Banks hit back over 'credit binge' accusations

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The Independent Online

The high street banks yesterday hit back at claims that they have lured customers into unprecedentedly high levels of borrowing, and denied that debt levels are any higher than 10 years ago.

The high street banks yesterday hit back at claims that they have lured customers into unprecedentedly high levels of borrowing, and denied that debt levels are any higher than 10 years ago.

Deirdre Hutton, chairman of the National Consumer Council (NCC), told the British Bankers' Association (BBA) annual conference: "Britain is in the grip of a credit binge. Many thirty and forty-somethings have embraced debt as part of their lifestyle, and debt is part of young people's lives. Banks need to act responsibly and stop pushing credit."

Oliver Letwin, the shadow Chancellor, joined in the debate this week, staging a visit to a Citizens Advice Bureau in Paddington, west London, where he declared: "Household debt problems are set to become significantly worse."

But Paul Rodford, head of policy for card services at the banks' Association for Payment Clearing Services (Apacs), said: "Our industry prides itself on responsible lending, but things will always come up that don't work out. Over the last five years, many reports have suggested over-indebtedness is a growing problem in the UK, and that society stands on the precipice of a debt disaster. Yet the data we collect within our industry indicates that this is not the case."

This week Apacs teamed up with the BBA, the Consumer Credit Association and the Finance & Leasing Association to publish a report which concludes that estimates of over-indebtedness should be treated with caution. It said: "Main indicators show unsecured debt proportions have remained stable since 1987, and UK debt trends are in line with other markets. But lack of an agreed conceptual framework and reliable data inhibits understanding of over-indebtedness."

Nevertheless, six million families are reportedly having difficulties meeting repayments. Ms Hutton said banks should not be offering unsolicited credit increases, and cheques on credit card accounts if they haven't properly assessed borrowers' circumstances. She said: "They must fully explain the terms and conditions to customers."

The NCC is asking banks and other lenders to put their house in order ahead of legislation. It wants them to agree on one method of calculating annual percentage rates of interest (APRs), to provide clear information about loans and to treat borrowers fairly when they get into difficulties.

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