William Kay: Lenders should take more care in their scramble to push loans

The debt crisis bandwagon is in danger of becoming seriously overcrowded. On Monday the Conservative party announced a Commission on Debt, to be headed by the economist Lord Griffiths, a former policy adviser to Margaret Thatcher.

The debt crisis bandwagon is in danger of becoming seriously overcrowded. On Monday the Conservative party announced a Commission on Debt, to be headed by the economist Lord Griffiths, a former policy adviser to Margaret Thatcher. The shadow Chancellor, Oliver Letwin, told a debt summit that UK personal debt was heading for £1,000bn. And on Thursday the British Bankers' Association unwrapped a study of over-indebtedness by the independent economic group Oxera.

While for their own political reasons it suits the Tories to wring their hands over how debt is spiralling out of control, the Oxera study confines itself to saying that it is difficult to draw strong conclusions and a more thorough understanding is required. As this investigation, largely a survey of surveys, was paid for by the credit industry, it provides lenders with convenient ammunition to warn against the dangers of exaggerating the problem.

Oxera produced impressive evidence to show that the level of unsecured household debt has been fairly steady over the past decade. At any one time a constant one in 20 of us regards debt as a heavy burden, while the proportion finding it "somewhat" of a burden has edged down to about one in 10 and those having no difficulty has edged up from 25 to 30 per cent.

This puts in context the rash of debt-related suicides and near-suicides which have been reported recently. Just as the poor will always be with us, so will a minority who take on far more debt than they can handle. And of that minority a few will be so overwhelmed that they tragically take their own life.

While such cases help to focus attention on the problem, the big question is to what extent lenders are to blame because they push loans too hard to people who cannot cope.

The instant response from the industry is that it is committed to "responsible lending", by which it means loans which customers can repay. That is far too narrow a definition. Truly responsible lending is that which customers can repay without gouging into their other spending, such as holidays, trips to pubs or restaurants, new clothes and so on.

At this, industry spokespeople start blathering about the need for more financial education so that would-be borrowers can assess risk. As The Independent is campaigning for a Personal Finance GCSE, we would hardly disagree with the need for education. While the Personal Finance Education Group is pushing the Department for Education to include money in maths classes, it is generally accepted that such steps will take years to have an effect. So in the meantime it is up to lenders to exercise greater restraint in pushing loans. It is not enough for them to conduct credit checks; they should do at least as much as fund managers to ensure a loan is appropriate, and that borrowers realise the risks they might be taking.

Credit card promotion is the wild end of the game, but here More Than is lobbying for all card issuers to share information about borrowers to ensure no one is swamped. Let's hope it succeeds - and includes store cards.

* While the Shell scandal has filled business pages for days, it is easy to forget that the company is a core holding in the portfolios of thousands of individual shareholders. So I was pleased to see two of them writing to the Financial Times to warn regulators and lawyers against getting carried away in their eagerness to sue the pants off the company.

As one writer points out, there cannot be a clearer example of a negative-sum game. He wants the litigants to reserve their fire for blameworthy individuals. Only one problem: Shell Transport, the UK end, is valued at £37bn and its Dutch counterpart at £59bn. Both are more appealing targets than even the richest individual.

Don't just let your sleeping funds lie

Bank, building society and insurance customers should wake up to the intense activity behind the scenes over the issue of dormant accounts. These are customers' accounts that have not been used for several years, making it likely that the owner has died, moved away, forgotten about it or would possibly find it embarrassing to reopen them.

In last month's Budget the Chancellor, Gordon Brown, said the Treasury would be looking at these dormant accounts, which are believed to contain £15bn, or £250 for every man, woman and child in Britain. Unfortunately, it is nowhere as neat and tidy as that: not all the £15bn will be distributed, and some is owned by clubs, charities, companies and other organisations that may by now have disbanded.

But time is beginning to be a factor. Treasury officials are in discussion with the British Bankers' Association and the Association of British Insurers, because Mr Brown is keen to take a decision. He has seen what has happened in Ireland, where millions of pounds have been forcibly transferred to charity. That may not be where Britain's dormant funds end up, but a point in time will be chosen when the shutters will come down, or at the least the whole business will become very messy.

Better, if you think you or one of your relatives has some money lying idle, to contact the business in question to start the process of establishing ownership.

w.kay@independent.co.uk

PROMOTED VIDEO
Arts and Entertainment
Babysitter Katie and Paul have terse words in the park
tvReview: The strength of the writing keeps viewers glued to their seats even when they are confronted with the hard-hitting scenes
News
i100
Arts and Entertainment
American singer, acclaimed actor of stage and screen, political activist and civil rights campaigner Paul Robeson (1898 - 1976), rehearses in relaxed mood at the piano.
filmSinger, actor, activist, athlete: Paul Robeson was a cultural giant. But prejudice and intolerance drove him to a miserable death. Now his story is to be told in film...
Sport
England’s opening goalscorer Alex Oxlade-Chamberlain battles with Scotland’s Charlie Mulgrew
FootballEngland must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Life and Style
Make-up artists prepare contestants for last year’s Miss World, held in Budapest
fashion
Sport
Wigan Athletic’s back-of-the shirt sponsor Premier Range has pulled out due to Malky Mackay’s arrival
Football
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

    Ampersand Consulting LLP: Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Carlton Senior Appointments: Director, Private Bank - San Francisco, CA

    $175 - $200 per annum, Benefits: full benefits: Carlton Senior Appointments: P...

    Carlton Senior Appointments: San Diego, CA – Tier 1 House - Senior MD FA

    Not specified: Carlton Senior Appointments: Senior MD Financial Advisor - San ...

    Day In a Page

    US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

    Immigration: Obama's final frontier

    The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
    Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

    Bill Cosby rape allegations explained

    Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
    Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

    You know that headache you’ve got?

    Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
    Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

    Scoot commute

    Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
    Paul Robeson: The story of how an American icon was driven to death to be told in film

    The Paul Robeson story

    How an American icon was driven to death to be told in film
    10 best satellite navigation systems

    Never get lost again: 10 best satellite navigation systems

    Keep your vehicle going in the right direction with a clever device
    Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

    Paul Scholes column

    England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
    Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

    Michael Dawson: I’ll thank Spurs after we win

    Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
    Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

    Frank Warren column

    Dr Wu has big plans for the professionals yet he should stick to the amateur game
    Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

    Terror unites Jerusalem after synagogue attack

    Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
    Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

    'How do you carry on? You have to...'

    The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
    Isis extends its deadly reach with suicide bombing in Kurdish capital

    Isis extends its deadly reach with suicide bombing in Kurdish capital

    Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
    Underwater photography competition winners 2014 - in pictures

    'Mysterious and inviting' shot of diver wins photography competition

    Stunning image of cenote in Mexico takes top prize
    Sir John Major: Negative West End portrayals of politicians put people off voting

    Sir John Major hits out at theatres

    Negative West End portrayals of politicians put people off voting
    Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

    Kicking Barbie's butt

    How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines