those people who fall behind or become delinquent,” Mais said.

Nevertheless, financial advisor Marlon Campbell pointed out that, ultimately, consumers need to take responsibility for their financial positions.

“At the end of the day, the only person that can lead you into a debt trap is you. The banks might make it easy for you to sign, but at the end of the day you have to look in the mirror and ask, ‘Do I need to go this path?’ ” Campbell said.

He added, “Until we take personal responsibilities in a lot of these things. We’re going to find people who are constantly on this hamster wheel of debt and they stay just ahead of ruin.”