22/04/2004

Lenders warned over 'irresponsible' credit offers

Credit card companies have been warned that there will be no room for irresponsible lenders in the marketplace of the future.

According to the Consumer Minister Gerry Sutcliffe, companies must improve data sharing to help promote "responsible lending" and crack down on those who exploit the most vulnerable borrowers. However consumers also share of the responsibility in creating the current credit boom, he said.

The minister made his comments at today's British Bankers' Association's (BBA) annual conference in London. The meeting follows on from a report, published by Datamonitor earlier this month, which found that credit card debt rose to a record £53.5 billion in 2003 – equating to an average £1,100 of debt per cardholder. There are now more than 65 million cards in the UK, but if current trends continued there would be 90 million cards in use by 2008, the report claimed.

The BBA's director of statistics, David Dooks, said today that mortgage lending and consumer credit remained buoyant last month, and individual appetites for borrowing "shows little sign of abating".

Speaking at the conference, Mr Sutcliffe said that credit was an important part of life today and, properly managed, was a "great benefit to consumers and the economy".

"But alarm bells should be ringing," he said, "if someone applies for a credit card and already has several credit cards they are currently using - even if they are paying the minimum amount each month."

The Minister added: "Consumers themselves have to take their share of responsibility when it comes to credit agreements, but there is a vital need for honest credit companies to ensure they are sharing the fullest possible information to avoid lending to those who are already struggling with credit.

Also at the BBA conference, Deirdre Hutton, Chairman of the National Consumer Council, warned that Britain was in the grip of a "credit binge", and told delegates that, for many people in middle age, debt is now a part of their lifestyle.

"Stories about people getting themselves into serious debt difficulties are becoming too commonplace. Only last week, we heard about how Aqua credit card offered a nine-year-old girl a £1,000 credit limit. Then there was the story of the man with a £30,000 salary who managed to rack up debts of £80,000 – and as a result will now spend the rest of his life paying off his debts. There was also the case of the 84-year-old blind pensioner, with a weekly disposable income of £3.12 who managed to run up debts of £30,000 on 20 credit cards," she said.

Ms Hutton said that banks should be "responsible" and not offer "unsolicited automatic credit increases" and cheques on credit card accounts if they "haven’t properly assessed borrowers’ circumstances".

"They must fully explain the terms and conditions to customers, otherwise, how are borrowers able to make sensible choices?" she said.

Concluding his speech to the conference, the Consumer Minister called on lenders to work with the government and consumer groups to implement reforms in the government's Consumer Credit White Paper; the "biggest shake-up in consumer credit for 30 years", according to Mr Sutcliffe.

Measures contained in the White Paper are aimed at improving transparency as current rules on consumer credit advertising are too complex, technical and confusing, he said.

(gmcg)

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