William Kay: Lenders should take more care in their scramble to push loans
Saturday 24 April 2004
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.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens