Past Articles for May, 2006

According to a One Advice study, not only are 249,000 people missing mortgage deadlines, but well over a million more have racked up debts on credit cards and loans.

The addition of 661,000 people accumulating credit card debt and 416,000 borrowing money through loans means that as many as 110,000 people could be heading towards bankruptcy.

Another problem that should not be overlooked is that of borrowing money off friends and family, something which 837,000 people are resorting to, according to the One Advice figures.

A cahoot study last week had revealed that some £65 billion was owed by Brits from money borrowed off an acquaintance.

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Irish consumers are being told by their regulator to put any money they will get from Special Savings Incentive Accounts (SSIAs), which will mature shortly, into paying off high interest debt.

“Reducing outstanding debts will give you peace of mind and will give you more flexibility,” said Mary O’Dea, consumer director at the Financial Regulator.

“Even if you have no difficulty repaying your loans now, think about whether this might be a good option for you.”

Warnings come as a survey for Allied Irish Banks found that a fifth of respondents planned to spend any money they had saved.

Others planned to reinvest savings but only eight per cent said they would pay off debt.

Yet with interest on debt typically outpacing any earned on savings, consumers were told they would be better off paying what they owe before taking on more debt.

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The Department of Trade and Industry (DTI) has launched a website highlighting how, starting next April, consumers will be able to take disputes to court and get clearer and better information.

Teresa Perchard, director of policy at Citizens Advice, welcomed the protection offered: “We believe this can only strengthen the new act and make it more effective, with measures that have at long last promised to protect vulnerable consumers from unfair lending, bully boy debt collection tactics and extortionate credit deals, while at the same time being fair to business.”

Receiving Royal Assent in March, the act will give new dispute resolution powers from April 2007 and create obligations for clearer credit information from April 2008.

Borrowers will benefit from a dispute resolution scheme from the Financial Ombudsman Service and have a new unfair relationships test, allowing claims of unfair treatment by lenders to be taken to court.

Consumer minister Ian McCartney claims the act will be a “huge boost” to consumers and it should benefit all people taking out a loan in the near future.

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New research from London Victoria shows that one in three adults in Britain will fancy a flutter during the World Cup, a situation which is made more alarming by the fact that 29 per cent of people don’t plan to save any money at all during this period.

Of those among the male population who are putting money aside for a rainy day, just under a quarter are then undoing their good work by gambling it away.

Nigel Snell, Liverpool Victoria’s head of corporate communications, said: “While a lot of people still intend to gamble substantial amounts over the period of the World Cup, the important message about the need to save does seem to be getting through to some people.

“However, the well publicised savings gap would be reduced further, if more people diverted some of their gambling money into regular savings.”

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The bank has reported that bad debt at Barclaycard, its credit card arm, meant that money owed to it in 2005 surged by 44 per cent to £1.1 billion.

“We’ve started a cycle of deterioration in credit quality in the UK,” commented analyst James Hamilton at WestLB, according to Reuters.

Banks were now treating bad debt and poor credit quality as their “core concern”, he added.

Action has already been taken by Barclays by limiting the amount of credit it would give to customers back in February.

However, it appears that this has not been enough to limit debt, a symptom of what Elen Thomas of National Savings and Investment has called a “growing gap” between the perception and reality of spending.

With debt levels mounting across the UK, analysts expect Barclays to slash credit levels further in a bid to boost profits in the wake of Britons’ failure to repay debt.

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Bosses at the credit card firm claim that it was a typo and that the “three per cent of its customer base” offered the deal will only get six months, website This is Money reports.

Cardholders claimed that the small print on the promotional material confirmed that they had until June to obtain the interest-free lifetime offer.

Credit card companies have long been offering introductory offers to tempt customers over to them, though Barclaycard recently announced it was to limit the amount of credit it offered due to bad debt.

Amex customer Richard Morris told the website: “I understand banks don’t usually offer free loans, but the offer was in black and white. Does Amex have any rights to alter the offer when I have complied with every one of its details?”

Other Amex customers also told the reporters that they were annoyed at the withdrawal of the offer.

However, with lenders becoming increasingly wary about bad debt, it seems as if “too good to be true” credit card offers are just that.

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Gross lending of £15,500 million was 12 per cent lower than March’s total of £17,673 million, according to the British Bankers’ Association (BBA).

Additionally, net mortgage lending, after seasonal adjustments, only rose by £5 billion compared to £5.5 billion in March.

April’s figures come after the unusual net fall in loans during March and though last month saw a rise in loans and overdrafts to £0.2 billion, it was still below the six month average of £0.3 billion.

Mr Dooks said that “consumers were showing little appetite to take on additional unsecured borrowing” in April.

Debt resolution company, ClearDebt, warned that this slowdown could foreshadow a further upswing in private individuals going bust.

“In our experience, a large proportion of debtors only stop borrowing well after the point where it stopped making sense,” commented ClearDebt chief executive, David Mond.

“If consumers really have started borrowing less, it may mean that the numbers entering bankruptcies and IVAs is set to rise still further over the next few months.”

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With calls for children to be educated about managing their finances in schools, Nick White, head of personal finance at Uswitch.com, says that teaching should be extended to all.

“All age groups need educating about finances - to a degree this is, to me, a generational thing,” said Mr White.

“Education is key, as is providing help to help people budget and live within their means.”

His comments come as a study by uSwitch.com reveals that two thirds of the over-50s have an overdraft with 850,000 of them permanently overdrawn.

Mr White said that for many, action is only taken when it is too late which is why people need better financial education, especially in light of easier credit facilities than ever before.

As more people get themselves saddled with large debt, Mr White believes that immediate financial education for all ages is needed to change attitudes as soon as possible.

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Elen Thomas of National Savings and Investment (NS&I) claims that as customers only receive a statement rather than a bill, many fail to realise how much they are really spending.

“People are not associating money management with spending,” claimed Ms Thomas. “There is a gap between perception and reality.”

Credit card debt is adding to the soaring debt levels seen in the UK, with Datamonitor claiming that personal debt levels grew by 41 per cent between 2000 and 2004.

Ms Thomas labelled the attitude of people towards spending as “worrying”, with NS&I claiming that two fifths of consumers overspent on debit cards as it did not seem like “real” spending.

In order to beat debt and stop people overspending, Ms Thomas urged credit card users to check their accounts weekly to ensure they have a grip on their finances.

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GamCare claims that a quarter of its messageboard users are female, up from just two per cent of clients in 2000.

“Gambling has become so accessible and so de-stigmatised that, unfortunately, it can only get worse,” gambling expert Faith Freestone told BBC’s Six O’Clock News after the broadcaster obtained a report from GamCare.

“As more people are exposed to gambling, more people will become addicted.”

Online casinos and gambling with credit cards have been blamed for the rise in female players, as traditional betting shops are still seen as predominantly male.

According to GamCare 6,563 people used the charity for counselling in 2005, up by 41.3 per cent from 2004.

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